The officer declared your return invalid for non-payment of self-assessment tax and then assessed you under s.143(3) starting from the figures in that very return. Can he do both?
No. The Tribunal held that once a return is treated as defective and invalid under s.139(9), the only recourse legally available to the Assessing Officer is to frame the assessment under s.144. An assessment under s.143(3) built on the income returned in a return the officer has himself declared invalid cannot stand, and the Tribunal quashed it.
Decided by the ITAT (M. Balaganesh, Accountant Member and Vimal Kumar, Judicial Member) on 2024-10-16, reported as ITA Nos. 242 and 249/Del/2024, assessment year 2013-14. It bears on section 139(9), section 139(9) proviso, section 139(9) Explanation, section 140A, section 143(3), section 144, section 119 of the Income Tax Act 1961, in Assessment & Scrutiny, How Tax Law Is Read and Appeals matters.
This is the internal contradiction that appears again and again in assessments following a s.139(9) notice. The department wants the benefit of the returned figure and the consequence of invalidity at the same time. The section does not allow it: if the return has gone, the assessment is a best-judgment assessment under s.144 and the returned income is not the starting point.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee filed its return for assessment year 2013-14 on 30 March 2015 declaring income of Rs. 107,56,68,480 with self-assessment tax payable of Rs. 49,00,67,340. On 29 October 2015 the Assessing Officer issued a notice under s.139(9) requiring the defect to be removed, the defect being the failure to pay the self-assessment tax due on the returned income. The assessee, in financial difficulty, did not pay. It had booked sales income on accrual from debtors who had not acknowledged the invoices and from whom no payment had been received. The Assessing Officer treated the return as invalid under s.139(9) and nonetheless proceeded to assess under s.143(3), taking the returned income of Rs. 107.57 crores as the starting point and making disallowances of Rs. 2,85,77,271 to arrive at a total income of Rs. 1,10,42,45,751.
The Tribunal quashed the assessment framed under s.143(3). Once the return is treated as defective and invalid under s.139(9), the only recourse legally available to the Assessing Officer is to frame the assessment under s.144 (para 8). On merits the Tribunal held that the officer should not tax the income offered on a mercantile basis in respect of unrealised debtors (para 14).
The Tribunal took the two CBDT instruments placed before it, of 13 November 2013 and 12 December 2017, the later of which directs that in pending cases where the defect specified under s.139(9) has not been rectified the officer is to initiate proceedings under s.144, and that where the defect is not removed by the time of passing the assessment order the case is to be concluded by an order under s.144 (paras 9 and 10). Such instructions are binding on the departmental authorities under s.119, for which the Tribunal relied on Commissioner of Customs v. Indian Oil Corporation Ltd., 165 ELT 257 (SC) (para 12). It followed that the officer, having declared the return invalid, had no jurisdiction to make a s.143(3) assessment on it. On the accrual question the Tribunal noted that for assessment years 2014-15 and 2015-16 the officer had accepted the same explanation and made no addition, and applied the principle of consistency in Radhasoami Satsang v. CIT, 193 ITR 321 (SC) (paras 13 and 14).
Once the return is treated as defective and invalid in terms of section 139(9) of the Act, the only recourse legally available
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Handle my notice → Ask a CA on WhatsAppNo. The Tribunal held that once a return is treated as defective and invalid under s.139(9), the only recourse legally available to the Assessing Officer is to frame the assessment under s.144. An assessment under s.143(3) built on the income returned in a return the officer has himself declared invalid cannot stand, and the Tribunal quashed it. This was decided by the ITAT (M. Balaganesh, Accountant Member and Vimal Kumar, Judicial Member) and bears on section 139(9), section 139(9) proviso, section 139(9) Explanation, section 140A, section 143(3), section 144, section 119 of the Income Tax Act 1961. It is reported as ITA Nos. 242 and 249/Del/2024, assessment year 2013-14. This is the internal contradiction that appears again and again in assessments following a s.139(9) notice. The department wants the benefit of the returned figure and the consequence of invalidity at the same time. The section does not allow it: if the return has gone, the assessment is a best-judgment assessment under s.144 and the returned income is not the starting point. If it applies to you, the first step is this: Check what the officer did after declaring the return invalid; if he assessed under s.143(3) and took the returned income as his opening figure, the jurisdictional ground is available.
The assessee filed its return for assessment year 2013-14 on 30 March 2015 declaring income of Rs. 107,56,68,480 with self-assessment tax payable of Rs. 49,00,67,340. On 29 October 2015 the Assessing Officer issued a notice under s.139(9) requiring the defect to be removed, the defect being the failure to pay the self-assessment tax due on the returned income. The assessee, in financial difficulty, did not pay. It had booked sales income on accrual from debtors who had not acknowledged the invoices and from whom no payment had been received. The Assessing Officer treated the return as invalid under s.139(9) and nonetheless proceeded to assess under s.143(3), taking the returned income of Rs. 107.57 crores as the starting point and making disallowances of Rs. 2,85,77,271 to arrive at a total income of Rs. 1,10,42,45,751. The matter was decided on 2024-10-16 by the ITAT (M. Balaganesh, Accountant Member and Vimal Kumar, Judicial Member). On those facts the ITAT held as follows. The Tribunal quashed the assessment framed under s.143(3). Once the return is treated as defective and invalid under s.139(9), the only recourse legally available to the Assessing Officer is to frame the assessment under s.144 (para 8). On merits the Tribunal held that the officer should not tax the income offered on a mercantile basis in respect of unrealised debtors (para 14).
