Section 139

Section 139 — the law in short

What the courts have decided on section 139, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CBDT v Vasudeva Adigas Fast Food P Ltd Supreme CourtHelps taxpayerNo later treatment found
  The CBDT rejected my condonation application without dealing with my reasons. Can I challenge that?
  Yes. A rejection that does not properly consider the reasons advanced and the documents filed is not a proper exercise of the s.119(2)(b) power. Where the delay was demonstrably beyond the assessee's control — prolonged promoter-investor litigation — the High Court was entitled to set the rejection aside and direct that the application be allowed, and the Supreme Court dismissed the Revenue's SLP.
• PCIT v Wipro Ltd Supreme CourtHelps department
  A declaration was required by the due date and you filed it late. Is that fatal?
  Yes. Both limbs — furnishing the declaration, and doing so before the due date for the original return — are mandatory, not directory. A claim made only in a belated revised return does not qualify.
• M/s Fibre Boards (P) Ltd. v CIT, Bangalore Supreme CourtHelps taxpayer
  I am shifting my factory out of an urban area. I have paid advances for the new land, building and machinery but nothing is bought yet, and I have not deposited anything in the capital gains scheme. Is s.54G lost?
  No. The Supreme Court held that advances paid towards the purchase or acquisition of new machinery, plant, land or building amount to 'utilisation' of the capital gain for the purposes of s.54G, so the deposit machinery in s.54G(2) is not attracted and the assessee has the full three-year window in s.54G(1) in which to complete the purchases. The Court also held that the 1967 notification declaring Thane an urban area survived the omission of s.280ZA, so the section was workable.
• Goetze (India) Ltd v CIT Supreme CourtHelps department
  You want to make a claim you missed, but the time to revise the return has gone. Can you just write to the officer?
  Not to the Assessing Officer — a claim before him needs a revised return. But the Court expressly said this does not touch the Tribunal's power under s.254, so the appellate route stays open.
• Brij Mohan v CIT Supreme CourtHelps department
  The penalty provision was made harsher after my assessment year but before I filed the return. Which version applies to my concealment penalty?
  The one in force when you filed. The Supreme Court held that a penalty is imposed for the commission of a wrongful act, so it is the law operating on the date the wrongful act is committed that determines the penalty. Where the penalty is for concealment of particulars of income, the concealment occurs when the return is filed, and the law ruling on that date applies. It is wholly immaterial that the concealed income falls to be assessed for an earlier year. The substituted clause brought in by the Finance Act, 1968 therefore governed a return filed in April 1968.
• CIT v Manmohan Das (Deceased) Supreme CourtHelps taxpayer
  In the loss year the officer recorded that the loss could not be carried forward, and we did not appeal. The officer of the set-off year now says that finding is final against us. Is it?
  No. The Supreme Court held that whether a loss may be carried forward to the following year and set off is to be determined by the Income-tax Officer dealing with the assessment of that subsequent year, and that a decision recorded in the loss year — under s.24(3) of the 1922 Act, the provision now corresponding to s.157 — that the loss cannot be set off is not binding on the assessee. Failure to appeal the loss year order therefore does not forfeit the claim.
• Kohinoor Educational Services Pvt Ltd v Union of India High CourtHelps department
  The payee will not give me the accountant's certificate in Form 26A, so I am stuck as an assessee in default. Can the High Court order it to sign?
  Not where the payee does not have the records to certify from. The Delhi High Court held that the Form 26A certificate is not a routine administrative letter but a certification of specific statutory facts made after examining the payee's return, accounts and documents. Mandamus lies to enforce a clear legal right and a corresponding public duty; it does not lie to command an authority to certify facts it cannot verify. Proof that the payee filed its return, and bank statements showing receipts, are not proof that the particular sum was taken into account in computing its income. The review petition was dismissed, no error apparent being shown.
• Kohinoor Educational Services v Union of India High CourtHelps departmentNo later treatment found
  My payee refuses to sign the accountant's certificate for Form 26A. Can I get a writ compelling him to issue it?
