Income Tax Appellate Tribunal - Chandigarh
Deputy Commissioner Of Income-Tax vs Purewal And Associates Ltd. on 21 October, 1993
Equivalent citations: [1994]48ITD568(CHD)
JUDGMENT
J. Kathuria Accountant Member
1. Appeal for assessment year 1987-88 is by the revenue and appeal for assessment year 1988-89 is by the assessee. Since identical issues are raised in these appeals, these are disposed of by a combined order for the sake of convenience.
2. Brief facts of the case are these. The assessee is a company. For assessment year 1987-88, the return of income was required to be filed by 31-7-1987. It was, however filed on 30-9-1987. The return declared net loss of Rs. 11,94,431. The Assessing Officer passed an order under Section 139(10) holding that the loss return which was filed beyond 31-7-1987 and was a belated one had to be treated as non est, and infructuous. The learned CIT(A), however, found that the Assessing Officer had granted extension of time to the assessee upto 30th September, 1987, on which date the return was filed and hence the return had been filed within the time allowed by the Assessing Officer and so the provisions of Section 139(10) were not attracted. The revenue is in appeal against the impugned order.
3. For assessment year 1988-89, the due date for furnishing the return was 3i-7-1988 whereas it was actually filed on 1-2-1989. The return declared loss of Rs. 66,62,817. The Assessing Officer, again, held that the return was non est and infructuous in view of the provisions contained in Section 139(10) of the Act. The learned CIT(A) confirmed the action of the Assessing Officer because the assessee had not filed any application seeking extension of time. The loss return was held to be invalid and the assessee's appeal was dismissed. The assessee is in further appeal before us for this year.
4. Shri P.C. Jain, the learned Counsel for the assessee submitted that holding of a return as non est and not allowing the carry forward of losses were two different things. Referring to the language of Section 139(10), it was submitted that only those returns which showed the total income below the maximum amount which was not chargeable to tax had to be deemed never to have been furnished. It was emphasised that these returns did not embrace in their ambit the loss returns but only those returns showing positive income below the maximum amount of income not chargeable to tax. The learned Counsel for the assessee further relied on the Tribunal's decision in Asstt. CITv. Ampee Industries (P.) Ltd. [1992] 40 ITD 20 (Gauhati) and submitted that this was the only decision available which explained the provisions of Section 139(10) and according to this decision, loss returns were not covered by the provisions of Section 139(10). It was submitted that the proviso to Section 139(10) only contained exceptions. Relying on the Supreme Court decision in CIT v. Maharaj Kumar Kamal Singh [1973] 89 ITR 1, it was submitted that a legal fiction should not be extended beyond the purposes for which it was created. Reliance was also placed on the Single Member decision in the case of Weston Leasing and Finance (P.) Ltd. v. Asstt CIT [ 1991 ] 37 ITD 506 (Delhi) where the question of carry forward of unabsorbed depreciation was involved. It was vehemently argued that the loss return was not covered by the provisions of Section 139(10) and the Assessing Officer, therefore, could not treat such return as non est or infructuous or invalid, but he had to further see whether loss under Section 139(3) could be carried forward or not which was a different issue.
5. As regards the facts of the case, it was submitted that for assessment year 1987-88, the Assessing Officer himself had extended the period for submission of return and the return was, in fact, filed during the extended period and as such there was no default and, therefore, the first appellate authority had correctly directed the Assessing Officer to treat the return as a valid return and proceed to frame the assessment as per law. It was also submitted that the loss of this year amounted to Rs. 11,94,430 which was mainly on account of depreciation claimed at Rs. 13,37,514. The submission, therefore, was that for assessment year 1987-88, there was no loss as such but only unabsorbed depreciation and as such the provisions of Section 139(10) did not apply.
6. As regards the assessment year 1988-89, it was submitted that there was a strike in the assessee's premises with the result that the audit work was held up and the return was filed late for which there was reasonable cause. It was also submitted that the loss as per profit and loss account came to Rs. 84,74,541 which included depreciation of Rs. 13,03,530. According to the working given by the learned Counsel, for the assessee, the depreciation allowable was of the order of Rs. 1,10,48,346 which was more than Rs. 66,62,817. It was, therefore, submitted that the Assessing Officer was required under the law to deal with the return and then dispose of the question of carry forward of loss as per the provisions of law. But he could not simply declare the return as invalid or non est.
