1983 (3) TMI 123 - AT - Income Tax

Summary

Issues Involved:
1. Whether a return filed under section 139(4) of the Income-tax Act, 1961 can be treated as a return filed under section 139(1) or 139(2) and can be revised under section 139(5).
2. Whether the Income-tax Department can avail the benefit of the extension of the time limit provided for completion of the assessment proceedings as per section 153(c) of the Income-tax Act, 1961.
3. Whether the extended period of limitation under section 153(1)(b) applies in cases attracting penalty under section 271(1)(c).

Issue-wise Detailed Analysis:

1. Whether a return filed under section 139(4) can be treated as a return filed under section 139(1) or 139(2) and can be revised under section 139(5):

The assessee, a partnership firm, did not file the return within the time prescribed under section 139(1) or 139(2). Instead, it filed a return under section 139(4) on 20-1-1973 and a purported revised return on 15-1-1974. The ITO made an ex parte assessment under section 144 estimating the income at Rs. 30,000. The AAC canceled the assessment, holding that the return filed on 15-1-1974 was invalid and the assessment was barred by limitation. The revenue appealed, arguing that a return under section 139(4) can be revised under section 139(5). The Tribunal, after extensive arguments, concluded that a return filed under section 139(4) cannot be revised under section 139(5). The Tribunal emphasized that section 139(5) specifically mentions returns under sub-sections (1) and (2) but not under sub-section (4), indicating a legislative intent to treat returns under section 139(4) as a separate category. The Tribunal also noted that the legislative scheme maintains distinct categories of returns under section 139, and a return under section 139(4) cannot be treated as one under section 139(1) or (2).

2. Whether the Income-tax Department can avail the benefit of the extension of the time limit provided for completion of the assessment proceedings as per section 153(c):

The Tribunal examined the provisions of section 153 and noted that the ordinary period of limitation is extended by one year for returns filed under section 139(4). However, the Tribunal held that a return filed under section 139(4) cannot be revised under section 139(5) to extend the period of limitation for making the assessment. The Tribunal referred to the decisions of the Calcutta High Court, which allowed the revision of returns under section 139(4), but distinguished these decisions based on the facts and the specific language of section 139(5). The Tribunal also considered the decisions of the Delhi and Allahabad High Courts, which held that returns under section 139(4) cannot be revised under section 139(5). The Tribunal found the reasoning of the Delhi and Allahabad High Courts more persuasive and concluded that the extended period of limitation under section 153(1)(c) does not apply to revised returns under section 139(5) when the original return was filed under section 139(4).

3. Whether the extended period of limitation under section 153(1)(b) applies in cases attracting penalty under section 271(1)(c):

The Tribunal considered the argument that the assessee's case falls under section 153(1)(b) due to the potential levy of penalty under section 271(1)(c). The Tribunal noted that there was no clear finding by the ITO that the case attracted penalty under section 271(1)(c). The mere issuance of a notice under section 271(1)(c) without a finding that the facts justify the levy of penalty does not extend the period of limitation. The Tribunal referred to the decisions of the Allahabad High Court, which emphasized that the extended period of limitation cannot be applied merely on the possibility of penalty. The Tribunal also considered the Explanation to section 271(1)(c) and concluded that it could not be invoked in this case, as the notice to show cause was issued before the income was computed. The Tribunal found that the facts did not justify the application of section 271(1)(c) or its Explanation, as the assessment was based on an estimate without positive material indicating concealment of income.

Conclusion:

The Tribunal held that a return filed under section 139(4) cannot be revised under section 139(5) to extend the period of limitation for making the assessment. The assessment made on 24-7-1974 was beyond the prescribed period and was consequently annulled. The appeal filed by the revenue was dismissed.