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Presidency Medical Centre (P.) Ltd. Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 5 of 1971
Judge
Reported in[1977]108ITR838(Cal)
ActsIncome Tax Act, 1961 - Sections 72(1), 80, 139(1), 139(2) and 139(4)
AppellantPresidency Medical Centre (P.) Ltd.
RespondentCommissioner of Income-tax
Appellant AdvocateS.R. Sen, Adv.
Respondent AdvocateB.L. Pal and ;Ajit Sen Gupta, Advs.
Cases ReferredB.B. Danganavar v. Income
Excerpt:
- .....simply stated that in order to get the benefit of section 24(2) the assessee should submit his loss return within the time specified by section 22(1). the provision had to be read with section 22(3) for the purpose of determining the time within which a return had to be submitted. it could well be said, the supreme court further said, that section 22(3) was merely a proviso to section 22(1). thus, a return submitted at any time before assessment was made was a valid return. in considering whether the return made was within the time, sub-section (1) of section 22 must be read along with subsection (3) of that section. a return whether it was a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it was made within the time.....
Judgment:

Sabyasachi Mukharji, J.

1. In this reference under Section 256(1) of the Income-tax Act, 1961, we are concerned with the assessment year 1964-65. The relevant accounting year is the period which ended on the 31st March, 1964. One of the contentions that arose in the appeal before the Tribunal for the assessment year 1964-65 was that the revenue authorities were wrong in not directing the carry forward of the loss sustained in relation to that year. It appears that the return for that year was filed on the 3rd October, 1964, showing a loss of Rs. 15,890. The Income-tax Officer completed the assessment and determined the loss at Rs. 8,387. He did not allow the carry forward of the loss, inter alia, holding :

'Assessee will not get benefit of carry forward of loss as notice under Section 139(2) was not served and return showing loss was not filed within the time allowed under Section 139(1) of the Income-tax Act, 1961.'

2. The assessee on appeal before the Appellate Assistant Commissioner urged this as one of the grounds amongst other grounds and it was contended that the time for filing of the return could have been extended. The Appellate Assistant Commissioner observed that there was no automatic extension of time and it could only be done on the application made by the assessee and, referring to the provision of Section 139(3) of the Income-tax Act, 1961, the Appellate Assistant Commissioner held that the benefit of carry forward was available only to an assessee who had furnished the return within the time allowed under Section 139(1) and, therefore, he upheld the Income-tax Officer's finding on this aspect of the matter. There were other items in dispute in appeal before the Appellate Assistant Commissioner but the appeal was dismissed.

3. The assessee, thereafter, preferred an appeal to the Tribunal. It was urged before the Tribunal that the return had been signed on the 30th September, 1964, and sent by registered post on the 1st October, 1964, but it was delivered to the Income-tax Officer only on the 3rd October, 1964. In those circumstances, the time should have been extended, it was urged. It was further submitted that notice under Section 143(2) had been issued and, therefore, return should have been treated as a return filed under Section 139(1) and under Section 139(3) the provisions of the Act applied as if it was a return under Sub-section (1) and the loss should have been allowed to be carried forward. It was submitted that an oral request had been made before the Income-tax Officer and the Appellate Assistant Commissioner for extending the time. The Tribunal found that no written application had been filed for extension of time to file the return of loss. The Tribunal noticed that there was no reference to any request by the assessee for extension of time either in the assessment order or in the order of the Appellate Assistant Commissioner and in those circumstances did not accept the contention that such requests had been made. It was not disputed that no notice under Section 139(2) of the Income-tax Act, 1961, had been issued. The Tribunal held that the section was clear that if the assessee wanted the loss to be carried forward, the assessee must file the return within the time prescribed under Section 139(1). The return should have been filed within six months from 21st March, 1964. The Tribunal was accordingly of the opinion that the posting of the return on the 1st October, 1964, would not fulfil the requirements of Section 139(3) in this behalf. In this connection the Tribunal relied on and referred to the decision of the Mysore High Court in the case of B. B. Danganavar v. Income-tax Officer [1967] 65 ITR 370 (Mys), a decision upon which reliance was also placed before us at the hearing of the reference and with which we shall deal later on. According to the Tribunal in that decision it was held that there was no discretion vested in the Income-tax Officer to extend the time. The Tribunal, accordingly, affirmed the order of the Income-tax Officer on this aspect of the matter.

