1995 (10) TMI 67 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the return filed by the assessee.
2. Legality of the notice issued under section 148 of the Income-tax Act, 1961.
3. Opportunity to rectify the defect in the return.
4. Applicability of section 292B of the Income-tax Act, 1961.
5. Procedural compliance under the Income-tax Act and the Code of Civil Procedure (CPC).

Comprehensive, Issue-Wise Detailed Analysis:

1. Validity of the Return Filed by the Assessee:
The primary issue was whether the return filed on 10-9-1985, signed by Sri J.D. Ong in his capacity as Chairman and Chief Executive Officer, was valid under section 140(c) of the Income-tax Act, 1961. The Assessing Officer (AO) deemed the return invalid because it was not signed by a Managing Director or Director as required. The Tribunal held that the defect in the signature was a curable defect and did not invalidate the return. The Tribunal relied on various judicial precedents, including the Calcutta High Court's decisions, which stated that procedural defects in signatures are curable and do not render documents invalid.

2. Legality of the Notice Issued Under Section 148 of the Income-tax Act, 1961:
The AO issued a notice under section 148 to re-open the assessment, treating the original return as invalid. The Tribunal concluded that if the original return was valid, the notice under section 148 would be without jurisdiction. Since the defect in the signature was curable, the original return was deemed valid, making the notice under section 148 invalid. Consequently, the assessment made on 23-1-1989 was also held invalid.

3. Opportunity to Rectify the Defect in the Return:
The assessee contended that they were not given an opportunity to rectify the defect in the signature as per the proviso to section 139(9) of the Act. The Tribunal noted that the AO's letter dated 9-11-1987 did not offer an opportunity to rectify the defect but instead concluded the return was invalid and issued a notice under section 148. The Tribunal emphasized that procedural defects should be allowed to be rectified and that the AO should have given the assessee a chance to correct the signature defect.

4. Applicability of Section 292B of the Income-tax Act, 1961:
Section 292B states that no return shall be invalid merely due to any mistake, defect, or omission if it is in substance and effect in conformity with the Act. The Tribunal found that the return signed by Mr. Ong, who was the Chairman of the Board, was in substance and effect in conformity with the Act. Therefore, the return was not invalid under section 292B, supporting the view that the defect in the signature was curable.

5. Procedural Compliance Under the Income-tax Act and the Code of Civil Procedure (CPC):
The Tribunal referred to Order VI, Rule 14 of the CPC, which deals with signing pleadings and has been held to be a procedural provision. Defects in signatures are curable at any stage by amendment. The Tribunal applied this principle to the Income-tax Act, emphasizing that similar procedural rules should apply to tax matters. The Tribunal also cited various judicial precedents to support the view that defects in signatures are curable and do not invalidate documents.

Conclusion:
The Tribunal held that the return filed by the assessee on 10-9-1985 was not invalid but only defective, and the defect was curable. The AO should have given the assessee an opportunity to rectify the defect. Consequently, the notice issued under section 148 was without jurisdiction, and the assessment made on 23-1-1989 was invalid. The assessee's appeal was allowed.