7. The learned departmental representative submitted that so far as the assessment year 1987-88 was concerned, the power to grant extension of time in respect of loss returns had been withdrawn by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 w.e.f. 1-4-1987 and as such the Assessing Officer was not empowered to grant any extension of time in respect of such cases. He, therefore, found fault with the reasoning of the learned CIT(A) that the return filed was within time. As regards the assessment year 1988-89, it was submitted that the provisions of Section 139(10) were clear and unambiguous, and that all returns showing income below the maximum amount of income not chargeable to tax including loss returns were covered by the said provision. According to the learned departmental representative the law provided six exceptions which included the returns of loss filed before 31st of July of the assessment year relevant to the previous year during which loss was sustained. It was vehemently argued that for assessment year 1987-88 the return was filed beyond 31-7-1987 and for assessment year 1988-89, beyond 31-7-1988 and hence both the returns could not be covered by the exceptions contained in the proviso but would be hit by the main provisions. It was also submitted that if it was held that the main provisions contained in Section 139(10) applied only to returns of positive income and not to loss returns, then the proviso (d) contained in Section 139(10) of the Act would be rendered surplus which could never be the intention of the Legislature.
8. We have carefully considered the rival submissions as also the facts on record. Before 1-4-1987, the Assessing Officer had the authority to allow extension of time even in respect of loss returns. The Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 w.e.f. 1-4-1987, however, brought about a qualitative change in this regard. By the Amending Act, this power of the Assessing Officer to grant extension of time was withdrawn. Loss under Section 139(3) could be carried forward only if the loss return was filed either under Section 139(1) or by 31st day of July of the assessment year relevant to the previous year during which the loss was sustained.
9. The Supreme Court in the case of CIT v. Ranchhoddas Karsondas [1959] 36 ITR 569 has laid down that a return showing income below the taxable limit submitted voluntarily under Section 22(1) of the Indian Income-tax Act, 1922, corresponding to Section 139 of the Income-tax Act, 1961, was a good return and as such a return voluntarily made before the assessment could not be ignored by the Income-tax Officer. This decision was, however, circumvented and superseded by the insertion of Section 139(10) of the Act.
10. The learned Counsel for the assessee has been at pains to submit that the expression "the return of income showing the total income below the maximum amount which is not chargeable to tax" meant only positive income and not negative income. Reliance in this regard has been placed on the Tribunal's decision in the case of Ampee Industries (P.) Ltd. (supra). Strength has also been derived from the Single Member decision in the case of Weston Leasing and Finance (P.) Ltd. (supra). We have very carefully gone through the said decisions. The legal position it appears was not properly brought before the Tribunal in the case of Ampee Industries (P.) Ltd. (supra). There is no discussion about the exception contained in proviso (d) to Section 139(10) though a reference is available to the proviso (c) to Section 139(10). In that case, the facts were that there was a loss return showing loss of Rs. 18,280 and the return had been filed on 10-1-1989 i.e., after 31-7-1988. The Assessing Officer completed the assessment under Section 143(3) on positive income of Rs. 9,03,720. In that case, it was the assessee who took up the plea that since the loss return had been filed late it ought to be treated as non est by the Assessing Officer and hence the Assessing Officer could not have made an assessment under Section 143(3) that he did. The Tribunal, however, negatived this plea of the assessee and came to the conclusion that the return was valid and had been properly dealt with by the Assessing Officer. The Tribunal, however, has not given any weight as to why the loss return should be excluded from the purview of Section 139(10). According to us, a proviso or saving clause or exception prevails over the substantive part which it follows. The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso, would fall within the main enactment. A proviso is generally something engrafted on the main enactment. It must be considered only with relation to and harmoniously with the principal matter to which it stands as a proviso. Proviso (d) to Section 139(10) stipulates that a return of loss which has been furnished before the 31st day of July of the assessment year relevant to the previous year during which the loss was sustained, will be treated as an exception because nothing contained in Section 139(10) would apply to such a return. The question that arises is that if all loss returns were to be excluded from the purview of Section 139(10), then what was the necessity to bring proviso (d) to Section 139(10). It is a cardinal principle of interpretation that the Legislature Speaks its mind by using correct expressions and no clause, sentence or word shall be superfluous. If all loss returns are to be excluded from the ambit of Section 139(10) then proviso (d) to the said section would be rendered superfluous and no superfluity can be attributed to the Legislature. According to us, the scheme of the section is very clear. All returns showing income below the maximum amount of income which is not chargeable to tax have to be deemed to be non est. This cannot be limited only to positive income. Even zero income or income below zero will also come within the ambit of this section because all such incomes whether positive or negative, would be below the maximum amount of income which is not chargeable to tax. This finds further support from the insertion of proviso (d) to the said Section. The Legislature has clearly made a distinction that all loss returns which have been filed by 31st day of July of the assessment year relevant to the previous year during which the loss was sustained, have to be held as valid and legal and have to be acted upon. This is in conformity with the provisions contained in Section 139(3) which were also modified in tune with the provisions of Section 139(10) by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 w.e.f. 1-4-1987.
