TMI Blog2009 (1) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Class (iv) NACM Institutional Investors LLC Small CAP Engineering Countries Class. 3. The returns in respect of these four sub-divisions were originally filed separately within the time prescribed under section 139(1) of the Income-tax Act, 1961, on October 30, 2001. Subsequently, the assessee realized that a consolidated return for all the four divisions was required to be filed. Therefore, a revised return dated October 29, 2002 was filed incorporating the income/loss of all the four sub-divisions. The Assessing Officer noticed that the assessee had derived income from dividends as well as short-term capital loss. The dividend income of Rs. 5.61 lakhs was claimed as exempt under section 10(33). The short-term capital loss was shown at Rs. 32.54 crores, in support of which the assessee filed necessary supporting evidence towards purchase and sale of shares in the form of Contract notes. The Assessing Officer has mentioned in paragraph 2.1 of the assessment order that on the verification of the details furnished by the assessee, the claim in respect of short-term capital loss as well as dividend income as exempt was found to be in order. However, a show cause notice was issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the original four returns were filed within time. However, it was realized later on that one single return was required to be furnished consolidating the results of the four divisions and as such a return was prepared and filed in which the trading activities as well as the resultant profits from operation were clubbed as a single unit. He further submitted that section 292B was applicable in his case as the returns were in substance and effect in conformity with the purpose of this Act. He contended that the benefit for carry forward of loss was erroneously denied to the assessee as it had fulfilled the necessary conditions. He relied on certain decisions for contending that the subsequent return filed by the assessee on October 29, 2002 be taken as in substitution of the original returns. 5. Sounding the contra note, the learned Departmental representative, besides strongly relying on the impugned order, contended that the assessee had filed four returns which were invalid because section 2(31) dealing with person includes a company and not the sub-division of a company . She contended that the four returns filed by the sub-divisions distinctly were invalid and the subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Section 139(3) deals with loss return and provides that if any person has sustained a loss under the head Profits and gains of business or profession or under the head Capital gains and claims that the loss should be carried forward, he may furnish a return of loss within the time allowed under sub-section (1). 8. After going through the relevant sections for our purpose, we now advert to the facts of the instant case. The due date for filing return under section 139(1) was October 31, 2001. This return could have been revised within one year from the expiry of the assessment year, viz., up to, March 31, 2003. Suppose an assessee had not furnished any return for this year, he could have filed a belated return under section 139(4) up to March 31, 2003. In order to claim the benefit of carry forward of loss, it was required to furnish the return within the time prescribed under section 139(1), i.e., up to October 31, 2001. Now we have to decide the claim of the assessee for carry forward of loss sustained by it at Rs. 32.54 crores, whose computatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome 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 of income as furnished by the assessee are scrutinized for determining the correct total income. There may be a case in which the assessee has intentionally or unintentionally claimed wrong deductions or exemptions, etc., to which he is not entitled. In that case the Assessing Officer makes the disallowances as per law. Still in another situation the assessee may have stated the correct income and no disallowance etc. are required. The purpose of the Act is achieved when the correct total income is determined either by way of making adjustments by the Assessing Officer and enhancing the stated income to the correct income or by the assessee himself furnishing the correct particulars of income not warranting any enhancement by the Assessing Officer. It, therefore, transpires that if a return has been furnished by the assessee which is otherwise in substance and effect in conformity with or according to the intent and purpose of this Act, then any technical d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 separately filed. We, therefore, hold that the four returns filed on October 30, 2001, are valid returns under section 139(1) read with section 292B. 10. Now we turn to the subsequent return filed by the assessee in a consolidated manner on October 29, 2002. It is noted that the Revenue has treated it as an original but belated return. In view of our conclusion in the foregoing paragraph that the original returns filed by the four sub-divisions are valid returns within the meaning of section 139(1) read with section 292B, there cannot be any question of treating the subsequent single return as original return. In the peculiar circumstances prevailing in this case, the return can also not be characterized as a revised return under section 139(5) for the reason that there was neither any omission nor any wrong statement in the original returns filed by the assessee, which are pre-requisite conditions for filing a revised return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were independently registered with SEBI. Further, separate permanent account numbers were also allotted to these cells by the Income-tax Department. (iii) The above four cells/units filed separate returns on 30th October, 2001 in their own respective names in respect