Calcutta High Court
Commissioner Of Income-Tax vs Bharat Refineries Ltd. on 6 March, 1986
Equivalent citations: [1986]162ITR652(CAL)
JUDGMENT Dipak Kumar Sen, J.
1. On October 6, 1971, Bharat Refineries Ltd., formerly known as Burmah Shell Oil Storage and Distributing Co. of India Ltd., the assessee, filed its return of income for the assessment year 1971-72, the accounting year ending on December 31, 1970. The return was accompanied with a statement of computation of the assessable income. The assessee's profit and loss account and balance-sheet were, however, not enclosed with the return.
2. In response to a notice under Sections 143(2) and 142(1) of the Income-tax Act, 1961, the assessee produced and filed its profit and loss account and balance-sheet for the said assessment year on June 8, 1973. The Income-tax Officer by his order dated March 27, 1974, made an assessment of the income of the assessee. He also charged interest under Section 139(8) of the Income-tax Act, 1961, for the period from October 1, 1971, till October 6, 1971, for late filing of the return.
3. The Commissioner of Income-tax took the view that the order of the Income-tax Officer in charging interest only for the period from October 1, 1971, till October 6, 1971, was erroneous and prejudicial to the interests of the Revenue. He, therefore, initiated proceedings under Section 263 of the Income-tax Act, 1961, by a notice dated February 4, 1976. The Commissioner found that it was the duty of the assessee to file the return of its income voluntarily under Section 139(1) of the Act in the prescribed form and verified in the prescribed manner. The assessee in the instant case was required to file its return in Form No. 1 as prescribed under rule 12 of the Income-tax Rules. It was provided in the form that if accounts were maintained under the mercantile system, copies of the balance-sheet and profit and loss account were required to be attached with the return. If accounts were audited, a copy of the auditor's report on statement of accounts was required to accompany the return.
4. The Commissioner rejected the contention of the assessee that the failure to attach statement of accounts and balance-sheet was a mere irregularity and did not make the return invalid. He also rejected the contention that accounts were only evidence in support of the return and did not form a part of the return. The Commissioner held that if the prescribed particulars were not furnished, the return had to be treated not only as incomplete but also invalid. In the instant case, complete particulars were made available on June 8, 1973, when copies of the profit and loss account and the balance-sheet were filed and till that date the return was incomplete and invalid. The Commissioner noted that the auditors of the assessee had signed the balance-sheet at London on November 4, 1971, and the balance-sheet of the assessee was signed in India by the auditors on December 23, 1971.
5. For the above reasons, the Commissioner set aside the assessment so far as the charging of interest was concerned and directed the Income-tax Officer to charge interest on the tax payable on the return from October 1, 1971, to June 8, 1973, which was assessed at Rs. 17,64,735.69.
6. Being aggrieved by the order of the Commissioner, the assessee preferred an appeal before the Income-tax Appellate Tribunal. The Tribunal found that the return filed by the assessee had been accepted by the Income-tax Officer as a legally valid return and that the Income-tax Officer had acted upon the same. The Tribunal also found that no defect was discovered in the return itself and the income shown there was supported by the computation of the assessee. The Tribunal held further that the copies of the balance-sheet and profit and loss account were not part and parcel of the return but were evidence which supported the income disclosed by the assessee. The Tribunal also noted that the accounts of the assessee had been audited within the time prescribed by the Companies Act and that the audited balance-sheet and profit and loss account were available with the assessee when the return of income was filed. The said copies were not filed with the return as they were voluminous and might have been lost. The Income-tax Officer permitted the assessee to file the return without the said accounts and the balance-sheet but received the same at the time of making the assessment. The conduct of the Income-tax Officer showed that the assessee was permitted to amend the procedural or technical defect in the return, if any, found by the Income-tax Officer. It was found that the Income-tax Officer after receiving the return on October 6, 1971, did nothing in the matter till June 8, 1973, when he started the assessment proceeding. If the return was found to be defective or incomplete, the said fact should have been brought to the notice of the assessee earlier, so that the same could have been cured. The Tribunal held that the return filed by the assessee could not be held to be incomplete or invalid.
7. The Tribunal also found that the Income-tax Officer had applied his mind to the statutory provisions regarding levy of interest for belated submission of the return and in fact had charged interest under Section 139(8). The Tribunal held that there was no provision in the Act under which interest could be charged up to the date on which copies of the balance-sheet and profit and loss account would be filed by the assessee.