  No, not where the records the certificate must rest on no longer exist. The deductor wanted a mandamus against the Airports Authority of India to issue the accountant's certificate in Annexure A to Form 26A under rule 31ACB, so as to bring itself within the first proviso to section 201(1) and escape disallowance under section 40(a)(ia). The Authority's answer was that its records for the period before April 2013 had been lost in floods in 2015 and could not be retrieved from the legacy system after migration. The Delhi High Court held that a mandamus enforces a clear legal right and a corresponding public duty, and does not lie to command an authority to issue a factual certification when the records on which such a certification must rest are not there. Replies under the Right to Information showing that returns had been filed did not fill the gap, because proof that a return was filed is not proof that a particular receipt from a particular payer was accounted for in it. The review petition was dismissed.
• Optum Global Solutions India Pvt Ltd v PCIT High CourtHelps taxpayerNo later treatment found
  You signed an APA and filed a modified return under s.92CD. The Commissioner has now issued a s.263 notice on the old assessment order. Can he?
  Not on this reasoning. Once a modified return is filed under the APA it has to be treated as a return filed under s.139, and the earlier return and earlier assessment order lose their efficacy for all practical purposes; a fresh assessment order is what has to be passed. Allowing the s.263 notice on the superseded order to run would make the APA and the modified return inconsequential, and nothing stops the Assessing Officer from taking the very same points while re-scrutinising the modified return. Both writ petitions were allowed and the show cause notices set aside.
• Anurag Bagaria v Income Tax Department High CourtHelps taxpayerNo later treatment found
  After a search I filed revised returns giving up a capital gains claim and paid the tax. Can I still be prosecuted under s.276C(1) for wilful evasion?
  Not on those facts. The Karnataka High Court quashed the s.276C(1) prosecution, holding that a claim of deduction which the revenue does not accept is not by itself a wilful evasion of tax — an incorrect or erroneous claim can come from a wrong reading of the law. The department's special leave petition against that order was dismissed.
• Kunal Structure (India) Pvt Ltd v Dy CIT High CourtHelps taxpayer
  My return was defective and I cured the defect ten months later. Does the s.143(2) clock run from the original filing or from the day I removed the defect?
  From the original filing. Where the defect is removed within the time the Assessing Officer allowed, the return relates back to the date on which it was originally furnished, and the six-month limitation for a s.143(2) notice is counted from the end of the financial year in which that original return was filed. On the facts the scrutiny notice was issued nearly a year after that period had run out and was held barred. The Revenue's special leave petition was dismissed.
• Humayun Suleman Merchant v CCIT High CourtHelps departmentNo later treatment found
  I never deposited the unspent sale proceeds in a capital gains account. Can I still claim 54F?
  No, not for the unspent part. Section 54F(4) requires the amount not utilised towards the new house to be deposited in the notified account before the due date under section 139(1), and failure to do so confines the exemption to what was actually spent.
• Court On Its Own Motion v CIT High CourtHelps taxpayer
  CPC has refused my TDS credit and adjusted the refund against an old demand. What did the Delhi High Court actually direct?
  Taking up the problem on its own motion, the Delhi High Court issued directions on both limbs. A TDS claim supported by the deductor's certificate is not to be rejected merely because the uploaded information does not tally, and unmatched challans are to be verified and corrected within a fixed time. And s.245 is a two-stage provision: prior intimation of the proposed adjustment, a reply from the assessee, consideration of that reply by the Assessing Officer, an order under s.245, and communication of the outcome. A computerised set-off without that sequence does not comply with the section.
• CIT v Govind Nagar Sugar Ltd High CourtHelps taxpayer
  The return was filed late, so the officer has refused to carry forward everything — including unabsorbed depreciation. Is depreciation really caught by the late return bar?
  No. The Delhi High Court held that s.80 and s.139(3) apply to business losses and not to unabsorbed depreciation, which is governed exclusively by s.32(2). There is accordingly no obligation to file the return within the prescribed time in order to carry forward depreciation.
• Sonaj And Company v DCIT — a belated block return under the 1995 Chapter is still a valid return, and the 2024 amendment proves it ITATHelps taxpayerNo later treatment found
  The block return was filed after the time given in the section 158BC notice and the notice under section 143(2) came more than twelve months later. The department says the return was non est. Is it?
