Income Tax Appellate Tribunal - Delhi
Bhagat Singh & Virender Singh vs Assistant Commissioner Of Income Tax on 27 June, 2000
Equivalent citations: [2000]75ITD1(DELHI)
ORDER
U. B. S. Bedi, J.M.
1. This is assessee's appeal directed against the order of CIT(A) X, New Delhi, dt. 24th January, 1997, relating to asst. yr. 1993-94 and following grounds have been raised :
"(1) That the learned AO as well as learned CIT(A) have failed to appreciate the fact available on record. The authorities below have neither accepted nor denied that the abovementioned lands vested in the Land Acquisition Act only on 16th March, 1990 (the date of original award) not on 20th August, 1974 (the date of possession taken over from the assessee).
(2) That the authorities below have also erred while taxing the interest amount during the period under assessment in spite of the fact that the same should have been taxed on mercantile basis.
(3) That the authorities below have also failed to take note that these amounts were received on 17th May, 1993, and even on receipt basis the same cannot be taxed during the period under assessment.
(4) That the learned AO as well as learned CIT(A) have also failed to appreciate that the lands under reference are agricultural lands and do not come within the definition of the term "capital asset" as defined under s. 2(14) of the IT Act, 1961. The learned Tribunal, Delhi Bench 'A' has clearly held on the similar facts in the case of ITO vs. Surjan Singh in (1983) 3 ITD 438 (Del) that the lands in question are agriculture lands and do not come within definition of the term of the capital assets.
(5) That the learned AO, as well as learned CIT(A) have erred while treating the entire additional compensation as capital gain in spite of the fact that even otherwise the additional compensation awarded does not result in gain to the assessee.
(6) That alternatively the amount of alleged capital gain if any cannot be taxed during the period under assessment as the same was received on 17th May, 1993.
(7) That the entire assessment order as well as order of learned CIT(A) are wrong, arbitrary, illegal, unjust, against the facts as well as against the law."
2. During the course of the hearing assessee filed application on 31st December, 1997 under r. 11 of ITAT Rules for raising additional grounds of appeal and contents of the application are reproduced as below :
(1) The order of assessment is bad in law as it has been passed in pursuance of a notice under s. 143(2) which was served on the appellants on 26th September, 1995, well beyond the statutory period of 12 months from the end of the month in which the return was filed (i.e. August, 1994) the assessment order being void ab initio may be quashed.
(2) The learned CIT(A) erred in law in treating the revised return filed in March, 1995, as valid return, ignoring the settled law that a late return, filed under s. 139(4) on 31st August, 1994, could not be revised under s. 139(5) and that the period of limitation could not be counted with reference to it.
(3) Assessment in respect of the income of the deceased Shri Bhika Ram should have been made on his legal heirs, but no notices under s. 143(2) or 142(1) were ever issued to them, nor was the assessment made on the appellants in the capacity as legal heirs. The assessment is, thus, bad on this count also and deserves to be quashed and may kindly be quashed.
(4) Late Shri Bhika Ram had left behind him three legal heirs, two sons and a daughter. Notices should have been issued to all the three legal heirs to enable the representation of the entire estate before the AO. The daughter was, however, never made a party to the assessment proceedings, and thus, the estate of the deceased was not fully represented before the AO. The assessment made is accordingly bad in law for this reason also and deserves to be quashed and may kindly be quashed.
(5) The learned CIT(A) erred in law in confirming the assessment order even when it ascribed no status to the assessee. There can be no valid assessment on an assessee without ascribing to him appropriate status. The assessment is accordingly bad in law and may be quashed. The above grounds go to the root of the matter as they raise the question of validity of assessment in law. No further investigation into facts is necessary to adjudicate upon them. They may, therefore, be kindly admitted. In support of the above prayer, reliance is placed on the following authorities :
(1) CIT vs. Mahalakshmi Textile Mills Ltd. (1967) 66 ITD 710 (SC);
(2) Jute Corpn. of India Ltd. vs. CIT (1991) 187 ITR 688 (SC);
(3) Hukumchand Mills Ltd. vs. CIT (1967) 63 ITR 232 (SC);
(4) CIT vs. Ram Sanehi Gian Chand (1972) 86 ITR 724 (P&H); and (5) CIT vs. Mohd. Ayyub & Sons Agency (1992) 197 ITR 637 (All).
3. Copy of this application under r. 11 was given to the Department and Departmental Representative was heard on admission of additional grounds of appeal raised by the assessee during the course of hearing. Since these grounds are found to be legal grounds and go to the root of the matter as they raised the question of assessment in law and no further investigation to the facts was necessary to adjudicate upon them. So keeping in view the nature of grounds raised as additional grounds and case law as relied upon by the assessee in the said application, we are of the considered opinion that these grounds should be allowed to be raised and as such alleged and would form part of grounds in memorandum of appeal.
