Let us start with a practical situation. Say , in the month of June or July 2015 , search & seizure u/s 132 was conducted on a group by the income tax department . In that case , since the FY 2014-15 is over ,the tax return for assessment year 2015-16 was supposed to filed as per due date specified u/s 139(1) of the I.T.Act . But now that the search has been conducted , the assessment for the previous year 2014-15 ( assessment year 2015-16) will be done under section 153A . So, a confusions may engulf the mid of a tax practitioners whether the normal tax return u/s 139 should be filed even when you know that the notice for filing of tax return will be issued by the A.O assessing the income u/s 153A?
Filing of Pending Returns u/s 139(1) After Search is Conducted
Let us first see what the provision u/s 153A says :
153A. (1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall—
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made :
- There is special form for filing tax return after search is conducted.
- There is no due date prescribed for filing of tax return.
- There is no time frame for the assessing officer to suggest when will he issue the notice for filing of tax return.
Further , under Income Tax Act , it is not prohibited or put any kind of restriction that if you ae searched u/s 132 and assessment is to be done under special provision u/s 153A , you are not allowed to file the tax return under normal provision.
So , if you file tax return within due date , it is perfectly legal and there are no hindrance for such action for your side.
Pros & Cons of Non Filing of Normal Tax Return
The positive (PRO) part.
The pro part is not hard to understand . You are saved from botheration of filing of tax return two times- one u/s 139 (1) and then u/s 153A when A.O issues notices . The reason for not filing the tax return u//139(1) can be as under :
- Section 153A starts with non obstante Clause ” Notwithstanding anything contained in section 139 ” which means when search is conducted , the application of section 153A will prevail over provision u/s 139 which requires a person to file tax return within specified due date.
- It is further written that the return filed u/s 153A shall be considered as if filed u/s 139 ( see above in Blue Lines)
- Section 153A itself provides that all assessment or reassessment proceeding pending as on date of search shall abate….
For these reasons , a view can be made that there is no need to file tax return u/s 139 (1) and only when the A.O issues notice for filing the tax return, the return should be filed within time allowed by him
Negative (Con) part of Not Filing Return us/ 139
If you file the tax return u/s 153A and assessment was made by the A.O . You accepted the assessment , then there may not be great foreseeable disadvantages. However not filing a tax return u/s 139(1) may put you in awkward position . Say you challenged the assessment u/s 153A and the Court quashed the assessment order , pronouncing the proceeding of search u/s 132 illegal. In that case , your return u/s 153A will also be non est -not in existence ! In other words, in such situation, you will be like without any return under Income Tax Act.
Now , add to such situation, the provision u/s 153A (2) which provides that if the order u/s 153A(1) is annulled, then the proceeding which abated shall stand revive.
In the result , a highly uncertain and legally challenge-able view shall be formed if the return filed u/s 153A can be considered return u/s 139 after the proceeding itself held as non-est or search was pronounced illegal
Effect on Deductions
Under Income Tax Act , there are 12 deductions which can be claimed only when a tax return is filed and the claim was made in such a tax return . Please read 12 Deductions if You Forgot to Claim in the Tax Return , Will Be Lost Forever !
So, an avoidable circumstance may arise that teh claim of deductions may be challenged by revenue authorities on the ground that there is no tax return u/s 139 and because the search proceeding u/s 132 or assessment order u/s 153A is pronounced invalid or illegal , the return filed u/s 153A has no value.
Play Safe Mantra
Yes, the way the wordings are put in the provision u/s 153A , it creates a view that once search u/s 132 is done , return u/s 153A is suffice . However, for the reasons explained above ,such view is fraught with risk of misinterpretation and not free from legal scrutiny . In my opinion , filing tax return u/s 139(1) is better step for preventing any future controversy as far as the duty of the assessee under Income Tax Act is concerned.