Income Tax Appellate Tribunal - Gauhati
Forest Development Corpn. Of Meghalaya ... vs Income-Tax Officer on 4 April, 1991
Equivalent citations: [1991]38ITD239(GAU)
ORDER
Egbert Singh, Accountant Member
1. (The assessee in this appeal has taken up the following effective grounds:
(1) For that the learned Commissioner of Income-tax (Appeals), Gauhati, failed to consider the question of limitation as per ground No. 1 of the grounds of appeal taken by the assessee that the assessment based on the return submitted on 11-9-1987 was bad in law.
(2) For that, inasmuch as the Income-tax return filed on 11-9-1987 has been accepted as a valid return under under Section 139(1), so the assessment made on 7-9-1988 on the basis of the same is barred by limitation.
(3) For that an assessment which is already barred by limitation cannot be set aside with a direction to make a fresh assessment (4) For that as the income-tax return filed on 15-3-1988 is neither a subject matter of assessment nor a ground of appeal the same should not be considered as an issue in this appeal.
At the time of hearing the assessee's learned counsel did not press ground Nos. 2,4 and 5. At the time of hearing the assessee has also filed a petition dated 14-3-1991 stating that in ground No. 3 there was same typographical error and the same should be read as rectified as below :
3. For that an assessment which is already bad in law cannot be set aside with a direction to make a fresh assessment.
The case of the assessee is that the CIT(Appeals) failed to consider the question of limitation as per ground No. 1 taken before him. The assessment having been based on the return filed on 11-9-1987, was bad in law. Briefly speaking, the facts of the case were as under:
2. The assessment year involved is 1985-86. The status of the assessee has been shown in the assessment order as a domestic company in which the public are substantially interested. The assessment was made under Section 144 on 7-9-1988. In the assessment order the assessing officer noted that the assessee is a Government, of Meghalaya Undertaking engaged in the development and sale of various forest products like timber, pine, teak, seeds etc, The assessee filed its return of income on 11-9-1987 with a net profit of Rs. 11,61,215, without enclosing audit report as required by under Section 44 AB of the IT Act. He pointed out that the profit so declared was claimed as set off against the brought forward losses of the earlier years. The assessing officer pointed out that the assessee then filed another return of income on 19-11-1987 showing lesser amount of profit at Rs. 6,66,457 which was set off against the earlier year's loss. The assessing officer directed the assessee to clarify the claim of set off of losses of earlier years. The assessee submitted that the return of income filed, was aprovisional return on the basis of unaudited accounts and in January 1988 the Company Law Board had appointed statutory auditors who had taken some books and files etc. to Calcutta on 4-3-1988 and lastly time for furnishing clarification was asked for. The assessing officer refixed the case again on 6-9-1988 by issuing notices under Section 143(2) and under Section 142(1), with which there were no compliance. He, therefore, observed that as limitation was running out he had no alternative but to complete the assessment under Section 144 of the Act
3. The assessing officer pointed out that the assessee claimed that the second return of income filed on 19-11 -1987 was a revised return. This contention was not accepted as according to the assessing officer only the return filed within the time allowed by under Section 139(1) or under Section 139(2) could be revised under Section 139(5) on discovery of any mistake and/or omission. He placed reliance on certain decisions as noted in the assessment order. He also pointed out that the second return filed was not due of any mistake and/or omission. He placed reliance on certain decisions as noted in the assessment order. He also pointed out that the second return filed was not due to any discovery of mistake or omission but because of the reasons as per note found enclosed with the subsequent return that the assessee decided to charge certain amounts of revenue expenditure as against the amount having been capitalised earlier for several years, following the practice followed in the past years, on raising of the objections by the auditors for the assessment year 1984-85, as-well as to charge the full salary of part-time Managing Director which was earlier paid by the State Government. He noted that the claim for inclusion of such salary as expenditure was also a debatable issue. The assessing officer, therefore, concluded on the reasoning recorded by him that it was clear that there was no discovery of any omission or mistake necessitating revision of the return of income but due to change in the procedure of accounting in respect of certain charges. The assessing officer noted that in the case of Deep Narain Nagu & Co. v. CIT [1986] 157 ITR 37 the Hon'ble M.P. High Court had held in similar circumstances that the return could not be revised.