4. We first take up ground Nos. 1 & 2 of additional ground which relate to challenge by the assessee about order of assessment as bad in law as it has been passed in pursuance of notice under s. 143(2) which was served on the assessee on 26th September, 1995, stated to be well beyond the statutory period of 12 months from the end of the month in which the return was filed (i.e. August, 1994). Prayer was made for quashment of the assessment order being void ab initio and it was pleaded that CIT(A) has erred in law in treating revised return filed in March, 1995 as valid return ignoring the law that late return filed under s. 139(4) on 31st August, 1994, could not be revised under s. 139(5) and that the period of limitation could not be counted with reference to it.
5. Facts are like this that return in this case was filed on 31st August, 1994, declaring an income of Rs. 84,821. The assessee was the owner of the land measuring 8 bighas six and half biswas situated at village Ghazipur, Delhi and the same was acquired by Delhi Administration on 20th August, 1974, under the Land Acquisition Act, 1894. Ultimately the compensation was determined by the Land Acquisition Collector at Rs. 20,400 per bigha vide Award No. 31 of 1989-90, dt. 16th March, 1990 against which the appeal was preferred before the learned Addl. Distt. Judge, the amount was enhanced to Rs. 72,650 per bigha vide order, dt. 18th May, 1992. Compensation of Rs. 2,20,779 at first instance was received in March, 1990 as awarded by Land Acquisition Collector vide his order, dt. 16th March, 1990. The detail of total enhanced compensation and interest is as under : Rs.
(1). Addl. compensation awarded by Distt. Judge on appeal filed by the assessee against Land Acquisition Collector 5,65,475.62 (2). Interest @ 6 per cent under s. 28 of Land Acquisition Act from 20th August, 1974 to 20th October, 1992, i.e. 17 years 61 days 5,82,455.38 (3). Interest under s. 28 of the Land Acquisition Act @ 9 per cent p.a. from 20th August, 1974 to 20th October, 1992, i.e., 18 years 61 days 9,24,575.82 ------------
20,72,506.82
------------
6. Subsequently assessee has filed revised return of income on 16th March, 1995, declaring income of Rs. 2,20,116 in respect of interest income from 16th March, 1992 to 20th October, 1992. Both these returns have been filed in Form No. 2. Assessment was processed under s. 143(1)(a). Notice under s. 143(2) was issued to the assessee for the first time on 26th September, 1995. Assessment was completed at an income of Rs. 20,72,510 on 29th March, 1996, against which assessee preferred appeal which was dismissed by the CIT(A) X, New Delhi vide order, dt. 24th January, 1997, and further appeal was filed before the Tribunal. Assessee's counsel took legal plea before us that first notice in this case under s. 143(2) was issued to the assessee on 26th September, 1995, and this notice was beyond the period of 12 months from the end of the month of August, 1994 when original return was filed by the assessee. Return filed on 31st August, 1994, was a belated return as due date for filing the return for the assessment year under consideration being 30th June, 1993. As it was a belated return under s. 139(4), it was incapable of being revised under s. 139(5) as per the ratio of the judgment of the Hon'ble Supreme Court in the case of Kumar Jagdish Chandra Sinha vs. CIT (1996) 220 ITR 67 (SC). The return filed on 16th March, 1995, was, thus, a nullity in the eye of law and the period of limitation prescribed in the proviso to sub-s. (2) of s. 143 could not be counted therefrom. As per this proviso, no notice under s. 143(2) "shall be served on the assessee after the expiry of 12 months from the end of the month in which the return is furnished. The said notice having been served on the assessee on 26th September, 1995, was beyond the period of 12 months, and was thus, invalid in the eye of law. No order under s. 143(3) could be passed as a result thereof. The order under s. 143(3) is, therefore, bad in law and deserves to be quashed.
7. The learned Departmental Representative, while rebutting the above noted arguments of the assessee's counsel had made two-fold submissions in this regard. Firstly he stated that first return has been filed in a wrong form, i.e. Form 2. It had not been processed under s. 143(1). The revised return was, therefore, the original return and that it had been processed by the AO and was, therefore, valid. He, however, admitted on query by the Bench that no defect memo was issued against the original return filed on 31st August, 1994, and that the second return was also filed on Form No. 2. Second plea of the learned Departmental Representative was based on the observations contained in judgment of the Hon'ble Supreme Court in the case of CIT vs. Jai Prakash Singh (1996) 219 ITR 737 (SC) at 747 to the effect that the principle that emerges from the above decision is that an omission to serve or any defect in the service of the notice provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive provisions (charging sections). Any such omission or defect may render the order irregular-depending on the nature of the provision not complied with the certainly not void or illegal. According to the learned Departmental Representative the delay in the issue of the notice under s. 143(2) was only procedural irregularity. It might make the assessment order irregular but not void or illegal. So it was pleaded for rejection of the plea taken by the assessee and confirmation of order passed by the AO and confirmed by the CIT(A) on this legal aspect.
