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income-tax Officer Vs. Bohra Film Finance - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Jaipur
Decided On
Judge
Reported in(1983)4ITD247(JP.)
Appellantincome-tax Officer
RespondentBohra Film Finance
Excerpt:
1. this appeal has been placed before a special bench by the president for deciding the following question: 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) so as to entitled the income-tax department to avail the benefit of extension of time limit provided for completion of the assessment proceedings as per section 153(c) of the income-tax act, 1961 a few facts will have to be mentioned before dealing with the question.the assessee is a partnership firm carrying on business of financing and distribution of films. the accounting year of the assessee ended on 31-3-1970. the due date of filing the return of income by the firm was 31-7-1970. the assessee did not.....
Judgment:
1. This appeal has been placed before a Special Bench by the President for deciding the following question: 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) so as to entitled the Income-tax Department to avail the benefit of extension of time limit provided for completion of the assessment proceedings as per Section 153(c) of the Income-tax Act, 1961 A few facts will have to be mentioned before dealing with the question.

The assessee is a partnership firm carrying on business of financing and distribution of films. The accounting year of the assessee ended on 31-3-1970. The due date of filing the return of income by the firm was 31-7-1970. The assessee did not file the return in accordance with the provisions of Section 139(1) of the Income-tax Act, 1961 (the Act). The ITO issued notice under Section 139(2) on 6-11-1970 (received by the assessee on 11-12-1970), but the return was not filed within the time prescribed under Section 139(2). However, the assessee filed return of its income on 20-1-1973 declaring a loss of Rs. 27. On 26-2-1973, a sort of duplicate return was filed. It appears the two returns were filed before two different ITOs, because there was some doubt about the jurisdiction of the assessing officer. On 15-1-1974, the assessee filed another return purporting to be a revised return wherein it declared a profit of Rs. 306. The ITO issued notices both under Sections 141(1) and 143(2) of the Act, and, here we are not concerned with the details of such notices. According to the ITO, the assessee did not comply with the requisitions issued by him and, therefore, the ITO proceeded to make an ex parte assessment under Section 144 of the Act. In the absence of any other material, the ITO estimated the assessee's total income at Rs. 30,000. This is what the ITO stated in his order: Having regard to the income receipts of this year at nearly Rs. 72,000 for this year, the past history and the fact that in the absence of B/S and A/c books nothing can be said as to some of income either not being disclosed or some bogus loans being there, I estimate the net income for this year at Rs. 30,000.

2. The assessee carried the matter in appeal to the AAC. Among the other grievances, the assessee raised a ground that the assessment was barred by limitation, inasmuch as, the return filed on 15-1-1974, is invalid. To elucidate the matter, the assessee stated before the AAC that since the assessee filed a return under Section 139(4) pointing out the return filed on 20-1-1973, and the duplicate on 26-2-1973, there was no scope for filing a revised return within the meaning of Section 139(5) on 15-7-1974. Consequently, it was argued that the limitation for completing the assessment expired by 31-3-1973 and the extended period of limitation provided under Section 153(1) of the Act cannot be availed of by the revenue. This argument found favour with the AAC. The result was that the assessment was cancelled by the AAC.3. The revenue being aggrieved by the order of the AAC filed the appeal before the Tribunal and the sole ground taken up before the Tribunal is: The Appellate Assistant Commissioner of Income-tax has erred in cancelling the order passed by the ITO under Section 144 of the Income-tax Act, 1961.

4. In view of the importance of the matter, wide publicity was given.

Some assessees intervened in the matter through their counsels. The assessee's counsel Mr. Kothari and lawyers for the interveners Mr. O.P. Vaish and Mr. M. S. Syali have also been heard. On behalf of the revenue, the learned senior departmental representative Shri Koolwal argued.

5. Mr. Koolwal at the outset stated that the question can be answered with reference to the scheme of the Act and especially Sections 139,143, 144, 153 and 271(1)(a). According to Mr. Koolwal on perusal of the different provisions of the Act, the following propositions emerge: (a) Return filed by the assessee on 20-1-1973 was only a belated return under Section 139(2) and it cannot be treated as a separate return under Section 139(4); (b) Even if it is treated as a return under Section 139(4), since it is a valid return it could be revised when there is any omission or error in the return, according to the assessee.

In support of these propositions, he particularly referred to the provisions of Section 144, which according to him, indicate that return under Section 139(4) is equated with one under Section 139(2). He further pointed out that Section 143 speaks of Section 139 without reference to any particular sub-section. According to Mr. Koolwal, Section 274 also shows that a belated return under Section 139(2) is same thing as one filed under Section 139(4). Mr. Koolwal next contended that the assessee's case would be covered by the provisions of Section 153(1)(b). According to him, provisions of Section 271(1)(c) are clearly attracted in this case and at any rate Explanation thereto is attracted particularly in the background of the assessee's conduct in not furnishing details required by the ITO during the assessment proceedings.

