When a Return of Income is Regarded as Defective [Explanation to Section 139]

Under the Explanation to Section 139(9) of the Income Tax Act, 1961, a return is considered defective if it fails to meet specific procedural or substantive requirements. Below are the key conditions that render a return defective:

1. Mandatory Requirements for a Valid Return

A return shall be regarded as defective unless all the following conditions are fulfilled:

(A) Documentation & Disclosures

• Annexures & Statements:
  • The return must include all schedules, annexures, and columnsrelated to:
    • Computation of income under each head (salary, house property, business, capital gains, etc.).
    • Gross total income and total taxable income.
  • Missing schedules(e.g., Schedule VDA for crypto income) make the return defective.
• Tax Computation Statement:
  • Must be accompanied by a statement showing tax payablebased on the declared income.
• Audit Reports (if applicable):
  • Section 44AB Audit Cases: Submit Form 3CA/3CB + 3CD(tax audit report).
  • Charitable Trusts/Institutions: Attach Form 10B/10BB(audit report for exemptions under Sections 11/12).

(B) Proof of Tax Payments

• TDS/TCS Certificates: Proof of TDS (Form 16/16A)and TCS
• Advance Tax/Self-Assessment Tax: Challan details (BSR code, date, amount).
• Exception: If TDS certificate is unavailable, the return is not defectiveif:
  • The deductor failed to issue it (Section 203), and
  • The taxpayer submits it within 2 years(Section 155(14)).

(C) Financial Statements & Books of Accounts

• For Maintained Books:
  • Submit profit & loss account, balance sheet, trading account, and personal accounts(for proprietors/partners).
• For Non-Maintained Books:
  • Provide a statementshowing:
    • Turnover/gross receipts, expenses, net profit.
    • Sundry debtors/creditors, stock-in-trade, cash/bank balances.

(D) Personal & PAN Details

• Name Mismatch: Discrepancy between the name in the return and PAN card.
• Incomplete Bank Details: Missing account information for refund processing.

2. Common Reasons for Defective Returns

• Filing in Wrong ITR Form:
  • Example: Using ITR-4(presumptive income) when turnover exceeds ₹2 crore.
• Unreported Income:
  • Omitting income (e.g., interest, capital gains, crypto transactions under Schedule VDA).
• Mathematical Errors:
  • Negative values in income fields or incorrect tax calculations.
• Non-Payment of Tax:
  • Filing returns without paying self-assessment tax.

3. Consequences of Defective Returns

• Notice under Section 139(9):
  • Taxpayer gets 15 days(extendable on request) to rectify defects.
• Invalid Return:
  • If unrectified, the return is treated as non-filed, leading to:
    • Loss of deductions/exemptions.
    • Penalties under Section 271F(up to ₹10,000).
• Best Judgment Assessment:
  • • AO may estimate income if defects persist.

4. How to Rectify?

1. Log into the Income Tax e-filing portal.
2. Navigate to “e-Proceedings” → “Defective Return Notice”.
3. Upload corrected documents (XML/JSON file) and e-verifyvia Aadhaar OTP/DSC