  For a search governed by the 1995 Chapter XIV-B, no. The Pune Tribunal held that there was no provision in the erstwhile section 158BC making a block return filed beyond the time specified in the notice non est, so the belated return was a valid return, the notice under section 143(2) had to issue within twelve months of the end of the month in which it was filed, and a notice issued later made the block assessment null and void. The Tribunal reached that conclusion partly BECAUSE the amended section 158BC, applicable from 1 September 2024, now says expressly that a return furnished beyond the period allowed shall not be deemed to be a return under section 139 — a provision it treated as absent from the earlier law.
• Jyotsna Kunwar v ITO, Ward 41(1)(1), Mumbai ITATHelps taxpayerNo later treatment found
  The Assessing Officer says s.54GB died on 31 March 2017, that the most I can invest is Rs 50 lakh, and that I must invest the whole net consideration. Are any of those right?
  None of them. The proviso to s.54GB(5) substitutes a later date where the investment is in an eligible start-up — for the year before the Tribunal the substituted date was 31 March 2022 — so a transfer after 31 March 2017 is not automatically out. There is no Rs 50 lakh cap anywhere in s.54GB. And where less than the whole net consideration is invested, clauses (a) and (b) of s.54GB(1) give a proportionate exemption, not nil.
• ITO (TDS) v Sashwat Energy P Ltd ITATHelps taxpayerNo later treatment found
  My deductee has returned the income and paid the tax, and I have filed Form 26A. I know the s.201(1) demand goes — but for how long does s.201(1A) interest run against me?
  To the date the resident payee furnished his return of income, not to the date you eventually pay. The Mumbai Bench stated the rule expressly: where the payer is not deemed to be an assessee in default under s.201(1) because the resident payee paid the tax, interest under s.201(1A)(i) is payable from the date on which the tax was deductible to the date of furnishing of the return of income by that resident payee. The s.201(1) demand itself was set aside subject to verification.
• Krishnakumar Manda v DCIT, Circle-12(1), Hyderabad ITATHelps departmentNo later treatment found
  The addition under the s.68 group has been confirmed and I never showed the income in my return. Is there any discretion left to the AO not to levy the s.271AAC penalty?
  On this decision, none. The Hyderabad Bench held that once income of the s.68 to s.69D kind is brought to tax and sustained, and the conditions of the proviso are not satisfied, the levy of the s.271AAC penalty is automatic and mandatory, and the language of the section leaves the AO no discretion.
• Manish Kumar Vijay v ITO ITATHelps taxpayer
  CPC added income because Form 26AS shows more receipts than my 44AD turnover. Can they do that?
  Not on the 26AS entry alone. Form 26AS is a third-party information source and is subject to error; here the deductor had reported the TDS against the wrong PAN, so the figure evidenced no receipt at all. An adjustment made without verifying the underlying transaction was deleted.
• Shankar Lal Ludhani v DCIT, Central Circle, Ajmer ITATHelps taxpayerNo later treatment found
  I left the surrendered cash out of my original return and brought it in only by a revised return under s.139(5). Does the proviso to s.271AAC(1) still protect me?
  On this decision, yes. The Jaipur Bench held that once a revised return is filed the original stands withdrawn and is substituted by the revised return, so where the revised return has been accepted as a return under s.139 the proviso to s.271AAC(1) is answered and the penalty cannot stand.
• Rohit Khandelwal v AC/DCIT, Central Circle, Muzaffarpur ITATHelps taxpayerNo later treatment found
  I disclosed the seized cash and paid the s.115BBE tax, but my return was a belated one under s.139(4). The AO says the proviso to s.271AAC(1) only saves a return under s.139(1). Is he right?
  No. The proviso says "return of income furnished under section 139" and does not confine itself to s.139(1); the Tribunal held that where the legislature meant a particular sub-section it said so, and deleted the penalty on a belated return filed under s.139(4).
• International Fresh Farm Products (India) Ltd v ITO ITATHelps taxpayerNo later treatment found
  CPC has refused to let me carry forward my s.35AD specified-business loss because the return went in late. Can the officer of the loss year decide that at all?
