Calcutta High Court
Commissioner Of Income-Tax vs Banshidhar Jalan And Sons on 25 September, 1992
Equivalent citations: [1994]207ITR488(CAL)
JUDGMENT Ajit Kumar Sengupta, J.
1. In this reference under Section 256(1) of the Income-tax Act, 1961, the following questions of law have been referred to this court for the assessment years 1968-69 and 1973-74 :
"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the revised return filed by the assessee on April 7, 1976, was a valid return?
2. If the answer to question No. 1 above is in the affirmative, since on April 22, 1976, i.e., the date on which the assessment was framed by the Income-tax Officer, the time-limit for completing the assessment on the basis of the revised return filed on April 7, 1976, had not expired, the Tribunal was justified in not setting aside the assessment and directing the Income-tax Officer to make a fresh assessment according to law?"
2. Shortly stated, the facts are as under :
The assessment years involved in this reference petition, are 1968-69 and 1973-74. The material facts for 1968-69 in brief are that the assessee filed its return of income on February 2, 1972, in response to a notice under Section 148 issued on November 8, 1971. In the assessment proceedings, a draft assessment order under Section 144B was served on the assessee on March 23, 1976. The assessee was granted extension of time to send its objection by April 7, 1976. No objections were, however, filed, instead a revised return was filed. The Assessing Officer declined to take cognizance of the return and held that the time for filing a revised return had run out on March 31, 1976, being the ordinary limitation period of four years from the end of the financial year in which the notice under Section 148 was issued, i.e., March 31, 1972. He finalised the assessment on April 22, 1976, on the basis of the draft order prepared with reference to the original return which remained uncontested by the assessee. In appeal before the Commissioner of Income-tax (Appeals), the assessee contended, inter alia, that it had a right to file a revised return at the draft order stage as Section 139(5) entitles the assessee to revise its return any time before the completion of the assessment. The Commissioner of Income-tax (Appeals), relying on the Tribunal's decision in I. T. A. No. 2666/ (Cal) of 1974-75 dated December 3, 1976, and also the decision of the Delhi High Court in Narinder Singh Dhingra v. CIT [1973] 90 ITR 110, cancelled the assessment on the ground that the earlier return being superseded, the Income-tax Officer had no jurisdiction to complete the assessment on the basis of such return. The Department carried the matter in appeal before the Tribunal. The Tribunal upheld the order of the Commissioner of Income-tax (Appeals). The Revenue's contention that the facts in Hoby Centre Pvt. Ltd. (supra) were distinguishable did not appeal to the Tribunal. The further contention that an assessee having filed a return under Section 148 cannot file a revised return under Section 139(5) was also negatived by the Tribunal. The last contention of the Revenue before the Tribunal was that the revised return virtually being similar to the earlier return except for a marginal variation of Rs. 400 could be deemed to have been acted upon, and the validity of the assessment cannot be questioned. This also did not find favour with the Tribunal as the Income-tax Officer, as evident from the assessment order, consciously ignored the revised return.
3. The Tribunal has taken the view that the language of Section 148 clearly brings into operation Section 139(2) with all its ramifications. According to the Tribunal, Section 148 and Section 139(2) are on par. Therefore, when the assessee filing a return under Section 139(2) has the option of revising his return under Section 139(5), for the sake of parity, a return filed under Section 148 also confers on the assessee the same right of revising the earlier return under Section 139(5) in pursuance of a notice under Section 148.
4. The Tribunal, again, went into the question whether the revised return filed after expiry of the prescribed limitation of four years from the end of the financial year in which the notice under Section 148 had been issued but before the completion of the assessment proceeding was valid. The Tribunal came to the conclusion that such a revised return was valid because the outer limit of time is either four years as stated or the date of completion of the assessment. In this case, the revised return was filed at the stage of the draft assessment order and not after completion of the assessment. Therefore, the revised return, according to the Tribunal, had superseded the earlier return and any assessment completed on the basis of such superseded earlier return would be an act beyond jurisdiction.