153. He placed strong reliance on the decision of the Calcutta High Court in the case of Kumar Jagdish Chandra Sinhav.CIT [1982] 137 ITR 722 (Cal.). He invited our attention to the observations of their Lordships at pages 729 to 733. He has also relied on the ratio of the same High Court reported in Mst. Zulekha Begum (Khatoon) v. CIT [1981] 129 ITR 560. He brought to our notice the well-known decision of the Supreme Court in the case of CITv. Kulu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518. The learned departmental representative argued that there is no difference between the provisions of the 1922 Act and those of the 1961 Act, so far as the relevant provisions are concerned. He has also relied on the decisions reported in CIT v. S. Raman Chettiar [1965] 55 ITR 630 (SC) and Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236 (All.). Thirdly, he argued that Section 153 being a procedural or machinery provision, it should be construed harmoniously with other provisions bearing in mind the scheme of the Act. According to Mr.

Koolwal, Section 139(4) should be read as a proviso to Section 139(1) and (2). While referring to Section 153, he relied on the expression 'whichever is latest' to show that revised return can be filed even in respect of return filed under Section 139(4).

6. Mr. Kothari, learned counsel appearing for the assessee, in his reply, also relied on the scheme of the Act with particular reference to the provisions of Section 139. According to his analysis, basically there are two types of returns contemplated under the Act. One he calls the mandatory return under Section 139(1) or 139(2). The second category is enabling or permissible return falling under Section 139(4). Section 139(5) authorises revision of a return. Since the controversy arisen is as to whether this provision would be applicable to both the categories of returns as stated above, we are leaving the detailed arguments regarding Section 139(5) for the present. Mr.

Kothari also referred to the provisions of Section 139(8) to emphasise his own analysis. He invited our attention to the provisions of Section 276CC to bring home his point that return contemplated under Section 139(4) is altogether a different return and the consequences that flow in regard to such a return are different from the consequences that flow from a return filed under Section 139(1) or (2).

Mr. Kothari thereafter, pointed out the distinguishing features in the Calcutta High Court decisions relied on by the learned departmental representative. On the other hand, he relied on the decision of the Allahabad High Court in the case of Dr. S.B. Bhargava v. CIT [1982] 136 ITR 559, and that of the Delhi High Court in the case of O. P. Malhotra v. CIT [1981] 129 ITR 379. He has also invited our attention to the provisions of Section 139(4)(6)(iii), which specifies that the return cannot be filed beyond the period prescribed therein, whereas the provisions for filing the revised return are somewhat different. In this connection, he has also relied on the decisions of the High Courts in the matter of penalties where revised returns have been filed.

Coming to Clause (b), at the outset, Mr. Kothari argued that the facts of the case do not justify levy of penalty under Section 271(1)(c) at all, as it was a case of mere estimate in the absence of details without any positive material. He has brought to our notice that on identical facts for the assessment year 1969-70, the Tribunal determined the income at nil and for the assessment year 1971-72, the AAC vide order dated 17-3-1978, cancelled the penalty levied by the 1TO under Section 271(1)(c). (No further appeal has been filed by the revenue).

With regard to the Explanation to Section 271(1)(c), initially Mr.

Kothari argued that Section 153(1)(6) does not mention of the Explanation, nor does the notice issued by the ITO mention the same and, therefore, Explanation cannot be invoked. Secondly, he raised a fundamental issue that while the assessment was completed on 24-7-1974, notice to show cause under Section 271(1)(c) was issued by the ITO on 23-7-1974 and in such a situation, Explanation to Section 271(1)(c) could not have been invoked at all, as the same comes into play only when the income is computed. In other words, before income is computed, the question of application of Explanation to Section 271(1)(c) would not arise, Mr. Kothari argued. Thirdly, Mr. Kothari relied on a number of authorities to show that in the circumstances of the case on the basis of the Explanation penalty cannot be levied. He particularly referred to the following decisions: CIT v. Smt. Chandralata Bahuji Goswami, Addl. CIT v. Noor Mohd. & Co. [1974] 97 ITR 705 (Raj.), Ram Bilas Kedar Nath v. ITO [1964] 54 ITR 711 (All.) and CIT v. Mir. Subha Hari Bhakta [1978] 112 ITR 544 (AIL). Finally Mr. Kothari referred to the department Instruction No. 888 dated 1-10-1975.

7. Mr. Vaish, for one of the interveners, apart from adopting what all has been argued by Mr. Kothari, stated as to why an assessee, who files return under Section 139(4) is not allowed to file a revised return, no doubt, after emphasising the language used in Section 139(5) which excludes return under Section 139(4). According to Mr. Vaish, since the assessee is given a sort of concession to file a return at any time before the assessment proceeding is completed, there is no further scope or a chance for such an assessee to file a revised return on the ground of any mistake or omission. He referred to Section 139(9), which came to be introduced later on to bring out the intention of the legislature. He has pointed out that even in the case of Section 139(5) only such mistakes as are bonafide that can be corrected and a revised return filed in order to treat it as a valid and proper return. In this behalf, he referred to the following decisions: Amjad Ali Nazir Ali v.CIT [1977] 110 ITR 419 (All.), Union Engineering Co. v. CIT [1980] 122 ITR 719 (Ker.) and Add!. CIT v. Radhey Shyam [1980] 123 ITR 125 (All.).

