2009 (1) TMI 301 - AT - Income Tax

Validity of Return Of Income - claim for benefit of carry forward of short-term capital loss - revised return or not - due date for filing return u/s 139(1) - purchase and sale of shares in the form of Contract notes - business of trading in shares by the four cells/units - Application of section 292B - difference of opinion between learned members - Third Member Order - R.S. Syal, Accountant Member - HELD THAT - It is not the case here as the authorities below have not controverted the fact that these four sub-divisions represent the assessee-company as a whole and only one assessment is called for in the name of the assessee-company. Now when four returns were filed in respect of the assessee's income, which are otherwise valid and complete, in our considered opinion, the assessee has complied with the intent and purpose of this Act, which is to assess the total income correctly. When that is the position, the provisions of section 292B get fully attracted and the assessee's case cannot be shunted out simply on the ground that subsequently one return combining the figures of the four divisions was separately filed. We, therefore, hold that the four returns filed on October 30, 2001, are valid returns u/s 139(1) read with section 292B. In view of our conclusion in the foregoing paragraph that the original returns filed by the four sub-divisions are valid returns within the meaning of section 139(1) read with section 292B, there cannot be any question of treating the subsequent single return as original return. In the peculiar circumstances prevailing in this case, the return can also not be characterized as a revised return u/s 139(5) for the reason that there was neither any omission nor any wrong statement in the original returns filed by the assessee, which are pre-requisite conditions for filing a revised return. The substituted return consolidated the same information and particulars which were given earlier in the separate returns and there is no deviation, worth the name, in any of the particulars of the income or otherwise, which could bring it within the purview of revised return . In fact the subsequent return is nothing but a consolidating return. This later return would not have the effect of effacing but supplementing the original returns and hence would relate back to the date when four returns were filed. Thus, the natural corollary that follows is that the benefit of carry forward of loss cannot be denied to the assessee as the returns filed before the due date will be considered as returns of loss u/s 139(3) furnished within the time allowed u/s 139(1). In the result, the appeal is allowed. K. C. Singhal Vice-President - It is held that the returns filed by the cells/units in their own names cannot be treated as valid returns u/s 139(1) and therefore question of filing any return u/s 139(5) did not arise. The Assessing Officer was therefore justified in considering the revised return filed by the assessee as original return u/s 139(1) read with section 139(4) of the Act and consequently, the said return cannot be treated as return u/s 139(3) as the said return was not filed within the time allowed u/s 139(1) of the Act. The contention of the assessee's counsel that the revised return filed by the assessee is return u/s 139(4) and therefore be considered as return u/s 139(1) in view of certain judgments cannot be accepted for the reasons that for claiming carry forward of losses the return must be filed within the time prescribed u/s 139(1). Since the return was filed after the time prescribed u/s 139(1), the assessee was not entitled to carry forward the loss for set off in the subsequent years. In the result, the appeal of the assessee is dismissed. Vimal Gandhi, President, (As a Third Member) - I am inclined to hold that four cells of the assessee, by filing four returns, in which total loss claimed by the assessee was disclosed, did comply in substance and in effect with the intent and purpose of the Act. All the relevant and correct information in the prescribed time was given so that the assessment could be made after proper scrutiny. Their Lordships of the Supreme Court in the case of CIT v. Kulu Valley Transport Co. P. Ltd. 1970 (4) TMI 14 - SUPREME COURT had held that even if loss is claimed in the revised return, the same should also be considered and allowed. To override the above decision statutory changes were made with effect from April 1, 1989 in section 80. The statute now insists on filing return of loss within the time prescribed u/s 139(1) of the Act for reasons already discussed. In the present case, no doubt there was a defect and a bona fide mistake in filing four returns instead of one. But the above defect is not material in the light of the provisions of section 292B. When total information needed by the Revenue in the return was fully furnished the returns in substance and in effect conformed to the requirement of the provision. In other words, the effect of four returns taken together was really the same as would have been the case if only one return was filed by the assessee. It is nobody's case that any prejudice was caused to the Revenue because of the above defect and mistake. It is merely technical that instead of the assessee-company, the returns were filed by four cells, in this case. In my opinion, the Revenue authorities, in holding that the return was not filed by the company, has not given effect to the provision of section 292B. As noted by their Lordships of the Bombay High Court, from the decision of the Supreme Court in the case of State Bank of Patiala 1996 (3) TMI 526 - SUPREME COURT the conduct of the subject must be borne in mind while examining a complaint of non-observance of procedural rules . It has already been noted how four returns of loss were bona fidely filed and on discovery of the mistake, the assessee filed a consolidated return, in which figures of four different returns were consolidated and the figure of total loss was shown. In such a situation, it is not correct to hold that returns filed earlier were invalid, ineffective and of no legal consequences. This revised return would in such circumstances relates back to the date of filing of the original return. The said return has to be taken along and considered with the original four returns, which contained complete information for making assessment. The technical mistake in the four returns stood removed on filing of the consolidated return. To ignore date of four returns is to ignore the provision of section 292B of the Act. In my considered opinion, the Revenue authorities and the learned Vice-President took a very narrow view of the statutory provisions of section 292B and thus defeated the very purpose of the provision. It could only advance injustice on account of a technical default. Whereas the provisions of section 292B aims to prevent such injustice. The learned AM, in my considered opinion, has taken right view of the matter. I therefore agree with him and answer the question in the affirmative. In conformity with the opinion of the majority of the Members of the Income Tax Appellate Tribunal who have heard this case and for the reasons cited in the order, we adjudicate the issue apropos the point of difference in favour of the assessee. In the result, the appeal is allowed.

