2025 (3) TMI 1287 - HC - Income Tax

Return treated as non-est - delay in filing the return was not attributable to the appellant rather to the department as having supplied photocopies of the seized materials and books of accounts on 05.07.2004 seized on the date of search dated 04.09.2002 under Section 132 - HELD THAT - We are of the view that the Tribunal was not justified in treating the observation as nonest as a finding against the assessee and therefore when we peruse paragraph 8.3 of the impugned judgement we find force in the submission of Shri Goyal that the Tribunal has failed to examine the entire facts and circumstances of the case but has treated the finding of non-est as final and the consequence thereof appears to be that the assessee has been taxed twice i.e. in regular proceedings as well as those relating to block assessment for the relevant period. The Tribunal has itself held that delay in filing non-est return was not solely attributable to the assessee. The said observation has material bearing on the entire controversy involved as the financial implications of the result of proceedings of regular assessment vis-a-vis block assessment have to be examined in the entirety of the fact situation. Consequently we answer both the questions in the manner that the Tribunal s finding treating the ITR under Section 139(1) for the Assessment Year 2002-2003 filed on 01.09.2004 as non-est is erroneous and the effect of search conducted on 04.09.2002 before the due date i.e. 31.10.2002 release of material in favour of the assessee on 05.07.2004 filing of return thereafter on 01.09.2004 and its financial consequences were liable to be considered on their own merits and not based upon the observation of non-est made by this Court in the order dated 16.05.2014. Appeal allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal questions considered in this judgment were:

(i) Whether the return for the Assessment Year (A.Y.) 2002-03 filed on 01.09.2004 was non-est, given that the delay in filing was attributed to the Department due to the late provision of photocopies of seized materials and books of accounts.

(ii) Whether the Income Tax Appellate Tribunal (ITAT) was correct in allowing relief for A.Y. 2002-03 to the extent of the advance tax paid, despite the regularization of the return by the Assessing Officer under Sections 143/148 and the imposition of interest under Sections 234A, 234B, and 234C.

ISSUE-WISE DETAILED ANALYSIS

Issue (i): Non-est Status of the Return

- Relevant legal framework and precedents: The case revolves around the interpretation of Section 139 of the Income Tax Act, 1961, concerning the filing of returns, and the implications of the search and seizure operations under Section 132.

- Court's interpretation and reasoning: The Court noted that the ITAT treated the return filed on 01.09.2004 as non-est based on a previous High Court observation. However, the Court clarified that this observation was not a conclusive finding but rather an obiter dictum. The Court emphasized the need to consider the circumstances leading to the delay, particularly the Department's role in providing the seized materials late.

- Key evidence and findings: The search was conducted on 04.09.2002, prior to the due date for filing the return (31.10.2002). The Department provided the seized materials to the assessee on 05.07.2004, leading to the filing of the return on 01.09.2004.

- Application of law to facts: The Court determined that the delay in filing the return was not solely attributable to the assessee, as the materials necessary for filing were provided late by the Department. The Court found that the ITAT's reliance on the non-est status was erroneous and required a fresh examination of the facts.

- Treatment of competing arguments: The Department argued that the assessee was non-cooperative and delayed the inspection process. However, the Court found that the delay in providing the materials was significant and impacted the assessee's ability to file the return timely.

- Conclusions: The Court concluded that the ITAT's finding of the return as non-est was incorrect and required reconsideration of the entire case on its merits.

Issue (ii): Relief for Advance Tax and Interest Imposition

- Relevant legal framework and precedents: The assessment of interest under Sections 234A, 234B, and 234C was contested, alongside the relief granted for advance tax paid.

- Court's interpretation and reasoning: The Court noted that the ITAT allowed relief for the advance tax paid but did not fully consider the implications of the non-est finding on the interest imposition.

- Key evidence and findings: The Assessing Officer had regularized the return under Sections 143/148 and imposed interest totaling Rs. 16,50,147/-. The ITAT's decision to allow relief for the advance tax paid was not fully aligned with the overall assessment of the case.

- Application of law to facts: The Court found that the ITAT's decision was based on an incomplete assessment of the facts, particularly the implications of the search and the subsequent filing of the return.

- Treatment of competing arguments: The Department maintained that the interest imposition was justified due to the delayed filing, while the assessee argued that the delay was beyond their control.

- Conclusions: The Court determined that the ITAT needed to reassess the case, considering the interplay of regular and block assessment proceedings and the implications of the delayed filing.

SIGNIFICANT HOLDINGS

- Core principles established: The Court emphasized that observations made in prior judgments should not be treated as conclusive findings unless explicitly stated. The interplay between regular assessment and block assessment proceedings must be carefully considered, especially when delays are caused by the Department.

- Final determinations on each issue: The Court set aside the ITAT's order and remanded the matter for fresh consideration, directing the ITAT to examine the case on its merits, without relying on the prior non-est finding.

- Verbatim quotes of crucial legal reasoning: The Court stated, "The Tribunal was not justified in treating the observation as 'nonest' as a finding against the assessee... the Tribunal has failed to examine the entire facts and circumstances of the case but has treated the finding of 'non-est' as final."

The appeal was allowed, and the ITAT was instructed to provide a fresh determination, considering the full context and ensuring a fair opportunity for the parties to present their case.