Further, Mr. Vaish commented upon the decision of the Calcutta High Court stating that it is not in conformity with the established rule of interpretation of statutes and he referred to the decision of the Supreme Court, one reported in CIT v. Shahzada Nand & Sons [1966] 60 ITR 392 and the other in CED v. Smt. S. M. Muthukamppi Achi [1977] 109 ITR 345 (Mad.).

8. Mr. Syali, counsel for another intervener, invited our attention to the provisions of Section 139(4A) to bring home the point canvassed by his predecessor that whenever a return is treated as one filed under Section 139(1) or (2), it is so specifically mentioned and, therefore, in the absence of similar language in Section 139(4), it cannot be treated as a return under Section 139(1) or (2). Mr. Syali referred to the decision of the Allahabad High Court in CIT v. Baldeoji Maharaj Trust [1982] 10 Taxman 269 and invited our attention to the observations in the decision of the Supreme Court in the case of Brij Mohan v. CIT[1979] 120 ITR 1 According to Mr. Syali, only one return can be filed under Section 139(4) and he referred to the decision of the Calcutta High Court in Dhampur Sugar Mills Ltd.'s case {supra), which has been relied on by the learned departmental representative. He also tried to make out some distinction between the return contemplated under Section 139(4) and the one under Section 139(5) with reference to the use of the article used before the word 'return'. Alternatively, he has pointed out that there may be a scope for filing number of revised returns under Section 139(5), but definitely not under Section 139(4) and he invited our notice to the decisions reported in Niranjan Lal Ram Chandra v. CIT [1982] 134 ITR 352 (All.).

9. Answer to the question to be decided by the Special Bench in a way is very simple and straight if one looks at the language of Section 139(5). Both Sub-sections (4) and (5) may be read together: (4)(a) Any person who has not furnished a return within the time allowed to him under Sub-section (1) or Sub-section (2) may, before the assessment is made, furnish the return for any previous year at any time before the end of the period specified in Clause (b), and the provisions of Sub-section (8) shall apply in every such case ; (b) the period referred to in Clause (a) shall be--(i) where the return relates to a previous year relevant to any assessment year commencing on or before the 1st day of April, 1967, four years from the end of such assessment year ; (ii) where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1968, three years from the end of the assessment year ; (iii) where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year.

(5) If any person having furnished a return under Sub-section (1) or Sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made.

If we go by the mere language used in Section 139(5), it is evident that it does not cover a return falling under Section 139(4). If it is so simple as that, there would not have been any occasion to constitute the Special Bench before whom elaborate arguments have been advanced.

Apparently, there is a conflict of judicial opinion ; the Calcutta High Court holding that even a return under Section 139(4) can be revised under Section 139(5) while the Allahabad and Delhi High Courts have gone by the language of Section 139(5). Therefore it is necessary to examine the question initially without looking to the authorities on the point.

10. The scheme of the Act in regard to the filing of the return is contained in Section 139 itself. Section 139(1) creates a statutory obligation on every person, whose income exceeds the taxable limit to file the return. It is not necessary for the ITO to issue any notice calling upon any person to file a return. Once the income exceeds taxable limit, it is the obligation of that person to file the return under Section 139(1). Nevertheless the ITO is also empowered to issue notice under Section 139(2) calling upon any person to file a return of income. In the case of Sub-section (1) it is an obligation on the person whose income exceeds taxable limit while under Sub-section (2) it is the obligation of every person who is called upon to file the return irrespective of the fact whether his income exceeds taxable limit or not. In both the cases the obligation is statutory obligation.

If a person files a return either under Sub-section (1) of Section 139 or under Sub-section (2) of Section 139 in response to the notice issued by the ITO, the assessment proceedings will follow in the normal course. The question that arises is: Suppose a return is not filed under Sub-section (1) or (2), can the assessee file a return beyond the period prescribed under either Sub-section (1) or Sub-section (2) of Section 139. There may be statutory liabilities for not complying with the provisions of Section 139(1) or (2). Apart from those statutory liabilities for non-fulfilment of the obligation imposed by the statute, whether an assessee can file a return The Act definitely allows a return to be filed and for that purpose, Section 139(4) is enacted. An assessee who has not filed the return either under Sub-section (1) or Sub-section (2) of Section 139, has been given the right to file the return under Sub-section (4) of Section 139 but it should be filed before the assessment is completed. This is the outer limit within which an assessee is permitted to file the return even though he fails to comply with the provisions of Section 139(1) or (2).

The above scheme therefore clearly postulates two situations, one a compulsory compliance with the statute in regard to the filing of the return within the prescribed time limits and second is an enabling provision by which the assessee is permitted to file a return beyond the periods prescribed under Section 139(1) or (2) but subject to the condition that it should be filed before the assessment is completed.