4. On an application having been made in the aforesaid circumstances the Tribunal under Section 256(1) of the Income-tax Act, 1961, has referred the following question to this court:

'Whether, on the facts and circumstances of the case, the loss determined in respect of the assessment for the assessment year 1964-65 should have been directed to be carried forward under Section 72(1) read with Section 80 of the Income-tax Act, 1961 ?'

5. In view of the contentions urged before us we will have to refer to some of the relevant provisions of the Indian Income-tax Act, 1922, as well as the corresponding provisions and the relevant provisions of the Income-tax Act, 1961. Section 22 of the Indian Income-tax Act, 1922, which we shall hereinafter refer to as '1922 Act', provided for the return of the income. Sub-section (1) of that section provided for issue of a general notice by publication in the prescribed manner requiring every person whose total income during the previous year exceeded the maximum amount which was not chargeable to income-tax to furnish within such period, not being less than sixty days, as might be specified in the notice mentioned in Sub-section (1) of Section 22, a return in the prescribed form along with such other particulars as may be required by the notice of his total income and total world income during that period. Sub-section (1) of Section 22 of the 1922 Act contained a proviso to the following effect:

'Provided that the Income-tax Officer may in his discretion extend the date for the delivery of the return in the case of any person or class of persons.'

6. Sub-section (2) of Section 22 of the 1922 Act dealt with what was loosely described as individual notice which provided that in case of any person whose total income was in the opinion of the Income-tax Officer of such an amount as to render that person liable to income-tax, the Income-tax Officer might serve a notice upon him requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return in the prescribed form of his total income during the previous year. In this sub-section there is also a similar proviso giving discretion to the Income-tax Officer to extend the date of the delivery of the return. Subsection (2A) which was introduced by Section 14 of the Indian Income-tax (Amendment) Act, 1953, with effect from 1st April, 1952, provided as follows:

'If any person who has not been served with a notice under Subsection (2) has sustained a loss of profits or gains in any year under the head 'Profits and gains of business, profession or vocation', and such loss or any part thereof would ordinarily have been carried forward under subsection (2) of Section 24, he shall, if he is to be entitled to the benefit of the carry forward of loss in any subsequent assessment, furnish within the time specified in the general notice given under Sub-section (1) or within such further time as the Income-tax Officer in any case may allow, all the particulars required under the prescribed form of return of total income and total world income in the same manner as he would have furnished a return under Sub-section (1) had his income exceeded the maximum amount not liable to income-tax in his case, and all the provisions of this Act shall apply as if it were a return under Sub-section (1).'

7. Sub-section (3) of Section 22 merely provided that if any person had not furnished a return within the time allowed by Sub-section (1) or Subsection (2) or having furnished a return under either of those Sub-sections, discovered any omission or wrong statement therein, he might furnish a return or a revised return at any time before the assessment was made. Section 23 dealt with the assessment with which we need not detain ourselves. The return of income has been dealt with under Section 139 of the Income-tax Act, 1961, hereinafter referred to as the 1961 Act. In the 1961 Act the first significant change that was introduced was that there was no provision made for issue of a general notice in the press as was contemplated under Section 22(1) of the Indian Income-tax Act, 1922. Sub-section (2) of Section 139 of the 1961 Act provided for the issue of individual notice which was covered by Section 22(2) of the Indian Income-tax Act, 1922. Section 139(1) provided that every person if his total income in respect of which he was assessable under the Act during the previous year exceeded the maximum amount which was not chargeable to income-tax, should furnish a return of his income or the income of such other person during the previous year in the prescribed form setting out the particulars as might be prescribed. The time for filing of the return was altered. We need not detain ourselves with that alteration for the purpose of this case. Clauses (a) and (b) dealt with two different classes of assessees, namely, those whose income included income from profession or business--they were dealt with in Clause (a) and others were dealt with in Clause (b). But it may be necessary to set out the proviso to Sub-section (1) of Section 139. The proviso to Section 139(1) provided as follows:

'Provided that, on an application made in the prescribed manner, the Income-tax Officer may, in his discretion, extend the date for furnishing the return-

(i) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired on or before the 31st day of December of the year immediately preceding the assessment year, and in the case of any person referred to in Clause (b), up to a period not extending beyond the 30th day of September of the assessment year without charging any interest;

(ii) in the case of any person whose total income includes any income from business or profession the previous year in respect of which expired after the 31st day of December of the year immediately preceding the assessment year, up to the 31st day of December of the assessment year without charging any interest; and

(iii) up to any period falling beyond the dates mentioned in Clauses (i) and (ii), in which case, interest at six per cent. per annum shall be payable from the 1st day of October or the 1st day of January, as the case may be, of the assessment year to the date of the furnishing of the return-

(a) in the case of a registered firm or an unregistered firm which has been assessed under Clause (b) of Section 183, on the amount of tax which would have been payable if the firm had been assessed as an unregistered firm; and

(b) in any other case, on the amount of tax payable on the total income, reduced by the advance tax, if any, paid or by any tax deducted at source, as the case may be.'

