Vildirect: IncomeTax-caselaws-1972-VIL-312-ALH-DT

1972-VIL-312-ALH-DT

Equivalent Citation: [1973] 90 ITR 236

ALLAHABAD HIGH COURT

Date: 09.03.1972

DHAMPUR SUGAR MILLS LIMITED

COMMISSIONER OF INCOME-TAX, DELHI (CENTRAL).

BENCH

Judge(s) : H. SWARUP., R. S. PATHAK.

JUDGMENT

HARI SWARUP J.-This reference has been made by the Income-tax Appellate Tribunal at the instance of the assessee, the Dhampur Sugar Mills Ltd.

A return of income was filed by the assessee, a company incorporated under the Indian Companies Act, in Form A under rule 19 on June 20, 1961, showing a loss of Rs. 3,94,196. This return was not accompanied by the balance-sheet and the profit and loss account as the same were not ready. Later on, on August 26, 1962, the profit and loss accounts and the balance-sheet were submitted. Thereafter, the assessee filed a revised return on October 30, 1962. Although it was also in Form A under rule 19 of the old Act, the return was complete otherwise. The Income-tax Officer had issued a notice under section 22(2) of the Indian Income-tax Act, 1922, and the first return was filed in compliance thereof. After the revised return was filed by the assessee the Income-tax Officer issued a notice to the assessee under section 143(2) of the Income-tax Act, 1961, and finally completed the assessment under section 143(3) of the Act. The assessee, feeling aggrieved, filed an appeal against the assessment and, inter alia, took the ground that assessment could not legally be made under section 143(3) of the 1961 Act as the original return had been filed before 1st April, 1962, under the provisions of the 1922 Act. The Appellate Assistant Commissioner accepted the assessee's contention and cancelled the assessment order on the ground that it could not be made under the new Act as the return had been filed originally before the enforcement of that Act.

The Commissioner of Income-tax filed an appeal against the order of the Appellate Assistant Commissioner before the Income-tax Appellate Tribunal and the Tribunal allowed the appeal holding that the assessment order could be validly made under section 143(3) of the 1961 Act. The assessee applied for referring to this court for its opinion four questions of law. The Tribunal, however, has referred only one question of law which is as follows:

" Whether, on the facts and circumstances of the case, the assessment was validly made under section 143(3) of the Income-tax Act, 1961?"

The Tribunal negatived the contention of the revenue that the assessment could be deemed to have been made under section 22(3) of the 1922 Act on the ground that no proceedings under section 23(3) of the said Act were taken and the notice was specifically issued under section 143(3)(ii) of the 1961 Act by the Income-tax Officer before completing the assessment and that the assessment had been in fact completed by him under that section.

Learned counsel for the department contended that the question referred by the Tribunal should be refrained in the following terms:

"Whether, on the facts and in the circumstances of the case, the assessment for the assessment year 1961-62, which purports to have been made under section 143(3) of the 1961 Act is valid?"

I do not think that the reframing of the question is either necessary or will more correctly represent the controversy between the parties before the Tribunal. I accordingly deal with the question as it is.

The Tribunal held, firstly, that the return filed by the assessee on 20th June, 1961, in compliance with the notice under section 22(2) of the 1922 Act was invalid as it was given on a wrong form, was not properly verified, and was not accompanied by the necessary documents; secondly, that the defects and shortcomings in the return of 20th June, 1961, having been made good only in August, 1962, the complete return must be deemed to be filed after April 1, 1962, and, thirdly, when the revised return was filed the earlier return was superseded and the assessment was to be made on the basis of the new return filed on 30th October, 1962, i.e., after 1st April, 1962. On these findings the Tribunal held that the case was covered by clause (b) and not clause (a) of sub-section (2) of section 297 of the 1961 Act. The contention of the assessee is that as the return was filed originally before April 1, 1962, the provisions of clause (a) and not clause (b) would be applicable.

I am unable to hold that the return filed by the assessee in June, 1961, was a nullity or suffered from such invalidity as to make it equal to no return within the meaning of section 297(2)(a) of the 1961 Act. The defect that the return was in Form A which was not meant for the company will not vitiate the return. No error in the particulars supplied has been pointed out. Similarly, the mention in the verification clause of a "firm" instead of "company" will not make the return invalid as the signatures in the verifying clause did mention the name of the assessee as Dhampur Sugar Mills Ltd. The circumstance that the return was not accompanied by the profit and loss account or the balance-sheet will no doubt render the return incomplete, but will not make it invalid so as to be treated as non est, for purposes of section 297(2)(a) of the 1961 Act.

I am also unable to agree with the view of the Tribunal that the return filed in June, 1961, should be deemed to be no return till its defects were removed by the filing of the balance-sheet and the profit and loss account in August, 1962. The ground upon which the return filed in June, 1961, is said to be defective is not so fundamental in nature as to take away from that document its character of a return. The return when filed was a return in all essential respects, and the removal of the defects merely made good the shortcomings from which it suffered. It must be held that the return in question must be considered as filed by the assessee in June, 1961, and not subsequently when the defects were removed.