There is, therefore, a sort of distinction that is maintained in regard to the returns filed under Section 139(1) or (2) of the Act, and returns filed under Sub-section (4) of Section 139. A separate category of returns is contemplated by the scheme of the Act itself. The return filed under Section 139(4) is not treated as one under Section 139(1) or (2). There are no such words in Section 139(4). It is a return by itself. From a perusal of Section 139(4A), it is clear that whenever the legislature wanted to treat a return filed within the ambit of Section 139(1) or (2), they have specifically provided that way. In the absence of any such indication either expressly or impliedly in Section 139(4), the return filed thereunder cannot be treated as a return under Section 139(1) or (2).

11. Undoubtedly the return filed under Section 139(4) is, treated separately. In this connection we may refer to the provisions of Section 139(8). The language used therein does not indicate that returns filed under each of the sub-sections is treated separately.

Similarly, if we look to the provisions of Section 276CC a differentiation is maintained between the returns filed under Section 139(1) or (2) and those filed under Sub-section (4) of Section 139. The liabilities arising out of the default in not filing the return within the time stipulated either under Section 139(1) or (2) (without getting extension of time) always maintained even if a return is filed under Sub-section (4) of Section 139. We are only trying to emphasise the point that the legislature maintained distinct categories of returns filed under each of the sub-sections of Section 139, i.e., under Section 139(1) or 139(2) and 139(4). Reference to Section 144 by the learned departmental representative does not throw much light on the point sought to be canvassed by him. On the other hand, it again indicates that different categories of returns are contemplated under Section 139. It does speak of returns under Sub-section (4) and a revised return under Sub-section (5). Now the only point to be considered is whether the return filed under Section 139(4) can be treated as one under Section 139(1) or (2) or that Section 139(4) should be read as a proviso to Section 139(1) or (2) as contended by Mr. Koolwal. We have already indicated by the analysis of the provisions of Section 139 and the scheme of the Act, that it is not possible to construe the returns filed under Section 139(4) as those filed under Section 139(1) or (2) or that Section 139(4) can be read as proviso to Section 139(1) or (2). In the case of S. Raman Chettiar (supra) relied on by Mr. Koolwal, the Supreme Court was concerned with the question as to whether a return filed after the expiry of the statutory period under Section 22(3) of the 1922 Act was a valid return. Their Lordships held that that was a valid return. They further held that there is no distinction between voluntary returns and non-voluntary returns and all that is necessary is that a return should be filed. At page 634 of the report their Lordships observed as follows: ... We are unable to appreciate that every return made under Section 22(3) must be a voluntary return, in the sense that it must be suo tnotu. If a return is made in pursuance to a general notice under Section 22(1), or a special notice under Section 22(2), it is a return made voluntary but not suo motu. It is a return made in response to a public notice or a special notice. If no return is made in response to notices under Section 22(1) and Section 22(2), the Act attaches certain penalties. In our view, it is not correct first to describe a return made under Section 22(3) in response to a notice under Section 22(1) or Section 22(2) as voluntary, and then say that a return made in response to a notice under Section 34 is not voluntary just because it warns the'assessee that some income has escaped assessment. In our opinion both types of returns are under Section 22(3) of the Act. In the first type of cases it is directly under Section 22(3). In the case of a notice under Section 34, it is deemed to be a notice under Section 22(2) and the return deemed to' be a return under Section 22(3)...(p. 634) It is a clear that what their Lordships were concerned in that case was quite different. Further the scheme of the 1922 Act, in regard to the filing of the return is somewhat different from the scheme of the 1961 Act. Here also there is no doubt that the return filed by the assessee on January, 1973 and/or on 26-2-1973 is a valid return and its validity is not in dispute. We are concerned with an altogether different issue in this case. The next decision cited by Mr. Koolwal is reported in the case of Kulu Valley Transport Co. (supra). There also their Lordships were concerned with the question about the validity of a loss return filed after the statutory period. Their Lordships stated that Section 22(3) as it stood in the 1922 Act should be read as a proviso to Section 22(1). It was only for the limited purpose of treating the loss return as a valid return which has to be processed by the ITO. It has nothing to do with the question that is posed in this appeal. As already pointed out the scheme of the 1922 Act is quite different.

Similarly, the case of Dhampur Sugar Mills Ltd. (supra) considered an altogether different question as to whether an assessment could be made under the 1961 Act. We will revert back to this decision in considering a different aspect which has been argued. But so far as reliance on this decision by Mr. Koolwal is concerned, we do not find anything to support his stand.

12. Now we look to the decisions directly on the point as to whether a return under Section 139(4) can at all be revised. The direct case in favour of the revenue is of the Calcutta High Court. The first one is reported in the case of Jagdish Chandra Sinha (supra). The head-note reads: The Income-tax Act contemplates the filing by the assessee of a correct and complete return. The law gives him a right to substitute and bring on record a correct and complete return if he discovers any omission or wrong statement in the return originally filed by him. The law cannot contemplate the making of an assessment on the basis of a return which even the assessee claims contains wrong statements. When an assessee files a revised return, he, in fact, admits that the original return filed by him was not correct or complete and substitutes the same by a revised return which, according to him, is correct and complete. The effective return for the purposes of assessment is thus the return which is ultimately filed by an assessee on the basis of which he wants his income to be assessed. Sub-section (5) is a part of Section 139. The statute itself provides for the filing of a revised return. Section 143 does not specifically deal with the return filed either under Sub-section (1) or Sub-section (2) of Sub-section (4) of Section 139. It deals generally with the return filed under Section 139. It is true that Sub-section (5) specifically mentions Sub-section (1) or Sub-section (2) but does not mention the case of a return filed under Sub-section (4) of Section 139. However, the true purport of a return filed under Sub-section (5) is that it substitutes the original return filed and Sub-section (4) specifically gives the assessee a right to file a return at any time before the assessment.