8. The learned counsel for the assessee in order to counter the submission of learned Departmental Representative submitted that since both the returns were filed on Form No. 2 and assessment has been framed on the basis of such return when no defect memo has been issued so the Department has not treated either of the returns as invalid and moreover Department could not treat one return as invalid and another as valid. So limitation of notice under s. 143(2) had, therefore, to be counted from the first return and, thus counted, it is beyond period of limitation. It was further submitted that the above judgment of the Hon'ble Supreme Court is with reference to provisions of s. 159 of IT Act, 1961. The interpretations of provisions of s. 143(2) as in force w.e.f. 1st April, 1989, was not the issue before their Lordships. There was no built in limitation under s. 143(2) prior to 1st April, 1989. This has been introduced by the legislature for the first time w.e.f. 1st April, 1989. The introduction of limitation and this right cannot be violated except as provided by law. It is a substantive right. Any other order passed in its violation on will be 'void' and not 'irregular'. Assessee relied upon Supreme Court judgment in this regard in the case of J. P. Jani, ITO vs. Induprasad Devshanker Bhatt (1969) 72 ITR 595 (SC). It was prayed that assessment in question deserves to be quashed.
9. Besides these legal objections and pleas, it was pleaded that assessment in question is bad in law for non-joinder of all the legal heirs. There are 3 legal heirs to the deceased Shri Bhika Ram, namely, his sons, Bhagat Singh and Virender Singh and his daughter Smt. Om Biri Devi. Smt. Om Biri Devi has not been joined as a legal representative. The assessment is therefore, irregular and deserves to be set aside in view of the law laid down by the Hon'ble Supreme Court in Jai Prakash Singh's case (supra). These arguments and those which follows, are without prejudice to those taken above, claiming the assessment to be void. It was also submitted that the enhanced compensation was received on 17th May, 1993, and was, therefore, liable to be assessed in asst. yr. 1994-95 and not in asst. yr. 1993-94 and document to substantiate this claim of the assessee was duly furnished to the AO who simply brushed aside the same and did not accept the same or give any weightage to the same. Further it was contended that AO included the entire interest paid to the assessee amounting to Rs. 15,07,031 in this year's income even though it relates to the period from 20th August, 1975 to 20th August, 1992, on the ground that the assessee has kept no accounts and so the entire amount would be includible in his income on cash basis. This finding of the AO is based on the ratio of Supreme Court judgment in the case of Rama Bai vs. CIT (1990) 181 ITR 400 (SC). As per this judgment interest cannot be taken to have accrued on the date of the order of the Court granting enhanced compensation but has to be taken as having accrued year after year from the date of delivery of possession of the land till the date of such order." From the above basis interest includible in the income of the assessee for this year was about Rs. 47,174.44 and not Rs. 15,07,031.
10. We have heard rival submissions, perused the record, gone through the orders of the AO and CIT(A). We have also gone through the written submissions made by the assessee's counsel and other documents to which our attention was drawn. This is admitted position that original return in this case was belatedly filed declaring an income of Rs. 84,821 on 31st August, 1994, when due date of filing of the return was 30th June, 1993. Another return was filed on 16th March, 1995, declaring an income of Rs. 2,20,116 and both these returns have been filed in Form No. 2. It is also admitted fact that since no defect memo was issued, so no objection to the validity of either of these returns was raised by the AO at any stage. He processed the case under s. 143(1)(a) in March, 1995, and first notice under s. 143(2) was issued in this case on 26th September, 1995. Since notice under s. 143(2) could be issued within 12 months from the end of the month in which the return is filed, could the return subsequently filed on 16th March, 1995, be taken and treated as revised return as per s. 139(5) of the IT Act, when original return filed is belated return, because revised return substitutes, the original return and time period of 12 months could only be counted from the date of filing of revised return if legally a belated return could be revised. For this we would refer to ss. 139(1), 139(4) and 139(5) which read as under :
"139(1) : Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such other person during the previous year in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed :
Provided that a person, not furnishing return under this sub-section and residing in such area as may be specified by the Board in this behalf by a notification in the Official Gazette, and who at any time during the previous year fulfils any two of the following conditions, namely :
(i) is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or
(ii) is the owner or the lessee of a motor vehicle; or
(iii) is a subscriber to a telephone; or
(iv) has incurred expenditure for himself or any other person on travel to any foreign country, shall furnish a return, of his income during the previous year, on or before the due date in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed.
139(4) : Any person who has not furnished a return within the time allowed to him under sub-s. (1), or within the time allowed under a notice issued under sub-s. (1) of s. 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier :
Provided that where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year.
139(5) : If any person, having furnished a return under sub-s. (1), or in pursuance of a notice issued under sub-s. (1) of s. 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment whichever is earlier :
Provided that where the return relates to the previous year relevant to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, the reference to one year aforesaid shall be construed as a reference to two years from the end of the relevant assessment year."
