What is Defective Income Tax Return? How to respond to Defective Return Notice issued u/s 139(9)?

One of my friends is a very sincere guy in paying income tax every year. He is very prompt in filing his ITR within the due date. He has filed his Income Tax Return on 15th July, 2016 and has also e-verified his ITR on the same day. His EVC has been accepted on 16th July.

After filing his return, he kept on checking the status of his ITR daily. The status of his ITR remained as ‘successfully e-verified’. During last week, he had contacted me and we had a discussion on this issue.

I have asked him to login to the e-filing portal and click on ‘My Pending Actions’ under the ‘Dashboard’ menu option. We could see that there is one pending action item under this link. My friend’s income tax return has been marked as ‘Defective Return(Incomplete Income Tax Return).

The IT dept has issued Defective Return notice u/s 139(9) on 20th July, 2016 itself. This is just after 3 days of filing ITR. But my friend has missed going through the email sent by the IT dept regarding the defective return.

So, what is a Defective Return? What are the reasons under which your ITR is treated as a Defective Return? What to do if you receive defective return notice u/s 139(9)? How to respond to Defective return notice? Can the Defective Return be revised or rectified  online?…Let’s discuss..

What is a Defective Return?

Once you file your income tax return, the details provided by you in the ITR is cross-verified and processed by the IT dept. The dept compares the details provided by you with the information that is available with them. If they find any discrepancies or mistakes or any information is missing in ITR then they will treat your ITR as Defective Return. They will then issue a Defective Return notice u/s 139(9).

Reasons for receiving a Defective Return Notice

Let me explain to you about my friend’s case and then some of the possible reasons.

My friend is a professional, so he has been filing ITR-4 form for the last few years. His professional income is less than Rs 10 Lakhs and hence it is not required to audit his accounts. There is no necessity for him to provide full details of Balance sheet & p&L account in ITR.

(As per Section 44 AB if business income exceeds Rs 1 Crore (or) professional income exceeds Rs 25 Lakh then auditing of books is mandatory.

As per Section 44 AA, certain professionals who belong to professions like  Legal, medical, Engineering, Architectural, Accountancy, Technical consultancy etc have to maintain books of accounts. The other professionals are not required to maintain books of accounts if the gross receipts is less than Rs 10 Lakhs.)

The above sections are not applicable for my friend’s case. So, when filing his ITR form, ideally he should have checked ‘No’ against both these options.

ITR Section 44AA Section 44AB Books of acounts Audit Balance sheet P&L account pic

 

Unfortunately, he has checked ‘YES’. If one checks these options as YES then he/she has to provide full details in Balance Sheet and P&L sections.  My friend has ticked YES but did not provide balance sheet details in the ITR.

He has uploaded the ITR without providing the required details. Hence, his ITR has been considered as ‘Defective Return’.  (In my friend’s case, the notice has been issued with an Error Code 31. This code is related to non-furnishing of Balance Sheet / P&L statement in ITR.)

Some of the other possible reasons for receiving Defective Return notice can be as below;

  • Error Code 14 : If you provide negative amount in Gross profit or Net profit sections, ITR is treated as Defective return.
  • Error Code 8 : If you file ITR-4S, even though the total presumptive income u/s 44AD is less than 8% of Gross turnover/Gross receipt”. (In this case, the tax assessee has to file ITR-4 form instead of ITR 4S)
  • Error Code 31 : Tax Payer having income under the head “Profits and gains of Business or Profession” but not filled Balance Sheet and Profit and Loss Account. (Like in my friend’s case.)
  • Error Code 38 : Tax determined as payable in the return of income filed but has not been paid.

How to respond to Defective Return Notice issued u/s 139(9) online?

Below is the step by step procedure for responding to defective return notice and e-file your rectified ITR u/s 139(9);

  • Kindly visit e-filing portal & login with your credentials.
  • efiling portal my pending actions link pic
  • Click on ‘My Pending Actions’ link under ‘Dashboard’ menu option.
  • If your ITR has been marked as ‘Defective’ then you can see an option as ‘For your action : Details of Defective Returns – Click here.’
  • Defective Return pending for action
  • Click on the above option.
  • You can find details of your defective return issued under section 139(9). Here, you can find notice issued date, CPC Reference number, status of your notice and Response option.
  • Defective return notice under section 139 9 details submit response pic
  • Click on the ‘Response’ link.
  • Kindly go through the error code, error code description & Probable resolution to understand the reason for treating your ITR as a defective one.
  • Defective return notice error code 38 31 details resolution agree with defect
  • If you believe that the reason is valid and you agree with defect then select YES option under ‘do you agree with defect’ list box.
  • Response to defective return notice online upload revised ITR rectified itr xml file
  • You now have to correct the required details in your ITR and has to upload your new revised ITR. Kindly note that you have to select the option “In response to a notice under Section 139(9) where the original return filed was a defective return” in ITR.
  • Revised return Revised ITR Rectified ITR filing under section 139 (9) pic
  • Select your ITR form name and upload xml file. (My friend has ticked ‘NO’ option under section 44 AA & 44 AB and uploaded the revised ITR.)
  • Original return revised return under section 139 9
  • If you do not agree with the defect then you can select NO under column ‘Do you agree with defect?’ and  provide the remarks under column Assesse Remarks.
  • Disagree with defective return response no tax assessee remarks

After filing your response to defective return notice, if you wish to withdraw your response then you may do so within 3 days of submission.

Also, note that if you receive communication regarding your return being defective, you have to respond to the notice or file a revised return within 15 days of receiving such intimation.

If the mistake is not rectified within 15 days, or within the extended period, or before the assessment is made, the AO will treat the income-tax return as invalid.

If you observe that in my friend’s case, he has filed the revised return after 15 days, but before the assessment is completed. So, let’s hope that his ITR will now be processed without any further notices.

In case if the status of your filed ITR has been remaining same for many days, do check the ‘pending actions link’ in e-filing portal immediately.

I hope this post is informative and useful. If you have received defective return notice, and need help in responding to the notice.

VidyaSunil & Associates is into practice of Tax Complaince, Audit, Accounts , Corporate / Business Finance & Outsourced CFO Services.

Advise for contacting VidyaSunil & Associates;

E Mail ID : vidyasunilassociates@gmail.com

Cell No. : +91 9739834819

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