8. The Tribunal allowed the appeal of the assessee and set aside the order of the Commissioner under Section 263 of the Income-tax Act, 1961. The order of the Income-tax Officer was restored.
9. On an application of the Revenue under Section 256(2) of the Income-tax Act, 1961, this court directed the following questions, stated to be questions of law arising out of the order of the Tribunal, to be referred to this court for its opinion :
" (i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the return filed by the assessee without enclosing therewith copies of the balance-sheet and profit and loss account was a valid return and the Income-tax Officer had acted upon the said return, and as such, the Commissioner of Income-tax was not justified in invoking Section 263 of the Income-tax Act, 1961, to revise the order of the Income-tax Officer and to levy interest under Section 139(8) of the Income-tax Act, 1961, for Rs. 17,64,735 from October 1, 1971, to June 8, 1973?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal misdirected itself in law in holding that non-filing of the profit and loss account and balance-sheet along with the return is only a procedural or technical defect and the subsequent filing of the same cures the defect ?
(iii) Whether, on the facts and in the circumstances of the case and on a correct interpretation of the relevant provisions of the Income-tax Act, the Tribunal misdirected itself in law in holding that no interest was payable under Section 139(8) of the Income-tax Act, 1961, till the date of submission of the balance-sheet and the profit and loss account ? "
10. At the hearing, the learned advocate for the Revenue contended before us that the assessee admittedly did not comply with the statutory provisions of rule 12 of the Income-tax Rules and did not file its return as prescribed, viz., Form No. 1. The prescribed form was not complied with by the assessee who failed to attach to the same its balance-sheet and profit and loss account. He submitted that on the facts, it must be held that the return filed by the assessee did not fulfil the requirements of the Rules and the return should be held to be invalid and non est. The said return could be treated as valid only when the profit and loss account and balance-sheet were subsequently filed by the assessee. Interest under Section 139(8) was chargeable up to the time when the return became complete and correct, that is, on June 8, 1973.
11. Learned advocate for the Revenue contended further that under Section 292B which was introduced in the Income-tax Act with effect from October 1, 1975, it has now been laid down that a return of income should not be held to be invalid on account of mistake, defect or omission therein, if the return is otherwise in substance and in effect in conformity with the Act. The learned advocate submitted that the introduction of the new section indicated that prior to October 1, 1975, the law was different and a return should be considered to be invalid if it was not in strict compliance with the Rules and the form prescribed.
12. In support of his contentions, learned advocate for the Revenue drew our attention to the following sections of the Income-tax Act, 1961 :
" Section 139(8). Where the return under Sub-section (1) or Sub-section (2) or Sub-section (4) for an assessment year is furnished after the specified date, or is not furnished, then whether or not the Income-tax Officer has extended the date for furnishing the return under Sub-section (1) or Sub-section (2), the assessee shall be liable to pay simple interest at twelve per cent, per annum, reckoned from the day immediately following the specified date to the date of the furnishing of the return.
Section 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 provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of the Act."
13. The learned advocate for the Revenue cited the following decisions :
(a) Vadilal Ichhachand v. CIT [1957] 32 ITR 569 (Bom).
14. After the assessee in this case had filed a return of his income, on an examination of the books of the assessee, the Income-tax Officer discovered that the assessee had failed to disclose a particular item of income. On the same day, the assessee filed a revised return including therein the item of income not disclosed. A penalty was imposed on the assessee on the ground that he had deliberately concealed the said item of income. On appeal, it was held by the Tribunal that the penalty should be calculated on the basis of the revised return. On a reference, a Division Bench of the Bombay High Court held that it was the original return which had to be taken into account for the purpose of calculation of penalty and that the order of the Tribunal holding that the penalty should be imposed on the basis of the revised return was incorrect.
(b) Dhampur Sugar Mills Ltd. v. CIT .
