It has been always a point of discontent between Tax paper and Tax official, up to which period return can be revised by the taxpayer.
As per Section 139(5), “If any person, having furnished a return under sub-section (1) or sub-section (4), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the end of the relevant assessment year or before the completion of the assessment, whichever is earlier”
An important point, will Tax Notice will constitute completion of the Assessment?
Mumbai Bench of ITAT (Income Tax Appellate Tribunal) has ruled in the case of Mahesh Hinduja, which will provide relief to several Taxpayers. ITAT said in his ruling that “A Tax benefit claim by Taxpayer/Assess in his revised income Tax return cannot be denied outright by an Income Tax officer merely because the revised Return was filed after the issue of Notice. The Revised return needs to be filled within the time limits as per Income Tax Act 1961”
In the case of Mahesh Hinduja before ITAT, Mahesh Hinduja had declared a total income of Rs 4.91lacs in his original return for the financial year 2010-11. He later filed a revised return declaring a total income of Rs 6.24lacs. In his revised return he also disclosed Long Term Capital Gain (LTC Gain) Rs 50lacs and invested Rs 1.5Core in the new house and claimed exemption under Section 54 of the Income Tax Act.
As per Income Tax Act, If Assess has made an investment in another home/Flat in India within the time frame recommended in the act, the Assess can claim deduction under Sec 54, if the amount of capital gain is equal to or less than the cost of the new house, then entire Long Term Capital Gain is not Taxable.
A reader can refer to our Book- CAPITAL GAIN TAX- on Sale of Real State for detail information.
Income Tax Act has entrusted power to Tax Official to issue a notice to Taxpayer/ Assess to protect Tax revenue asking further evidence.
Mahesh Hinduja has filed a revised return after receiving a notice under section 143(2). The Income Tax official rejected his claim for deduction under Section 54 and raised demand.
Litigation finally reached the Mumbai Bench of ITAT.
ITAT observed that the Income Tax official had rejected the deduction in the revised return as invalid but had accepted the higher income offered in the revised return.
ITAT observed that “Income Tax Official has adopted a very selective approved; only the deduction claim under section 54 had been rejected. This is against the law of natural justice”
The ITAT held “ The Income Tax Act does not bar a taxpayer from filing a revised IT Return after the issue of notice under section 143(2)”
This is a beneficial decision for the taxpayer facing the same issue.