Revised income tax return can be filed even after notice is issued: ITAT

income tax return

Income Tax Appellate Tribunal (ITAT) in its recent ruling has said an income tax return benefit claimed by a taxpayer in his revised income tax return cannot be denied outright by an income-tax officer. The report mentioned that because the return was filed after the issuing of notice, it cannot be denied.

Many taxpayers, who make a mistake in filing the original I-T return, which could range from not disclosing capital gain or claiming a deduction will be benefited by this order which was passed by the Mumbai bench of the ITAT. However, a taxpayer needs to file the revised return in time to claim this benefit. According to section 139 (5) of I-T Act, a revised return can be filed not later than 12 months from the end of financial year or before completion of income tax assessment.

The above order was passed in the case of Mahesh Hinduja, who had declared a total income of Rs 4.91 lakh in his original return for FY 2010-11 and later revised the return declaring a total income of Rs 6.24 lakh. In the revised return, he disclosed long-term capital gains (LTCG) of nearly Rs 50 lakh. However, as he had invested 1.15 crore in a new residential house, he claimed a deduction under Section 54 of the I-T Act. Thus, capital gains were not offered for tax.

According to the Act, if a taxpayer buys another property from the money of his earlier property sellout within a stipulated time, then the cost of the new house is deducted and only the balance component of the LTCG is taxable. Thus, if the amount of capital gains is equal to or less than the cost of the new house, the entire sum of LTCG is not taxable. Going by this Hinduja has not under reported his income. To ensure that the taxpayer has not underreported his income or paid less tax, the I-T Act empowers I-T officials to issue a notice asking for further evidence. As the revised return was filed by Hinduja after he had received a notice under section 143(2), the I-T official rejected his claim for deduction. The litigation finally reached the level of the ITAT.

The I-T official, in this case, had rejected the claim of deduction under Section 54 but at the same time had accepted the higher income offered in the revised return, including the LTCGs. “The I-T official has adopted a very selective approach in respect of the revised return of income filed by the taxpayer,” the TOI report quoted the ITAT ruling as saying.

The tribunal held that the I-T Act does not bar a taxpayer from filing a revised I-T return after issuing of notice under Section 143 (2). Hinduja’s case was sent back to the I-T official for examining and allowing the deduction, subject to the fulfilment of conditions prescribed for such claim.


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