Summary

Issues Involved:
1. Validity of returns filed by four cells/sub-divisions of the assessee-company under section 139(1).
2. Whether the return filed by the assessee on October 29, 2002, can be considered as a revised return under section 139(5).
3. Entitlement of the assessee to carry forward the loss declared in the so-called revised return.

Summary:

Issue 1: Validity of Returns Filed by Four Cells/Sub-Divisions
The assessee, a company incorporated in Mauritius, filed separate returns for its four sub-divisions within the time prescribed u/s 139(1). The Assessing Officer deemed these returns invalid, stating that the sub-divisions were not distinct entities eligible to file returns. The assessee argued that these returns were valid under section 292B, which allows for returns to be considered valid despite defects if they conform to the intent and purpose of the Act. The Tribunal, considering the substance and effect of the returns, held that the four returns collectively represented the total income of the assessee-company and complied with the intent of the Act, thus validating them under section 292B.

Issue 2: Nature of the Return Filed on October 29, 2002
The return filed by the assessee on October 29, 2002, was treated by the Revenue as an original but belated return. The Tribunal noted that this return merely consolidated the information from the four sub-division returns without any material deviation. It was held that this return supplemented rather than replaced the original returns, thus relating back to the original filing date. Therefore, it could not be characterized as a revised return under section 139(5) since there was no "omission" or "wrong statement" in the original returns.

Issue 3: Entitlement to Carry Forward the Loss
The Tribunal concluded that the assessee was entitled to carry forward the loss as the four returns filed before the due date were valid returns under section 139(1) read with section 292B. The subsequent consolidated return did not invalidate the original returns. Consequently, the loss declared by the assessee was determined in pursuance of a return filed in accordance with section 139(3), allowing the assessee to carry forward such losses for setting off in subsequent years.

Separate Judgment by Vice-President:
Vice-President K.C. Singhal disagreed with the majority view, holding that the returns filed by the sub-divisions were invalid as they were not "persons" under section 2(31) and that the return filed on October 29, 2002, was an original but belated return. He concluded that the assessee was not entitled to carry forward the loss as the return was not filed within the time prescribed under section 139(1).

Final Order:
In conformity with the majority opinion, the Tribunal adjudicated in favor of the assessee, allowing the appeal and permitting the carry forward of the loss.