Section 139(9) – Defective Return

While filing an Income Tax Return (ITR) is a fundamental compliance requirement, sometimes the submitted return may not be considered valid by the Income Tax Department due to certain errors or omissions. To address such situations, the Income Tax Act, 1961, includes Section 139(9), which deals with "defective returns." This provision empowers the Assessing Officer (AO) to intimate the taxpayer about such defects and provide an opportunity for rectification.

What is a Defective Return?

A "defective return" is an Income Tax Return that the Income Tax Department deems incomplete, inconsistent, or incorrect, preventing its proper processing or assessment. It signifies a procedural flaw in the return rather than an intentional act of misrepresentation or evasion. When such a defect is identified, the taxpayer receives a notice under Section 139(9) from the Income Tax Department.

Common Reasons for a Defective Return Notice

A return can be considered defective for various reasons. Some common scenarios include:

• Incomplete or Incorrect Information:
  • Missing or incorrect personal details (e.g., PAN, Aadhaar, address).
  • Not furnishing mandatory information required in the ITR form.
• Mismatch of Tax Deducted at Source (TDS)/Tax Collected at Source (TCS):
  • The amount of TDS/TCS claimed in the ITR does not match the information available in Form 26AS, Annual Information Statement (AIS), or Taxpayer Information Summary (TIS).
  • Income on which TDS/TCS has been deducted is not fully reported in the return.
• Incorrect ITR Form Used: Filing the return using an incorrect form (e.g., filing ITR-1 when ITR-2 was applicable due to capital gains).
• Failure to Submit Required Documents: Though most e-filing doesn't require physical attachments, specific cases or responses to certain notices might require documentation which, if not provided, could lead to a defect.
• Discrepancies in Financial Statements (for Business/Profession Income): For returns involving business or professional income, if the balance sheet or profit & loss account is incomplete, inconsistent, or not filed, it can lead to a defective return.
• Income Tax Payment Mismatch: If the tax paid (including advance tax and TDS) does not reconcile with the income declared in the return.

Example: Ms. Priya files her ITR-1, but inadvertently forgets to report a small capital gain from the sale of shares, which would have required her to file ITR-2. The Income Tax Department's processing system identifies this mismatch, and she receives a Section 139(9) notice.

Consequences of a Defective Return

If a return is declared defective and the defect is not rectified within the stipulated time, the implications can be severe:

• Return Treated as Invalid: The return will be treated as if it was never filed.
• Loss of Benefits: Any benefits associated with filing a return, such as carrying forward losses (capital losses, business losses), will be forfeited.
• Interest Liability: The taxpayer may become liable to pay interest for delay in filing the return under Section 234A, as if no return was ever filed.
• Best Judgment Assessment (Section 144): The Assessing Officer may proceed to make a Best Judgment Assessment, estimating the income and tax liability of the taxpayer to the best of their judgment, which often results in a higher tax demand.

How to Rectify a Defective Return

Upon receiving a Section 139(9) notice, the taxpayer is usually given a period of 15 days from the date of the notice to rectify the defect. This period can be extended by the Assessing Officer if a valid request is made.

To rectify the defect, the taxpayer must:

1. Log In: Access the e-filing portal of the Income Tax Department.
2. Locate Notice: Find the Section 139(9) notice under 'e-Proceeding' or 'Pending Actions'.
3. Rectify: Identify the specific defects mentioned in the notice and make the necessary corrections to the original return (e.g., re-file with correct form, provide missing details, reconcile TDS data).
4. Submit: Submit the rectified return/response to the notice through the portal.

Important Points & Distinction from Other Sections

• Defective Return vs. Revised Return (Section 139(5)):
  • A defective return notice is an intimation from the department, requiring the taxpayer to correct specific flaws.
  • A revised return is filed voluntarily by the taxpayer to correct self-discovered errors or omissions in a previously filed return.
• Defective Return vs. Intimation under Section 143(1):
  • A Section 143(1) intimation is an automated communication regarding basic computation mismatches, leading to a demand or refund.
  • A Section 139(9) notice indicates more fundamental flaws that render the return invalid if not corrected.
• Non-Rectification: If the defect is not rectified within the given time frame (or extended time), the return originally filed is deemed to be invalid, and the taxpayer is treated as if they never filed a return.