Hence, where a voluntary return has been filed under Section 139(4), a revised return can be filed in respect of it.

It is clear from the above that this decision fully supports the contention of Mr. Koolwal. However, Mr. Kothari pointed out that the facts of this case slightly gives a different picture. The reference related to two years. The following details bring out the necessary facts:Last date for return u/s 139(1) - 30-6-1964Return filed on u/s 139(4) - 13-8-1966Subsequent return u/s 139(4)filed on [This return was within - 18-2-1969the time limit prescribed u/sAssessment made on - 15-1-1970Assessment year 1965-66:Last date for return u/s 139(1) - 30-6-1965Return filed on u/s 139(4) - 17-12-1965Subsequent return u/s 139(4)the time limit prescribed u/s 39(4)(b)] - 17-7-1969Assessment made on - 6-7-1970 It is manifest from the above dates that the subsequent returns filed for both the assessment years are within the period of time contemplated under Section 139(4). At this stage it will be relevant to mention that Section 153 prescribes different periods of limitation for completing the assessments. The relevant provisions of Section 153 may be reproduced: 153(1). No order of assessment shall be made under Section 143 or Section 144 at any time after-- (i) four years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or before the 1st day of April, 1967 ; (ii) three years from the end of the assessment year in which the income was first assessable, where such assessment year is the assessment year commencing on the 1st day of April, 1968 ; (iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969 ; or (b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within Clause (c) of Sub-section (1) of Section 271 ; or (c) the expiry of one year from the date of the filing of a return or a revised return under Sub-section (4) or Sub-section (5) of Section 139, In the case of a return filed under Section 139(4) ordinary period of limitation is extended by one year. It is in this context, we have pointed out the dates in the Calcutta High Court case referred to above. No doubt the Hon'ble Calcutta High Court did not go by these dates but they laid down the ratio that even a return under Section 139(4) can be revised under Section 139(5). But the principle laid down by the Calcutta High Court must be understood and appreciated with reference to the facts before it and all that it can be said is that a return under Section 139(4) can be corrected but a corrected or revised return must again be within the period allowed by law. The Calcutta High Court has nowhere specifically stated that even if a revised return is filed beyond the period prescribed for filing a return under Section 139(4), it would be a valid return. Since the learned departmental representative also referred to the decision of the Calcutta High Court in the case of Mst. Zulekha Begum Khatoon (supra), we may refer to the same. That decision does not lay down that a return filed under Section 139(4) can be revised under Section 139(5). All that their Lordships held was that the assessee can file another return subsequently and an assessment can be based on the subsequent return and further that the limitation starts from the date of the subsequent return. At page 569 the following clearly brings out the ratio: ... It appears to us that in the instant case where the assessee has been assessed on a return filed by him within the time prescribed by Section 139(4), the assessment thereon cannot be held to be incompetent.

For the above reasons, we hold that the subsequent return filed by the assessee was a valid return under Section 139(4) of the 1961 Act and that the assessment thereunder was within the time prescribed under Section 153 of the said Act.

On the other hand there are direct decisions in favour of the assessee.

The first one is that of the Delhi High Court reported in O.P.Malhotra's case (supra). It was held by their Lordships; Taking first the language of the provision, it is seen that Section 139(5) in terms allows an assessee to revise only a return which has been furnished under Sub-section (1) or Sub-section (2). It carefully avoids a reference to Section 139(4) which, it seems to us, is significant considering that the purpose of the Legislature is to permit the assessee to revise a return which he has already filed and the Legislature has just outlined in Sub-section (4) one of the circumstances, in addition to those set out is Sub-sections (1) and (2) in which the assessee could have filed a return. The reference to Section 271(1)(a) does not help because that section deals with the delay in the filing of the return beyond the period contemplated by Sections 139(1) or (2) and there can be no question of a delay under Section 139(4). Section 139(3) (which permits the filing of a return of loss) and Section 139 (4A) (introduced subsequently) specifically provide that the returns filed under those sub-sections would attract all the provisions of the Act as if they were returns filed under Sub-section (1) while Sub-section (4) does not use any such language. It is, therefore, difficult to accept the argument that Section 139(5) entitles an assessee to rectify or revise a return filed by him under Sub-section (4) unless the return so filed can be fully equated to a return under Sub-section (1) or Sub-section (2).