of the year under conside ration under section 139(1) of the Act. All the cells/units declared losses in respect of the business carried on by these cells/units. (iv) The assessee-company filed a revised return on October 29, 2002 declaring the consolidated losses of the above cells/units. (v) The Assessing Officer treated the returns filed by the cells as invalid returns since such cells could not be considered as person defined under section 2(31) of the Act. The revised return filed by the assessee company was treated as original return. Since this return was filed after the period prescribed under sub-section (1) of section 139, the same was not treated as return filed under section 139(3) of the Act. Consequently, the loss declared by the assessee was not allowed to be carried forward for set off to the subsequent years. On appeal, the learned Commissioner of Income-tax (Appeals) upheld the order of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who has sustained a loss in any previous year under the head 'Profits and gains of business or profession' or under the head 'Capital gains' and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or subsection (2) of section 73, or sub-section (1) or sub-section (3) of section 74, or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the other provisions of this Act shall apply as if it were a return under sub-section (1). (4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time allowed under a notice issued under sub-section (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier : Provided. . . . . (5) If any person, having furnished a return under sub-section (1), or in pursuance of a notice issued u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Therefore, it cannot be said that return filed by these cells/units were in accordance with the provisions of section 139(1) or 139(3) of the Act. Further, perusal of sub-section (1) and sub-section (3) of section 139 shows that there must be relationship between the person filing the return and the person who has incurred the loss. If the company has incurred a loss then it is the company who must file the return of loss under sub-section (1) of section 139 or under section 139(3) of the Act as the case may be. Since the loss was incurred by the assessee-company, the return could be filed by the assessee-company only and consequently the four returns filed by its cells/units could not be considered as valid returns in accordance with sub-section (1) or sub-section (3) of section 139 of the Act. 18. The provisions of section 292B invoked by learned counsel for the assessee, in my opinion, does not help the case of the assessee. Section 292B is being reproduced as under : 292B. No return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time prescribed under section 139(1). 20. In view of the above discussion, it is held that the returns filed by the cells/units in their own names cannot be treated as valid returns under section 139(1) and therefore question of filing any return under section 139(5) did not arise. The Assessing Officer was therefore justified in considering the revised return filed by the assessee as original return under section 139(1) read with section 139(4) of the Act and consequently, the said return cannot be treated as return under section 139(3) as the said return was not filed within the time allowed under section 139(1) of the Act. The contention of the assessee's counsel that the revised return filed by the assessee is return under section 139(4) and therefore be considered as return under section 139(1) in view of certain judgments cannot be accepted for the reasons that for claiming carry forward of losses the return must be filed within the time prescribed under section 139(1). Since the return was filed after the time prescribed under section 139(1), the assessee was not entitled to carry forward the loss for set off in the subsequent years. In the result, the appeal of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neering Countries Class The returns of income of four cells for the assessment year 2001-02 were filed within the time prescribed under section 139(1) of the Income-tax Act on October 30, 2001. Subsequently, the assessee realized that a consolidated return for all the four cells was required to be filed. Therefore, a revised return dated October 29, 2002 was filed incorporating income/loss of all the four cells/sub-divisions. The Assessing Officer noticed that the assessee had derived income from dividends and short-term capital loss. The dividend income was claimed to be exempt under section 10(33) of the Income-tax Act. The Assessing Officer (as per the learned Accountant Member, on which the learned Vice-President has not differed) has mentioned in the assessment order that on the verification of details of sales and purchase of shares, the claim in respect of short-term capital loss as well as claim of dividend income being exempt, was found to be in order. 23.1. The Assessing Officer, however, was of the view that the return filed on October 29, 2002 was to be considered as original return and four returns filed separately by four cells on October 30, 2001, were invalid. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that in order to claim the benefit of carry forward of loss, the assessee was required to furnish the return within the time prescribed under section 139(1), i.e. up to October 31, 2001 in order to consider the claim of the assessee for carry forward of loss of Rs. 32.54 crores sustained by it, whose computation and otherwise eligibility has been accepted by the Assessing Officer. The learned Accountant Member further observed four returns were filed by the cell companies individually, copies of which have been placed in the paper book. On perusal of these returns, it is found that all of them have been signed and verified by one Shri E. Blakemoore, who is the director of these cells. Thereafter a consolidated return was filed by the assessee on October 29, 2002, in which the income and other particulars of all the four sub-divisions were clubbed. Now the case of the assessee is that the returns filed by the four sub-divisions be treated as original returns and the benefit of carry forward of loss be granted. 