5. We have heard the rival contentions of the learned advocates of the parties appearing before us. We are not persuaded to subscribe to the view that the Income-tax Officer, by reason of not taking any cognizance of the revised return and having completed the assessment with reference to the earlier return, stripped himself of initial or inherent jurisdiction to reassess. It is not the case that the issue of the notice under Section 148 is in any manner questioned. There was no challenge to the assumption of jurisdiction to assess under Section 147. The jurisdictional facts furnishing the conditions precedent for reassessment remained uncontested. Once jurisdiction is initiated, we do not perceive any reason how the non-cognizance of the subsequent revised return on the basis of a particular view taken by the Officer in respect of the revised return can destroy the initial jurisdiction which the notice under Section 148 had activated. At this juncture, without commenting upon the correctness or otherwise of the stand taken by the Income-tax Officer, we are convinced that such decision does not affect the initial or inherent jurisdiction to assess. What can destroy jurisdiction to assess is the absence of jurisdictional fact, i.e., the facts constituting the conditions precedent to initiating the proceeding under Section 147. If the view taken by the Income-tax Officer with regard to the revised return is incorrect, the completion of the assessment on the basis of such erroneous view would be only a supervening irregularity and not an infirmity as may reduce the order to a nullity. It was very correctly submitted before the Tribunal by the Departmental representative that in view of the decision of the Supreme Court in Guduthur Bros. v. ITO [1960] 40 ITR 298, it would be improper for the Tribunal to cancel the assessment. The Departmental contention in that particular line is vindicated by the subsequent decision of the Supreme Court in Kapurchand Shrimal v. CIT [1981] 151 ITR 451. There it has been held by the Supreme Court that, where the assessing authority commits an error or misdirects the proceeding, it is the duty of the appeal court to set right such defect in the proceeding. Thus, the Income-tax Officer's refusal to take cognizance of the revised return could be an act that merely misdirected the course of the proceeding but could not be said to be an act that undermines the jurisdiction to assess.
6. There could be another situation where the assessment order might have been declared a nullity. Such eventuality would have happened, if it were the situation that the order passed by the Income-tax Officer was barred by the limitation of time. Here the order was passed within the limitation prescribed by Sub-section (2) of Section 153 read with Explanation (1)(iv). What the assessee pleads, if held to be correct, would have extended the limitation by one year from April 7, 1976. Therefore, there cannot be any question of limitation of time barring the completion of the assessment.
7. Now, we are addressing ourselves to the first question as regards the validity of the revised return filed by the assessee on April 7, 1976. The revised return could not be said to be a valid one because the marginal amount of Rs. 400 where the original return itself was for a sum of Rs. 47,492 and the income as finally assessed came to Rs. 1,86,820. It does not appear from the statement of facts why the revision was called for. If there was any extra item of income included, that must have been taken by the Income-tax Officer in the computation because the income assessed exceeded the income returned by more than Rs. 1 lakh. The Revenue was quite reasonable in arguing that the variation being for a marginal amount of Rs. 400, in substance and effect, the revised return was also taken into consideration in making the assessment. The contention cannot be said to be absolutely unacceptable.
8. That besides, we are also not of the view that simply because Section 148 says that the provisions of Section 139(2) shall "so far as may be, apply accordingly as if the notice were a notice issued under that sub-section", a notice under Section 148 shall have all the consequences of Section 139(2). The fundamental purpose of Section 148 is merely to provide the assessing authority with the machinery for assessment. Fundamentally, both the assessment and reassessment need same machinery. But for this particular fiction, the Assessing Officer would have been without the enabling provision to make the reassessment. Viewed from that angle, it cannot be said that a notice under Section 148 has to be construed to be a notice under Section 139(2) for a purpose ulterior to the purpose of the fiction. The fiction in Section 148 is merely a link with Sections 143 and 144 and all other ramifying provisions for implementing the reassessment. The fiction has nothing to do with the filing of the return. Section 148 itself is enough to take care of the filing of a return. This is evident from the fiction "as if it were a notice under Section 139(2)". Section 139(2) steps in not for empowering the Officer to call for a return but to follow up the issue of the notice in the same manner a notice under Section 139(2) is pursued.
9. We, therefore, answer the first question in the negative and in favour of the Revenue.
10. Though the second question does not survive for answer, yet it by itself raises a very important question of substantial and of general interest. Even if the Assessing Officer completes the assessment without taking notice of a revised return, assuming that the revised return is a valid one, that does not affect the Assessing Officer's jurisdiction to assess. Because, by overlooking the revised return, he, at the worst, could be said to have committed an irregularity. An assessment made in oversight of a revised return does not render the assessment so made into a nullity. Therefore, assuming as a hypothesis that the revised return was a valid one, the Tribunal should have set aside the assessment so that the supervening irregularity is removed.
11. In that view of the matter, we answer the second question as well in the negative and in favour of the Revenue.
12. There will be no order as to costs.
J.N. Hore, J.
13. I agree.