11. It is significant to note that Section 139(10) starts with a non obstante expression. This Section is "notwithstanding anything contained in any other provisions" of this Act. The loss returns filed even before 31st July would have been excluded from the purview of this Section but the Legislature carved out an exception and in keeping with the provisions of Section 139(3) enacted proviso (d) to Section 139(10). There is, therefore, a close relation between Section 139(3) and proviso (d) to Section 139(10). This also makes the intention of the Legislature very clear. When the law says that a particular legal fiction will be created, that fiction has to be given effect to and the Courts cannot ignore that fiction. The Supreme Court in the case of Maharqj Kumar Kamal Singh (supra) also lays down the samething. There is no question of any interpretation of Board's circular or the rules. The law itself is contained in Section 139(10) is very clear and if the main provisions contained in that section and the proviso are read harmoniously, it becomes absolutely clear that all returns below the taxable income limit whether positive or negative, have to be treated as non est with six exceptions enumerated in the proviso.
12. Since the matter has not been considered by or projected before the Gauhati Bench of the Tribunal in the case of Ampee Industries (P.) Ltd. (supra) in the above light, we have not accepted the conclusion arrived at by that Bench of the Tribunal.
13. As regards the Tribunal's decision by Single Member in the case of Weston Leasing & Finance (P.) Ltd. (supra), the content and the thrust of the matter before the Tribunal was different. The Assessing Officer had held the return for assessment year 1986-87 to be invalid because it was filed beyond time and it was a loss return. The Tribunal was dealing with assessment year 1987-88 and not assessment year 1986-87. While dealing with the assessment year 1987-88, a question arose before the Tribunal as to whether the assessee was entitled to the benefit of carry forward of unabsorbed depreciation even if such depreciation had not been determined by the Assessing Officer for assessment year 1986-87. The Tribunal consisting of Single Member held that the assessee's claim could not be rejected on the ground taken by the taxing authorities. Even otherwise, according to the Tribunal, since the claim was made for the depreciation allowance in the current year, not only in respect of the current year's depreciation but also in respect of the amount of depreciation for assessment year 1986-87, the Assessing Officer was duty bound to consider the claim and record a finding for purposes of arriving at the amount of unabsorbed depreciation required to be considered as part of the depreciation allowance.
14. The question whether a loss return filed beyond the statutory period was non est or not in view of the provisions of Section 139(10), was not the issue before the Tribunal and as such the facts of that case are clearly distinguishable.
15. In view of the foregoing discussion, we hold that even loss returns are covered by the provisions of Section 139(10) and if the return is filed beyond 31st day of July of assessment year relevant to the previous year during which the loss was sustained, then such a return has to be treated as non est. Only one category of loss returns which have been filed before 31st day of July of the assessment year have been saved by the proviso as an exception. Since in the assessee's case, returns for assessment years 1987-88 and 1988-89 were filed beyond 31st day of July, these had to be treated as non est. We hold accordingly.
16. This would mean that for assessment year 1988-89 the return declaring loss of Rs. 66,62,817 was an invalid return which did not exist in the eyes of law and had, therefore, been correctly ignored by the Assessing Officer. We accordingly uphold the order of the first appellate authority for assessment year 1988-89.
17. As regards the assessment year 1987-88, we do not agree with the reasoning of the learned CIT(A) that the return had to be treated as valid and legal because it was filed within the time allowed. As mentioned earlier the power to grant extension of time in the cases of loss returns by the Assessing Officer was withdrawn by the Amendment of Section 139(10) by the Taxation Laws (Amendment & Miscellaneous Provisions) Act, 1986 w.e.f. 1-4-1987. In that view of the matter, the Assessing Officer had no authority or power to extend the time upto 30-9-1987 and the power exercised by him was beyond jurisdiction. We, therefore, do not accept the reasoning of the learned CIT(A) that the loss return for assessment year 1987-88 had been filed in time and hence the return could not be treated as invalid. Any loss return which had been filed after 31st day of July of the assessment year relevant to previous year in which the loss was suffered, had to be treated as an invalid return and non est and the wrong exercise of jurisdiction by the Assessing Officer could not save the situation for the assessee.
18. There is, however, another angle to the matter. As rightly pointed out by the learned Counsel for the assessee, the loss for assessment year 1987-88 was of the order of Rs. 11,94,430. This had occurred because of depreciation of Rs. 13,37,514. This clearly shows that there was no business loss as such but loss on account of unabsorbed depreciation. Section 139(10), according to us. includes loss returns. But such loss returns should not be on account of unabsorbed depreciation because that was never the intention of the Legislature to declare such returns also as non est. In that view of the matter, we hold that for assessment year 1987-88, the return could not be treated as non est. We, therefore, confirm the conclusion of the learned CIT(A) though not for the reasons mentioned by her.
19. In the result, both the appeals are dismissed.