24.2. The learned Accountant Member also noted the Revenue's claim that four returns filed by sub-divisions were invalid as sub-divisions were not eligible to fil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se falls under the second category. It is not the case of the Revenue that the assessee had evaded any tax by furnishing four returns separately or by submitting one consolidated return. Neither any mischief or mala fide on the part of the assessee either in bifurcating or clubbing its income has been brought to our notice by the learned Departmental representative. The Assessing Officer has accepted in paragraph 2.1 that the claim of the assessee in respect of short-term capital loss as well as dividend income is perfectly in order. We observe that separate returns were filed by these sub-divisions of the assessee-company under a mistaken notion that there was a requirement of furnishing the returns separately. For all practical purposes, these separate returns individually represent total loss suffered by the assessee-company as one unit. There was no obligation on the part of sub-divisions for furnishing returns in respect of their operations independently de hors the assessee-company. In other words, the liability for filing the return in respect of the four sub-divisions fell squarely on the assessee-company as they are its part and parcel. Now when the total income as submitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Member accepted the claim of the assessee. According to him the benefit of carry forward of loss cannot be denied to the assessee as it filed returns of loss before the due date within the time allowed under section 139(1) of the Income-tax Act. Therefore, in the proposed order, the learned Accountant Member set aside the impugned orders and held that the right of the assessee to carry forward the loss cannot be snatched away from it. 27. The learned Vice-President did not agree with the above view of the learned Accountant Member. He also noted in paragraph 14 the names of the four cells/units of the assessee carrying on the business of investment in shares. He also noted that the Assessing Officer treated the returns filed by cells as invalid since such cells could not file the return not being a person defined under section 2(31) of the Income-tax Act. The revised return was treated by the Revenue as original return. However, the same being belated, the loss declared by the assessee was not allowed to be carried forward for set off to the subsequent years. 28. The learned Vice-President thereafter posed the question whether the assessee was entitled to carry forward the loss in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn of income filed by the assessee and such return of income must be in conformity with the provisions of the Act. The present case cannot be said to be a case of any mistake, defect or omission in the return since no return of income was filed by the company itself. Section 292B pre-supposes a return of income or loss which is in accordance with the provisions of the Act. If the return of income itself is not in accordance with the provisions of the Act then question of invoking the provisions of section 292B would not arise. As already held in the preceding paragraph, the returns filed by the four cells/units of the company cannot be said to be in conformity with the provisions of the Act. In my opinion, the reliance of the assessee's counsel on the pro visions of section 292B is therefore misplaced. 28.4. In view of the above, the learned Vice-President held that the assessee, on account of belated return, was not entitled to carry forward the loss for set off in the subsequent years. Accordingly, the learned Vice-President, in his proposed order, upheld the action of the Revenue authorities and dismissed the appeal of the assessee. 29. In the light of the above difference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce and effect in conformity with or according to the intent and purpose of this Act. 30. Learned counsel referred to the provisions of section 292B of the Income-tax Act and submitted that the purpose of the Income-tax Act is to achieve/determine the correct total income and when correct total income was given in four returns filed simultaneously and later in the return consolidating figures were given, the original four returns filed were valid. 30.1. The four returns disclosed the total income of the assessee and therefore in substance conform to statutory requirements. May be they did not comply strictly with provision. However, the defect here was fully curable under section 292B of the Income-tax Act. 30.2. All the four returns were filed simultaneously with the same Assessing Officer giving complete information, thus no loss or prejudice was caused to the Revenue. The assessee did not intend to cause loss to the Revenue and no mala fide or mischief on the part of the assessee at any stage has been alleged. 