2003 (3) TMI 8 - HC - Income Tax

Whether the authorities under the Income-tax Act, 1961, were justified in treating the revised return for the AY 1991-92 and the original return for the year 1992-93 as invalid u/s 139(9) - Tribunal has held that even though the return is held to be invalid, the assessee is not debarred from furnishing any evidence in support of any claim though not made in the original return. - We set aside the intimation of the Assessing Officer dated March 30, 1993, treating the return filed by the petitioner on December 30, 1992, for the AY 1992-93 as an invalid return - Action or rather, inaction on the part of the Assessing Officer in treating the return filed by the petitioner as invalid and then not finalising the assessment because there is no taxable income, is wholly improper and contrary to the scheme of taxation law. - Whether there is income or loss, the Assessing Officer is bound to finalise the assessment for the assessment year in which the return filed by the assessee is treated as an invalid return. Not to do so would be travesty of justice. - Accordingly, the petition is allowed.

Summary

Issues Involved:
1. Validity of the revised return for the assessment year 1991-92 and the original return for the year 1992-93 under section 139(9) of the Income-tax Act, 1961.
2. Maintainability of appeal against an intimation under section 139(9) of the Income-tax Act.
3. Interpretation of clause (e) of the Explanation to section 139(9) of the Income-tax Act.

Detailed Analysis:

1. Validity of the Revised Return for the Assessment Year 1991-92:
The court noted that the petitioner had already pursued the appellate remedy for the assessment year 1991-92. The Tribunal had held that even if the return is invalid, the assessee is not barred from furnishing evidence in support of any claim not made in the original return. Therefore, the controversy for this year was resolved, and the petitioner was allowed to continue with the appellate process.

2. Validity of the Original Return for the Assessment Year 1992-93:
The petitioner filed the return for the assessment year 1992-93 on December 30, 1992, declaring a loss and annexing the audited profit and loss account, balance sheet, and the auditor's report. The Assessing Officer issued a notice under section 139(9) on February 11, 1993, citing defects due to material differences identified in a special audit report. The petitioner responded, justifying the discrepancies and stating that rectifications were made in the accounts for the subsequent year. Despite this, the Assessing Officer treated the return as invalid on March 30, 1993.

3. Maintainability of Appeal Against Intimation Under Section 139(9):
The Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal both dismissed the appeal, stating that section 139(9) did not contemplate the passing of any order and hence, no appeal was maintainable. The Tribunal also noted that if defects are not removed, the return becomes non est by operation of law.

4. Interpretation of Clause (e) of the Explanation to Section 139(9):
The court examined whether the return filed by the petitioner contained defects as per clause (e) of the Explanation to section 139(9). Clause (e) requires the return to be accompanied by copies of the audited profit and loss account, balance sheet, and auditor's report. The court found that the petitioner had complied with this requirement. The court emphasized that discrepancies between the computation of income and the audited profit and loss account do not constitute defects under clause (e). The court cited examples where accounting practices and tax computations may differ, such as deferred revenue expenditure and capitalized interest.

Judgment:
The court concluded that the Assessing Officer erred in treating the return as invalid based on discrepancies in the income computation. It was held that there was no defect as per clause (e) of the Explanation to section 139(9). Consequently, the court set aside the intimation dated March 30, 1993, and directed the Assessing Officer to finalize the assessment for the assessment year 1992-93 within three months.

Additional Observations:
The court criticized the Assessing Officer's inaction in not finalizing the assessment despite issuing a notice under section 143(2). The court emphasized that the assessment must be finalized regardless of whether there is taxable income or a loss.

Conclusion:
The petition was allowed, and the rule was made absolute. The court directed the Assessing Officer to finalize the assessment for the assessment year 1992-93 based on the return filed by the petitioner on December 30, 1992. There was no order as to costs.