  On this Tribunal's view, no. Carry forward and set off are two separate stages: the officer of the loss year determines and notifies the loss, and it is the officer of the later year, when set-off is actually claimed, who decides whether s.80 read with s.139(3) bars it. The Bench set aside the CIT(A)'s order and directed the AO/CPC to remove the direction denying carry forward, expressly leaving the due-date objection alive for the year of set-off.
• M/s Sri Jayabharath Timber Depot v ITO (TDS), Tirunelveli ITATHelps departmentNo later treatment found
  I produced the buyers' Form 27C during the assessment, and later a Form 27BA from an accountant. The officer says both are too late. Is he right?
  On this order, yes. The Chennai Tribunal read s.206C(1A) with s.206C(1B) and held that the seller must either collect TCS at the time of sale or obtain the Form 27C declaration and file a copy with the Commissioner by the seventh day of the month next following the month of receipt, so that a Form 27C produced for the first time during assessment proceedings is not within a reasonable time. It also rejected the alternative plea under the first proviso to s.206C(6A), holding that a Form 27BA obtained on 24 April 2021 — seven years after the end of the relevant assessment years — came too late for the immunity, and dismissed both appeals.
• Dar Al Handasah Consultants (Shair & Partners) India Pvt Ltd v DCIT ITATHelps taxpayerNo later treatment found
  I signed an APA with rollback and filed a modified return under s.92CD offering additional income. The officer says the proviso to s.92C(4) bars any Chapter III deduction on that extra income. Is he right?
  He is not. The proviso to s.92C(4) bars a s.10A deduction on income by which the total income is ENHANCED by a transfer pricing addition made by the authorities; income the assessee itself offers in a modified return under the APA is not such an addition. Section 92CD(2) then supplies the positive answer: save as otherwise provided in that section, all other provisions of the Act apply as if the modified return were a return under s.139, so any deduction otherwise available applies to the income offered in the modified return.
• Motorola Inc v DCIT ITATHelps taxpayer
  The Assessing Officer issued me a notice under section 142(1) calling for a return after the assessment year had already ended. Is the assessment made on that notice valid?
  No. The Delhi Special Bench held that a notice under section 142(1)(i) calling for a return cannot be issued after the end of the relevant assessment year. Where no return has been filed and the year has closed, the case is one of escaped assessment and the Assessing Officer must proceed under section 148 after satisfying section 147 - recording reasons and forming a reason to believe. Allowing him to call for a return under section 142(1)(i) instead would let those requirements be sidestepped, and the two provisions cannot operate in the same field at the same time. The notices in Motorola's and Ericsson's cases were issued after the year ended, so those assessments were invalid.
• In re Vanenburg Group B.V. Advance RulingHelps taxpayerNo later treatment found
  Our Dutch company is moving its Indian subsidiary's shares to another group company in the Netherlands. If the gain is exempt under the treaty, do we still have to withhold, file a return and do a transfer pricing study?
  No, on all four counts. The Authority ruled that no taxable capital gain arose in India on Vanenburg Group B.V.'s proposed transfer of its shares in Cordys R&D (India) Pvt Ltd to Cordys Holding B.V., because article 13(5) of the India-Netherlands agreement leaves such gains taxable in the Netherlands where the transfer is part of a corporate reorganisation and the alienator holds at least ten per cent of the transferee. It followed that the transferee need not withhold under section 195, that no return was required under section 139, and that the transfer pricing provisions in sections 92 to 92F did not apply. The ruling binds only Vanenburg.
• In re Dun and Bradstreet Espana S.A. Advance RulingHelps taxpayerNo later treatment found
  We buy standardised business information reports from a Spanish company and resell them here. Do we have to withhold tax on what we pay, as royalty or technical fees?
  No. The Authority ruled that the payments made by Dun and Bradstreet Information Services India for electronic purchases of business information reports from its Spanish associate were the Spanish company's business profits within article 7 of the India-Spain agreement; that the Spanish company had no permanent establishment in India under article 5; that it was therefore not taxable in India on those profits; and that the Indian company was not required to withhold tax under section 195. Buying a finished report was likened to buying a book, not to acquiring intellectual property or a service. Three of the seven questions were not pressed. The ruling binds only that applicant.
