TMI Blog2009 (8) TMI 847X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer - Is the ld. first appellate authority entitled to decide the issue from a different perspective ? HELD THAT:- We observe that the ld. CIT(A), did not even travel beyond the assessment order. The AO held the return as invalid, which matter was assailed by the assessee before him. His action was confined to examining the validity or otherwise of return on the appreciation of material already on record, although from a different angle. Be that as it may it is a settled legal position that the powers of the CIT(A) are co-terminus with that of the AO as has been held in several judgments including Jute Corpn. of India v. CIT [ 1990 (9) TMI 6 - SUPREME COURT] . It shows that anything which can be done by the AO can also be done by the first appellate authority. The power of enhancement is rather a step forward, which shows that what the AO could have been done but omitted to do, now can be done by the CIT(A) while disposing of the appeal. We are, therefore, unable to accept the contention raised by the ld. AR that the ld. CIT(A) exceeded his jurisdiction in examining the authenticity of the PoA and filing of its copy. However, we agree with the ld. AR that befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral person and not an artificial person is not correct in entirety. It is simple and plain that an artificial person cannot sign in a natural way. When any of its representatives sign the document, it is considered as duly signed by the artificial person. Like in the instant case whereas M/s. S.B. Billimoria Co., Chartered Accountants was appointed as Power of Attorney for filing the return etc., it was only some partner of M/s. S.B. Billimoria Co. who could have signed the return for and on behalf of this firm. Even though there is irregularity in the signature but still it cannot be said that such verification is not done by a natural person. The learned A.R. has placed on record a copy of the recent judgment passed in Prime Securities Ltd. v. Varinder Mehta, Asstt. CIT [ 2009 (4) TMI 108 - BOMBAY HIGH COURT] in which the return was held to be valid after considering section 292B. In this case some observations of the Hon ble Supreme Court have been recorded to the effect that if a statute requires personal signature of a person, which includes a mark, the signature or the mark must be that of the man himself. In this judgment, the Hon ble Bombay High Court, taking assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by getting it signed from one of the partners of M/s. S.B. Billimoria Co. not in his own name individually but as S.B. Billimoria . So the instant case is still roaming in the domain of section 292B and has not been brought within the purview of section 139(9) by the AO, enabling to reach a positive conclusion as to whether the return is valid or invalid, which, in turn, is dependent on the assessee succeeding or failing to remove the defect. The sole reason behind the AO treating the return as invalid is that such a return will be deemed as if never filed and the right to carry forward the loss under the head Capital gains shall come to naught. Now when we are restoring the matter to the Assessing Officer, we want to make it clear that he will issue defect memo to the assessee calling upon it to remove the defects in the return and if the assessee succeeds in removing the defects, the correct return now filed shall date back to the original return as has been held in the case of Prime Securities Ltd. [ 2009 (4) TMI 108 - BOMBAY HIGH COURT] and Nicholas Applegate South East Asia Fund Ltd. s [ 2009 (1) TMI 301 - ITAT BOMBAY-L] provided the defect is removed within the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose to or was received by me from any asset held in my name or in the name of any other person; ( b )there is no other income, including income of any person, in respect of which I am chargeable to tax under the Income-tax Act, 1961. *I further solemnly declare that during the said previous year(s) ( a )no other income accrued or arose to or was received by *the person for and on whose behalf this return is furnished/the person in respect of whose total income I am assessable from any asset held in *the name of the person in respect of whose total income I am assessable, or in the name of any other person; ( b )there is no other income including income of any other person in respect of which the said person is chargeable to tax under the Income-tax Act, 1961, I further declare that I am making this return in my capacity as Constituted Attorney (designation) and that I am competent to make this return verify it. Place : Mumbai S.B. Billimoria Co., Date : 30/6/97 Constituted Attorney **(Name Signature)" 4. The Assessing Officer further noted that verification was done on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry forward of loss under the head Capital gain . 6. We have heard the rival submissions and perused the relevant material on record. It is noted that the original return filed by the assessee on 30-6-1997 was verified by Constituted Attorney i.e., M/s. S.B. Billimoria Co., Chartered Accountants. In the beginning of the verification part after the word "I", "S.B. Billimoria Co." was mentioned in place of name in full and block letters. Down below in the declaration part it was written that the return was filed in the capacity as "Constituted Attorney". On the right hand side of the verification part one signature is appearing from where it can be seen that it has been signed as S.B. Billimoria , below which it is mentioned Constituted Attorney . A revised return was filed on 17-11-1998 with a minor variation in the income. This return was filed in the same manner as the original return, that is the verification part and the signing of the return was on the same lines. One more so called revised return was filed along with the assessee s letter dated 18-1-2000, which has not been rightly considered by the Assessing Officer for the reason that neither it was in respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer and no fault can be found in his decision. 