8. A similar question with which we are concerned came up for consideration before the Supreme Court under the provisions of the Indian Income-tax Act, 1922, in the case of Commissioner of Income-tax v. Kulu Valley Transport Co. (P.) Ltd. : [1970]77ITR518(SC) . In that case what happened was that in January, 1956, the assessee had filed voluntarily returns disclosing loss for the assessment years 1953-54 and 1954-55 and the question that arose was whether the loss had to be determined and carried forward under Section 24(2) of the Indian Income-tax Act, 1922, though the returns were not filed within the time specified in the general notice under Section 22(1) and the time had not been extended by the Income-tax Officer. No notice had been served under Section 22(2) of the Act. The Supreme Court by a majority judgment held that the losses had to be determined and carried forward. It was held by the Supreme Court that Section 24(2) conferred the benefit of losses being set off and carried forward and there was no provision in Section 22 under which losses had to be determined for the purpose of Section 24(2). Section 22(2A) simply stated that in order to get the benefit of Section 24(2) the assessee should submit his loss return within the time specified by Section 22(1). The provision had to be read with Section 22(3) for the purpose of determining the time within which a return had to be submitted. It could well be said, the Supreme Court further said, that Section 22(3) was merely a proviso to Section 22(1). Thus, a return submitted at any time before assessment was made was a valid return. In considering whether the return made was within the time, Sub-section (1) of Section 22 must be read along with Subsection (3) of that section. A return whether it was a return of income, profits or gains or of loss must be considered as having been made within the time prescribed if it was made within the time specified in Section 22(3). In other words, if Section 22(3) was complied with Section 22(1) must be held to have been complied with. If compliance had been made with the latter provision the requirements of Section 22(2A) of the Indian Income-tax Act, 1922, would stand satisfied. The Supreme Court further observed that even if two views were possible, the view which was favourable to the assessee must be accepted while construing the provisions of a taxing statute. Shah J., as the learned judge then was, however, expressed a different opinion. In that decision the Supreme Court analysed the history of introduction of Sub-section (2A) of Section 22 of the Act, and noted the differences of opinion in the different High Courts which were set at naught by the decision of the Supreme Court in the case of Commissioner of Income-tax v. Ranchhoddas Karsondas : [1959]36ITR569(SC) . About the procedure for making the return which will be relevant for the present purpose in view of the alteration in the new Act it might be appropriate to refer to certain observations made by the Supreme Court at page 527 of the report. The Supreme Court observed as follows--See : [1970]77ITR518(SC) :

'It is well-settled by now that a return can always be filed at any time before the assessment is made. The Income-tax Officer has to make the assessment on that return and he could not choose to ignore it. The question that immediately arises is whether, in case of a voluntary return in which loss has been shown and determined, the Income-tax Officer can decline to give the benefit under Section 24(2) of carrying forward the loss on the ground that the assessee did not comply with the provisions of Section 22(2A) of the Act. In other words, when there is an express provision in that sub-section which must be availed of if the assessee is to be entitled to the benefit of carrying forward of loss in any subsequent assessment can he take advantage of the provisions of Section 22(3) and claim that since he has filed a voluntary return before any assessment has been made and, if it be determined that he has suffered a loss, he is entitled to carry forward that loss.