• In re Fidelity Advisor Series VIII Advance RulingHelps taxpayerSuperseded by amendment
  Our US fund buys and sells Indian shares through local brokers and a custodian bank. Are our gains business profits or capital gains, and does the custodian give us a permanent establishment?
  Business profits, and no permanent establishment - so the fund won. The Authority ruled that the gains arising to Fidelity Advisor Series VIII from sales of its portfolio investments in India were its business profits covered by article 7 of the India-US convention, the shares and securities being held as business assets. It further ruled that the fund had no permanent establishment in India under article 5: it had no branch, office, employee or dependent agent here, and Standard Chartered Bank, its domestic custodian, was an independent agent within paragraph 5 of article 5. Without a permanent establishment the fund was not taxable in India under the convention. The ruling binds only that applicant.
• Statutory position — s.206C(6A) first proviso, Form 27BA, and the two interest rates in s.206C(7) from 1 April 2025 CBDT Circulars & InstructionsCuts both ways
  I did not collect TCS but my buyer has filed his return and paid the tax. Am I still an assessee in default, and what interest do I owe?
  The first proviso to s.206C(6A) says a person responsible for collecting tax under sub-section (1) or sub-section (1C) who fails to collect is not to be deemed an assessee in default if the buyer or licensee or lessee has furnished his return of income under s.139, has taken the amount into account in computing income in that return, and has paid the tax due on the income declared — and the collector furnishes a certificate to that effect from an accountant in the prescribed form. Rule 37J prescribes that certificate as Form 27BA, to be furnished to the Director General of Income-tax (Systems) or his authorised person in the procedures, formats and standards that officer specifies.
• Statutory position — s.170A as substituted from 1 April 2023: the successor's modified return within six months of the month of the order, in Form ITR-A under rule 12AD, and what the Assessing Officer must then do CBDT Circulars & InstructionsCuts both ways
  The NCLT has just sanctioned our merger, and it applies to two years for which returns were already filed and one of which is already assessed. How do I get those years re-done, how long have I got, and in what form?
  Section 170A, as substituted with effect from 1 April 2023, gives the successor a modified return. Where, before the date of an order of a High Court or tribunal or an Adjudicating Authority under the Insolvency and Bankruptcy Code, 2016 in a business reorganisation, a return has been furnished under section 139 by an entity to which the order applies for an assessment year relevant to a previous year to which the order applies, the successor shall furnish a modified return within six months from the end of the month in which the order was issued, in the prescribed form and manner, in accordance with and limited to that order. Sub-section (2) then tells the Assessing Officer what to do: if the assessment or reassessment for that year is already complete when the modified return is filed, he passes an order modifying the total income already determined; if it is pending, he passes an order assessing or reassessing the total income in accordance with the reorganisation order and taking the modified return into account. Rule 12AD prescribes Form ITR-A, to be furnished electronically under digital signature.
• Statutory position — s.194P: the specified senior citizen, the declaration, and relief from filing CBDT Circulars & InstructionsCuts both waysNo later treatment found
  My client is 78, has only pension and interest from the same bank, and does not want to file a return. Does s.194P get him out of filing, and what does the bank need from him?
  Yes, but only if every condition is met, and the relief is a consequence of the bank's deduction and not of the client's age. Section 194P(2) provides that s.139 shall not apply to a specified senior citizen for the assessment year relevant to the previous year in which tax has been deducted under sub-section (1) — so if the bank does not compute and deduct, the return obligation remains. Sub-section (1) requires a 'specified bank' to compute the total income after giving effect to Chapter VI-A deductions and the s.87A rebate and to deduct tax on that total income at the rates in force, and the Explanation confines a 'specified senior citizen' to a resident individual aged seventy-five or more at any time during the previous year, whose income consists of pension and no other income except interest received or receivable from an account maintained by him in the SAME specified bank in which he receives his pension, and who has furnished the prescribed declaration to that bank.
