TMI Blog2008 (1) TMI 438X X X X Extracts X X X X X X X X Extracts X X X X ..... he date of filing of power of attorney. The assessee filed reply to notice under s. 154 on 31st March, 2003. However the AO rejected the contentions raised by the assessee and withdrew the interest granted for the period from November, 2002 to February, 2003. 2. Aggrieved by the order of AO, the assessee appealed before the CIT(A)-XXIX, New Delhi. The CIT(A) fixed the case for hearing on 17th Dec., 2003, but none attended on that date. The case was again fixed on 9th Feb., 2004. On this date also, as none appeared on behalf of the assessee, learned CIT(A) passed order ex parte after considering the statement of facts and other material available on record. While deciding the issue, learned CIT(A) observed that interest on refund under s. 244A would not be given to the assessee for the period for which the delay was attributable to the assessee. Since the assessee had not filed power of attorney in favour of the project manager along with the return of income, the return was to be treated as invalid and defective. Since the assessee on 17th Feb., 2003 rectified the defect, the delay for the period from November, 2002 to February, 2003 was clearly attributable to the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in November, 2002. The return of income was processed under s. 143(1) and refund together with interest under s. 244A were granted. The provisions of s. 139(9) make a distinction between a defective return and an invalid return. A defective return is not ipso facto to be regarded as an invalid return. It is only when a return contains any of the specified defects and the AO, in his. discretion, intimates the defect to the assessee and the assessee fails to rectify the same within the specified period of 15 days or such further period as the AO may, on application made in this behalf, allow that the return shall be treated as an invalid return. Thus the AO is empowered under s. 139(9) to call upon the assessee to rectify a defective return. Non-filing of power of attorney under s. 140(c) along with the return is not a defect within the meaning of s. 139(9). Thus the return of income filed by the assessee could not be treated a defective return within the meaning of s. 139(9) of the Act. 6. Now a question arises as to whether a return of income not signed by the person authorized by the law is an invalid return of income? If, so, what would be the consequences when such a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that person only who knowingly makes a false statement in any verification under the Act. In the case of a company, the return is usually signed by the secretary who is merely an employee and thus it is he who can be prosecuted under s. 277 of the Act. The managing director and other directors who are in fact the persons in charge of running of concern, and in that capacity are normally responsible for commission of tax offences escape prosecution. Similarly, in the case of partnerships, the managing partner escapes prosecution if the return is signed by a partner who does not actively participate in managing the business. In order to get at the persons who are really responsible for tax offences, we recommend that the definition of 'principal officer' for the purposes of signing of the return should be amended so as to provide that the return of income of a limited company should be signed by the person mainly responsible for the management or administration of the affairs of the company. In other words, the liability for signing the return should be fixed primarily on the managing director, failing which on the working director. Similarly, in the case of a partnership, the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pril, 1989, which read as under: "Provided that where the company is not resident in India, the return may be signed and verified by a person who holds a valid power of attorney from such company to do so, which shall be attached to the return." From above it is clear that the purpose of filing power of attorney along with the return is to hold the managing director responsible in a case where a false return is filed and prosecute him under s. 277 of the Act. 7. The first question that needs to be adjudicated is regarding requirement of s. 140(c) of the Act. The common law "qui facit per alium facit per se" governs the matter of signatures by persons. That rule says that what a man can do himself, can equally well be done by his duly authorised agent. It is well-settled that unless there is a specific provision of law requiring the signatures and verification of the assessee himself, the signature, etc. may be validly affixed by the constituted attorney. In case of a company a return can be signed and verified only as provided for in s. 140(c) of the Act. For the sake of repetition, in the case of a company, a return is be to be signed and verified as per s. 140(c) between 1s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect, or omission therein. if in substance and effect it is in conformity with or according to the intent and purpose of the Act. The section intends to ensure that an inconsequential technicality does not defeat justice. However, the provisions of s. 139(9) override other provisions of IT Act including s. 292B by existence of non obstante clause in it. Non-filing of power of attorney along with the return as specified under s. 140(c), is not a defect within the meaning of provisions of s. 139(9). Therefore the issue is to be examined in the light of the provisions of s. 292B and various judicial pronouncements on the issue. 9. In CIT vs. Royal Textiles (1980) 14 CTR (Mad) 291 : (1979) 120 ITR 506 (Mad), the assessee firm filed its return of income in Form No. 3 instead of appropriate Form No. 2. Provisional assessment was made and the resultant tax was paid. Thereafter, the assessee filed a return in Form No. 2 as required by the ITO. The regular assessment was completed after charging interest for late submission of the return till the date of filing of return in Form No. 3. Later ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. vs. CIT (1995) 127 CTR (Cal) 238 : (1995) 213 ITR 862 (Cal), return of income was signed and verified by director-cum-general manager. The defect was pointed out by the AO. The assessee company filed revised return of income without indicating the reason as to why the managing director did not sign the original return of income. Invoking the provisions of s. 292B, first return of income was held by Hon'ble Calcutta High Court to be an invalid return. 