Madras HC Quashes Order rejecting ITR without Providing Opportunity to Rectify Defect [Read Judgment]

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The Madras High Court recently set aside an order passed by the Assessing Officer rejecting an Income Tax Return ( ITR ) filed by the assessee on the ground that an opportunity to rectify the defect under section 139(9) of the Income Tax Act was not granted.

In the instant case, the assessee filed its return declaring certain taxable income. Subsequently, the assessee filed a revised return u/s 139(5) within the prescribed time period wherein the value of the closing stock was reduced and administrative cost was increased. The Assessing Officer rejected said revised return at very threshold on the ground that it was not accompanied with tax audit report.

Justice T S Sivagnanam observed that if in the opinion of AO, the return was defective, then procedure contemplated u/s 139(9) should have been followed.

The Court noted that Sub-Section (9) of Section 139 of the Act is a beneficial provision to the assessee, which provides them an opportunity to rectify the defects.

“Since the intention is that the assessment proceedings are an outcome of dialogue and discussion, the Assessing Officer is entitled to clarify all issues by issuing the notice to the assessee and calling upon them to produce documents and explain their books of accounts, etc. Unfortunately, in the instant case, such procedure was not adopted when the revised return was rejected at the very threshold, which, in our considered view, ought not to have been done,” the Court said.

Accordingly, the Court remanded the matter to the Assessing Officer to redo the assessment after giving an opportunity to the assessee in terms of Section 139(5) of the Act to rectify the defects, which have been pointed out by the Assessing Officer in the assessment order.

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