TMI Blog1989 (9) TMI 150X X X X Extracts X X X X X X X X Extracts X X X X ..... 1981. In accordance with the provisions of law, the return of income from the assessee was due on or before 30th of June of the relevant assessment year. The assessee filed the return of income signed by its Secretary, Shri R. Narayanan, on 28-6-1979 for the assessment year 1979-80. In this return, the assessee, inter alia, claimed loss of Rs. 5,03,470 and also made a claim for carry forward of Rs. 26,09,436 as investment allowance etc. On the basis of this return, the Income-tax Officer started the assessment proceedings on 3-9-1979. These proceedings continued and culminated in an assessment order made u/s. 144 of the Act on 29-3-1982. On receipt of this order made ex parte u/s. 144 by the assessing authority, the assessee made an application u/s. 146 of the Act on 7-4-1982. On the basis of this application, the assessing authority cancelled the ex parte order, mentioned supra, by order dated 19-4-1982. 3. Thereafter, on 20/23-1-1985, the assessee received a letter bearing No. 965 on the subject of return for the assessment year 1979-80 filed on 28-6-1979. In this letter, the Inspecting Assistant Commissioner of Income-tax (Asst.) Chandigarh, projected to the assessee that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignored the losses claimed and the carry forward of investment allowance by taking the income as 'nil'. Thereafter, there is narration of the historical development as to how application u/s. 146 was filed and the assessment was cancelled. This letter also projects that the order u/s. 146 of the Act was made on 19-4-82, i.e. during the financial year 1982-83, and, therefore, in accordance with the provisions of law, the de novo assessment had to be made on or before 31-3-1985. It is only towards the close of this period that the assessee was informed that the best judgment assessment made u/s. 144 on the basis of the return dated 28-6-1979 and cancelled by an order u/s. 146 on 19-9-1982 was invalid. 5. The assessee projected to the Assessing Officer that the company had no Managing Director or wholetime Director as it was a joint sector company established in collaboration with P.S.I.D.C. (Punjab State Industrial Development Corporation). The company was managed, it was pointed out, by a Board of Directors through a Chief Executive and a Secretary. The Secretary was the principal officer of the company and under a bona fide belief, he had been given the powers, in respect of var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1985 was denying the assessee an opportunity of amending the return to make it in accordance with law as desired. Thereafter, certain authorities were cited to convince the assessing authority that it is merely a procedural defect as, in substance, the return was the same and only the signature of the Director had been placed on the return which in fact tantamounts to ratification of the original return as the return filed on 19-9-84 was identical except for the signature of the Director. 8. As mentioned supra, on receipt of the letter from the Inspecting Assistant Commissioner of Income-tax (Asst.) about the invalidity of return dated 28-6-1979 and the subsequent ex parte assessment raised thereon, the assessee had sent a reply dated 30-1-1985. We have obstructed important portion of this reply above to bring out the controversy. However, on receipt of this letter, the Inspecting Assistant Commissioner of Income-tax (Asst.) proceeded and made an order on 22-2-1985 bearing No. 377 without giving any section of the Act under which this order was made. Nonetheless, this order in the form of a letter addressed to the assessee held that "your return for the assessment year 1979-80 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stake so made, by the revenue to the assessee, that the defect, if any, in the return filed on 28-6-79 in view of the requirement of section 140(c) of the Act was also made good by the subsequent return filed on 19th Sept. 1984 and the return this dated back to 28-6-79, that the second return filed on 19-9-84 was not really a return u/s. 139(4) because this return merely made good a defective return by removing the defect in the original return which was filed within the time required under law that the defect was removed by the assessee voluntarily and that so validated return which should have been treated as substituted for the earlier return was bound to be considered for the purpose of assessment. The authorities below, therefore, erred in acting in the manner as they did. They be directed to accept the return and allow to the assessee various claims made thereunder. 10. The learned Commissioner of Income-tax (Appeals), after careful consideration of the submissions made before him and the reasons recorded in the orders of the Inspecting Assistant Commissioner of Income-tax(Asst.), accepted the submissions of the assessee and directed that, "the appellant is allowed to carry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -82. Another return was filed on 21-1-1985 signed by the Director of the company. The Inspecting Assistant Commissioner of Income-tax (Asst.) completed the assessment on 27-3-85. In the impugned assessment made u/s. 143(3), there is again reference to section 140(c) for the purpose of treating the return signed by the Secretary and filed on 28-6-82 as invalid return. The return filed on 21-1-85 was taken as return u/s. 139(4). The assessment was completed on 27-3-1985 and it was challenged in appeal. The assessee had also filed an appeal before the Commissioner of Income-tax (Appeals) against the assessment made for the assessment year 1980-81 on 25-5-84. The learned Commissioner of Income-tax (Appeals) vide his order dated 13-8-85 directed that the losses of assessment year 1979-80 had been held by him to be carried forward to the subsequent assessment year and the same was, therefore, to be allowed. These observations he made with regard to ground No.3 in which the claim of loss, unabsorbed depreciation and investment allowance for the assessment year 1979-80 had been required to be quantified and set off against the income for the assessment year 1980-81. Hence, apparently, he a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the