11. As first return has been filed belatedly, it cannot be held to be return under s. 139(1) in view of the provisions contained therein. So it can be deemed as return under s. 139(4) only. Since there is no provision for revision of return filed under s. 139(4), return filed subsequently on 16th March, 1995, cannot be held to be revised return. This view gets support from the ratio of the judgment as laid down in the case of Kumar Jagdish Chandra Sinha (supra) wherein the Hon'ble Supreme Court has held as under :
"For the years 1964-65 and 1965-66, the assessee did not file his returns within the period prescribed by sub-s. (1) of s. 139 of the IT Act, 1961. No notice under sub-s. (2) of s. 139 was also issued to him. The assessee filed returns for both the assessment years under sub-s. (4) of s. 139. The assessee thereafter filed revised returns for the two assessment years, on 18th January, 1969 and 17th July, 1969, respectively, declaring the total income at figures lower than those declared in the original returns. The ITO, by orders dt. 15th January, 1990 and 6th July, 1990, respectively, completed the assessments for the two assessment years in question, and also initiated penalty proceedings under s. 271(1)(c) of the IT Act. The High Court, on a reference, held that even in the case of a return filed under s. (4) of s. 139, a revised return was permissible, and that, therefore, the assessment orders in question must be deemed to have been made within the period of limitation of one year from the date of the revised return provided in cl. (c) of sub-s. (1) of s. 153 of the Act. The High Court also held that the larger period of eight years in cases of concealment of income, provided by cl. (b) of sub-s. (1) of s. 153, was also attracted in this case and that on this count also, the assessment orders must be held to have been made within the period of limitation prescribed by the Act. On appeal to the Supreme Court :
'Held, allowing the appeal, (i) that no revised return can be filed under sub-s. (5) of s. 139 in a case where the return is filed under s. 139(4). Once this is so the revised returns filed by the assessee for both the said assessment years were invalid in law and could not have been treated and acted upon as revised returns contemplated by sub-s. (5) of s. 139."
12. While holding so it was further observed by the Hon'ble Supreme Court at p. 75 (middle of first paragraph) as under :
"..... We are, therefore, of the opinion that no revised return can be filed under sub-s. (5) of s. 139 in a case where the return is filed under s. 139(4). Once this is so, the revised returns filed by the assessee for both the said assessment years were not valid in law and could not have been treated and acted upon as revised returns contemplated by sub-s. (5) of s. 139 which means that s. 153(1)(c) was not attracted in this case. Indeed, this is the view taken by all the High Courts as conceded by Mr. Ashok Sen [see O. P. Malhotra vs. CIT (1981) 129 ITR 379 (Del), Dr. S. B. Bhargava vs. CIT (1982) 136 ITR 559 (All), Vimalchand vs. CIT (1985) 155 ITR 593 (Raj) and Eapen Joseph vs. CIT (1987) 168 ITR 26 (Ker)]. Only the Calcutta High Court has taken the contrary view with which we are unable to agree."
13. As is apparent from the foregoing the Hon'ble Supreme Court has approved the judgment of Delhi High Court in the case of O. P. Malhotra vs. CIT (1981) 129 ITR 379 (Del) besides other judgments of Allahabad High Court, Rajasthan High Court and Kerala High Court. The only contrary view taken by Calcutta High Court was reversed in this case while approving the views of other High Courts. In the case of O. P. Malhotra (supra), the Division Bench of the Hon'ble Delhi High Court has observed and held as under :
"For the asst. yr. 1960-61, the assessee filed a return on 30th March, 1965, disclosing an income of Rs. 1,720. On 28th March, 1966, he filed a revised return declaring an income of Rs. 4,295. The ITO made an assessment treating the revised return filed on 28th March, 1966, as invalid in law as the return filed on 30th March, 1965, had not been filed either under sub-s. (1) or under sub-s. (2) of s. 139 of the IT Act, 1961. On appeal, the assessee claimed that the return filed on 28th March, 1966, was a valid return and also raised other grounds on the merits of the assessment. The AAC held that the revised return was a valid return under s. 22(3) of the 1922 Act and set aside the assessment and directed the ITO to complete the assessment afresh taking note of the revised return. The assessee preferred a further appeal contending that the AAC ought to have annulled the assessment and not set it aside for being redone. The Tribunal held that in view of s. 297(2)(b) of the 1961 Act, the assessment had to be completed under the 1961 Act and the return dt. 30th March, 1965, had been correctly treated as a return filed under s. 139(4) and the subsequent return could not be treated as a revised return under s. 139(5) as the assessee had not furnished a return under sub-s. (1) or sub-s. (2) of s. 139. Nor could the earlier return be treated as a voluntary return under s. 139(4), as it had been filed after the expiry of four years from the end of the assessment year. The Tribunal then held that the ITO had acted legally in ignoring the second return and that, therefore, the order of assessment could not be cancelled. Without modifying the AAC's order the Tribunal dismissed the appeal observing that it would not cancel the assessment order.