8. From the above narration of facts of the case, it is clear that the learned CIT(A) decided the controversy against the assessee from an angle different from that of the Assessing Officer. Now the question is : Is the ld. first appellate authority entitled to decide the issue from a different perspective ? We are not convinced with the submission made on behalf of the assessee for the reason that section 251(1), defining powers of the CIT(A), has been worded in such a manner empowering him in an appeal against an order of assessment, to confirm, reduce, enhance or annul the assessment. We observe that the ld. CIT(A), in the present case, did not even travel beyond the assessment order. The Assessing Officer held the return as invalid, which matter was assailed by the assessee before him. His action was confined to examining the validity or otherwise of return on the appreciation of material already on record, although from a different angle. Be that as it may it is a settled legal position that the powers of the CIT(A) are co-terminus with that of the Assessing Officer as has been held in several judgments including Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent order was also passed under section 143(3). Similar position was shown for assessment year 1999-2000 in which again the return was filed in the like way. In the past also the assessee filed return for assessment year 1996-97 on the same pattern which was not disputed by the Assessing Officer. In view of the acceptance of the returns for the earlier as well as later years with similar verification, the ld. AR stated that the principle of consistency will apply and the Department was not entitled to take a contrary view from what had been accepted by it. He relied on the judgment of the Hon ble Supreme Court in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321 to contend that the rule of consistency be followed. 10. In principle we are in agreement with the view canvassed by the ld. AR that the rule of consistency should be followed and the assessee should be assured that once a particular state of affairs is accepted, then that shall not be altered in the later years unless there is change in factual or legal position. In other words, if an assessee has claimed deduction in one year or claimed a particular treatment to an item of income, which has been accepted, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atters. The Hon ble jurisdictional High Court in Kotak Mahindra Finance Ltd. v. Dy. CIT [2004] 265 ITR 114 (Bom.) considered a case in which higher rate of depreciation was allowed in the past and the assessee claimed that such higher rate be applied on the basis of acceptance of its claim in the last year. Turning down this plea, their Lordships have held that : There is no merit in the argument that because higher depreciation was granted by the Department for the earlier years, the Department was bound to grant higher depreciation for the assessment year in question. Under the Income-tax Act, each year is separate event of assessment. The principle of res judicata is not applicable . The Hon ble Apex Court has also held in following cases that the principle of res judicata is not binding on the Income-tax Appellate Tribunal : - CIT v. Brij Lal Lohia Mahabir Prasad Khemka [1972] 84 ITR 273 (SC) - M.M. Ipoh v. CIT [1968] 67 ITR 106 (SC) - New Jehangir Vakil Mills Co. Ltd. v. CIT [1963] 49 ITR 137 (SC). Similar view has been expressed by the Third Member in Dy. CIT v. Rajneesh Foundation (Neo Sannyas Foundation) [2002] 81 ITD 31 (Pune) (TM). 12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er but on the ground that PoA was not properly notarized and further its original was required to be filed as against the copy of PoA filed by the assessee. 14. There is no dispute on the fact that the assessee executed a Power of Attorney in favour of M/s. S.B. Billimoria Co., Chartered Accountants, a copy of which is available in the paper book. It authorized the said CA firm to file the return on its behalf through its partner. It is further noted that assessee did file its returns through M/s. S.B. Billimoria Co. Chartered Accountants signed by Sh. N.B. Bugwadia, its partner. But the said partner, instead of signing his own name, put initials as s.b. billimoria . 15. Section 140 has marginal note : "Return by whom to be signed". Clause ( a ) is applicable in the case of an individual. It states that the return shall be signed by the individual himself, but where he is absent from India, by the individual himself or by some person duly authorized by him in this behalf. Sub-clause ( iii ) deals with a particular situation where such individual is mentally incapacitated. Sub-clause ( iv ) states that where, for any other reason, it is not possible for the individual t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing of the return by the holder of a valid Power of Attorney. Clause ( e ) states that in case of any other association, the return shall be signed and verified, by any member of the association or the principal officer thereof. 