Revised IT Return Permissible Only For Bona Fide Discovery Of Omission Or Mistake: Gujarat High Court

The Gujarat High Court on 9 April, held that a taxpayer can file a revised return under Section 139(5) of the Income Tax Act, 1961 only when it discovers a bona fide omission or wrong statement in the original return filed under Section 139(1). The provision cannot be used to make deliberate or afterthought changes.

The Bench of Justices A.S. Supehia and Pranav Trivedi emphasised that a valid revised return replaces the original return for all purposes under the Act, but only when it reflects genuine correction of errors and not a strategic revision of claims. It observed:

“.....The statute enables the assessee to file the revised return only if he or she discovers the omission or the wrong statement which were missing in the original return by way of any bona fide reasons and it should not be deliberate or concocted. The giving provision of Section 139 (5) of the Act will only come to the rescue of an assessee who has acted bona fidely and due to such omission or wrong statement in his original return he had failed himself to avail any advantage or claim.”

Gujarat State Energy Generation Ltd, for Assessment Year 2002–03, filed its original return declaring income and claiming depreciation under the Straight Line Method (SLM) under Rule 5 read with Appendix-IA of the Income Tax Rules. The department processed the return under Section 143(1) and granted a refund.

Later, the company filed a revised return under Section 139(5). It stated that certain power sales were not confirmed by the Gujarat Electricity Board, some expenditure on power consumption had not been claimed, and depreciation had been wrongly computed. It reduced taxable income, added expenditure claims, and switched depreciation to the Written Down Value (WDV) method under Rule 5 read with Appendix-I.

The Assessing Officer rejected the revised return, holding that no omission or wrong statement existed in the original return, and completed the assessment under Section 143(3) based on the original filing.

The Commissioner (Appeals) accepted the revised return but denied relief on merits. The Income Tax Appellate Tribunal, however, upheld the revised return and allowed the taxpayer's claims.

The High Court agreed with the Tribunal and found that the revised return arose from bona fide discovery of omissions, including unrecognised income and unclaimed expenditure. It reiterated that Section 139(5) permits revision only in such circumstances and that a valid revised return replaces the original return.

On depreciation, the Court noted that the taxpayer exercised its option within the due date under Section 139(1). It therefore allowed the switch to the WDV method in the revised return.

The Court further held that Rule 5(1A) operates as a machinery provision and must not be interpreted in a way that defeats substantive benefits when a valid revised return exists. It stated:

“.....the original return filed under Section 139(1) of the Act can further open an avenue of filing a revised return under Section 139(5) of the Act if an assessee discovers any omission or any wrong statement. Thus, any fact which was omitted or a wrong statement which was made in the original returns, subsequently comes to the knowledge of the assessee, can enable him to file a revised return under Section 139(5) of the Act. Such knowledge or discovery of the omission or a wrong statement cannot be deliberately used........”

The judges held that once the Tribunal accepted the revised return as valid, it replaced the original return for all purposes under the Act, including depreciation claims.

Accordingly, the High Court upheld the ITAT's order and dismissed the appeals filed by the Revenue.

For Appellant: Senior Standing Counsel, Maithili Mehta and Advocate, Karan Sanghani

For Respondent: Advocate, Soparkar