On a reference :
Held, affirming the decision of the Tribunal, (i) that in view of s. 297(2)(b) of the 1961 Act, the return filed on 30th March, 1965, had to be fitted against one or the other of the sub-sections of s. 139, and it could be treated only as a return filed by the assessee under s. 139(4); (ii) that sub-s. (5) of s. 139 applies only in a case where a person, having furnished a return under sub-s. (1) or sub-s. (2), discovered any omission or wrong statement therein. The sub-section does not refer to sub-s. (4), and, therefore, does not entitle an assessee to rectify or revise a return filed under s. 139(4). The return filed on 30th March, 1965, being one under s. 139(4), a revised return could not be filed under s. 139(5) and the return filed on 28th March, 1966, was invalid in law."
14. In view of authoritative pronouncements of Hon'ble Supreme Court of India and Delhi High Court as referred to supra, we are of the view that the revised return filed by the assessee on 16th March, 1995, is an invalid return in law and as such is non est and cannot be acted upon and no action on the basis of this return can be taken as same can't be treated as a revised return filed under s. 139(5). Therefore, notice under s. 143(2) of the IT Act, could only be issued on the basis of return filed belatedly on 31st August, 1994, in this case upto 31st August, 1995, for making the assessment under s. 143(3) and not beyond that. As this was not done, no valid assessment could be made on the basis of notice issued beyond the period of limitation prescribed in proviso to s. 143(2) of the IT Act. As the return filed on 16th March, 1995 cannot be treated or acted upon as revised return contemplated by s. 139(5) of the IT Act, assessment order is held to be not valid and as such quashed. Since the assessment order is being quashed on legal grounds, other grounds are not being adjudicated upon. As a result, appeal of the assessee gets accepted and assessment order as well as the order of CIT(A) get quashed.
Nathu Ram, A.M.
15. I have gone through the order proposed by my Brother Judicial Member and on having considered all relevant facts and the decisions relied upon I have not been able to persuade myself to agree with the conclusion reached in the proposed order, cancelling the assessment made.
16. For proper appreciation of the controversy involved I recapitulate the relevant facts in brief :
17. The assessment relates to the year 1993-94. The assessee was required to file a return on or before 31st August, 1993 as per provisions of s. 139(1) of the IT Act. The assessee failed to file the return within the stipulated period. The AO had also not issued any notice under sub-s. (1) of s. 142 of the IT Act requiring the assessee to file the return. The assessee, however, suo motu filed a return declaring income of Rs. 84,821 on 31st August, 1994. The return so filed is obviously under s. 139(4) of the IT Act.
18. It is pointed out that a piece of land admeasuring 8 bighas and six and half-biswas belonging to the assessee and situated in village was acquired by Delhi Administration on 20th August, 1974, under the Land Acquisition Act and the Land Acquisition Collector determined the compensation therefor at Rs. 20,400 per bigha as per Award dt. 16th March, 1990. On appeal, the Addl. District Judge enhanced the compensation amount to Rs. 72,650 per bigha vide order dt. 18th May, 1992.
19. The assessee received originally compensation of Rs. 2,20,779 in March, 1990 and he received further enhanced compensation as per details below :
Rs.
Additional compensation awarded by District Judge 5,65,475.62 Interest @ 6 per cent under s. 28 of Land Acquisition Act from 20th August, 1974 to 20th October, 1992 5,82,455.38 Interest under s. 28 of the Land Acquisition Act, @ 90 per cent p.a. from 20th August, 1974 to 20th October, 1992 9,24,574.82 ------------ 20,72,506.82 ------------
20. The assessee filed another return declaring income of Rs. 2,20,116 on 16th March, 1995. This return was processed by the ITO under s. 143(1)(a) and selected it for scrutiny. The AO, therefore, issued a notice under s. 143(2) of the IT Act on 26th September, 1995. The AO for the detailed discussions made in the assessment order assessed the enhanced compensation as well as the interest received totalling to Rs. 20,72,506.82 in the order passed under s. 143(3) on 29th March, 1996. The assessee in the additional ground raised before us has challenged the validity of the assessment on the ground that the return filed on 16th March, 1995, being the revised return is not valid and the further proceedings taken by issue of notice under s. 143(2) based thereon and the assessment made is not legally tenable. The controversy so raised thus centres on the question of validity of return filed on 16th March, 1995. The validity of this return is therefore, to be examined in light of the relevant provisions of the Act.
21. As per provisions of s. 139(1) every person having taxable income is required to furnish a return within the prescribed time. If the assessee fails to file a return under s. 139(1) and later on the AO having come to know that such person had taxable income and the return as required has not been filed, would issue a notice under s. 142(1) of the IT Act requiring him to file a return of income within the stipulated period. Where no such notice is issued to the assessee having taxable income for filing a return, the assessee could suo motu furnish a return of income for the relevant year at any time before the expiry of one year from the end of the assessment year or before the completion of assessment whichever is earlier as per provisions of sub-s. (4) of s. 139 of the IT Act, sub-s. (5) of s. 139 provides that if any person having furnished the return under s. (1) or in pursuance of a notice issued under s. 142(1) discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. But there is no corresponding provision for revising the return filed under s. 139(4) of the IT Act.