In principle also, we do not find any incongruity in the above construction. It will not create any hardship, injustice or illogicality as suggested by Shri Verma. Sub-section (5) was intended to provide a locus penitentiae to assessees, who had filed their returns of income in compliance with the requirements of Sub-sections (1), (2) and (3) and within the time allowed thereunder to revise the same when they discovered an omission or wrong statement therein. But where a person has not filed such a return and is availing himself of the provisions of Sub-section (4) which enable him to file a return after a delay which might extend up to four years, it could well be that the Legislature thought that no such opportunity of revision was needed to be provided for. In this context, it should be remembered that such an assessee can within the period of four years provided for in Section 139(4) (which has been reduced subsequently to two years conformably to amendments in Section 153 reducing the time limit for completion of assessments) file as many returns as he wants. In view of this also, there was no necessity to provide a further opportunity to such an assessee to revise a return filed already after considerable delay by taking advantageof the fact that the assessment has not been completed by then... (p. 385) Their Lordships also explained the decision of the Supreme Court in Kulu Valley Transport Co.'s case (supra). It is further to be noted as to why the Legislature did not allow a return under Section 139(4) to be revised under Section 139(5). Filing of a return under Section 139(4) itself is a sort of concession for those who failed to comply with the statutory obligations of filing the returns under Section 139(1) or (2). Therefore, advisedly the Legislature did not provide further concession to an assessee who files return under Section 139(4). It is true that the decision of the Delhi High Court has been specifically dissented to by the Calcutta High Court but we are of opinion that the Delhi High Court's view is more reasonable and it is based on the clear language of the provision and also as to why the Legislature did not intend to provide that a return filed under Section 139(4) can be revised under Section 139(5).

The Allahabad High Court in the case of Dr. S.B. Bhargava (supra) observed as under: The Legislature is, thus, conscious of the three different types of returns and since Sub-section (5) does not give a right to an assessee to revise a return filed under Sub-section (4), we cannot intend such a provision therein by equating the return filed under Sub-section (4) with a return filed under Sub-section (1).

Now, we can consider this question from yet another aspect and it is that different time-limit for completion of assessment have been provided in respect of cases where a return has been filed under Sub-section (4) or a revised return has been filed under Sub-section (5). Sub-section (5) does not provide for any separate category of return. It only gives a right to an assessee to revise the return filed under Sub-section (1) or Sub-section (2). When a revised return is filed the original return stands supplanted or withdrawn.

In other words, if the original return is under Sub-section (1) and a revised return is filed, then the revised return would be a return under Sub-section (1) and so will be the position if the original return was under Sub-section (2). In our opinion, therefore, the return provided for under Sub-section (4) stands in a category different from those provided in Sub-section (1) or Sub-section (2) and such a return cannot be revised under Sub-section (5) because that sub-section does not say so... (p. 564) It may be noted that the Allahabad High Court decision has also taken note of its own decision in Dharhpur Sugar Mills Ltd.'s case (supra) as well as Kulu Valley Transport Co.'s case (supra).

13. We may finally add that the Board of Direct Taxes issued Instruction No. 888 dated 1-10-1975 and on the basis of the opinion given by the Law Ministry, stated as under: It may, therefore, be noted that the extended time limit of one year under Section 153(1)(c) will not be available in respect of a revised return of income purported to have been filed under Section 139(5) where originally the return was filed under Section 139(4).

Before completing this part of the case, we would like to mention that some interesting questions which have no direct bearing in the problem posed before us also have been raised and argued. The first question is whether a revised return can be further revised. In other words, whether there can be successive revised returns. We do not think that there can be any objection for filing successive revised returns. It has been held by the Allahabad High Court in Dr. S.B. Bhargava's case (supra) that once a revised return is filed, it substitutes the original return. In other words revised return becomes return either under Section 139(1) or (2). This is what has been observed in Kulu Valley Transport Co.'s case (supra). Therefore once a revised return under Section 139(5) is treated as a return under Section 139(1) or (2) a subsequent revised return may be possible. However, we do not want to dilate on this aspect as that is not the question directly before us though perhaps the authorities do support the view that successive revised returns under Section 139(5) can be filed. Then the other question that arose is whether the return filed under Section 139(4) can be corrected and another return under Section 139(4) be filed.

There may be two views on this. No doubt the Calcutta High Court has stated that even the return under Section 139(4) can be corrected under Section 139(5) but since we do not want to adopt that view, we proceed to discuss this aspect on the basis that a return under Section 139(4) cannot be revised under Section 139(5). All the same whether another return under Section 139(4) again can be filed or not is the question.

This is where we want to say that there can be possibly two views. One view is that there can be successive returns filed under Section 139(4) but subject to the limit prescribed under Section 153 for completing the assessment. This view is fully supported by the observations of the Delhi High Court in Malhotra's case (supra). Now take for instance this very case. The assessee could file another return under Section 139(4) as long as the period for completing the assessment under Section 153 is not completed. The other view may be that so far as the return under Section 139(4) is concerned, there can be no subsequent return under Section 139(4). To hold that there should not be any subsequent return under Section 139(4) even within the period of limitation is not warranted by the scheme of the Act. If such a view is taken it will lead to practical difficulties. If an assessee, who has filed a return under Section 139(4) finds an obvious mistakei or omission which is not intended cannot correct it by filing another return under Section 139(4) within the period prescribed. We do not think that the Legislature intended such a situation to arise. It is therefore proper to hold that successive returns under Section 139(4) can be filed so long as they are ultimately within the prescribed time.

