The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) allowed the appeal of the assessee by treating the Income Tax return (ITR) as valid and held that there is no need to audit the accounts when the gross business receipts are less than the threshold limit of Rs.1.00 Crore as prescribed under Section 44AB of the Income Tax Act, 1961.
The assessee applied for rectification under Section 154 of the Income Tax Act, stating for rectification of a mistake of law apparent in the order passed by the Deputy Commissioner of Income Tax (DCIT), Centralised Processing Centre (CPC), Bangalore for invalidating the return filed by the assessee.
The Assessing Officer (AO) on perusal of the application found that an order under Section 139(9) of the Income Tax Act has been passed by the DCIT, CPC, Bangalore treating the return as an invalid return with remarks as “Despite being afforded adequate opportunities, the assessee has not rectified all the aforementioned defects noticed in the return of income. Accordingly, the return of income filed is treated as an invalid return” and the AO rejected the application of the assessee.
The Authorized Representative submitted that the order passed by CPC under Section 139(9) of the Income Tax Act had an apparent mistake of law which resulted in the wrong invalidation of the return of the assessee. Thus, both the lower authorities rejected the appeal of the assessee without any rhyme or reason.
The Two-member bench comprising of Sandeep Gosain (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member) held that the assessee did not seek any rectification which had been treated as invalid but it sought rectification in the order passed under Section 139(9) of the Income Tax Act, therefore, the rectification application filed by the assessee was nothing to do with the invalid ITR and the AO held that due to invalid return, the rectification application was rejected.
It was also noted that if the gross receipts from the business of the assessee were less than Rs.1.00 crore then it was not required to get the accounts audited under Section 44AB of the Income Tax Act. It was imperative to mention that the gross receipt of the assessee from the business carried out by the assessee was not more than Rs. 1 Crore, therefore the assessee was not required to get his accounts audited.
Therefore, the bench quashed the defect notice, meaning thereby, the return of income filed by the assessee should be considered a valid return. The AO/CPC was directed to treat the ITR filed by the assessee as a valid return and process the same in accordance with the law. Thus, the appeal of the assessee was allowed.
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