30.3. What has been done is mere consolidation of figure in one return, which is supplementing the original four returns. There is no deviation at all in the consolidated r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns 139, 140, 154 and 292B of Income-tax Act, 1961 Assessee public limited company Return filed by assessee not signed by persons named in section 140 Whether in view of section 292B return cannot be questioned if it was in substance and in effect in conformity with intent and purpose of Act and action under section 154 not warranted Return cannot become void if there is no 'defect' 'Defect' means a blemish, fault or imperfection Action under section 154 was warranted if mistake is one which is apparent from record Held, action under section 154 not warranted. (3) Sujani Textiles P. Ltd. v. Asst. CIT [2004] 88 ITD 317 (Mad) : In this case, the 'B' Bench of the Income-tax Appellate Tribunal, Madras, laid down the following proposition : Ratio : If the assessee has filed a loss return under sub-section (3) of section 139 within the period provided under the Act, and if the assessee has filed a revised loss return under sub-section (5) thereof, again within the prescribed time limit, the Assessing Officer is bound to take cognizance of the revised return, because the original return is replaced by the revised return. (4) Niranjan Lal Ram Chandra v. CIT [1982] 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the past. The moment the defect was pointed out to the assessee, a fresh return was filed, which was signed by the managing director. The fresh return, it was held would relate back to the original filing of the return. The decision of the hon'ble Kerala High Court in the case of CIT v. Masoneilan (India) Ltd. [2000] 242 ITR 569 was applied. (6) CIT v. K. Ramasamy [2008] 296 ITR 358 (Mad) : In the said case, the hon'ble High Court held that the information given even in a belated return is a valid information and can be taken as given by the assessee to the Assessing Officer to determine undisclosed income of the assessee for the block assessment. (7) CIT v. Valli Cotton Traders P. Ltd. (Unit of Loyal Textile Mills Ltd.) [2007] 288 ITR 400 (Mad) : This decision was cited for the proposition that all the sub-sections of section 139 are to be read together harmoniously and in a fair and reasonable manner. The benefit should not be denied to the assessee, which is due on a technical ground. 30.6. Learned counsel for the assessee accordingly supported the proposed order of the learned Accountant Member. 31. Smt Malathi Sridharan the learned Departmental representative supporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e meaning of section 22(2) of 1922 Act. It was not a bona fide return. The learned Departmental representative also relied upon the decision of the Income-tax Appellate Tribunal, Delhi B Bench, in the case of ITO v. Atea Spa. [1992] 42 TTJ (Del) 80. In the said case the return filed by the Indian company on behalf of a non-resident company signed by the managing director of the Indian company was held to be invalid and non est. The defect was held to be not curable under section 139(9) or section 292B of the Income-tax Act. The learned Departmental representative placed reliance on all the above quoted decisions. 32. The learned Departmental representative then referred to the provisions of section 292B of the Income-tax Act and argued that the word purpose of filing return was to make an assessment of total income of the assessee. There is no provision in the Act enabling the assessee to show only a partial income as was done by four cells in this case. There is no right to amend such a return either with the assessee or with the Assessing Officer. There is no statutory provision under the Income-tax Act to take or consolidate four returns as one return. The best judgment assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant Member. Total income of the assessee was disclosed in the four returns. Therefore, four returns read together serve intent and purpose sought to be achieved by the Income-tax Act. These were valid returns. It was reiterated that benefit in the light of statutory provision should not be denied on technical grounds when in substance and in effect these statutory provisions have been compiled with. The returns were bona fidely filed and therefore their effect is required to be considered in this case, as has been done by the learned Accountant Member in the proposed order. 34. I have given careful thought to the rival submissions of the parties and examined them in the light of material available on record. I have also carefully considered the reasons given by my learned brothers for taking different views in the matter. The material difference is that four returns submitted by four cells have been held to be invalid and non est by the learned Vice-President, whereas the learned Accountant Member has held that these returns contained mistake, defect or omission, which were covered under section 292B of the Income-tax Act and, therefore, on facts, the provisions of section 80 were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , notice, etc. are governed and must take colour from the later part of the section requiring to consider whether such return etc. is in substance and in effect in conformity with or according to the intent and purpose of this Act . In other words, it is to be seen whether such return or notice is in substance and in effect in conformity with or in accordance with the intent and purpose of the Act and not the invalidity of the return e.g., if it is shown that return of income, notice, etc., have the same or substantially the same effect as would return, notice etc., without mistake, defect or omission would have, such, return, notice etc. must be given effect to and cannot be treated as invalid. If in substance and in effect, the intent and purpose of the enactment has been served, the action (return, notice, etc.) cannot be held to be invalid. 