22. Sec. 153 provides time-limit for completion of assessments and reassessments sub-s. (1) of s. 153 reads as under :
"153(1) No order of assessment shall be made under s. 143 or s. 144 at any time after the expiry of :
(a) two years from the end of the assessment year in which the income was first assessable, or
(b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-s. (4) or sub-s. (5) of s. 139, whichever is later."
23. The reading of this section would show that as per sub-cl. (a) an assessment has to be made within a period of two years from the end of the assessment year in which the income was first assessable or as per sub-cl. (c) assessment is to be made within one year from the end of the financial year in which the return or a revised return is filed. The revised return when filed, thus gets the extended period of one year for completion of assessment.
24. Admittedly the first return filed by the assessee on 31st August, 1994, was under s. 139(4) of the IT Act and no revised return thereon could validly be filed under s. 139(5) of the IT Act. The assessee, however, after filing the first return realised that the interest income declared in the first return is not full and true. The assessee therefore, filed another return on 16th March, 1995, declaring an income at Rs. 2,20,116. This return was also filed in the prescribed form and filed in the prescribed manner so as to avoid any penal action for concealment of income. By filing the second return the assessee has admitted that the original return filed was not correct or complete and the subsequent return filed is claimed to be correct and complete. The assessee has thus given a gobye to the return originally filed and wanted the Department to complete the assessment based on the return subsequently filed which according to the assessee, was correct and proper return. We also note that during the course of assessment proceedings the assessee at no stage made a claim that the second return filed is not valid and assessment should be completed based on the return originally filed. After having got the assessment completed based on the second return it would not be and should not be open to the assessee to contend at this stage that the return subsequently filed was invalid.
25. We also find that as per proviso to s. 143(2) no notice under that section shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished. In the present case the second return was filed on 16th March, 1995, and notice under s. 143(2) was issued on 26th September, 1995. The notice under s. 143(2) was thus issued within the requisite time with reference to the second return. The assessment made on 29th March, 1996 was also within the period of two years from the end of the assessment year and so far as the time-limit provided in s. 153(1) of the IT Act is concerned the assessment made was within the time prescribed.
26. According to the assessee the time limitation for issue of notice under s. 143(2) should have been reckoned from the date of filing of the first return under s. 139(4) on 31st August, 1994 and the notice having been issued under s. 143(2) beyond the period of one year from the date of filing of the original return it was not valid and the assessment made on issue of such notice under s. 143(2) is without jurisdiction. It is mentioned here that the second return filed on 16th March, 1995, is within a period of one year from the end of the relevant assessment year within the meaning of s. 139(4) of the IT Act. There is also no bar in s. 139(4) for filing another return in substitution of the earlier return filed if the same is found to be not correct and complete and the assessee with a view to come out clean files another return declaring correct and true income. The second return thus filed in my view is not invalid as it conforms to the provisions of s. 139(4). Further, the notice issued under s. 143(2) was also within a period of one year from the date of filing of the second return and assessment has also been completed within the period of two years from the end of the assessment year involved within the meaning of s. 153(1)(a) of the IT Act. However, based on the second return the Department would not have the extended period of one year extending beyond the limitation of two years as per s. 153(1)(c) as the return filed on 16th March, 1995, is not a revised return within the meaning of s. 139(5) of the IT Act, and in the present case the assessment having been completed within the period of two years available, the extended time-limit as per provisions of s. 139(5), r/w s. 153(1)(b) has not sought to be availed by the Revenue.
27. I have gone through the various decisions cited and find that the ratio of those decisions delivered is in the context of extended period of limitation sought by the Revenue treating the second return as a revised return within the meaning of s. 139(5) of the IT Act.
(a) In the case of Kumar Jagdish Chandra Singh vs. CIT (1982) 137 ITR 722 (Cal) the assessee did not file return within the period prescribed under s. 139(1) of the IT Act for the asst. yrs. 1964-65 and 1965-66. No notice under s. 139(2) equivalent to 142(1) was issued by the Revenue. The assessee filed returns for both the years under s. 139(4) of the IT Act. The assessee thereafter revised the said returns on 18th January, 1969 and 17th July, 1969, for the respective asst. yrs. 1964-65 and 1965-66 declaring total income at figures lower than those declared in the original returns. The AO completed the assessments on 15th January, 1990, for the asst. yr. 1964-65 and on 6th July, 1990, for the asst. yr. 1965-66. The Hon'ble Calcutta High Court in its judgment reported in Kumar Jagdish Chandra Sinha vs. CIT (supra) held the view that even in the case of a return filed under s. 139(4) a revised return was permissible and that, therefore, the assessment orders passed must be deemed to have been made within the period of limitation of one year from the date of the revised return as provided in the then s. 153(1)(c) which was pari materia with sub-cl. (b) of sub-s. (1) of s. 153. The Hon'ble Supreme Court held allowing the appeal of the assessee that no revised return can be filed under sub-s. (5) of s. 139 in a case where the return is filed under s. 139(4) and once this is so the revised returns filed by the assessee for both the assessment years were invalid in law and could not have been treated and acted upon as revised returns as contemplated by s. 139(5). Consequently provisions of s. 153(1)(c) was not attracted.