16. On going through various clauses of section 140, it is seen that whereas clauses ( a ) and ( c ) contain the provision for the signing of the return by a valid power of attorney holder, other clauses do not have such provision. Thus there is a clear line of demarcation between the classes of assessees, who, in certain circumstances, can get their returns signed and verified by the holder of valid PoA, in which case such PoA is required to be attached to the return and on the other hand the classes of assessees who do not enjoy such privilege. It is not permissible to a non-privileged assessee to issue PoA and get his return filed through the holder of a PoA. It is true that in common parlance if a person can do some work personally, he can get it done through his Power of Attorney holder also. But we are dealing with section 140, in which separate categories of assessees have been made and the said general rule has been made applicable only to some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Co-operative Apex Bank Ltd. v. CIT [1978] 112 ITR 257 he claimed that it has been held in these cases that the Tribunal cannot give a finding adverse to the assessee so as to place him in a position worse than what it was before appeal. 19. We are not inclined to agree with preliminary objection raised on behalf of the assessee. Primarily we are not raising a ground which will work adversely to the assessee as has been laid down by the Hon ble jurisdictional High Court in the case of Puranmal Radhakishan Co. ( supra ). The only question decided by the Assessing Officer is about the invalidity of the return on account of wrong verification, which has been upheld by the learned CIT(A) and the assessee is in appeal before us on that very issue. When the Assessing Officer held the return to be invalid for want of proper verification, he was not obliged to examine the return from all other possible angles also and point out the further defects, if any. When on the threshold, he came to the conclusion that the return was not valid, he was well within his power to hold it as invalid and proceed as if no return was ever filed. This can be examined from a different point of vie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of CIT v. Indian Express, (Madurai) (P.) Ltd. [1983] 140 ITR 705 has held that the Tribunal s jurisdiction is plenary in respect of questions of fact or law arising from assessment. The Tribunal is not precluded from examining a point for the first time merely because it has not been forwarded at the earlier stages of the proceedings. The Full Bench of the Hon ble jurisdictional High Court in the case of Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom.), has held that the Tribunal has jurisdiction to permit additional grounds to be raised before it even though these may not arise from the order of the Appellate Assistant Commissioner so long as these grounds are in respect of the subject-matter of the entire tax proceedings. Here is a case in which there is no question of any additional ground on an altogether different issue, but the consideration of the same issue from a different angle. 20. Rule 11 of ITAT Rules, 1961 reads as under : "The appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the memorandum of appeal, but the Tribunal, in deciding the appeal, shall not be confined to the gro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther been laid down that the Tribunal did not go outside the subject-matter of the appeal when it sustained disallowance on the same issue but under some different provision : - Steel Containers Ltd. v. CIT [1978] 112 ITR 995 (Cal.) - P. Ibrahim Haji v. CWT [1998] 232 ITR 253 (Ker.). 22. In the backdrop of the present factual matrix, we are not inclined to agree with the viewpoint of the ld. AR that the Tribunal s hands are tied for examining the validity of the return from a fresh angle. It is axiomatic that the subject-matter of the appeal is the validity or otherwise of the return. When some facts are open to the naked eye, which have bearing on the subject-matter, it cannot be heard that the Tribunal should act as a mute spectator and let the wrong prevail. In view of the foregoing legal position emanating from the judicial pronouncements and the later part of rule 11 of ITAT Rules, we are of the considered opinion that there is no jumping of power by us in examining the validity of return from the above angle after specifically putting across the assessee with this point of view and allowing it to make submissions in this regard. 23. Insofar as the relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the requirement of sub-section (2) of section 251 of a reasonable opportunity of showing cause against such enhancement being given to the appellant, assessee. This could have been done in the assessee s appeal itself filed in the present case. The Tribunal was not justified in taking the view that it had no other alternative except to affirm the order of the AAC cancelling even the lesser penalty imposed by the ITO. In view of section 251(1)( b ), it is also clear that the AAC was wrong in taking the view that he had no power to enhance the penalty in accordance with law on reaching the conclusion that the computation of penalty made by the ITO was illegal, and that he could only cancel even the lesser penalty which had been imposed by the ITO." 25. In view of the above discussion we are satisfied that there is no substance in the submission made on behalf of the assessee that the Tribunal cannot examine the validity of the return from the point on which clarification was sought from the ld. AR. We are, therefore, proceeding to dispose of the issue on merits. 