9911796707
TMI Blog1998 (8) TMI 70X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act and (ii) that it is not signed by the managing director of the company and the same was returned on January 24, 1995, to the petitioner for curing the defects. On February 20, 1995, the petitioner thereupon sent a fresh copy of the return filed on November 28, 1994, verified and signed by its managing director on February 15, 1995, with a covering letter in which it was explained that the audit under section 44AB of the Act could be finalised only after the statutory audit mandated by section 619 of the Companies Act is done by the auditors to be appointed by the Central Government and that the Central Government had not yet appointed any one for the said purpose. The petitioner requested for some more time for filing the tax audit report under section 44AB of the Act and the audited statement of accounts. The second respondent sent a communication dated October 17, 1995, with reference to the earlier communication dated January 24, 1995, wherein it is stated that the defects pointed out still remained uncured and that the return already filed will be treated as an invalid one. Then the petitioner sent a petition dated October 30, 1995, requesting for some more time to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 148 of the Act asking the petitioner to file its return of income for the year 1994-95. In this original petition, the petitioner has sought for a direction or order quashing exhibits P-11 and P-13 orders issued by the second respondent and exhibit P-15 order issued by the first respondent. The petitioner has also sought for a declaration that the notice exhibit P-16 issued by the second respondent is illegal and without jurisdiction. The petitioner has further sought for a direction to the second respondent to accept the return filed on February 20, 1995, as revised by exhibit P-10 filed by it and to complete the assessment on its basis. A counter affidavit is filed by the first respondent. It is stated therein that for the assessment year 1994-95, the petitioner filed a return on November 28, 1994, declaring a total income of Rs. 58,000 after setting off brought forward loss of Rs. 48,42,000 signed by the secretary-cum-finance manager, and that on verification of the said return certain defects were noted and a memo as envisaged by section 139(9) was issued to the petitioner. It is admitted that the petitioner filed a return signed by the managing director and requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also cannot be relied on to help the case of the assessee, since that decision was rendered in the circumstance in which when the statute conferred specific power to the Assessing Officer to condone the delay in filing the return of income." Learned counsel appearing for the petitioner submitted that the assessee had filed its return for the assessment year 1994-95 before the due date on November 28, 1994, and that pursuant to the defect memo the first defect was cured by affixing the signature of the managing director in the return and also requested for time for rectifying the other defect by explaining the circumstances on February 20, 1995. He submitted that though the assessee requested for time up to May 31, 1996, for filing the audit report, it could file the return along with all necessary documents including the audit report only on September 25, 1996, with a covering letter. Counsel submitted that the second respondent has got power under section 139(9) of the Act to condone the delay in curing the defect and that in fact the petitioner has sought for the same in the covering letter accompanying the revised return filed on September 25, 1996. He in support of his conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pulated in section 139(1), 139(4) or 139(5) and if the defects pointed out are not cured within the time fixed or allowed, original return will be invalid. He submitted that the petitioner did not cure the defects within the time allowed and, therefore, the returns are invalid. Counsel alternatively submitted that the court may not declare the return valid and if, for any reason, court feels that the matter requires reconsideration the Assessing Officer may be directed to consider the return without the two defects or as if the two defects have been cured. I have considered the rival submissions. In order to decide the controversy it is necessary to refer to the relevant provisions regarding the filing of returns as it obtained in the assessment year in question. Section 139 of the Act as it stood then with the relevant clauses, reads as follows : "139. Return of income.---(1) Every person, if his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax, shall, on or before the due date, furnish a return of his income or the income of such o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chever is earlier :... (9) Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return : Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return. Explanation.---For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely :--- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income furnished by the assessee is defective he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period, which the Assessing Officer may, in his discretion, allow, if a petition is filed therefor in that regard. It also provides that if the defect is not rectified within the period mentioned above, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return. The proviso to sub-section (9) gives power to the Assessing Officer to condone the delay and treat the return as a valid one, if the assessee rectifies the defect after the expiry of the time allowed, but before the assessment is made. The Explanation to the said sub-section states that for the purposes of this sub-section, a return of income shall be regarded as defective unless all the conditions provided therein are fulfilled. It is relevant to note that clause (bb) of the said Explanation specifies one of the defects. The defect is non-ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the primary objective of carrying on activities which provide