12. An identical issue was examined by Hon'ble Dhaka High Court in the case of Gopinath Biswambar Roy vs. CIT (1950) 18 ITR 976 (Dacca). The facts were that a return of income filed by the assessee was substantially complied with the requirement of r. 19 of the IT Rules, 1922, but was not accompanied by the copies of P L a/c and balance sheet, it could not be said that the return was not a return at all in the eyes of law. The ITO in such a case could issue a notice under s. 23(2) of the Act giving an opportunity to the assessee to complete the return. In other words Hon'ble High Court held that the return of income could not be treated as non est. 13. In Sheonath Singh vs. CIT (1958) 33 ITR 591 (Cal), the assessee had filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returns had been signed and verified by the assessee and the only defect in the returns was that the particulars of the profits and gains of the business had not been stated, the returns could not be treated as invalid and non-existent. A writ was issued commanding the respondents not to give any effect to the impugned notices under s. 148 of the Act. 15. In Smt. Sova Sarkar vs. ITO 1977 CTR (Cal) 329 : (1983) 139 ITR 386 (Cal) the facts of the case were more or less similar to the facts in Mohindra Mohan Sirkar's case. Hon'ble High Court following the said decision directed that notices issued under s. 148 of the IT Act, 1961, on the ground that the original returns were invalid and non-existent, should not be given effect to. The Court again made a distinction between a return which was not correct and complete within the meaning of s. 139 of the IT Act and a return which was so defective that the same could not be treated as a return at all in law. 16. In CIT vs. Garia Industries (P) Ltd. (1982) 31 CTR (Cal) 177 : (1983) 140 ITR 636 (Cal), the question arose as to the validity of a return submitted by an assessee and whether the Tribunal was justified in holding that the los ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of these facts the CIT set aside the assessment so far as the charging of interest was concerned and directed the ITO to charge interest on the tax payable on the return from 1st Oct., 1971, to 8th June, 1973. On further appeal the Tribunal found that the conduct of the ITO showed, that the assessee was permitted to amend the procedural or technical defect in the return. It was also found that the ITO after receiving the return on 6th Oct., 1971, did nothing in the matter till 8th June, 1973, when he started the assessment proceeding. If the return was found to be defective or incomplete, the said fact should have been brought to the notice of the assessee earlier, so that the same could have been cured. The return filed by the assessee had been accepted by the ITO as a legally valid return and that the ITO had acted upon the same. Therefore, the return filed by the assessee could not be held to be incomplete or invalid. Accordingly the Tribunal set aside the order of the CIT under s. 263 of the IT Act, 1961 and restored the order of the AO. On an application of the Revenue under s. 252(2) of the IT Act, 1961, the Court held: 'The return which was filed by the assessee on 6th O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... late authority, the assessee filed an appeal before the Tribunal which affirmed the view taken by the first appellate authority by holding that the judgment in the case of Commr. of Agrl. IT vs. Keshab Chandra Mandal was squarely applicable to the facts of the case. On reference by the assessee, Hon'ble Delhi High Court held: "The law relating to procedures is to be construed somewhat liberally so as to make it even effective retrospectively or retroactively. It is a settled principle of law that the procedures are presumed to be retrospective, unless a construction is textually inadmissible. It is a settled canon of interpretation of procedural law that normally its non-adherence does not result in illegality which would render the appeal incompetent, unless such non-compliance related to a substantive provision and had caused prejudice to the other party and may have the effect of taking away a settled right. Law relating to procedure may always not prove fatal to the proceedings initiated by the assessee and it would be in the interest of justice, fair and equitable to provide an opportunity to the assessee to rectify the irregularity committed in regard to compliance with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, this word does not cover a case of 'procedural irregularity' only. One of the basic distinctions between the two expressions is the resultant effect of its being curable or incurable. Normally, the 'illegality' which goes to the very root of the matter or jurisdiction could hardly fall in the class of those cases, but an 'irregularity' which is merely procedural and it has even been substantially complied with, then to bring such a case within the class of cases where irregularity is curable, would be a fair and just interpretation of the relevant rule." 19. In the aforesaid background, it has to be seen whether s. 154 applies to a case of this nature. In order to bring in application of s. 154, the mistake must be one which is apparent from record. As was observed by the apex Court in Sathyanarayanan Laxminarayan Hegde vs. Mallikarjun Bhavanappa Thirumale AIR 1960 SC 137, where an error is far from self-evident, it ceases. to be an apparent error. The apex Court in Master Construction Co. (P) Ltd. vs. State of Orissa (1966) 17 STC 360 (SC) expressed the view that an error which is apparent on the face of the record should be one which is not an error which depends for its dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 42 ITR 569 (Ker) held that "the signature of the unauthorized person renders the return defective to make it non est. 'Defect' means, a blemish, fault or imperfection. It is a lack of something necessary for completeness or perfection. The question whether s. 292B applies to the facts of a case is the question of law. Above being the position, the Tribunal was justified in its conclusion about non-applicability of s. 154.-Har Narain Textiles (P) Ltd. vs. CIT (1985) 47 CTR (All) 326 applied." 20. In the case before us the power of attorney was not filed along with the return. As per judicial pronouncements as discussed above, non-filing of power of attorney along with the return is a case of mere procedural irregularity and not of illegality. It is curable irregularity as held by Hon'ble jurisdictional High Court in the case Remfry Sons (2) V. Sagar vs. CIT. In Sheonath Singh, Hon'ble Calcutta High Court held that an irregularity could be rectified by amendment with effect from the date when the memoranda was originally filed. Applying this ratio we hold that the procedural irregularity of non-filing of the power of attorney got rectified from the date of filing of the return of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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