4. The assessing officer accordingly proceeded to compute the income of the assessee on the basis of the first return filed on 11 -9-1987. The income was computed at Rs. 13,84,731. Admissible depreciation etc. were considered separately.
5. Amongst other things, the assessee took up before the CIT(A) in appeal against such action of the assessing officer. The CIT(A) looked into the various aspects of the matter. He noted that in ground Nos. 1,2 and 3 the assessee submitted that the return filed on 11-9-1987 was an incomplete return and it was the duty of the assessing officer to allow the assessee to rectify the defects within the meaning of Section 139(9). The assessee contended also that the return filed on 19-11-1987 should have been taken into consideration though the original return has been filed within the meaning of Section 139(1) as Form No. 6 had been filed seeking for time up to 30-9-1987 and the return had been filed within the time as prayed for. It was pointed out that the assessing officer did not reject Form No. 6 nor granted time for filing the return and, therefore, the assessee presumed that the assessing officer had already granted time and, therefore, the first return should be treated as a return filed within the meaning of Section 139(1) and, therefore, the assessee had correctly filed a revised return on 19-11-1987 which was again revised on 15-3-1988. The assessee's contention before the CIT(A) was that since the first return should be treated as return within the meaning of Section 139(1) the subsequent return filed should be treated as return filed within the meaning of Section 139(5) which should have been considered by the assessing officer. The assessee also contended before the CIT(A) that the assessment was made wrongly under Section 144 because the notices under Sections 143(2) and 142(1) had not been served on the assessee. The assessing officer preceeded on the basis that the return filed an 11-9-1987 was not the return within the meaning of under Section 139(1) and, therefore, he was of the opinion that if the return had been filed within the meaning of Section 139(4), the same could not be revised under Section 139(5).
6. The CIT(A) considered the various aspects of the matter and the submissions made before him. He was of the view that the legal position adopted by the assessing officer was correct. The CIT(A) considered the decisions relied on the assessee before him. He pointed out that such decisions as in Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236 (All.) and Mst. Zulekha Begum v. CIT [1981] 129 ITR 560 (Cal.) had been considered by the Hon'ble Allahabad High Court in the case of Dr. S.B. Bhargava v. CIT [1982] 136 ITR 559 in which a different view was taken. He also noted that the Hon'ble Kerala High Court in Eapen Joseph v. CIT [1987] 168 ITR 26 (Ker.), had differed with the decision of the Hon'ble Calcutta High Court in Mst. Zulekha Begum's case (supra). The CIT(A) therefore, did not agree with the contentions of the assessee.
7. On the facts, he held that the assessee had sought for extension of time by filing Form No. 6 which the assessing officer had not disposed of and, therefore, it could be presumed that the assessing officer had already granted time to the assessee as applied for till 30-9-1987, following the decision in the case olLachman Chaturbhuj Java v. R.G. Nitsure [1981] 132 ITR 631 (Bom.). He, therefore, held that the return filed on 11-9-1987 was to be treated as a return within the meaning of Section 139(1) and the assessee had right to revise such return and the assessing officer should have issued notice under Section 143(2) on the basis of the revised return which he had failed to do.
8. The CIT(A) also considered the contention of the assessee that the notices under Sections 143 (2) and 142(1) had not been served on the assessee. He verified this point and noted that the service of the notices had not been mentioned in the assessment order. He, therefore, set aside the order of the assessing officer giving direction to him to frame the assessment afresh after giving reasonable opportunity of being heard to the assessee. He, therefore, set aside the assessment without adjudicating other grounds of appeal raised by the assessee before him. Hence this appeal by the assessee.