26. The Assessing Officer in his communication dated 11-1-2000 has mentioned in para 5 that the act of wrong verifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y and treat the return as a valid return. Explanation. For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely : ( a )the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in; ( b )the return is accompanied by a statement showing the computation of the tax payable on the basis of the return; ( bb )the return is accompanied by the report of the audit referred to in section 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report; ( c )the return is accompanied by proof of ( i )the tax, if any, claimed to have been deducted at source and the advance tax and tax on self assessment, if any, claimed to have been paid; ( ii )the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974); ( d )where regular books of account are maintained by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us the list of items spelled out in the Explanation is only inclusive and not exhaustive. Our view is fortified by the judgment in CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [1992] 195 ITR 825 (Cal.). The Hon ble High Court has held in this case as under : "Of course, the Assessing Officer cannot ignore the specified defects and must get them rectified but to contend that only the defects specified can be got rectified and no other defects would be putting unnecessary restrictions on the power of the Assessing Officer leading to inconvenient consequences and absurd result not intended by the Legislature. There is no such fetters on the powers of the Assessing Officer under section 143. The Assessing Officer has power to ask the assessee to remove all defects in the return other than the defects making the return invalid. ......Therefore, the Assessing Officer ought to have given the assessee an opportunity to submit the audit report as the return was defective inasmuch as the audit report was not filed along with the return." 29. Similar view has been taken in a large number of cases holding that the requirement of filing the audit report necessary for cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mistake, defect or omission in such return if it is in substance and effect in conformity with the intent and purpose of the Act. The intent and purpose of the Act is to make assessment at correct figure. If there is some technical defect in the return which does not affect the overall taxability of the income, section 292B comes into play to take care of such technical defect by considering it as not invalid return of income provided such return is in substance and effect in conformity with the Act. 33. Let us test the facts of the instant case on the touchstone of section 292B. It is noted that M/s. S.B. Billimoria Co., Chartered Accountants were appointed by the assessee to file the return. Shri N.B. Bugwadia, one of the partners of M/s. S.B. Billimoria Co. signed the returns in his own handwriting but instead of signing in his own name, he signed as S.B. Billimoria to indicate that he was signing it for and on behalf of M/s. S.B. Billimoria Co., Chartered Accountants. Further below the signature, it has been duly mentioned as Constituted Attorney in the return itself. It is further not disputed that the verification part of the return is in the handwriting of Shr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be relevant to take note of a recent order passed by the Mumbai Bench of the Tribunal in Nicholas Applegate South East Asia Fund Ltd. v. Assistant Director of Income-tax (International Taxation) [2009] 117 ITD 299 , which has been relied on by the ld. AR. In this case, it has been held as under : "On a plain reading of this section, it is observed that the return of income, etc., shall not be considered as invalid merely by defect or omission in such return if it is in substance and effect in conformity with the intent and purpose of this Act. The rationale behind this section is that the return of income, assessment, notice, summons or other proceedings should not be held to be invalid due to technical mistakes, which otherwise do not have much impact touching its legality provided such return, assessment notice, summons or other proceedings, etc., are otherwise in conformity with the purpose of the Act. The purpose of the Act is to charge income-tax on the total income of the assessee. This purpose is best fulfilled if the correct income is determined and tax is charged thereon. It involves the making of assessment by the Assessing Officer in which the particulars ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns was returned by them separately, it ultimately meant that they were representing a part of the assessee s total income in themselves. In a way the assessee had originally filed four returns of its income instead of the requirement of one return. The situation would have led to other consequences if these four divisions had been separate entities in themselves having requirement to file distinct returns casting obligation on the Assessing Officer for framing four separate assessments. It is not the case here as the authorities below have not controverted the fact that these four sub-divisions represents the assessee-company as a whole and only one assessment is called for in the name of the assessee-company. Now when four returns were filed in respect of the assessee s income, which are otherwise valid and complete, in our considered opinion, the assessee has complied with the intent and purpose of this Act, which is to assess the total income correctly. When that is the position, the provisions of section 292B get fully attracted and the assessee s case cannot be shunted out simply on the ground that subsequently one return combining the figures of the four divisions was separat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was executed on 23-6-1994, copy of which is available at page 57 of the paper book in which M/s. S.B. Billimoria Co., Chartered Accountants have been empowered inter alia to sign and submit the return "acting through their partners". It is further noted that the original return as well as two revised returns were filed indicating appropriately that it was signed by Power of Attorney holder - M/s. S.B. Billimoria Co., Chartered