There is another aspect also to be considered. Suppose there is an obvious mistake or an arithmetical error in the return filed under Section 139(4), should not the assessee be allowed to correct that mistake It is not necessary for him to file a revised return as such.

He may still ask for a correction by means of a letter. There is definitely some distinction between a correction of return and a revised return. This concept is noticed by the Allahabad High Court in Dhampur Sugar Mills Ltd.'s case (supra). At page 240 his Lordship Justice Swarup observed: There is a distinction between a revised return and a correction of the return. If the assessee files some application for correcting a return already filed or making amends therein, it would not mean that he has filed a revised return. It will still retain the character of an original return, but once a revised return is filed, the original return must be taken to have been withdrawn and to have been substituted by a fresh return for the purpose of assessment....

Therefore there will not be any practical difficulty in taking the view we have expressed in the actual working of the Act. In conclusion therefore we hold that a return filed under Section 139(4) cannot be revised under Section 139(5) so as to extend the period of limitation for making the assessment. This conclusion of ours would have normally disposed of the appeal but we have to deal with one more aspect argued by the learned departmental representative and that is based on the provisions of Section 153(1)0).

14. We have already seen the provisions of Section 153(1). The point sought to be made out by Mr. Koolwal is that the assessee's case falls under Sub-clause (b) in the sense that it attracts levy of penalty under Section 271(1)(c) of the Act and therefore, the period of limitation for completing the assessment would be eight years. This argument is fraught with many hurdles. First, there is no such case made out at any time by the revenue. There is no whisper by the ITO that the case falls under Section 271(1)(c) and therefore the extended period of limitation of 8 years would apply. The only thing that the ITO noted is that notice is issued under Section 271(1)(c) at the end of the assessment. In fact the notice under Section 271(1)(c) issued to the assessee is dated 23-7-1974 while the assessment was completed on 24-7-1974. In order that the ITO may get the benefit of extended period of limitation of 8 years, there must be clear finding and reasons for holding that the case attracts levy of penalty under Section 271(1)(c).

This is totally absent in this case. The period of limitation cannot be extended merely on the basis that a penalty might be levied. In the case of Ram Bilas Kedar Nath (supra) the Allahabad High Court had an occasion to consider a similar aspect under the 1922 Act. The Allahabad High Court at page 16 observed: ...The period of limitation cannot be extended at the sweet will and pleasure of the Income-tax Officer and the sword of Damocles cannot be kept hanging over the heads of assessees for all time to come, on the off-chance that some concealment or furnishing of inaccurate particulars might come to light at some distant future date.

Almost to the same effect are the observations of the same High Court in the case of CIT v. Surajpal Singh [1977] 108 ITR 746.

15. In order that the extended period of limitation of 8 years is available to the ITO, the facts of the case must justify levy of penalty. The wording of Section 153(1)(6) clearly shows that the case must fall under Section 271(1)(c). It would mean that the facts of the case justify levy of penalty under Section 271(1)(c). Whether penalty can be levied under Section 271(1)(c) has to be gone into and a finding recorded so that the assessment could be saved from the bar of ordinary limitation. It is not enough if the ITO merely issues a notice formally that penalty proceedings under Section 271(1)(c) are initiated. If that can be the interpretation, it would lead to harassment. In every case the ITO may resort to a mere issue of notice under Section 271(1)(e) on one or the other ground and get the benefit of the extended period of limitation. In our opinion that is not the purport of Section 153(1)(6). It definitely postulates a finding that the assessee would be liable to penalty under Section 271(1)(c). In this connection, reference may be made to the decision of the Calcutta High Court reported in Hansraj Dhingra v. Union of India [1975] 98 ITR 397 and that of the Allahabad High Court reported in the case of Mir Subha Hari Bhakta v. ITO [1960] 39 ITR 617 (All.).

16. The learned departmental representative wanted us to take into account not only the main provisions of Section 271(1)(c) but also the Explanation thereto in order to decide whether the assessee's case fall under Section 271(1)(c), so that the provisions of Section 153(1)(b) could be applied. With regard to the application of the Explanation to Section 271 (1)(c), there are two objections raised by Mr Kothari The first one is that Explanation is not mentioned in Section 153(1)(b). In our opinion this objection is devoid of any merit. When Section (1)(c) is mentioned it means the section as a whole. The Explanation is not to be omitted. The second objection is that the notice under Section 271(1)(c) does not mention the Explanation especially because the notice was issued in an old form prior to the amendment whereby the Explanation was introduced. This objection also, according to us, is without any merit. When the notice was given mentioning Section 271(1)(c), it-must be taken that it include, the entire provision including the Explanation, It can never be held that the Explanation is excluded. There is one more vital thing which has been pointed out by Mr. Kothari regarding Explanation and that we will deal with after dealing with the question whether the main provisions of Section 271(1)(c) would apply. This leads us to the consideration of the facts of the case and whether Section 271(1)(c) can be invoked to the facts of the case.

