Delhi High Court
Bharat Nidhi Ltd. vs Commissioner Of Income Tax on 27 August, 2007
Author: Madan B. Lokur
Bench: Madan B. Lokur, S. Muralidhar
JUDGMENT Madan B. Lokur, J.
1. The following question of law has been referred by the Income Tax Appellate Tribunal ('Tribunal') for our opinion under Section 256(1) of the Income Tax Act, 1961 ('Act'):
Whether on facts and circumstance of the case, the Income Tax Appellate Tribunal was right in law in treating the return filed on 27.8.1976 as an invalid return on the ground that it had not been signed in accordance with the provisions of Section 140(c) of the Income Tax Act?
2. The return of income filed by the assessed, a limited company, on 27th August, 1976, was signed by its Secretary.
3. On 30th June, 1977 and 1st November, 1977, the Income Tax Officer ('ITO') issued notices under Section 143(1) of the Act but it was not pointed out to the assessed that in terms of Section 140(c) of the Act, the return ought to have been signed by its Managing Director or one of its Directors in the absence of the Managing Director. It is only during the course of the assessment proceedings that the ITO pointed out to the Asssessee that the return was defective since it was signed only by the Secretary of the Company.
4. Immediately thereafter, on 27th November, 1978, the assessed removed the defect and filed a fresh return which was signed by the Managing Director of the assessed. The ITO thereafter completed the assessment and held that the original return filed on 27th August, 1976 was invalid.
5. The assessed, feeling aggrieved, preferred an appeal before Commissioner of Income Tax (Appeals) who passed an order on 6th May, 1981 in which it was held, relying upon Section 292B of the Act as well as a decision of the Madras High Court in Commissioner of Income Tax, Madras v. Royal Textiles 120 ITR 506 that the return filed by the assessed on 27th August, 1976 suffers from a curable defect and that the defect had been cured by the assessed by filing a return which was duly signed by the Managing Director.
6. The Revenue preferred an appeal before the Income Tax Appellate Tribunal which passed an order dated 3rd December, 1983 to the effect that the return filed by the assessed was not a valid return within the meaning of Section 140(c) of the Act.
7. For facility of reference, Section 140(c) and Section 292B of the Act are reproduced hereinbelow:
Return by whom to be signed.
Section 140(c) - In the case of a company, by the managing director thereof, or where for any unavoidable reason such managing director is not able to sign and verify the return, or where there is no managing director, by any director thereof:
Provided that where the company is not resident in India, the return may be signed and verified by a person who holds a valid power of attorney from such company to do so, which shall be attached to the return:
Provided further that,-
(a) Where the company is being wound up, whether under the orders of a court or otherwise, or where any person has been appointed as the receiver of any assets of the company, the return shall be signed and verified by the liquidator referred to in Sub-section (1) of Section 178;
(b) Where the management of the company has been taken over by the Central Government or any State Government under any law, the return of the company shall be signed and verified by the principal officer thereof;
(cc) In the case of a firm, by the managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign and verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor;
292B. Return of income, etc., not to be invalid on certain grounds. No return of income, assessment, notice, summons or other proceedings, 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 this Act.
8. Learned Counsel for the assessed has drawn our attention to a decision of the Kerala High Court in Commissioner of Income Tax v. Masoneilan (India) Ltd. . In that decision, the High Court considered the words used in Section 292B of the Act that is omission, defect and mistake. In the said decision by the Kerala High Court, the assessed, a company, had filed a return but it was signed by a person who was duly authorised but who was not in the capacity/post mentioned under Section 140 of the Act in relation to a company. In response to a notice issued under Section 154 of the Act, the assessed filed a petition stating that the return was filed by a person who was authorised to do so on the basis of a power of attorney given to him. The Kerala High Court took the view that the return suffered from a defect which is to say that there was a fault or an imperfection which could be cured. That being the situation and, the defect having been removed, the filing of a fresh return duly signed by a competent person within the meaning of Section 140 of the Act would relate back to the date of filing of the original return.
9. In the present case, there can hardly be any doubt that a Secretary is otherwise a person who is competent to sign documents on behalf of the assessed which is a company.In respect of filing of income tax returns, the Secretary may not be competent to file a return under Section 140 of the Act but, as it transpires from the records of the case, and as mentioned in the Statement of Case, even in the past the returns of the assessed have been filed by its Secretary. In the present case, the moment the defect was pointed out to the assessed, a fresh return was filed which was signed by the Managing Director.
From the facts of the case as they appear on record, there cannot be any doubt whatsoever that the assessed had made an error which was in the nature of a defect as explained by the Kerala High Court and that defect was removed by filing a fresh return signed by the Managing Director of the assessed. The return would then relate back to the original filing date.
10. Following the decision of the Kerala High Court, we answer the question in the negative that is in favor of the assessed and against the Revenue.
11. The reference is disposed of accordingly.