TMI Blog2009 (4) TMI 71X X X X Extracts X X X X X X X X Extracts X X X X ..... k Exchange, filed a return of its income on 30.9.2008, declaring a total income of Rs.79,07,54,470/- and disclosing a tax liability of Rs.29,54,97,940/-. Out of the disclosed liability, the petitioner-Company paid a sum of Rs.4,11,76,102/-, leaving an arrears of Rs.25,43,21,838/-. 2. However, after about 5 months of filing the original return, the petitioner filed a revised return of income, on 6.3.2009 under Section 139 (5) of The Income Tax Act, 1961, claiming a sum of Rs.76,94,22,500/- as "prior period losses". As per the revised return, the total income of the petitioner for the assessment year was only Rs.2,13,31,972/- and the book profit under Section 115 JB was Rs.17,25,48,875/-. Consequently, the tax payable, according to the petitioner, was Rs.1,95,49,789/-. Since the petitioner had already made payment of Rs.4,11,76,102/-, as per the original return dated 30.9.2008, the petitioner sought a net refund of the difference viz., Rs.2,16,26,310/-. 3. But before the petitioner filed a revised return, the Assessing Officer viz., the Deputy Commissioner of Income Tax, Media Circle-I, attached all the bank accounts of the petitioner and also issued garnishee notices to peti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the first respondent issued notices of hearing to the petitioner and heard the Managing Director of the petitioner-Company as well as the Chartered Accountants representing them. The first respondent also called for a report from the Assessing Officer, viz., the second respondent. Thereafter, the first respondent has proceeded to pass a very detailed order, nay a thesis, dated 2.4.2009, ultimately rejecting the representation of the petitioner for lifting the orders of attachment and almost simultaneously rocking the very foundation of the revised return and reducing the revised return to a comatose condition, so that the final rites could be performed by the second respondent in course of time. 7. Aggrieved by the said order of the first respondent dated 2.4.2009, the petitioner has come up with W.P.No.6213 of 2009, seeking a Writ of Certiorari, to call for the records and to quash the same. The petitioner has also come up with another writ petition in W.P.No.6214 of 2009, seeking a Writ of Mandamus, to forbear the respondents from treating the petitioner as an "assessee in default" under Section 140A(3) of the Act and proceeding with the recoveries under Section 226(3) till ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the actual tax liability and that in the face of uncertainties, all the orders of attachment have to necessarily continue. 12. In the above background of facts, on which broadly there is no dispute, what falls for consideration in these writ petitions, is the question as to whether the revised return effaces and substitutes the original return and whether the petitioner could be termed as an assessee in default, on the basis of the original return. 13. Section 139(1)(a) of the Act, mandates every person being a Company, to furnish a return of income, during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed, on or before the due date. Explanation-2 to sub section (1) of Section 139, defines the "due date" to mean the 30th day of September of the assessment year. 14. Sub section (5) of Section 139, entitles an assessee to file a revised return and it reads as follows:- "If any person, having furnished a return under sub section (1), or in pursuance of a notice issued under sub section (1) of Section 142, discovers any omission or any wrong statement therein, he may furnish a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... return or the statement filed along with it. 20. In response to the above decisions relied upon by the learned Senior Counsel for the petitioner, the learned Standing Counsel for the Department, relied upon the following decisions:- (i) Deepnarain Nagu vs. Commissioner of Income Tax {157 ITR 37}. (ii) Commissioner of Income Tax vs. Girishchandraharidas {196 ITR 833}. (iii) Sunanda Ram Deka vs. Commissioner of Income Tax {210 ITR 988}. 21. In Deepnarain Nagu's case, the original return was filed along with a statement of accounts and a balance sheet, showing that the assessee was following mercantile system of accounts. Subsequently, a revised return was filed along with a statement of accounts claiming that they were maintained on cash basis. The Assessing Officer, the Appellate Assistant Commissioner and the Income Tax Appellate Tribunal, rejected the revised return and at the instance of the assessee, a reference was made to a Bench of the Madhya Pradesh High Court, which held as follows:- "This provision clearly enacts that where a person who has filed a return under sub-section (1) or sub-section (2) discovers any omission or wrong statement made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior Counsel for the petitioner is supported by two decisions of the Allahabad High Court {in Amjad Ali's case and Niranjan Lal's case} and two decisions of the Karnataka High Court {in Mangalore Chemicals case and Machine Tool Corporation's case}. On the other hand, the proposition advanced by the Standing Counsel for the Department is supported by the decisions of the Madhya Pradesh High Court, Kerala High Court and Gauhati High Court. 25. But there is a fundamental distinction between the decisions cited on behalf of the petitioner and those cited on behalf of the Department. The decisions cited on behalf of the petitioner, are on first principles relating to "merger" or "substitution". They are recognised in common law and also recognised by Section 139(5) of The Income Tax Act, 1961. But the recognition afforded to this principle, is circumscribed by two limitations viz., (i) that it should be done within the time limit prescribed and (ii) that the purpose of such substitution should be to set right any omission or wrong statement contained in the original return. 26. In contrast to the decisions cited on behalf of the petitioner, the decisions cited by the learned St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the basis of the revised return, has to be analysed. 30. Section 140-A(1) of the Income Tax Act, 1961, mandates that where any tax is payable on the basis of any return required to be furnished under the relevant provisions, the assessee shall be liable to pay such tax together with interest for any delay in furnishing the return, after taking into account the amount of tax already paid under any provision. The point of time at which such tax shall be paid is also indicated in the same provision. Sub section (1) of Section 140-A reads as follows:- "Where any tax is payable on the basis of any return required to be furnished under Section 115-WD or Section 115-WH or Section 139 or Section 142 or Section 148 or Section 153-A or as the case may be Section 158-BC, after taking into account the amount of tax, if any, already paid under any provision of this Act, the assessee shall be liable to pay such tax together with interest payable under any provision of this Act for any delay in furnishing the return or any default or delay in payment of advance tax, before furnishing the return and the return shall be accompanied by proof of payment of such tax and interest." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he payment of tax thereon computed at the prescribed rates amounts to an admission of tax liability which the assessee admits to have incurred in accordance with the provisions of the Finance Act and the Income Tax Act. Both the quantum of tax payable and its mode of recovery are authorized by law. The liability to pay income tax chargeable under Section 4(1) of the Act thus, does not depend on the assessment being made. As soon as the Finance Act prescribes the rate or rates for any assessment year, the liability to pay the tax arises. The assessee is himself required to compute his total income and pay the income tax thereon which involves a process of self-assessment." 34. Therefore, the law as declared by the Apex Court, on an interpretation of Section 4 of the Act, together with the other provisions, appears to be that "the liability to pay income tax chargeable under Section 4(1) of the Act does not depend on the assessment being made". Hence in the case on hand, the moment a self-assessment is made and a return filed by the petitioner, under Section 139(1) on 30.9.2008, the provisions of Section 140-A(1) and consequently Section 140-A(3) came into operation, automaticall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period less than the period of thirty days aforesaid, as may be specified by him in the notice of demand. (2) If the amount specified in any notice of demand under Section 156 is not paid within the period limited under sub-section (1), the assessee shall be liable to pay simple interest at one per cent for every month or part of a month comprised in the period commencing from the day immediately following the end of the period mentioned in sub-section (1) and ending with the day on which the amount is paid. Provided that, where as a result of an order under Section 154, or Section 155, or Section 250, or Section 254, or Section 260, or Section 262, or Section 264, or an order of the Settlement Commission under sub-section (4) of Section 245-D the amount on which interest was payable under this Section had been reduced the interest shall be reduced accordingly and the excess interest paid, if any, shall be refunded: Provided further that in respect of any period commencing on or before the 31st day of March, 1989 ending after that date, such interest shall, in respect of so much of such period as falls after that date, be calculated at the rate of one and one-half per cent f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f his income which, by reason of such prohibition or restriction, cannot be brought into India, and shall continue to treat the assessee as not in default in respect of such part of the tax until the prohibition or restriction is removed." 37. A reading of Section 220 shows that it provides a lot of opportunities for the assessee to make payment of the tax. Sub section (1) gives an assessee 30 days time to make payment of the amount mentioned in the notice of demand issued under Section 156. The proviso enables the Assessing Officer to provide a lesser time than 30 days. But sub section (3) enables the Assessing Officer even to enlarge the time or to allow payment by instalments. The immediate consequence of non-payment within the time prescribed under sub section (1), is the charging of simple interest, but sub section (2-A) empowers the Chief Commissioner or Commissioner to reduce or waive the interest. It is only after the failure of the assessee to make payment within the time limit prescribed under sub section (1) or the extended time limit prescribed under sub section (3) that he becomes an assessee in default under sub section (4) of Section 220. Under sub section (5), a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the interests of revenue, but shall not be tight enough to strangulate him. It is in the context of such leverage granted to the assessees that the action of the respondents 1 and 2 may now have to be tested. 42. The orders of attachment and garnishee notices in the present case, issued on the basis of the admitted liability as per the original return filed on 30.9.2008, may have been validly issued, before the date of filing of the revised return, on 6.3.2009, treating the petitioner as an assessee in default by virtue of Section 140-A(3). But after the revised return was filed, the admitted tax liability was different from what it was under the original return. 43. The respondents have now taken a stand, in the impugned order and the counter affidavit, that the revised return is not worth the piece of paper on which it is written. In the revised return, the petitioner has chosen to switch over to a different system of accounting, which is not acceptable to the respondents, even at the threshold. Therefore according to the respondents, the revised return is not a valid return under Section 139(5). Moreover, it is the contention of the respondents that a revised return i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of performance of certain contractual obligations, have been issued with garnishee notices. Those persons have denied any liability to pay to the petitioner, on account of the fact that the amounts paid to them were not like loans or advances repayable in cash. They have paid in consideration of the performance of certain personal obligations, which could be translated in terms of money by the petitioner, at the time of performance. The learned Senior Counsel submitted that all the operations of the petitioner have come to a standstill, in view of the freezing of the bank accounts. Even the day-to-day administration of the Company is today impossible since the banks could not release the overdraft facility made available to the petitioner, on account of the orders of attachment. 48. In support of his contention that an overdraft facility cannot be the subject matter of a garnishee notice or order of attachment, the learned Senior Counsel for the petitioner relied upon the judgment of Justice N.Rajagopala Ayyangar in K.M.Adam vs. Income Tax Officer {33 ITR 26(Madras)}. It was held in the said decision that a banker who had offered overdraft facility, is not a debtor n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pugned in the writ petition. In the present writ petition, the second respondent himself has filed a counter affidavit contending that the revised return is an after thought on the part of the petitioner, filed after the initiation of recovery proceedings. In paragraph-8 of his counter affidavit, the second respondent has contended that the revised return lacks bona fides on the part of the petitioner and that it was filed with the intention of escaping the statutory liability. In paragraph-9 of the counter affidavit, it is stated by the second respondent that the revised return is bound to be treated as invalid, since the petitioner has not established that there was an omission or wrong statement in the original return. Thus, the second respondent, who is the Assessing Authority and whose task is quasi judicial in nature, has taken a very strong position with regard to the validity of the revised return. Therefore, I cannot easily brush aside the apprehensions expressed by the learned Senior Counsel for the petitioner about how impartially, the second respondent can look into the revised return hereafter. But I do not wish to issue any directions in this regard except to leave it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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