The Tribunal took the two CBDT instruments placed before it, of 13 November 2013 and 12 December 2017, the later of which directs that in pending cases where the defect specified under s.139(9) has not been rectified the officer is to initiate proceedings under s.144, and that where the defect is not removed by the time of passing the assessment order the case is to be concluded by an order under s.144 (paras 9 and 10). Such instructions are binding on the departmental authorities under s.119, for which the Tribunal relied on Commissioner of Customs v. Indian Oil Corporation Ltd., 165 ELT 257 (SC) (para 12). It followed that the officer, having declared the return invalid, had no jurisdiction to make a s.143(3) assessment on it. On the accrual question the Tribunal noted that for assessment years 2014-15 and 2015-16 the officer had accepted the same explanation and made no addition, and applied the principle of consistency in Radhasoami Satsang v. CIT, 193 ITR 321 (SC) (paras 13 and 14). In the words reproduced by the source cited on this page: "Once the return is treated as defective and invalid in terms of section 139(9) of the Act, the only recourse legally available" The decision followed or applied Commissioner of Customs v. Indian Oil Corporation Ltd., 165 ELT 257 (SC) — relied on for CBDT instructions being binding under s.119; Radhasoami Satsang v. CIT, 193 ITR 321 (SC) — applied on consistency.
It was decided by the ITAT on 2024-10-16 and is reported as ITA Nos. 242 and 249/Del/2024, assessment year 2013-14. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 139(9), section 139(9) proviso, section 139(9) Explanation, section 140A, section 143(3), section 144, section 119, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The Tribunal quashed the assessment framed under s.143(3). Once the return is treated as defective and invalid under s.139(9), the only recourse legally available to the Assessing Officer is to frame the assessment under s.144 (para 8). On merits the Tribunal held that the officer should not tax the income offered on a mercantile basis in respect of unrealised debtors (para 14). It arises in Assessment & Scrutiny, How Tax Law Is Read and Appeals matters, on section 139(9), section 139(9) proviso, section 139(9) Explanation, section 140A, section 143(3), section 144, section 119 of the Income Tax Act 1961, and was decided by M. Balaganesh, Accountant Member and Vimal Kumar, Judicial Member. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Put the CBDT letter of 12 December 2017 on the record; it directs the officer to proceed under s.144 where the defect has not been removed by the time the assessment order is passed. Where the defect was non-payment of self-assessment tax and the reason was that the income was booked on accrual from debtors who never paid, take the accrual point on merits as well. Where the officer accepted the same treatment in later years, take consistency as a separate ground.
Searched for later treatment; none was found. That is not the same as a source affirming it. No later order applying, doubting or dissenting from this one was located on indiankanoon. The same proposition, that the assessment must be framed under s.144 where the defect is not removed, was reached by the Delhi Bench in Niranjan Lal Gupta v. ITO (ITA No. 6244/Del/2018, 19 April 2022) on the strength of the same CBDT letter. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
indiankanoon carries this order twice, at /doc/163900526/ and /doc/47633395/, both dated 16 October 2024 and both naming ITA Nos. 242 and 249/Del/2024. The quotation from the CBDT letter of 12 December 2017 in para 9 contains the word 'AD' where 'AO' is plainly meant; that is how the copy read prints it. No reporter citation appears on the copy read. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Tribunal quashed the assessment framed under s.143(3). Once the return is treated as defective and invalid under s.139(9), the only recourse legally available to the Assessing Officer is to frame the assessment under s.144 (para 8). On merits the Tribunal held that the officer should not tax the income offered on a mercantile basis in respect of unrealised debtors (para 14).
TaxSphere, “PME Power Solutions India Ltd v DCIT”, https://taxnotice.vittsphere.com/caselaw/case/pme-power-solutions-v-dcit-invalid-return-144-not-143-3/ (validity last checked 2026-09-17)
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Neither your original nor your revised return carried the self-assessment tax. The officer ignored that and assessed you on the original return. Is the assessment good?
You never asked the Assessing Officer for more time, the return went invalid for want of proof of tax, and you have gone to the Commissioner under s.264. Will that work?
You missed the fifteen days on a s.139(9) notice and the officer has written back that your return is invalid. Is there anything left to do?
The officer treated some of your s.153A returns as defective for non-payment of self-assessment tax and others as valid, on the same facts. Can the Tribunal put that right?