employment to and the upliftment of thousands of the weaker sections of traditional and tribal bamboo cutters and weavers scattered throughout the State of Kerala. The statutory auditors of the company are to be appointed by the Central Government as provided under section 619(2) of the Companies Act, 1956. The Central Government appointed the auditors only by their order dated September 25, 1995, and received by the petitioner only on October 16, 1995. The petitioner immediately thereafter contacted the auditors, as is evident from exhibit P-5 communication and requested for expediting the audit. For reasons beyond their control, the audit reports could be obtained from the statutory auditors only on April 9, 1996 and April 10, 1996. The said reports were approved by the board of directors and thereafter the petitioner wrote to the auditors requesting for completing the tax audit to enable it to file its return for the year 1994-95 before May 31, 1996. It so happened that the petitioner could get the report from its auditors only on September 24, 1996, and on the very next day it filed the return with all necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... visional return. The case of the respondents is that though the petitioner had filed the return on November 28, 1994, and cured one of the defects by filing another return on February 20, 1995, the petitioner did not cure the other defect within the time allowed by the second respondent, i.e., on or before February 28, 1996. Their case is that by virtue of the provisions of sub-section (9) of section 139 of the Act, the return originally filed has become invalid and it has been so declared by the second respondent in the communications dated October 17, 1995 (exhibit P-4), and September 30, 1996 (exhibit P-11), and further on November 1, 1996 (exhibit P-13). The further case is that a return which has been declared as invalid cannot be resurrected by the subsequent event of filing a revised return. In this context, it has to be noted that the defects in the original return were pointed out by the second respondent in the communication dated January 24, 1995, and without noticing the reply submitted by the petitioner, he issued communication dated October 17, 1995, stating that the petitioner did not cure the defects and, therefore, he has to treat the return as an invalid one. Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etition as one for condoning the delay in curing the defects. The first respondent-Commissioner of Income-tax in revision conceded that the Assessing Officer has power to condone the delay, but stated that the assessee has not made any application for condonation of delay beyond February 28, 1996. It must be noted in this context that the second respondent in the communication dated November 1, 1996, had clearly admitted that the petitioner applied for extension of time till May 31, 1996. Further, this is admitted in the counter affidavit filed by the first respondent also. From the above it is clear that the statement of the first respondent that the petitioner did not make an application for time beyond February 28, 1996, is factually incorrect. The first respondent further noted that there is substantial variation in respect of the figures furnished in the return dated November 28, 1994, and in the return filed on September 25, 1996, and, therefore, it cannot be said that the defect in not filing the audit report was a minor one or an immaterial one. The first respondent considered the matter further in the light of sub-sections (4) and (5) of section 139 and observed that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condone the delay and treat the return as a valid return. From the above it is amply clear that the question of treating a defective return as invalid and visiting the assessee with consequences of not filing the return will arise only after the assessment for the year for which the defective return is filed is completed or after the time for completion of the assessment is over. This is for the reason that if the assessee files the return curing the defect at any time before the said date the assessing authority has got the power to condone the delay and to treat the return as valid. If this is the true legal position it has to be held that there is no merit in the contention raised by counsel for the respondent. The decision of the Calcutta High Court in National Insurance Co. Ltd. v. CIT [1995] 213 ITR 862, relied on by counsel does not support the stand taken by the Revenue. The court in that case noted the distinction between a defective return and an invalid return and observed that a defective return is not ipso facto to be regarded as an "invalid return". It was also observed that it is only when a return contains any of the specified defects and the officer intimates the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. The second respondent has no case that any assessment was made for the year 1994-95 in respect of the assessee either before or after the filing of the revised return on September 25, 1996. The time for completion of the assessment for the year 1994-95 expires only on March 31, 1997, i.e., on the expiry of two years from the end of the assessment year in which the income was first assessable only on March 31, 1996, i.e., one year from the end of the financial year which relates to the assessment year (sic). In this case the revised return or the correct return was filed on September 25, 1996, and, therefore, there was time till March 31, 1998 to complete the assessment. Therefore, it is clear that on the date when the petitioner had submitted the return along with all the required documents on September 25, 1996, the assessment of the petitioner for the year 1994-95 was pending. The proviso to sub-section (9) of section 139 does not in terms say that the application for condonation of delay and for treating the return as a valid return is required to be made. However, reading the main provisions of sub-section (9), it would appear that the power to extend the time for curin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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