The question however remains as to whether this return will continue to form the basis for purposes of assessment even after it was substituted by a revised return. Section 22(3) of the 1922 Act as also section 139(5) of the 1961 Act permit an assessee to file a revised return if he discovers any omission or wrong statement in the return filed by him. 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 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 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. Learned counsel for the assessee, to support his contention to the contrary, urged that, as penalty proceedings under section 28(1)(c) of the 1922 Act or under section 271(2)(c) of the 1961 Act are permissible if the assessee conceals the particulars of his income or deliberately furnishes inaccurate particulars of such income in the original return even though he may subsequently file a correct and complete revised return, it must be held that the original return is also the effective return. I am not inclined to accept the contention. A person is penalised for the wrong act that he does and the offence becomes complete as soon as the act is done. It cannot be cured by subsequent mending. It is on this principle that an assessee can be penalised for concealing the particulars of his income or deliberately furnishing inaccurate particulars of such income. But, when an assessment has to be made the assessee is given a right to file a correct and complete return if he discovers an error or omission in the return filed earlier. The assessment can be completed only on the basis of the correct and complete return. The earlier return, after a revised return has been filed, cannot form the basis of assessment although it may be used to indicate the conduct of the assessee. Hence, for the purpose of assessment of income, the effective return must be the revised return filed by the assessee ultimately.

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. The same view has been taken in Gopaldas Parshottamdas v. Commissioner of Income-tax.

Section 297(2)(a) of the 1961 Act is a saving clause. It permits the taking of proceedings for the assessment relating to any year prior to the enforcement of the Act in case the assessee had filed a return of income before the commencement of the Act. Normally, after the 1922 Act was repealed, proceedings had to be taken under the 1961 Act. But clause (a) of sub-section (2) of section 297 permits the taking of such proceedings. On the other hand, clause (b) of sub-section (2) makes it mandatory that when the return of income is filed after the commencement of the new Act for the assessment years ending prior to 31st March, 1962, the assessment of the person for that year shall be made in accordance with the procedure specified in the 1961 Act. It appears that for the purpose of continuing proceedings for years ending prior to the commencement of the new Act, the return of the income has been made the starting point. Normally, proceedings for the assessment must be deemed to commence when the notice under section 22 of the 1922 Act or section 139 of the new Act is issued to an assessee, but for continuing the proceedings clauses (a) and (b) of sub-section (2) of section 297 make the return the basis for the applicability of the provisions of the old and new Acts. The return contemplated in these two clauses is the return on the basis of which assessment is to be completed. A return which has been substituted by a revised return is, for all practical purposes, the return of income as the assessment has to be completed on the basis of the revised return. After the revised return is filed the assessee has to prove the correctness and completeness of the revised return. Similarly, the assessing authority has to see that the revised return discloses the correct income. Although the proceedings are taken by applying the old Act, when the return is filed prior to April 1, 1962, by virtue of clause (a) of sub-section (2) of section 297 of the 1961 Act, the proceedings get a new form when the assessee voluntarily files a revised return after April 1, 1962, then assessment must be completed by virtue of clause (b) of sub-section (2) of section 297 of the 1961 Act in accordance with the procedure specified in the Act of 1961.

I am accordingly of the opinion that the Tribunal was right in holding that, on the facts and circumstances of the present case, the assessment was validly made under section 143(3) of the Income-tax Act, 1961, and answer the question referred to us in the affirmative. The Commissioner of Income-tax is entitled to his costs which I assess at Rs. 200. Counsel's fee is assessed at the same figure.

PATHAK J.-I agree with my brother Hari Swarup on the several points considered by him, but with great respect I am unable to agree that the case can be said to fall under section 297(2)(b) of the Income-tax Act, 1961. In my opinion, it is section 297(2)(a) which applies. The assessee filed his original return of income on June 20, 1961. A proceeding came into existence. On April 1, 1962, when the Income-tax Act, 1961, came into force, section 297(2)(a) was immediately attracted to that proceeding. Accordingly, the proceedings for the assessment of the assessee for the year to which the return pertained could be taken and continued as if the Income-tax Act, 1961, had not been passed. In other words, the assessment proceedings could be taken and continued under the Indian Income-tax Act, 1922. Subsequently, when the assessee filed a revised return, that could not put a stop to the operation of the Act of 1922. The revised return would, in its terms, be governed by the Act of 1922. A revised return in itself contemplates that a proceeding has begun earlier and a return has already been filed. It will be noted that the provisions of the Act of 1922 apply to a proceeding pending on April 1, 1962, by the automatic operation of section 297(2)(a). I do not think that Parliament ever intended that by his subsequent conduct an assessee could stop that law from operation and substitute for it the operation of another law. It may be that for the purpose of assessment it is the revised return which is the document for consideration. But, in my opinion, for the purpose of section 297(2)(a) it is the first return filed by the assessee.

But, the matter does not end there. The Income-tax Officer had jurisdiction to take and continue the assessment proceedings. He enjoyed that jurisdiction under the Act of 1922 by virtue of section 297(2)(a) of the Act of 1961. The conditions and limitations to which that jurisdiction is subject do not differ in any material respect from those governing the corresponding jurisdiction under the Income-tax Act, 1961. Therefore, although the assessment proceedings purported to have been taken in its later stage by reference to the provisions of the Act of 1961, it must be referred to the jurisdiction of the Income-tax Officer under the Act of 1922.

In my opinion, the assessment for the assessment year 1961-62 is a valid assessment. The question is answered in the affirmative. The Commissioner of Income-tax is entitled to his costs, which I would assess at Rs. 200. Counsel's fee is assessed at the same figure.

BY THE COURT.-For the reasons contained in our respective judgments the question is answered in the affirmative. The Commissioner of Income-tax is entitled to his costs, which we assess at Rs. 200. Counsel's fee is assessed at the same figure.

Question answered in the affirmative.

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