Accountants, a copy of which was attached along with the return. However, the mistake occurred when a partner of M/s. S.B. Billimoria Co., instead of putting his own signature signed the name of S.B.Billimoria at the space required for verification. Naturally the non-signing of the return by the partner in own name did not make the return as valid. But the question is as to whether this defect is of such an enormity as to make the return as invalid and non est. 41. In our considered opinion this defect, in the given circumstances, can be held as technical only covered within the meaning of section 292B for the reason that but for such defect the return is in substance and effect in conformity with the intent and purpose of this Act. The view po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orrect particulars of income are forthcoming from the return, it shall be valid, notwithstanding the fact that it is filed in wrong form. We are unable to agree with the ld. AR on this point. Firstly the correct status of the assessee in the year in question is still in dispute. The mere fact that the Assessing Officer in passing order under section 154 has mentioned the status of the assessee as a non-resident company and that too in relation to the assessment year 2000-01 cannot be considered as the admission of this status even in relation to the year in question. 43. The next contention raised is that a return filed in wrong Form be considered as valid. We are unable to accept this view point. The Income-tax Rules, 1962 prescribe different types of return forms in which returns are to be filed by the specified class of assessees. For example Form No. 1 is a return form for companies other than those claiming exemption under section 11. Then Form No. 2 is return form for assessees other than companies whose income include income under the head "Profits and gains of business or profession". Form No. 2B is return of income for block assessment. Form No. 3 is return of income f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se cures the defect. The defect has to be removed by the assessee on being brought to his notice by the Assessing Officer. In the case of Nicholas Applegate South East Asia Fund Ltd. ( supra ), relied on behalf of the assessee, the defect was removed and a correct return was filed before the completion of assessment, that is why it was held to be valid. However, in the instant case the Assessing Officer has opined that only the defects enumerated in Explanation to section 139(9) are liable to be considered for treating the return as defective and not any other defect, such as wrong verification. It is further seen that the Assessing Officer held the return to be invalid on the sole ground that the return was not properly signed and verified. He did not proceed further to examine whether it was a case of an AoP or a company. The assessee also filed one return after the other in Form No. 3 in the same wrong manner by getting it signed from one of the partners of M/s. S.B. Billimoria Co. not in his own name individually but as S.B. Billimoria . So the instant case is still roaming in the domain of section 292B and has not been brought within the purview of section 139(9) by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered opinion, the return without the original Power of Attorney cannot be treated as invalid and non est, without providing opportunity to the assessee to file such Power of Attorney in original, more so when the original Power of Attorney is in existence. We, therefore, hold that the filing of the copy instead of the original Power of Attorney, in the given circumstances, is only an irregularity and cannot invalidate the return. 47. Now we are back to square one that the assessee filed its three returns in Form which is not applicable to the corporate assessee and claimed the status as an AoP. Before the Assessing Officer the submission was made that the provisions of section 140( c ) are applicable, which are relevant for corporate assessee. If, however, we go by the status of the assessee as mentioned in the returns of income, that is found to be that of an AoP and in that case clause ( e ) of section 140 shall apply for the signing and verification of the return. In the given circumstances it is not clear as to what is the correct status of the assessee. In our considered opinion, it is of paramount importance to first determine the correct status of the assessee only the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t aside the impugned order and restore the matter to the file of the Assessing Officer with the direction to first verify the correct status of the assessee. If the assessee turns out to be AoP as mentioned in returns filed by it then a defect memo should be issued enabling the assessee to rectify the defect by getting it signed and verified by the member or principal officer thereof as per section 140( e ). If, however, the correct status is found to be company then again we hold that the signing by the partner as S.B. Billimoria in the verification part of the return and non-filing of original power of attorney will constitute defects in the return. In that case also he will issue a defect memo and afford an opportunity to the assessee to get the return signed by the partner in his own name under a valid Power of Attorney to be annexed in original along with the return. While finalizing the assessment he will also examine the aspect of the notarization of the Power of Attorney in the given case. If the assessee fails to remove these defects within the prescribed time-limit under section 139(9), then the Assessing Officer will be right in treating the return as invalid in which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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