1989 (1) TMI 170 - AT - Income Tax

Summary

Issues:
1. Validity of assessment order based on unsigned and unverified return.
2. Jurisdiction of Commissioner under section 263 of the Income Tax Act.
3. Corrective actions required for an unsigned or unverified return.

Analysis:

Issue 1: Validity of assessment order based on unsigned and unverified return
The assessee, a private limited company engaged in manufacturing electrical wires, filed a return of income for the assessment year 1982-83 that was neither signed nor verified. The Income Tax Officer (ITO) completed the assessment based on this unsigned return, resulting in a net loss different from the one declared by the assessee. The Commissioner of Income-tax, under section 263, held that the assessment order was erroneous as the unsigned return was considered no return at all, annulling the assessment.

Issue 2: Jurisdiction of Commissioner under section 263
The Commissioner invoked his jurisdiction under section 263 of the Income Tax Act, determining that the assessment order was prejudicial to the interests of revenue due to the defective nature of the unsigned return. The Commissioner found that the ITO failed to exercise his jurisdiction under section 139(9) to rectify the defect in the return, leading to the conclusion that the assessment order was indeed erroneous.

Issue 3: Corrective actions required for an unsigned or unverified return
While upholding the Commissioner's decision regarding the erroneous assessment order, the Appellate Tribunal found that the Commissioner erred in annulling the assessment outright. Instead, the Tribunal held that the correct course of action would have been to set aside the assessment order and direct the ITO to provide the assessee with an opportunity to rectify the defect in the unsigned return as per section 139(9). Consequently, the Tribunal modified the Commissioner's order, instructing the ITO to complete the assessment afresh after allowing the assessee to rectify the defect in the return.

In conclusion, the appeal was partly allowed, emphasizing the importance of following the prescribed procedures under the Income Tax Act when dealing with unsigned or unverified returns to ensure a fair and accurate assessment process.