28. The Hon'ble Supreme Court in the aforesaid case approved the decisions in the following cases :
(i) O. P. Malhotra vs. CIT (1981) 129 ITR 379 (Del) case.
In this case the assessee filed a return on 30th March, 1965, for the asst. yr. 1960-61 disclosing an income of Rs. 1,720. On 28th March, 1966 the assessee filed another return declaring an income of Rs. 4,295. The AO made the assessment treating the revised return filed on 28th March, 1966, as invalid in law as the return filed on 30th March, 1965 had not been filed either under sub-s. (1) or under sub-s. (2) of s. 139 of the IT Act. The AAC held that the revised return was a valid return under s. 22(3) of the 1922 Act and set aside the assessment and directed the AO to complete the assessment afresh taking note of the revised return. The Tribunal held that in view of s. 297(2)(b) of the 1961 Act the assessment had to be completed under the 1961 Act and the return dt. 30th March, 1965, had been correctly treated as a return filed under s. 139(4) and the subsequent return could not be treated as a revised return under s. 139(5). The Tribunal further held that the AO acted illegally in ignoring the second return and therefore the order of assessment could not be cancelled. The Hon'ble High Court affirming the decision of the Tribunal held that s. 139(5) applies only in a case where the assessee having furnished a return under sub-s. (1) or sub-s. (2) discovered any omission or wrong statement therein. This sub-section does not refer sub-s. (4) and therefore, it does not entitle an assessee to rectify or revise a return filed under s. 139(4). The return filed on 30th March, 1965 being under s. 139(4) a revised return could not be filed under s. 139(5) on 28th March, 1966 and the same was invalid in law. The second return filed here is beyond the period of four years available under s. 139(4) for filing a return.
(ii) Dr. S. B. Bhargava vs. CIT (1982) 136 ITR 559 (All) In this case the assessee filed a return for the asst. yr. 1971-72, on 21st December, 1971, under s. 139(4) disclosing income at Rs. 9,525. Thereafter he filed a revised return on 23rd March, 1974, declaring an income at Rs. 11,225. The assessment was completed on 23rd January, 1975, at the total income of Rs. 30,130. The assessee challenged the assessment so made in appeal on the ground that it was barred by limitation as the original return was filed under s. 139(4) and the revised return filed subsequently did not extend the period for making the assessment beyond two years from the end of the assessment year involved. The assessment made was thus beyond time. The Hon'ble High Court held the view that the revised return being an invalid return cannot extend the period of limitation for completing the assessment.
(iii) Vimal Chand vs. CIT (1985) 155 ITR 593 (Raj) :
In this case the assessee filed a return on 11th March, 1974, declaring an income of Rs. 34,560 for the asst. yr. 1971-72 under s. 139(4) of the IT Act. The Hon'ble High Court held that extended time-limit of one year under s. 153(1)(c) for completing the assessment will not be available in respect of a revised return purported to have been filed under s. 139(5) where originally the return was filed under s. 139(4).
(iv) Eapen Joseph vs. CIT (1987) 168 ITR 26 (Ker) :
29. In this case the assessee filed a return on 10th May, 1974, for the asst. yr. 1972-73 under s. 139(4). The assessee filed a revised return on 11th March, 1975, and the assessment was completed on 6th March, 1976. The Hon'ble High Court held that return under s. 139(4) having been filed on 10th May, 1974, the subsequent return filed on 11th March, 1975, was invalid return and it could not extend the period of limitation contemplated by s. 153(1)(c) and accordingly the assessment made on 6th March, 1976, was held as illegal and without jurisdiction.
30. It would be seen from above that the aforecited decisions have been delivered in the context of limitation available under s. 153(1)(c) of the IT Act whereas the facts of the present case are different and distinguishable for the reason that the second return has also been filed within the period available under s. 139(4) and the assessment had been completed within the normal limitation period available of two years under s. 153(1)(a) and accordingly, in my considered view, the ratio of the abovecited decisions is not applicable to the facts of the present case.
31. Considering all the facts and ratio of decisions cited, I hold that the second return filed is not a valid return under s. 139(5) but it is considered to be valid under s. 139(4) filed in substitution of the original return and the notice issued under s. 143(2) based on the second return as a consequence is held to be valid. Thus, the assessment made is in conformity with the law and the same is upheld.
ORDER UNDER S. 255(4) OF THE IT ACT, 1961
32. Since we have difference of opinion on the following points emerging out of both the orders, the matter is referred to the Hon'ble President for reference to the Third Member :
33. Whether, on the facts and in the circumstances of the case the second return filed in substitution of the original return is valid within the meaning of s. 139(4) of the IT Act, 1961 ?