• Statutory position — s.3 of the Black Money Act: the charge at thirty per cent, the proviso to s.3(1) that fixes the year of charge for an undisclosed foreign asset, and what ss.4 and 5 bring in and refuse to take out CBDT Circulars & InstructionsCuts both waysValidity unconfirmed
  The department has issued a Black Money Act notice for a foreign bank account opened in 2007. The Act only came into force in 2015. On what does the charge on that asset actually rest, and in which year is it charged?
  On s.3(1) and its proviso. The Act came into force on 1 July 2015 (s.1(3): "Save as otherwise provided in this Act, it shall come into force on the 1st day of July, 2015"). Section 3(1) charges tax "on every assessee for every assessment year commencing on or after the 1st day of April, 2016 ... in respect of his total undisclosed foreign income and asset of the previous year at the rate of thirty per cent of such undisclosed income and asset". The proviso to s.3(1) is the provision that matters for an old asset: "Provided that an undisclosed asset located outside India shall be charged to tax on its value in the previous year in which such asset comes to the notice of the Assessing Officer." So the year of charge for an asset is not the year of acquisition but the year of coming to notice, and s.3(2) defines the "value of an undisclosed asset" as its fair market value determined in the prescribed manner. Section 4(1) puts three things into the total: (a) undisclosed income from a source outside India, (b) income from a source outside India where a return was required under s.139 of the Income-tax Act and none was furnished in time, and (c) the value of an undisclosed asset located outside India. Section 4(2) keeps out of the total any variation made under ss.29 to 43C, ss.57 to 59 or s.92C of the Income-tax Act, and s.4(3) keeps what is charged here out of total income under that Act. Section 5(1)(i) forbids any deduction for expenditure or allowance and any set off of loss, "whether or not it is allowable in accordance with the provisions of the Income-tax Act"; s.5(1)(ii) allows one reduction only — income already assessed or assessable under the Income-tax Act or under this Act is reduced from the value of the undisclosed asset if the assessee furnishes evidence to the Assessing Officer's satisfaction that the asset was acquired from that income — and s.5(2) prorates that reduction for immovable property.
• Statutory position — s.115-I: the non-resident Indian's annual election OUT of Chapter XII-A, made in the return itself CBDT Circulars & InstructionsCuts both ways
  Chapter XII-A gives my NRI client a flat twenty per cent with no deductions, but on his numbers the ordinary slab rates with Chapter VI-A relief come out cheaper. Can he simply not use the chapter, and does he have to commit for good?
  He can, and the election is for one assessment year at a time. Section 115-I lets a non-resident Indian elect not to be governed by Chapter XII-A for any assessment year by furnishing his return for that year under section 139 and DECLARING THEREIN that the chapter shall not apply to him for that year; if he does so, his total income for that year is computed and taxed in accordance with the other provisions of the Act.
• Statutory position — s.115H: continuation of the Chapter XII-A benefit after the assessee becomes resident, and the two things it does not cover CBDT Circulars & InstructionsCuts both ways
  My client has returned to India for good and is now assessable as a resident. He holds shares and public-company debentures bought in foreign exchange while he was abroad. Can he keep the twenty per cent rate, and on what?
  He can, but only on part of it, and only if he files the declaration on time. Section 115H lets a person who was a non-resident Indian in a previous year and becomes assessable as resident in a subsequent year furnish a declaration in writing ALONG WITH his return under section 139 for that assessment year, and the chapter then continues to apply to him until the asset is transferred or converted into money — but the continuation extends only to INVESTMENT INCOME, and only from assets of the nature in sub-clauses (ii), (iii), (iv) and (v) of section 115C(f). Shares in an Indian company, which are sub-clause (i), are not in the list.
• Statutory position — s.115G: no return need be furnished where the only income is investment income or long-term capital gains and tax has been deducted at source CBDT Circulars & InstructionsCuts both ways
  My NRI client's only Indian income for the year was interest on debentures of an Indian public company subscribed to in foreign exchange, and the company deducted tax at source. He did not file a return and has now had a notice. Was he obliged to file?
  If both conditions in section 115G are satisfied, no. It is not necessary for a non-resident Indian to furnish a return under section 139(1) if his total income assessable under the Act during the previous year consisted ONLY of investment income or long-term capital gains or both, AND the tax deductible at source under Chapter XVII-B has been deducted from that income.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.