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TMI Blog2008 (11) TMI 144X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal being I.T.A.No.5983/M/97 and the cross-objections filed by the assessee being C.O. No.162/Mum/2009. The said appeal pertains to the assessment year 1989-90. 2. The above appeal was admitted by this Court on 27 August, 2004, on the following substantial question of law: "Whether, on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the notice u/s 143(2) of the Act was validly issued and further that the assessment made in pursuance thereto was valid in law?" 3. The relevant facts giving rise to the present appeal are briefly set out hereunder. (i) The appellant (assessee) is an investment company carrying on business of dealing in investments. The appellant had originally filed a return of income for assessment year 1989-90 before respondent No.1 on 29 December, 1989 declaring a loss of Rs.63,07,631. By a letter dated 16 March, 1990, addressed to the assessee, the A.O. stated that there were certain defects in the return and requested the assessee to correct the said defects within 15 days on receipt of the letter. Since this letter was received by the assessee on 22 March, 1990 the assessee was required to rectify th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h as the original return was a valid return having been filed within the period prescribed under section 139(1) of the I. T. Act. 2. On the facts and circumstances of the case and in law, the learned DCIT, Spl. Range 15 has failed to appreciate that the return of income filed on 19 April, 1990, declaring a loss of Rs.63,63,625 had duly rectified the defects mentioned in the letter of the ACIT, Circle 3(4) dated 16 March, 1990. 3. On the facts and circumstances of the case and in law, the learned DCIT, Spl. Range 15, has failed to take cognizance of letter dated 24 May, 1990 of the ACIT Circle 3(4) which in effect confirmed the fact that the extension of time was granted to the appellant to rectify the defects stated in the letter of the ACIT Cir. 3(4) dated 16 March, 1990. 4. Your appellant prays that the letter refusing rectification under sec.154 of the I.T. Act is not based on correct appreciation of facts and that the original return filed by the appellant on 29 December, 1989 is valid in law and ought to have been accepted by the DCIT, Spl. Range 15. Your appellant further prays that the DCIT, Spl. Range 15 may be directed to rectify the mistake apparent from record." ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of 12 months from the end of the month in which the return was furnished. In other words, the A.O. could have issued a notice under section 143(2) upto 31 December, 1990 whereas the notice was issued on 14 September, 1995 and was clearly time barred. It was submitted that this notice was illegal and invalid and, therefore, the order passed under section 143(3) as a consequence thereof is also illegal and invalid and liable to be quashed. CIT(A) by his order dated 21 July, 1997 recorded that he did not agree with the arguments of the A.O., that for determining the carry forward of loss, it was necessary to compute the income under section 143(3). He further observed that if any assessee files the return of income in time, which for one reason or the other, remains to be considered, then, loss shown in the return has to be accepted subject to rectification of mistake which is apparent from the record. The CIT(A), therefore, rejected the argument of the A.O. and held that time limit for issuing a notice under sec.143(2) had already elapsed and as such notice issued on 14 September, 1995 was invalid and bad in law. In view thereof the assessment order passed under sec. 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll state its finding or decision, with the reasons therefor, upon each separate issue, unless the finding upon any one or more of the issues is sufficient for the decision of the suit." 6. The Hon'ble Supreme Court has thereafter observed that under the said order (Order XX, Rule 5), a "finding" is, therefore, a decision on an issue framed in a suit. The second part of the rule shows that such a finding should be one which by its own force or in combination with findings on other issues should lead to the decision of the suit itself. That is to say, the finding shall be one which is necessary for the disposal of the suit. 7. The meaning of expression "finding" as considered by the Division Bench of Allahabad High Court in Pt.Hazari Lal Vs. Income Tax Officer, reported in [1960] 39 ITR 265, is set out hereunder (page 272): "The word "finding", interpreted in the sense indicated by us above, will only cover material questions which arise in a particular case for decision by the authority hearing the case or the appeal which, being necessary for passing the final order or giving the final decision in the appeal, has been the subject of controversy between the interested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled upon and was not required to decide upon any other issue. 10. In support of his above submission, the learned Counsel for the assessee also relied upon the decision of the Hon'ble Supreme Court in the case of Rajinder Nath Vs. Commissioner of Income Tax, reported in [1979] 120 ITR 124 wherein the interpretation given to the word "finding" by the Hon'ble Supreme Court in the case of ITO V. Murlidhar Bhagwan Das [1964] 52 ITR 335 has been reiterated and the Hon'ble Apex Court has emphasised on the fact that "To be a necessary finding, it must be directly involved in the disposal of the case." 11. In support of his above submission, the learned Counsel for the assessee has also relied on the Division Bench decision of the Calcutta High Court in Goombira Tea Co. P. Ltd. Vs. Income Tax Officer, reported in [1980] 125 ITR 260. In that case, the appellants therein were being assessed by Income-Tax Officer, A Ward, Karimgunj, Assam. The CBDT by its order dated 30 June, 1973 transferred the cases to the ITO, Central Circle XXXIII, Calcutta. Aggrieved by this order, the appellants moved the court under article 226 of the Constitution of India and obtained rules nisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O. under sec. 143(2) dated 14 September, 1995 and the assessment made under sec. 143(3) dated 31 October, 1995 are void abinitio and not valid. 13. The learned Counsel appearing for the Revenue submitted that since the CIT(A) has given his finding that the return is valid, the claim of loss was required to be adjudicated. He submitted that in view of such a finding the bar of limitation is lifted under sec. 153(3)(ii) of the I.T. Act and the A.O. was right in issuing notice under sec. 143(2) of the I.T. Act and passing the assessment order under sec. 143(3) of the I.T. Act, 1961. 14. The learned Counsel for the revenue relied on the decision of the Hon'ble Supreme Court in Daffadar Bhagat Singh and Sons Vs. Income Tax Officer, reported in [1969] 71 ITR 417. In that case the appellant-firm comprising of father and his two sons, filed a return for the assessment year 1952-53 on March 31, 1953 and also applied for registration under section 26A of the Income Tax Act, 1922. The Income-Tax Officer refused registration and passed an order of assessment on March 26, 1957 holding that the assessee constituted a Hindu undivided family. On August 11, 1959, the Appellate Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions cited before us. It is an admitted fact that the assessee had filed its return on 29 December, 1989. In view of certain defects in the return the assessee was called upon by the Revenue by its letter dated 16 March, 1990 to correct the said defects within a period of 15 days from the date of the said letter. The said letter was received on 22 March, 1990. The assessee rectified the defects within 27 days from the date of receipt of the said letter i.e. on 19 April, 1990 instead of 15 days as required in the notice dated 16 March, 1990. The Revenue obviously having lost sight of the fact that the assessee has already cleared the defects on 19 April, 1990, once again by a letter dated 29 May, 1990 called upon the assessee to clear the said defects. On 28 September, 1990, the Revenue informed the assessee that the return of the assessee had been ignored by the Revenue because the defects were not cleared within the prescribed period of 15 days from the receipt of the notice dated 16 March, 1990. The assessee filed the rectification application dated 8 January, 1992 stating that the original return was filed before the prescribed date for filing the return of income, namely, 31 D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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