34. Whether, on the facts and in the circumstances of the case the notice issued under section 143(2) based on the second return is valid and assessment made in consequence thereof is in confirmity with law ?
M. K. CHATURVEDI, J.M. (THIRD MEMBER) :
35. This appeal came before me as a Third Member to express my opinion on the following questions :
Questions as framed by the learned A.M. :
"Whether, on the facts and in the circumstances of the case of the second return filed in substitution of the original return is valid within the meaning of s. 139(4) of the IT Act, 1961 ?"
"Whether, on the facts and in the circumstances of the case the notice issued under s. 143(2) based on the second return is valid and assessment made in consequence thereof is in conformity with law ?"
Questions as framed by the learned J.M. :
"Whether, in view of facts and circumstances of the case :
(a) second return filed as revised return subsequent to original belated return could still be treated as return under s. 139(4) of the IT Act and the same can be acted upon ?
(b) notice could be issued under s. 143(2) within time period allowed on the basis of such revised return and assessment completed thereafter on the basis of said notice could be held to be valid assessment ?"
I have heard the rival submissions in the light of material placed before me and precedents relied upon. Admittedly, the assessee filed belated return. Original return was filed on 31st August, 1994. In this return the assessee declared an income of Rs. 84,821. On 16th March, 1995, the assessee filed revised return. In this return the assessee declared the income of Rs. 2,20,116. Even in the assessment order, the AO referred this return as "Revised Return".
36. Shri Abhay Tayal, learned Departmental Representative vehemently argued that where the assessee who filed a return under s. 139(4), files another return, it is to be assumed that he has given a goodbye to the return filed previously. The return filed subsequently should be treated as correct and proper return. It would not be open to the assessee to contend later that the return filed subsequently was invalid.
37. Shri Anand Prakash, learned counsel for the assessee, submitted that a voluntary return furnished under s. 139(4) cannot be revised. Reference was made to the decision of the apex Court rendered in the case of Kumar Jagdish Chandra Sinha vs. CIT (1982) 137 ITR 722 (Cal). The learned counsel also explained the difference between the "revised return" and "corrected return". It was submitted that if an assessee after having filed a return under s. 139(4) files a corrected return, it is to be assumed that he has given goodbye to the return filed previously. But this rule will not apply if the assessee files a revised return. For filing the revised return, s. 139(5) prescribes the conditions precedent. Any return filed without fulfilling such conditions should be treated as non est return.
38. Prior to the authoritative pronouncement by the apex Court, there was a cleavage of judicial opinion on the subject-Whether a voluntary return furnished under s. 139(4) may be revised under the provisions of s. 139(5). One view was that no revised return is possible if the original return was filed under s. 139(4). The other view which was taken by the Calcutta High Court in the case of Kumar Jagdish Chandra Sinha vs. CIT (supra) was that s. 139(4) specifically gives the assessee a right to file a return at any time, within the period prescribed under s. 139(4), before the assessment is made. Therefore, where a voluntary return has been filed under s. 139(4), a revised return in respect of it may be filed. Hon'ble Supreme Court resolved the controversy in the case of Kumar Jagdish Chandra Sinha vs. CIT (supra). It was held that no revised return can be filed under s. 139(5) in a case where the return is filed under s. 139(4). In other words, a person who files a return under s. 139(4) is not entitled to file a revised return under s. 139(5). In taking this view the apex Court reversed the Calcutta High Court's decision in Kumar Jagdish Chandra Sinha vs. CIT case (supra) and has approved the view taken in O. P. Malhotra vs. CIT (1981) 129 ITR 379 (Del), Dr. S. B. Bhargava vs. CIT (1982) 136 ITR 559 (All), Vimal Chand vs. CIT (1985) 155 ITR 593 (Raj) and Eapen Joseph vs. CIT (1987) 168 ITR 26 (Ker). This decision of the apex Court was followed in the case of Suram Chand Ralhan vs. CIT (1997) 226 ITR 927 (Del) and in CIT vs. Smt. Jyoti Dhillon (1998) 231 ITR 102 (P&H).
39. Adverting to the facts of the present case, I find that the assessee filed the return under s. 139(4).
40. Subsequently, he did not file corrected return, but a revised return. The fact of filing the revised return was admitted by the AO in the assessment order. As such, the case of the assessee is squarely covered by the decision of the apex Court rendered in the case of Kumar Jagdish Chandra Sinha vs. CIT (supra). Respectfully following the decision of the Hon'ble Supreme Court, I am inclined to agree with the view taken by the learned Judicial Member, on this point.
41. Once it is decided that the return dt. 16th March, 1995, filed by the assessee was a non est return, the next question in regard to the issuance of notice under s. 143(2) becomes insignificant. However, I am inclined to agree on this aspect with the view taken by the learned judicial Member. In the ultimate analysis, I uphold the view taken by the learned Judicial Member.
42. The matter will now go before the Regular Bench for deciding the appeal in accordance with the opinion of the majority.