The argument on behalf of the assessee is that Section 24(2) confers the right to carry forward the loss to the following year provided the conditions contained in the sub-section are satisfied. There is no further requirement that has to be fulfilled so far as the substantive law is concerned. Section 22(2A) is merely a procedural provision and it also provides that once a return has been furnished in accordance therewith all the provisions of the Act become applicable as if it were a return under Subsection (1). That would attract Section 22(3) and, therefore, a voluntary return can be filed even after the period mentioned in Sub-section (2A) has expired so long as the assessment has not taken place. It is pointed out that, supposing a return is filed showing income but the Income-tax Officer in the assessment proceedings holds that there has been a loss and the assessee was mistaken in showing a profit, the assessee in such circumstances can certainly claim the benefit of Section 24(2). If that is possible, there is no reason or justification for holding that, although he could claim the benefit of Section 24(2) by filing a voluntary return in the given illustration, he would be deprived of that benefit if he filed a return voluntarily showing a loss except in compliance with Section 22(2A). On the other hand, the contention on behalf of the revenue is that Section 22 before its amendment in the year 1953 did not make any provision for the filing of a loss return voluntarily. Under Section 22(1), returns which were invited were only of taxable income. No return which in the opinion of the person making it was a loss return was intended to be filed under Section 22(1). It was only under Section 22(2) that the return that was required to be filed was in pursuance of the individual notice given by the Income-tax Officer. Since by this notice a return in the prescribed form had to be filed by a person to whom the notice was issued whether it was profit or loss, a loss return could, therefore, be filed only in pursuance of a notice served under Section 22(2) but not voluntarily. It is by virtue of the provisions contained in Section 22(2A) that a loss return can be filed where a person has not been served under Sub-section (2) in order to get the benefit of the carrying forward of the loss under Section 24(2). This is indeed expressly provided by Sub-section (2A) of Section 22.'

9. The Supreme Court thereafter referred to the amendment and observed : [1970]77ITR518(SC) that the amendment in 1953 seemed to have been made to clarify the law about the filing of a return showing a loss voluntarily. It was declared, according to the Supreme Court, that such a return could be validly made. The time which was specified for filing the return was on the same lines as in Sub-section (1) of Section 22 and all the provisions of the Act would have applied as if it was a return under Sub-section (1). The Supreme Court thereafter came to the conclusion that Section 24(2) conferred the benefit of the losses being set off and carried forward and there was no provision in Section 22 under which losses had to be determined for the purpose of Section 24(2). The question which normally arose was whether Section 22(2A) placed any limitation on that right. This sub-section, according to the Supreme Court, which had been reproduced before, simply stated that in order to get the benefit of Section 24(2) the assessee must submit his loss return within the time specified by Section 22(1). The proviso must be read with Section 22(3) for the purpose of determining the time within which the return had to be submitted. It could well be said that Section 22(3) was merely a proviso to Section 22(1). The Supreme Court further observed that a return whether it would be a return of income, profits or gains or of loss must be considered as having been made within the time specified if it was made within the time specified in Section 22(3). In other words according to the Supreme Court if Section 22(3) was complied with, Section 22(1) must also be held to be complied with. If compliance had been made with the latter provision, the requirements of Section 22(2A) would stand satisfied. The Supreme Court also noted that a voluntary return could not, however, be filed beyond the period specified in Section 34(3) of the Act. We have noticed the changes made by the Income-tax Act, 1961. The main significant change seems to be that the discretion that was given to the Income-tax Officer to extend the time for filing the return has been taken away. But the right of the assessee to file the return before the period of assessment and before the period mentioned in Sub-section (4) of Section 139, if it is made within the period stipulated in Sub-section (1) of Section 139, which is similar to the time mentioned in Sub-sections (1) and (2) of Section 22 of the 1922 Act, is not in any way affected. If that is the position the return can be filed within the time specified by Sub-section (4) of Section 139 and once that return is filed within that time, it would be deemed to be in accordance with law and then loss had to be determined under the relevant provisions of the 1961 Act which embodies principles similar to Section 24(2) of the old Act in this respect. If that is the position, in our opinion, the alteration in the new Act by which there has been curtailment of right of the Income-tax Officer to extend the time, does not materially affect the situation in this case. In this connection we may refer to the decision of the Mysore High Court in the case of B.B. Danganavar v. Income-tax Officer : [1967]65ITR370(KAR) . That, however, was a decision which was not under the new Act but the Mysore High Court was of the opinion that having regard to the alterations made in the new Act, if the return had not been filed under Section 139(1) the assessee lost the right to carry forward the loss in a particular year. The Mysore High Court did not have the advantage of the judgment of the Supreme Court mentioned before which the Supreme Court delivered subsequently even in respect of the previous enactment. In view of the aforesaid reasons and in view of the principles enunciated by the Supreme Court, which we are of the opinion are applicable in this case, we are unable, with respect, to accept the conclusion arrived at by the Mysore High Court on this aspect. In this case the return was filed. As a matter of fact, the assessment under Section 143 has been made. If that is the position, then the assessee is entitled to demand that the loss should be determined and carried forward as a matter of course.

10. In that view of the matter, the question referred to this court is answered in the affirmative and in favour of the assessee.

11. Each party will pay and bear their own costs.

Pyne, J.

12. I agree.


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