17. In our considered view the provisions of Section 271(1)(c) are not attracted. The assessee filed a loss return and on the ground that there is no matenal or evidence on record, the income was estimated at Rs 30 000. It is clear from a perusal of the assessment order that the estimate was made ,n the absence of any material. It does not indicate that there is any material to show that the estimated income is the assessee's income for the year and that the assessee concealed the same within the meaning of Section 271(1)(c). Secondly, on identical facts the Tribunal determined the income at nil for the assessment year 1969-70 and therefore there was no question of penalty for that year For the assessment year 1971-72 again on identical facts penalty was evied by the ITO under Section 271(1)(c) but the same was cancelled by the AAC by his order dated 17-3-1978. The revenue has not filed further appeal before the Tribunal. Though technically the penalty proceedings have been initiated for the year under appeal, this is a clear case where no penalty can be levied at all. The law on the point is very well settled. Authorities are uniform in holding that unless there is positive material, panalty cannot be levied merely bewcause the assessee's explanation is not accepted or that the assessee failed to comply with the statutory notice resulting in estimate of income. The penalty is to be levied only for conealment of income or furnishing of inaccurate particulars. It is not meant for non-compliance with the statutory provisions. It may be that the assessee defaulted in furnishing the information required by the ITO which necessitated an ex parte assessment but that does not give the ITO any justification for levying penalty under Section 271(1)(c).

18. Coming to the Explanation Mr. Kothari raised a fundamental objection which has great force. He showed that the notice to show cause was issued one day before the assessment was completed. This would show that the income was not computed. Therefore Mr. Kothari's point is that without determining the income the question of application of Explanation would not arise at all. Mr. Kothari also further pointed out that the last day of hearing was 24-7-1974 as per the order sheet and on that very day the assessment order was passed and therefore prior to that date the income was not computed and if that is so, the Explanation which mentions the arithmetical difference would not come into play. There is great force in this submission of Mr. Kothari. Explanation to Section 271(1)(c) throws the burden on the assessee in case the difference between the income returned and the income assessed exceeds 20 per cent. In order to find this arithmetical difference, the income must be determined Before the determination of that assessable income, the question of finding the arithmetical difference would not arise. In this case the income was admittedly determined only when the assessment was completed on 24-7-1974. Having therefore given notice on 23-7-1974, the idea of utilising the Explanation was totally absent and as such the Explanation to Section 271(1)(c) cannot be applied in this case. On this short ground the Explanation can be got over. However, we would like to dilate on the Explanatian further.

19. The Explanation to Section 271(1)(c) creates a rule of evidence.

The initial burden is thrown on the assessee to prove that there was no fraud or gross or wilful neglect on the part of the assessee. The scope of the Explanation has been the subject-matter of innumerable decisions. Without going into catena of decisions on the point, we would like to refer to the two decisions of the Rajasthan High Court.

The first one is reported in Smt. Chandralata Bahuji (supra). In that case their Lordships approved the comment of the learned author Kanga and Palkhivala, Seventh Edition, Volume I at page 1212 to the following effect: ...There are two ways of approaching this question, both of which converge on the same conclusion: (a) As is established by the cases cited above, in order to justify the levy of a penalty two factors must co-exist: (i) there must be some materials or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income, it being not enough for the purposes of penalty that the amount has been assessed as income ; and (ii) the circumstances must show that there was enimus, i.e. conscious concealment or conscious furnishing of inaccurate particulars on the part of the assessee. The Explanation has no bearing on (i), but it has a bearing only on (ii). The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does....

(b) Alternatively, even treating the Explanation as dealing with both the ingredients (i) and (ii) set out above, where the circumstances do not lead to the reasonable and positive inference that the assessees's explanation is false, the assessee must be held to have proved that there was no fraud or gross or wilful neglect on his part. Even in his view of the matter the Explanation cannot justify the levy of a penalty. (p. 1212) We may also refer to the case of Noor Mohd. & Co. (supra). That is a case where the assessee failed to maintain quantitative details and the estimate of income was made. The ITO applied the Explanation but their Lordships upheld the view of the Tribunal that Explanation cannot be invoked in such circumstances. In fact in this case the Hon'ble High Court refused reference on the application of the revenue. In the case before us, the assessee failed to produce certain materials required by the ITO and therefore the ITO proceeded to make the assessment ex parte and estimate was resorted to. The assessee has not committed any fraud nor can it be said that it has committed gross or wilful neglect in filing the return. All that happened was that he was not able to substantiate its return. Thus, in the facts and circumstances of the case, the burden that lay on the assessee is deemed to have been discharged. There was nothing else for the assessee to do in order to get over the Explanation. Thus, in our opinion the Explanation also cannot be invoked. Accordingly, we are of the view that the extended period of limitation provided under Section 153(1)(6) also has no application.

20. In the result, the assessment made on 24-7-1974 is beyond the period prescribed and consequently it is invalid and the same is annulled.


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