Return of income – Filing of, in electronic form (set-off and carry-forward of losses) – Section 139D r.w.s. 72 of ITA, 1961 and Rule 12 of ITR, 1962 – Procedure of filing electronic return as per section 139D r.w. Rule 12 cannot bar assessee from making claim which he was entitled to – Assessee was directed to make representation before CBDT where he was not able to reflect set-off available in terms of section 72 in prescribed return of income in electronic form

16. Samir Narain Bhojwani vs. Dy.CIT

[2020] 115 taxmann.com 70 (Bom.)

Date of order: 22^nd October, 2019

A.Y.: 2019-20

Return of income – Filing of, in electronic form (set-off and carry-forward of losses) – Section 139D r.w.s. 72 of ITA, 1961 and Rule 12 of ITR, 1962 – Procedure of filing electronic return as per section 139D r.w. Rule 12 cannot bar assessee from making claim which he was entitled to – Assessee was directed to make representation before CBDT where he was not able to reflect set-off available in terms of section 72 in prescribed return of income in electronic form

The assessee was obliged u/s 139D of the Income-tax Act, 1961 read with Rule 12 of the Income-tax Rules, 1962 to file his return of income electronically with his digital signature. However, he was not able to reflect in the prescribed return of income in electronic form the set-off available in terms of section 72, i.e., setting off of current year’s business income against the carry-forward loss from the earlier years. This was because the return which was filed electronically required certain columns to be filled in by the petitioner while the other columns were self-populated. The assessee was thus unable to change the figures and make a claim for set-off u/s 72 in the present facts. This resulted in excess income being declared, resulting in an obligation to pay more tax on income which in terms of section 72 was allowed to be set off against carried-forward losses of earlier years.

Therefore, the assessee filed a writ petition under Article 226 of the Constitution of India and sought a direction from the High Court to the Respondent No. 1, the A.O., and Respondent No. 2, the CBDT, to accept the petitioner’s return of income for A.Y. 2019-20 in paper form u/s 139(1) of the Act and the same be taken up for assessment in accordance with the Act.

The Bombay High Court allowed the writ petition and held as under:

‘i) The claim sought to be urged by the assessee, viz., set-off of business profits of this year offered to tax under the head “capital gain” being set off against carried-forward loss is prima facie supported by the decisions of the Tribunal in the case of M.K. Creations vs. ITO [IT Appeal No. 3885 (Mum.) of 2014, dated 7^th April, 2017] and in ITO vs. Smart Sensors & Transducers Ltd. [2019] 104 taxmann.com 129/176 ITD 104 (Mum.–Trib.). It is also not disputed by the Revenue that the return of income in electronic form is self–populated, i.e., on filling in some entries, the other entries in the return are indicated by the system itself. Thus, the petitioner is unable to make a claim which according to him he is entitled to in law. In case the petitioner is compelled to file in the prescribed electronic form, it could be declared by the A.O. as defective (if all entries are not filled), or raise a demand for tax on the basis of the declared income u/s 143(1), or if the assessment is taken to scrutiny u/s 143(3), then the petitioner will not be entitled to raise a claim of set-off u/s 72 during the assessment proceedings. This, in view of the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. vs. CIT [2006] 157 Taxman 1/284 ITR 323 wherein it has been held that if a claim is not made by the assessee in its return of income, then the A.O. would have no power to entertain a claim otherwise than by way of revised return of income. The revised return of income, if the petitioner attempts to file it, would result in the petitioner not being able to make the claim for which the revised return is filed as the revised return of income would also have to be filed in the prescribed electronic form which does not provide for such an eventuality. Thus, for the purposes of the subject assessment year if the return of income is filed electronically, it (the assessee) would have given up, at least before the A.O., his claim to benefit of section 72; this, whether the return of income is processed u/s 143(1) or undergoes scrutiny u/s 143(3).

ii) The purpose and object of e-filing of return is simplicity and uniformity in procedure. However, the above object cannot in its implementation result in an assessee not being entitled to make a claim of set-off which he feels he is entitled to in accordance with the provisions of the Act. The allowability or disallowability of the claim is a subject matter to be considered by the A.O. However, the procedure of filing the return of income cannot bar an assessee from making a claim under the Act to which he feels he is entitled.

iii) It is true that in terms of Rule 12 of the Rules the returns are to be filed by the petitioner only electronically and he is bound by the Act and the Rules, thus (the Department) cannot accept the paper return. However, in terms of section 139D, it is for the CBDT to make rules providing for filing of returns of income in electronic form. This power has been exercised by the CBDT in terms of Rule 12 of the Rules. However, the form as prescribed does not provide for (the) eventuality that has arisen in the present case and may also arise in other cases. Thus, this is an issue to be brought to the notice of the CBDT, which would in case it finds merit in this submission, issue necessary directions to cover this gap.

iv) In the normal course, the petitioner would have been directed to file representation with the CBDT making a demand for justice, before considering issuing of a writ of mandamus. However, in the peculiar facts of this case, the petitioner is required to file return of income by 31^st October, 2019. It is only when the petitioner was in the process of filing his return electronically that he realised that he is unable to make a claim of set-off u/s 72, even though the claim itself is prima facie allowable in view of the decisions of the Tribunal in M.K. Creation (Supra) and Smart Sensors & Transducers Ltd. (Supra). In the absence of the petitioner filing its return of income on or before 31^st October, 2019, the petitioner is likely to face penal consequences. The issue raised is a fundamental issue, which needs to be addressed by the CBDT.

v) Therefore, it would be appropriate that the petitioner make a representation on the above issue to the CBDT, who would then consider it in the context of the facts involved in the instant case and issue necessary guidelines for the benefit of the entire body of assessees if the petitioner is right in his claim that the prescribed return of income to be filed electronically prohibits an assessee from making its claim. However, in the meantime, the petitioner, without prejudice to his rights and contentions, would file the return of income in electronic form on the system before the last date. Besides, (he would) also file his return of income for the subject assessment year in paper form with the A.O. before the last date. This return of income in paper form would be accepted by the A.O. without prejudice to the Revenue’s contention that such a return cannot be filed.