9. As indicated earlier, ground Nos. 2, 4 and 5 were not pressed before us. It was vehemently urged by the assessee's learned counsel that the assessment order passed by the assessing officer was ab initio bad in law. Amongst other things, it is pointed out that the assessment made under Section 144 was also bad inasmuch as the condition for passing such order was totally absent in the present case. It is vehemently urged that the assessment which was bad in law cannot be set aside by the CIT(A) with the direction to make a fresh assessment. It is submitted that a bad assessment cannot be revived by the CIT(A) in this fashion. It is submitted that the notices issued by the assessing officer could not be complied with as such notices had not been received by the assessee and, therefore, the whole exercise adopted by the assessing officer was a nullity. It is submitted that a bad assessment order cannot be set aside by the CIT(A). In course of his argument the assessee's learned counsel refers to the decisions in the case of Lakshmi Narayan Prasad Bhagat v. State of West Bengal [1979] 118 ITR 454 (Cal.). It is stressed that unless notice under Section 143(2) or 142(1) has been served there was no question of the assessee's non-compliance with such notices and the assessing officer could not have the jurisdiction to pass order under Section 144 which provides specific condition before passing such exparte order. It is urged that in the circumstances of the case the CIT(A) should have annulled the assessment and he should not have failed to deal with the question of limitation specifically taken by the assessee in ground No. 1 taken before him.
10. The learned Departmental Representative supports the order of the authorities below submitting that a letter for clarification was sent by the assessing officer but the assessee sought for time and subsequently another opportunity was given by issuing notices under Sections 143(2) and 142(1) which the assessee had failed to comply. On behalf of the Revenue, reference is made to the decision in the case of SantBaba Mohan Singh v. CIT [1973] 90 ITR 197 (All.). It is urged that the CIT(A) has properly appreciated the facts of the case and the materials available vis-a-vis, the decisions relied on by the assessee before coming to the above conclusion and, therefore, there was no question of failure of the CIT(A) to annul the assessment. It is pointed out that the first appellate authority has the duty not only to set aside such order found to be irregular, defective etc. but also has the duty to direct that the proceeding should be recommenced from the stage at which such irregularity or illegality has crept in. Reference is made to a decision of the Hon 'We Supreme Court in the case of Kapur chand Shrimal v. CIT [1981] 131 ITR 451. In short, it is urged that there is no merit in the submissions of the assessee and, therefore, the same may be dismissed.
11. In reply, the assessee's learned counsel reiterates the submissions made earlier while highlighting the contentions that the CIT(A) should not have set aside the assessment order which had already been barred by limitation.
12. We have heard both the sides and have gone through the orders of the authorities below along with the various papers placed before us for our consideration. From the reading of the order of the CIT(A) it is seen that he had considered the ground No. 1 amongst other grounds while dealing with the appeal by the assessee. The CIT(A) might not have decided categorically in respect of the ground No. 1 taken before him though he had taken the same into consideration. In such a situation it can only be inferred that he had rejected such grounds raised by the assessee. For such proposition we may refer to the decisions in the case of Rohtak & Hissar Districts Electric Supply Co. (P) Ltd. v. CIT [1981] 128 ITR 52 (Delhi) and in the case of Harlal Mannulal v. CIT [1984] 147 ITR 11 (MP). In such a situation the first ground of appeal of the assessee before the CIT(A) should be deemed to have been decided against the assessee and therefore, the assessee is entitled to agitate this point before us also.