statute book by Finance Act, 1980 w.e.f. 1-9-1980 wherein the Income-tax Officer could call upon the assessee to amend the return but this provision was also not available to the assessee for 1979-80. Reliance was placed upon the judgment of Nagpur High Court in the case of Waman Padmanabh Dande v. CIT [1952] 22 ITR 339 and Supreme Court judgment in the case of CAIT v. Sri Keshab Chandra Mandal [1950] 18 ITR 569. Reliance was also placed upon the judgment of the Allahabad High Court in the case of Bhawani Shanker v. State [1968] 68 ITR 873. The ld. Departmental Representative also tried to draw a distinction between non-filing of return and filing of an incorrect return and invited attention of the Bench to the judgment of the Calcutta High Court in the case of Mohindra Mohan Sirkar v. ITO [1978] 112 ITR 47. It was also submitted that the judgment of the Punjab and Haryana High Court in the case of Dr. Krishan Lal Goyal, was applicable to the facts of the case. 16. A point was made by the revenue that section 292B, which is not retrospective in nature, was brought on the statute book mainly to protect the interest of the revenue and it could not be applied in a manner so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case, fully justified and the revenue has not made out any case for an interference therein. The appeals of the revenue may, therefore, be dismissed. 20. We have carefully considered the rival submissions. Before we come to examine the contentions of the parties before us on the issues that we have to determine, we would like to have a look at the relevant provisions of law to which the assessing authorities referred to and upon which they relied, to deny to the assessee various claims as narrated in factual backdrop of the case above. Section 140(c) was brought on the statute book by substitution for clauses (c) and (d) by Taxation Laws (Amendment) Act, 1975 w.e.f. 1-4-76. Therefore, w.e.f. 1-4-76, i.e. for and from the assessment year 1976-77, section 140(c) requires that the return u/s. 139 shall be signed and verified in the case of a company by the Managing Director thereof or where for any unavoidable reason, such Managing Director is not able to sign and verify the return or where there is no Managing Director, by any Director thereof. Chapter XIV of the Act deals with procedure for assessment and section 140 is part thereof. This chapter provides the actual assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall apply as if the assessee had failed to furnish the return. Before we go further, we would like to record, for the purpose of emphasis, that this provision is intended to give an opportunity to the assessee to remove the defects in the return because a proviso has been added to this sub-section to the effect that where the assessee rectifies the defect after the expiry of the period provided in this sub-section but before the assessment is made, the Income-tax Officer may condone the delay and treat the return as a valid return. Before we go further, we would like to express surprise that this provision contained in section 139(9) being on the statute book w.e.f. 1-9-80, the assessing authorities did not avail of the same and did not project to the assessee any defect in filing the return despite the fact that all assessments in appeal were completed after this provision came on the statute book. 23. Now, section 72 provides for carry forward and set off of business losses. It contains detailed provisions as to how the losses have to be carried forward and set off -- provided they are losses incurred in business. Section 80, which is contained in Chapter VI of the Act dealin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the record of the revenue. It is, therefore, very surprising that only when return for the assessment year 1979-80 was filed in a similar manner that the authorities acted in a very contradictory manner. First the return was accepted, notices were issued and an ex parte assessment was made thereon. It goes beyond comprehension of any reasonable person that if the return was invalid, why statutory notices were issued on the basis of that return and why an assessment was made ex parte for their non-compliance with relation to that return filed on 28-6-79 as signed by the Secretary of the company. Not only this, when an application u/s. 146 was made to cancel that best judgment assessment, the assessment was duly cancelled by the assessing authority. It is only thereafter that letter has been issued to the assessee u/s. 140(c) asking why the return should not be treated as invalid. 24. In this context it is surprising to note that before this letter was issued, assessment for the year 1980-81 had been completed and in that assessment it had been mentioned that if loss and other things, which were to be carried forward from assessment year 1979-80, are so found allowable that assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed before the authorities, they were identical but for the signature of the Director being in place of the signature of the Secretary. In our opinion, these were returns more by way of ratification of the original returns and technical compliance with the provisions of law. This should have been accepted if the assessing authorities were to act in accordance with the intent and substance of sections 140(c), 139(9), 292B and other relevant sections, mentioned supra, for making the assessments. The Commissioner of Income-tax (Appeals) has issued directions to the assessing authorities to allow the claims as made. We uphold his directions for asst. years 1980-81 and 1982-83. We would, however, not endorse his directions as it is for the assessment year 1979-80 because no assessment was made as such. These claims have therefore been not examined. But the losses and other allowances have to be determined in accordance with law. We, therefore, modify the directions of the Commissioner of Income-tax (Appeals) to say that order made by the assessing authority holding the returns invalid is set aside with the directions to treat the returns as validly made in time and proceed to make ass ..... X X X X Extracts X X X X X X X X Extracts X X X X
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