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.