13. As pointed out on behalf of the revenue that the appellate authority has the duty and obligation not only to set aside an order when it is found that certain irregularity or illegality has crept in. He has such authority and his duty is not only to set aside such order but has to direct the recommencement of the proceeding from the stage from at such irregularity or illegality has crept in as held by the Hon'ble Supreme Court in the case of Kapurchand Shrimal (supra). In the case of Estate of late Rangalal Jajodia v. CIT [1971] 79 ITR 505 (SC) on the facts of that case it was observed by the Hon'ble Supreme Court that lack of notice to the legal heir of the deceased only made the assessment defective and, therefore, the setting aside of the assessments was only on the ground that notice was not given to the assessee and therefore the finding and the direction was vital to the assessment proceedings. Thus, in our opinion, if no notice has been given to the assessee before an assessment order was passed by the assessing officer, such direction could be given in view of the ruling. The case of the assessee is that he has filed its return within the extended time as the assessing officer has not rejected the application for extension of time in Form No. 6 as held by the CIT(A) and, therefore, the assessee has had the right to file the revised return subsequently and, therefore, the assessment should have been made on the basis of those revised returns and not on the basis of the original return filed and as done by the assessing officer. The case of the assessing officer is that the first return filed by the assessee was not valid and cannot be treated as a return filed under Section 139(1)or 139(2) but should be considered as return filed under Section 139(4) and, therefore, the same cannot be revised under Section 139(5) of the Act.
14. As mentioned earlier only the ground Nos. 1 and 3 before the Tribunal are pressed at the time of hearing of this appeal. Of course, in respect of ground No. 3 the assessee has filed an application for verification as earlier stated. The first ground of appeal by the assessee is that the CIT(A) failed to consider the question of limitation as per ground No. 1 of the grounds of appeal taken by the assessee that the assessment based on the return submitted on 11-9-1987 was bad in law. The first ground of appeal by the assessee before the CIT( A) was that the assessment was bad in law inasmuch as the same was based on the provisional return submitted on 11-9-1987 and not on the basis of the subsequent valid return on the basis of audited accounts lawfully filed on 15-3-1988. From the order of the CIT(A) it is seen that the contention of the assessee was sustained and that was why the CIT( A) on the basis of other grounds also set aside the assessment for fresh disposal by the assessing officer after giving the assessee an opportunity of being heard. Before the CIT(A) apparently there was no question of limitation as ground No. 1 taken by the assessee. Even otherwise the original assessment cannot be said to be barred by time. The assessee has filed the first return on 11-9-1987 admittedly. The assessment year involved was 1985-86. In other words, the assessment should have been completed by 31-3-1988. But the Section 153(1)(c) provides that assessment could be completed before the expiry of one year from the date of filing of the return or revised return as the case may be. Since the first return was filed on 11-9-1987 the assessment order passed on 7-9-1988 cannot be said to be barred. Thus, this ground of appeal by the assessee cannot be accepted.
15. The other effective ground taken by the assessee before us is that the assessment which is already barred by limitation cannot be set aside with a direction to make a fresh assessment. The assessee has modified the ground in order to say that the assessment which is already bad in law cannot be set aside with the direction to make a fresh assessment. In this connection, we have heard both the sides at length and looked at the various points referred to by them. The powers of the first appellate authority are coterminus with those of the assessing officer. The DCIT (Appeals) or CIT(A) can do what the assessing officer has failed to do. There is no substance in the contention made by the assessee on this point. In this connection, it may be useful to refer the decision of the Hon'ble Supreme Court in the case of Kapurchand Shrimal (supra) as cited on behalf of the revenue. Amongst other things, it was held in that case that the appellate authorities have not only the power to set aside an order but also have the obligation to direct for commencement of the proceedings from the stage at which such irregularity or illegality has crept in. In the present case the CIT(A) has accepted the claim of the assessee that the assessment should have been made on the basis of the revised return filed by the assessee. Subsequently, the CIT(A) gave certain direction on the basis of such findings as recorded in his order. We are of the opinion that there was nothing wrong in the direction of the CIT(A) on this point.