15. In this case, the assessee in compliance with a notice under Section 22(2) of the Indian Income-tax Act, 1922, had filed a return showing a loss. The profit and loss account and balance-sheet, however, were filed more than one year thereafter. Subsequently, the assessee filed a revised return on October 30, 1962. The Income-tax Officer issued a notice to the assessee under Section 143(2) of the Income-tax Act, 1961, and completed the assessment under Section 143(3) of the Act of 1961. A question arose whether the assessment made under the new Act was valid. On a reference, it was held by a Division Bench of the Bombay High Court that the assessment was validly made under the subsequent Act. The following observations from the judgment of a learned judge, Hari Swarup J., was relied on (at pp. 240 and 241)';
" The question, however, remains as to whether this return will continue to form the basis for purposes of assessment even after it was substituted by a revised return. Section 22(3) of the 1922 Act as also Section 139(5) of the 1961 Act permit an assessee to file a revised return if he discovers any omission or wrong statement in the return filed by him. The Income-tax Act contemplates the filing by the assessee of a correct and complete return. The law gives him a right to substitute and bring on record a correct and complete return if he discovers any omission or wrong statement in the return originally filed by him. The law cannot contemplate the making of assessment on the basis of a return which even the assessee claims contains wrong statements. When an assessee files a revised return, he in fact admits that the original return filed by him was not correct or complete and substitutes the same by a revised return which according to him is correct and complete. The effective return for purposes of assessment is thus the return which is ultimately filed, by an assessee on the basis of which he wants his income to be assessed... The assessment can be completed only on the basis of the correct and complete return. The earlier return, after a revised return has been filed cannot form the basis of assessment, although it may be used to indicate the conduct of the assessee. Hence, for the purpose of assessment of income, the effective return must be the revised return filed by the assessee ultimately.
There is a distinction between a revised return and a correction of the return. If the assessee files some application for correcting a return already filed or making amends therein, it would not mean that he has filed a revised return. It will still retain the character of an original return, but once a revised return is filed, the original return must be taken to have been withdrawn and to have been substituted by a fresh return for the purpose of assessment."
(c) CIT v. K. Samswathi Ammal [1984] 146 ITR 486 (Mad).
16. This case does not appear to have any particular relevance to the facts and circumstances of the instant case and need not be considered further.
17. The learned advocate for the assessee contended, on the other hand, that so far as this court was concerned, the law was settled that a return if it contained any defect, could not be held to be invalid or non est for all purposes if the same was filed. A defect may be considered to be a mere irregularity which could be cured by the assessee. It was submitted that in this case the assessee had filed only one return on the basis of which ultimately the assessment was made. All that happened was that the assessee instead of filing its balance-sheet and profit and loss account along with the return submitted the same later when called upon by the Income-tax Officer. The Income-tax Officer had accepted the return and subsequently accepted also the balance-sheet and profit and loss account when submitted by the assessee. The defect, if any, in the return did not go to the root and make the return invalid.
18. In support of his contention, the learned advocate cited the following decisions;
(a) Sheonath Singh v. CIT [1958] 33 ITR 591 (Cal).
19. In this case, the assessee had filed two memoranda of appeal before the Tribunal from a decision of the Appellate Assistant Commissioner.
None of the said memoranda contained the signatures of the assessee as required. Subsequently, both the memoranda were properly signed by the assessee. The Tribunal dismissed the appeal on the ground that the memoranda originally filed were materially defective and the defects were not cured by putting the signature of the assessee in the pleadings within the period of limitation. On a reference, it was held by a Division Bench of this court that the absence of or defect in the signature of the appellant in the memoranda was not illegal or fatal but was only an irregularity which could be rectified by amendment. The amendment took effect from the date when the document was originally filed. The memoranda as originally filed were not a nullity and the Tribunal had power to accept them if at the hearing the Tribunal was satisfied that the assessee had in fact intended to file an appeal.
(b) Mohindra Mohan Sirkar v. ITO .
20. In this case, the assessee had filed his returns for three assessment years within time. The assessment proceedings were initiated thereafter on the returns filed, but no assessment was, however, made. Later, the assessee was served with three notices under Section 148 of the Income-tax Act, 1961, calling upon him to file returns for the said assessment years.
21. Being aggrieved, the assessee initiated proceedings under Article 226 of the Constitution for quashing the said notices. The defence of the Revenue was that the particulars of profits and gains of business had not been submitted with the returns and that, further, one of the returns was not properly verified. Therefore, all the returns were invalid in law. On the aforesaid facts, it was held by a Division Bench of this court that the returns could not be held to be invalid and non-existent. It was held further that there was a distinction between non-filing of a return and filing of an incorrect and incomplete return. The Income-tax Act did not provide for rejection of an invalid return but under Section 143, a duty was cast on the Income-tax Officer to assess the total income after notice to the assessee and considering the evidence that might be produced. It was observed that there could be cases where the returns were incomplete to such an extent that they could not be regarded as returns in law, for example, where the return was not signed by the assessee at all or where a blank return was filed. But where returns had been signed and verified by the assessee and the only defect in the returns was that the particulars of the profits and gains of the business had not been stated, the returns could not be treated as invalid and non-existent. A writ was issued commanding the respondents not to give any effect to the impugned notices under Section 148 of the Act.
