A case of un-necessary reassessment and harassment Proviso to S.139(1) inserted w.e.f. 01.04.2020 for compulsory filing of ITR in some cases is prospective and not retrospective.

[DEV KUMAR KOTHARI]

A case of un-necessary reassessment and harassment

Proviso to S.139(1) inserted w.e.f. 01.04.2020 for compulsory filing of ITR in some cases  is prospective and not retrospective.

A new proviso was inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f. 01-04-2020 in section 139(1), making it mandatory to file ROI in case assesse had certain specified transactions  considered to be of high value, suggesting that the assesse is a potential tax payer. The proviso reads as follows:

⁸⁸[Provided also   that a person referred to in clause (b), who is not required to furnish a return under this sub-section, and who during the previous year––

(i) has deposited an amount or aggregate of the amounts exceeding one crore rupees in one or more current accounts maintained with a banking company or a co-operative bank; or

(ii) has incurred expenditure of an amount or aggregate of the amounts exceeding two lakh rupees for himself or any other person for travel to a foreign country; or

(iii) has incurred expenditure of an amount or aggregate of the amounts exceeding one lakh rupees towards consumption of electricity; or

(iv) fulfils such other conditions as may be prescribed,

shall furnish a return of his income on or before the due date in such form and verified in such manner and setting forth such other particulars, as may be prescribed.]

Per author:

This proviso has been inserted vide FINANCE (NO. 2) ACT, 2019 w.e.f.  01.04.2020 that is AY 2020-21 and this is a substantive provision casting certain new obligations on people having some substantial transaction.

A ROI is made mandatory does not mean that assesse is supposed to file ROI for seeking relief which is allowable as basic exemption or certain exemption and deductions except those in which case there is specific mandate to claim by filing exemption or deduction by filing ROI within applicable specified last date (popularly called due date) for filing of ROI.

This proviso was applied in the  case for AY 200-09.

In 2021 (10) TMI 551 - ITAT RAJKOT  SMT. ASHABA RAJENDRASINH ZALA VERSUS CIT (A) , JAMNAGAR  I.T.A. No. 409/Rjt/2018 order  Dated: - 30 September 2021, it has been held that the proviso is applicable from AY 2020-21 and does not apply to the case in hand relating to an earlier year i.e. AY 2008-09.

From order of ITAT:	observations of author
The instant appeal filed by the assessee is directed against the order dated 27.08.2018 passed by the Commissioner of Income Tax (Appeals), Jamnagar arising out of the order dated 18.02.2016 passed by the ITO, Ward - 1(1), Jamnagar under Section 144 r.w.s. 147 of the Income Tax Act, 1961 (hereinafter referred as to "the Act") for the Assessment Year (A.Y.) 2008-09.	This is a case of reassessment in which reassessment was made after about eight years from end of previous year ended on 31.03.2008
Denial of benefit of exemption/deduction to the tune of ₹ 1,45,000/- under Section 54(1)(ii) is the subject matter before us.	The amount involved is miniscule for the revenue but can be considered substantial by assesse in view of demand for tax, interest, penalty and possibility of prosecution forcing assesse to indulge into litigation. Furthermore deduction us 54(1)(ii) was not dependent on filing of ITR. An assesse having no taxable income after considering such deductions, was not required to file ROI.
However, the benefit of basic exemption of ₹ 1,45,000/- has not been extended to the assessee. The Ld. CIT(A) while rejecting the claim of the assessee observed that the assessee was mandatorily required to file the return of income for the year under consideration which he has failed to do. In that view of the matter the claim of deduction has been rejected.	How a senior and independent judicial officer of the rank of CIT(A) took such a view is not understandable. How he considered that vide amendment introduced in 1919, assesse could be compelled to file ROI for PYE 31.03.2008 within due date which could be within July to December 2008 in different cases at relevant times. This really put a big question mark on ability and also integrity of such senior officers. This appears to be a clear case of  harassment by AO and CIT(A) both. Even if it was unintended, it is unfortunate.
From order of CIT(A) as reproduced in order of ITAT Again since the appellant himself has considered value of the property of ₹ 11,05,750/- which is less than the value of the property of ₹ 11,65,000/- as made by the DVO as per his valuation report and therefore the AO is directed to consider the cost of acquisition of property at 11,05,750/- and accordingly compute the capital gain."	So there is no relief allowed by CIT(A) because assesse has claimed lower amount as cost of acquisitions in comparison to valuation suggested by DVO in his report.
On the other hand, the assessee's contention is this that the amendment of this proviso of Section 139(1) is applicable w.e.f. assessment 2020-21 which is not applied in the case of the applicant. In this regard, he has drawn our attention to Page 132 of the Paper Book upon considering the same we find merit and substance in the case made out by the assessee. It appears that the 6th Proviso of Section 139(1) after amendment is applicable for A.Y. 2020-21. The assessee's case is not coming under the purview of such proviso. Hence, we hold that the assessee is entitled to such claim under Section 54 of the Act. We, therefore, allow the appeal by directing the Ld. AO to pass orders in accordance with law.	For claiming deduction us 54 it was not mandatory to file ROI. In many small and medium  cases of non- high income group people,  a property is sold and another is acquired so there is no taxable capital gain and filing of ITR may not be necessary. In such small cases harassment of assesse is not proper.