16. In the case of Berulal Tiwari v. CIT [1988] 173 ITR 280 the Hon'ble Andhra Pradesh High Court, on the facts of the case, held that the CIT(A) has power to set aside the assessment and give direction to redo the assessment after giving the assessee proper opportunity of hearing and that the prejudice caused to the assessee was remedied by the CIT(A) by setting aside the assessment and directing fresh assessment and, therefore, the Hon'ble High Court concluded that the assessee did not have any grievance.
17. In the case of CIT v. Chitranjali [1985] Tax LR1252, the Hon'ble Calcutta High Court, on the facts of that case, held that the limitation under Section 153(1)(a) or 153(1)(c) would not apply where the assessing officer completed the assessment on the basis of original return ignoring the revised return after considering the account books and other necessary evidence within the period of limitation.
18. In the present case before us the original return filed by the assessee is a return in all essential aspects, except that such return was not accompanied with the audited accounts and auditor's report. Thus, the revised return has cured such defects contained in the original return and, therefore, the revised return did not obliterate the original return. In the case of Rajendra Nath reported in 120 ITR 14 at page 19 the Hon'ble Supreme Court has dealt with the expression "direction" in a similar situation. In the case of Chitranjali (supra) the Hon'ble Calcutta High Court has held that the AAC was empowered to give the direction for making a fresh assessment and, therefore, the bar of limitation is raised.
19. In the instant case before us also the direction given by the CIT(A) to the assessing officer to complete the assessment afresh was a valid one and such direction has removed the bar of limitation.
20. The CIT (A) had set aside the assessment order as indicated above on other ground also that the assessee should be given proper opportunity of being heard. The case of the assessee was that no notice under Section 143(2) or 142(1) was ever received by the assessee and that was why the CIT(A) restored back the matter to the assessing officer for fresh disposal. We see no infirmity in this direction of the CIT(A) in the case of Estate of late Ranagalal Jajodia (supra) the Hon'ble Supreme Court, on the facts of that case, held that the original assessment was completed under Section 24B of the Income-tax Act, 1922 through the legal heir including the widow of the assessee who has since deceased. It was noted that wife was not merely intimately connected with the assessment and she was in fact an assessee. It was observed by the Hon'ble Supreme Court that the lack of notice to her only made the assessment defective and that the setting aside of the assessment was only on the ground that the notice was not given to her and, therefore, the finding and the direction was vital to the assessment proceedings. It was held in that case that the assessment proceedings were barred not by limitation. It was further observed by the Hon'ble Supreme Court in that case that an assessment proceeding does not cease to be a proceeding under the Act merely by reason of want of notice and that it will be a proceeding liable to be challenged and corrected. In the present case the assessee has challenged the above point before the CIT(A) who has corrected such defects.
21. Before us, neither the assessee nor the Department has come up in dispute regarding direction of the CIT(A) to the assessing officer to consider the revised returns filed by the assessee which were ignored by the assessing officer. The issue before us is whether the assessee in circumstances of the case, has or has no right to file revised return. In a slightly different situation the Hon 'ble Allahabad High Court in the case of CIT v. Sri Baldeoji Maharaj Trust [1983] 142 ITR 584 held that the return filed under Section 139(4A) should be treated as return under Suv-Section (1) of the said Section. It was observed that when the return is filed under Suv-Section (4A), it has to be accompanied by an auditor's report and since the original return filed by the assessee was not accompanied by an auditor's report, there was a clear omission in that return.
22. Thus, havingregard to the facts of the caseand the provisions of Section 153(1)(c) as well as the decisions of various Courts, we are of the opinion that the direction of the CIT(A) in the present case was quite valid and the assessment made by the assessing officer cannot be said to have been barred by limitation as sought to be made out by the assessee. Thus, the assessment made by the assessing officer was not bad in law and in such a situation the direction given by the CIT(A) to the assessing officer for fresh assessment, was maintainable.
23. In the circumstances of the case as mentioned above, both the grounds of appeal by the assessee pressed before us are decided against the assessee.
24. In the result, the appeal by the assessee is dismissed.