1984 (12) TMI 152 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the return filed by the assessee without the signature of any partner.
2. Applicability of section 292B of the Income-tax Act, 1961, to rectify the omission of signing the return.
3. Whether the Commissioner was justified in invoking section 263 of the Income-tax Act, 1961, to treat the return as invalid and prejudicial to the interests of the revenue.

Issue-wise Detailed Analysis:

1. Validity of the Return Filed by the Assessee Without the Signature of Any Partner:
The assessee filed a return for the assessment year 1978-79 declaring a net loss of Rs. 3,00,720, which was unsigned by any of the competent partners. The Income Tax Officer (ITO) completed the assessment on 31-3-1981, determining the loss at Rs. 2,94,653. The Commissioner reviewed the case records and concluded that the assessment was based on an invalid return, thereby being erroneous and prejudicial to the interests of the revenue. The Commissioner issued a notice under section 263(1) to the assessee, asserting that the omission to sign the return rendered it invalid and not rectifiable under section 292B.

2. Applicability of Section 292B of the Income-tax Act, 1961, to Rectify the Omission of Signing the Return:
The assessee's counsel argued that the failure to sign the return was a rectifiable omission under section 292B, which states that no return shall be deemed invalid due to any mistake, defect, or omission if it conforms to the intent and purpose of the Act. The counsel emphasized that all accompanying documents, including the trading account, profit and loss account, balance sheet, and partners' accounts, were duly signed by the partners, indicating that the omission was a simple mistake. The counsel relied on various judicial precedents, such as All India Reporter Ltd. v. Ramchandra Dhondo Dalar and Kalu Ram Pannalal v. Jagannath Kalua, to support the argument that procedural defects like unsigned returns could be rectified.

3. Whether the Commissioner was Justified in Invoking Section 263 of the Income-tax Act, 1961, to Treat the Return as Invalid and Prejudicial to the Interests of the Revenue:
The Commissioner held that the ITO had no authority to treat an unsigned return as valid and that the omission was not rectifiable under section 292B. The Commissioner distinguished the case from the precedents cited by the assessee, noting that those cases dealt with verification of pleadings, not unsigned returns. The learned departmental representative supported the Commissioner's view, citing the Allahabad High Court's decision in Behari Lal Chatterji v. CIT, which held that an unsigned return is not a valid return and cannot be treated as incomplete but as non-existent.

Tribunal's Decision:
The Tribunal concluded that the omission to sign the return was a procedural defect curable under section 292B. It emphasized that all accompanying documents were signed by the partners, indicating that the omission was not deliberate. The Tribunal noted that section 292B was enacted to prevent such procedural lapses from invalidating returns. It distinguished the case from Behari Lal Chatterji, noting that the decision predated section 292B and did not consider whether such defects were curable. The Tribunal found that the Commissioner was not justified in invoking section 263 and quashed the Commissioner's order, allowing the appeal filed by the assessee.