TMI Blog1993 (7) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... 07,530. On15th November, 1985 Assessing Officer passed an order under section 146 cancelling the assessment made under section 144. The Assessing Officer had issued notices under sections 143(2) and 142(1) from time to time. A notice under section 131 had also been issued on8th February, 1988. As per the Assessing Officer some of the notices remained uncomplied with and assessee's case is that there was no non-compliance of the notices issued. On29th March, 1988, Assessing Officer completed the assessment under section 144. The reasons for completion of assessment under section 144 indicated in the assessment order are two-fold. One is that assessee did not comply with the terms of notices issued from time to time as indicated in the assessment order. Another reason is that assessee had not filed any valid return either under section 139(1) or in response to a notice under section 139(2). The return filed by the assessee on30th March, 1985 was stated to be invalid for two reasons. One was that the return was not accompanied by trading account, profit and loss account, balance-sheet etc. as required under law. Second reason for treating the return as invalid indicated in the assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue of validity of the return of income filed by the assessee on30-3-1985. 4. Dr. Narayanan, the learned counsel for the assessee stoutly contested the two reasons advanced by the Revenue for treating the return filed by the assessee as invalid. According to the learned counsel, a return filed without trading, profit and loss account, balance sheet etc., could be a defective return but not an invalid return as held by the Assessing Officer. In this connection, our attention was drawn to section 139(9) incorporated w.e.f.1-9-1980by the Finance (No. 2) Act of 1980. This section, according to the learned counsel, makes it obligatory upon the Assessing Officer to intimate the defects to the assessee and in the event of the defect not being rectified within a period of 30 days, the return could be treated as invalid. In this case, according to Dr. Narayanan, no such notices as referred to under section 139(9) was ever issued and as such Assessing Officer was not justifled in treating the return of income as invalid on the ground that the statements such as trading account, profit and loss account, balancesheet etc. had not been filed along with the said return. 5. It was further co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded that the return of income having been filed after the completion of assessment could not be treated as a valid return and Assessing Officer having issued a notice under section 139(2) which remained uncomplied with, the latter was justified in completing the assessment under section 144. He also relied upon the finding of the CIT(A) in respect of various notices issued from time to time having remained uncomplied with. 8. We have given our careful consideration to the rival contentions. The return of income filed by the assessee on30th March, 1985has been treated as invalid for two reasons as described elsewhere in this order. One of the reasons for treating the return as invalid is that the assessee did not file trading account, profit and loss account and balance sheet rendering it as invalid. In our view, the finding of the Assessing Officer and the appellate authority in this regard is not well founded. A return not accompanied by the trading account, profit and loss account and balance sheet is a defective return and section 139(9) incorporated w.e.f. 1-9-1980 by the Finance (No. 2) Act of 1980 makes it obligatory for the Assessing Officer to inform the assessee about th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of any other person in respect of whose total income he is assessable under this Act, if his income or, as the case may be, the income of such other person during the previous year consisted only of income chargeable under the head ' Salaries ' or of income chargeable under that head and also income of the nature referred to in any one or more of clauses (i) to (ix) of sub-section (1) of section 80L and the following conditions are fulfilled, namely : (a) where is or such other person was employed during the previous year by a company, he or such other person was at no time during the previous year a director of the company or a beneficial owner of shares in the company (not being shares entitled to a fixed rate of dividend whether with or without a right to participate in profits) carrying not less than twenty per cent of the voting powers ; (b) his salary or the salary of such other person, exclusive of the value of all benefits or amenities not provided for by way of monetary payment, does not exceed eighteen thousand rupees--- (c) the amount of income of the nature referred to in clauses (i) to (ix) of sub-section (1) of section 80L, if any, does not, in the aggre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such assessment year : (ii) where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1968, three years from the end of the assessment year ; (iii) where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year. (4A) Every person in receipt of income derived from property held under trust or other legal obligation wholly for charitable or religious purposes or in part only for such purposes, or of income being voluntary contributions referred to in sub-clause (iia) of clause (24) of section 2, shall, if the total income in respect of which he is assessable as a representative assessee (the total income for this purpose being computed under this Act without giving effect to the provisions of sections 11 and 12) exceeds the maximum amount which is not chargeable to income-tax, furnish a return of such income of the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and all the provisions of this Act shall, so far as may be, apply as if it were a return required to be fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovisions of section 139 and section 148, it is observed that the return filed by the assessee on30th March, 1985does not ordinarily fit in under any of these provisions of the Act. 17. We will now proceed to consider as to what is the status of return filed after the expiry of the time allowed under section 139(4). Whether a return could be filed by the assessee beyond the period of limitation prescribed under law and whether such a return could be a valid return. In the case of CIT v. Ranchhoddas Karsondas [1959] 36 ITR 569 (SC) at page 573, their Lordships of the Supreme Court held that a return of income could be filed even after the expiry of the time limit under the 1922 Act. In the case of Jaikishan Gopikishan Sons v. CIT [1972] 84 ITR 645 (MP), the Madhya Pradesh High Court held that the return filed beyond the time under section 22(2A) could not be ignored in view of provisions of section 22(3) of the Act simply because it was beyond time. In the case of CIT v. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518, their Lordships of the Supreme Court held that a return submitted at any time before the assessment is made is a valid return in view of provisions of sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in consequence of setting aside of an order made under section 144. 19. For consideration of the contention raised on behalf of the assessee, it would be necessary for us to consider the provisions of section 139(2), 139(4), 144 and section 146. Under, section 139(2), assessee can file a return within 30 days from the service of the notice or till such time as is granted by the Assessing Officer in exercise of his powers under proviso to section 139(2). Section 139(4) permits filing of the return till the assessment is made or within a period of two years from the end of the assessment year, whichever is earlier. Section 144 empowers the Assessing Officer to make an assessment when assessee fails to file a return in response to notice under section 139(2) or when there is non-compliance of the notices issued under section 143(2) or section 142(1). However, section 146 provides circumstances under which the Assessing Officer is empowered to cancel the assessment made under section 144. We are hereunder reproducing section 146 so as to highlight the circumstances under which the Assessing Officer can cancel the assessment made under section 144 : " 146(1) Where an assessee assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions 139, 144 and 147 in conjunction with each other it is clear that assessee cannot be prevented from filing of the return once assessment under section 144 is cancelled by the Assessing Officer on being satisfied about the existence of sufficient cause from filing of the return of income in response to notice under section 139(2). Once assessment is cancelled, the consequences of completion of assessment under section 144 in the matter of filing of the return are lost and the chances for filing of the return by the assessee get revived. 20. In this case though we do not have the copy of the order passed under section 146, perusal of the second assessment order reveals that assessment under section 144 had been made on28th March, 1984as assessee had failed to furnish a return under section 139(2). Since the said order of assessment has been cancelled, it has to be presumed that Assessing Officer was satisfied that assessee was prevented by sufficient cause from making the return required under sub-section (2) of section 139. Under section 139(2) Assessing Officer was empowered to extend the time for filing of the return. It could be argued on behalf of the revenue that an appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use, the period of two years shall have to be computed by excluding the period between the making of the assessment under section 144 up to its cancellation under section 146. As already observed, cancellation of order under section 144 is possible only on existence of sufficient cause referred to in section 146. Once existence of sufficient cause is accepted by the Assessing Officer, it would be absurd to insist that assessee should still suffer the rigours of law and be deprived of the time that ordinarily would have been available to him in the event of assessment being completed on the last day of the limitation. If provisions of section 139(4) are interpreted strictly, it would result in absurdity. For example, in a case where Assessing Officer completes the assessment under section 144 and later on it is found that he was not justified in making the assessment say, for example, notice under section 139(2) or 143(2) or 142(1) not having been served upon the assessee. Assessment having been completed by the Assessing Officer under section 144 would mean that assessee is not entitled to file any return. However, once Assessing Officer accepts the existence of sufficient cause he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancellation of assessment made under section 144. First notice was issued on27th December, 1985. Notices under section 143(2) had also been issued subsequently. At no stage of the proceedings was the assessee informed that the return filed by him could not be treated as a valid return. The Assessing Officer has also issued a questionnaire to the assessee on the basis of the return of income filed and the information furnished along with it. The assessment has also been made on the basis of the return of income. It is note worthy that assessment in this case had been completed under section 144 at an income of Rs. 1 lakh. Assessee did file the return declaring income of Rs. 1,07,532 which was more than the assessed income. If assessee would not have been fair to the revenue he could have quietly accepted the assessment made under section 144. Assessee has been fair and reasonable to the revenue to disclose the higher income even though the time for filing of the return had already expired and assessment under section 144 had been completed. The Assessing Officer on the contrary has acted against the interests of the assessee by not issuing a notice under section 148 though the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... giving the income-tax number and sales tax numbers etc., disallowance under section 40A(3) should not be made. In this case substantial payments to M/s. Avon Sales Corporation had been made by cross cheques or bank drafts. Only two payments of Rs. 2600 and Rs. 4000 had been made by cash on the party having insisted for cash payment. These payments, in our view, are covered under Rule 6DD(j) read with Circular No. 220 of CBDT. The disallowance of Rs. 6600 is accordingly deleted. 25. Ground No. 4 is relating to bad debts amounting to Rs. 6305. The bad debts are on account of small amounts. Rs. 500 and Rs. 712 in respect of two former employees had been written off. There are four other items in respect of supplies made to the parties. There only ground for disallowance of the claim of the assessee is that sufficient steps for recovery of the amount had not been taken. In view of the smallness of the amounts, we are satisfied that it was prudent on part of the assessee not to pursue the claim in the court of law. The other conditions being satisfied, assessee is entitled to treat the small amounts of bad debts without going through the process of instituting suits etc. for the recov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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