From above discussion and reading of judgment of ITAT it is clear that the  income tax department (ITD) is working unnecessarily and harassing even poor people who are not even in category of middle class people. From the amounts of cost of property sold and acquired by assesse and addition made by the AO and confirmed by CIT(A) and deleted by ITAT it can be said that it is sheer wastage of public money by un-necessary litigation initiated by revenue on frivolous issues.

A reassessment is a long drawn proceeding involving lot of time of authorities from issue of notice us 148, filing of ITR, seeking reasons, reply and objections to reasons, order on objections and generally scrutiny assessment, then appeals before first and second appellate authorities is very common, even matters are carried before High Courts and the supreme Court.

It is also experienced that for small sums reassessment proceedings are initiated without proper application of mind by AO and authorities approving giving prior approvals on various steps.

In this case the following authorities have to spent time directly in the matter:

1. The AO and his team and organization
2. The CIT(A) and his  team and organization
3. The DVO and his  team and organization
4. Two members of ITAT and ITAT, their team and organization.

A search about cases laws on s. 147  and 148 provide following results on this website:

Search in Case Laws

Search Results: for S.147 any Court without searching text Showing 1 to 20 of 9480 Records Search Results: for S.147 any Court without searching text Search Text: in favor of revenue  Showing 1 to 20 of 3617 Records

Search Results: for S.147 any Court without searching text Search Text: in favor of assesse Showing 1 to 20 of 5531 Records Search Results: S.148 without searching text in favor of revenue Showing 1 to 20 of 3116 Records Search Results: in favor of assesse for S.148 without searching text Showing 1 to 20 of 4929 Records

Search Results:  with any Court S,147  Search Text: reassessment Showing 1 to 20 of 6688 Records

Search Results: Supreme Court S.147  Search Text: reassessment  Showing 1 to 20 of 51 Records Search Results: Supreme Court – orders/ highlights Search Text: reassessment Showing 1 to 20 of 27 Records

Search Results:  any Court , section 148 Search Text: reassessment  Showing 1 to 20 of 5702 Records

Search Results: S.148 Supreme Court Search Text: reassessment    Showing 1 to 20 of 51 Records

Search Results: Supreme Court   Orders/ highlights Search Text: reassessment Showing 1 to 20 of 27 Records

These results are only illustrative and not exhaustive. These shows magnitude of reassessment proceedings which resulted in appeals from Tribunal onwards. Matters closed at assessment or first appeal stage are not covered by these searches.

Minimum limit for reassessment proceedings:

In view of above discussions and experience about failure of reassessment proceedings and nominal benefits derived by revenue in cases of reassessment, a minimum limit of tax effect of Rs. ten lakh can be provided to save valuable time of tax authorities and tax payers.