34.2. Substance over form theory is the underlying philosophy of section 292B. If in substance and in effect return, notice or assessment is in conformity with or according to the intent and purpose of the Income-tax Act, the mistake, defect or omission is to be ignored. It is no doubt true, as agreed to by both the parties, that purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2B of the Income-tax Act. 35. In order to illustrate the point, I would like to refer to the decision of the hon'ble Punjab and Haryana High Court in the case of Swaran Kanta v. CIT [1989] 176 ITR 291. In the said case the assessee died during the pendency of the assessment proceedings. The assessment was completed after impleading the legal representative of the deceased but, in the assessment order, the name of the deceased was shown instead of the legal heir. Before the first appellate authority, the legal representative contended that the assessment was null and void as it was made on a dead person. The Revenue, on the other hand, relied upon the provisions of section 292B to support the assessment. The Appellate Assistant Commissioner and on appeal, the Tribunal upheld the assessment since the legal heirs of the deceased assessee were impleaded and were heard. It could not be said that the assessment was made on a dead person. The High Court agreed with the above view holding as under (page 294 of 176 ITR) : We are of the opinion that the Tribunal came to the correct conclusion. There is clearly a clerical error or omission in the heading of the assessment order. The corre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake the assessment order invalid as was sought to be declared by the Appellate Assistant Commissioner. The Tribunal was fully justified in restoring the order of assessment in exercise of its powers under section 292B of the Act. 35.1. In the case of CIT (Central) v. K. Saraswathi Ammal [1984] 146 ITR 486 (Mad), the Assessing Officer had raised demand for advance tax for 1965-66 on the basis of provisional assessment for 1964-65. Subsequently on the rectification of the provisional tax demand for 1964-65, the Income tax Officer rectified the advance tax demand for 1965-66 and issued a fresh notice to the assessee. However, before such rectification, no notice under section 154(3) was issued. As the assessee did not pay the advance tax demand on the basis of the rectified demand, the Income-tax Officer issued a letter asking the assessee to pay the balance of advance tax on or before a particular date and further stating that on failure to pay before the said date the assessee had to show cause why penalty should not be imposed for non-payment of advance tax. As no payment was made the officer levied penalty of Rs. 16,700 under section 221. The Appellate Assistant Commissioner set a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the defects are merely technical in nature, then such defects can be cured by the provision of section 292B of the Act. In support of his submission he pressed into service the Statement of Objects and Reasons leading to the introduction of section 292B of the Act. Their Lordships, after considering all the relevant provisions and case law, observed as under (page 256 of 287 ITR) : Having examined the factual matrix, the statutory provision, the law laid down by various courts presently holding the field, if one turns to the facts of the case at hand, it is not in dispute that notice dated July 6, 1998, did not mention the correct provisions of the Act; it did not mention the correct block period for which the return was required to be filed; it did not give 15 days clear notice. Though the said notice was defective, it did not cause any prejudice to the appellant. The undisputed factual matrix reveals that the appellant was served with another notice dated September 17, 1998, mentioning the block period for which the return was required to be filed incorporating the correct reference to the sections applicable to the case in question and it mentioned that the period of 45 days fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edural rules governing such enquiries. As a rule, all such procedural rules are designed to afford a full and proper opportunity to the subject to defend himself. The case of Dove Investments P. Ltd. v. Gujarat Industrial Investment Corporation [2006] 129 Comp Cas 929 (SC) has been reproduced (at page 255 of 287 ITR) : In the case of Dove Investments P. Ltd. v. Gujarat Industrial Investment Corporation [2006] 129 Comp Cas 929 ; [2006] 2 SCC 619 the apex court has observed that regard must be had to the context, the subject matter and object of the statutory provision in question in determining whether the same is mandatory or directory. No universal principle of law could be laid down in that behalf as to whether a particular provision or enactment shall be considered mandatory or directory. It is the duty of the court to try to get the real intention of the Legislature by carefully analysing the whole scope of the statute or section or a phrase under consideration. 36. In the light of the above decision, I am inclined to hold that four cells of the assessee, by filing four returns, in which total loss claimed by the assessee was disclosed, did comply in substance and in effect wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete information for making assessment. The technical mistake in the four returns stood removed on filing of the consolidated return. To ignore date of four returns is to ignore the provision of section 292B of the Act. In my considered opinion, the Revenue authorities and the learned Vice-President took a very narrow view of the statutory provisions of section 292B and thus defeated the very purpose of the provision. It could only advance injustice on account of a technical default. Whereas the provisions of section 292B aims to prevent such injustice. The learned Accountant Member, in my considered opinion, has taken right view of the matter. I therefore agree with him and answer the question in the affirmative. 37. Before closing, it needs to be mentioned that the decisions cited on behalf of the Revenue are not applicable. The view taken by the Tribunal in the case of Atea Spa [1992] 42 TTJ (Del) 80 is contrary to the view taken by different High Courts and cannot be followed. The decision in the case of Smt. P. K. Kochammu Amma [1980] 125 ITR 624 (SC) has no application to the facts of the case. The case of Abhey Ram Chunni Lal [1933] 1 ITR 126 (All) in fact supports the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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