22. In this case, the assessee had filed its return of income in a wrong form. Subsequently, as required by the Income-tax Officer, the assessee filed the return in the correct form. On the completion of the assessment, the Income-tax Officer charged interest under Section 139(1) up to the date of the filing of the original return. The Commissioner of Income-tax initiated proceedings under Section 263 of the Income-tax Act, 1961, and directed the Income-tax Officer to levy interest up to the date of the filing of the return in the correct form. On appeal, the Tribunal set aside the order of the Commissioner. On a reference, it was held by a Division Bench of the Madras High Court that though the assessee had used a wrong form, it did not mean that the return filed in the wrong form was nonest and that the return filed subsequently in the correct form could be treated as the only return filed by the assessee. The mistake of the assessee was innocuous and the return filed could not be treated as a mere scrap of paper resulting in penalty to the assessee. The court noted that the Income-tax Officer had accepted the original return for making a provisional assessment under Section 141 and had levied interest on the basis that the return was actually filed earlier. The court answered the reference in favour of the assessee.
23. The facts in this case are more or less similar to the facts in Mohindra Mohan Sirkar's case . A Division Bench of this court following the said decision directed that notices issued under Section 148 of the Income-tax Act, 1961, on the ground that the original returns were invalid and non-existent, should not be given effect to. The court again made a distinction between a return which was not correct and complete within the meaning of Section 139 of the Income-tax Act and a return which was so defective that the same could not be treated as a return at all in law.
(e) CIT v. Garia Industries Pvt. Ltd. [1983] 140 ITR 636 (Cal).
24. In this case, the question arose as to the validity of a return submitted by an assessee and whether the Tribunal was justified in holding that the loss should be determined and carried forward for the purpose of set off on the basis of such a return. The return was sought to be ignored by the Income-tax Officer inasmuch as the same was not accompanied by a statement of accounts and auditor's report. The assessee did not succeed before the Appellate Assistant Commissioner but succeeded before the Tribunal. On a reference, the decision of the Tribunal was upheld and this court observed as follows (at p. 647):
" In this connection, whether the requirement that the return should be accompanied by certain statements was directory or mandatory has been urged and reliance was placed on certain observations of the Allahabad High Court in the case of Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236 (at p. 239), of the Delhi High Court in the case of Qammar-Ud-Din & Sons v. CIT [1981] 129 ITR 703 (at p. 706), of the Calcutta High Court in the case of Mohindra Mohan Sirkar v. ITO [1978] 112 ITR 47 (at p. 55), as also in the case of Sheonath Singh v. CIT [1958] 33 ITR 591 (Cal). It appears to us that the appropriate directions in respect of question No. 2, would be, in view of the provisions of law, that the Tribunal was right in holding that the return filed by the assessee was a valid return."
25. The return which was filed by the assessee on October 6, 1971, admittedly did not include its profit and loss account and the balance-sheet which were required to be enclosed with the return in accordance with the prescribed form. To that extent, the return may be considered to be incomplete. The question to be decided is whether this return can be held to be so defective that it should be held to be an invalid return and in fact, non est in law. In our view, the return cannot be held to be invalid and non-existent. The return as filed did not contain any defect whatsoever on its face. The Income-tax Officer treated the same as a legally valid return. The assessment in fact has been made on the said return by the Income-tax Orficer after he called for and obtained the copies of the balance-sheet and profit and loss account subsequently. These facts have been found by the Tribunal and such findings remain unchallenged. It has not been established by the Revenue that the return as filed was so incomplete and defective that it could not be regarded as a return in law. This is not a case where a blank return was filed or the return was not signed by the assessee at all. Law on the controversy stands settled, so far as this court is concerned, by the decisions in Mohindra Mohan Sirkar's case , Sova Sarkar's case and Garia Industries Pvt. Ltd.'s case [1983] 140 ITR 636 (Cal).
26. The Madras High Court has taken a similar view in K, Saraswathi Ammal's case [1984] 146 ITR 486 and Royal Textiles' case [1979] 120 ITR 506.
27. Following the said decisions, we hold that the return as filed by the assessee was a valid return for the purpose of Section 139(8) of the Income-tax Act, 1961, For the above reasons, we answer the questions referred to us as follows :
28. Question No. (i) is answered in the affirmative and in favour of the assessee.
29. Questions Nos. (ii) and (iii) are answered in the negative and also in favour of the assessee.
30. There will be no order as to costs.
Lilamoy Ghosh, J.
31. I agree.