Calcutta H.C : Whether, on the facts and circumstances of the case and on interpretation of ss. 139, 147 and 153 of the IT Act, 1961, the Tribunal was correct in holding that the assessment was not barred by limitation ?

High Court Of Calcutta

Machino Techno Sales Ltd. vs. CIT

Sections 153(2), 153(3)

Asst. year 1987-88

Y.R. Meena & R.K. Mazumdar, JJ.

IT Ref. No. 75 of 1995

16th August, 2000

Counsel Appeared

Dr. Debi Prasad Pal with J.P. Khaitan & C.S. Das, for the Applicant : B.D. Halder, for the Respondent

JUDGMENT

Y.R. MEENA, J. :

On an application under s. 256(1) of the IT Act, 1961 (‘the Act’) the Tribunal has referred the following question for our opinion :

“Whether, on the facts and circumstances of the case and on interpretation of ss. 139, 147 and 153 of the IT Act, 1961, the Tribunal was correct in holding that the assessment was not barred by limitation ?”

For the asst. yr. 1987-88 the last date for filing the return under s. 139(1) of the IT Act, 1961 was 31st July, 1987. The assessee filed an application for extension of time on 3rd Aug., 1987. The time was allowed uptil 31st Oct., 1987. The return could not be filed. He again filed the application for extension of time for filing the return, and again the time was extended uptil 28th Feb., 1988. Even then the return was not filed by the assessee. The AO has issued the notice under s. 148 in October, 1988. On 30th March, 1989 the assessee filed the return declaring income at Rs. 49,65,690. The assessment was made on 22nd Aug., 1990 under s. 143(3), r/w s. 147(a) of the Act.

In appeal before the CIT(A), the assessee has taken the ground that the return was filed under s. 139(4) of the IT Act, 1961 and limitation for making the assessment is only one year. As the assessment has been made after limitation, the order of the ITO is time-barred. The CIT(A) has taken the view that return was filed in pursuance of the notice under s. 148, for that the limitation was 4 years and assessment was completed on 22nd Aug., 1990. That was well within limitation. The appeal was dismissed.

Before the Tribunal the same plea was taken. The Tribunal also found that the return was filed in pursuance to notice under s. 148 and that return cannot be treated as a return under s. 139(4) of the Act and the Tribunal has also dismissed the appeal of the assessee. Being aggrieved, he filed an application for reference under s. 256(1). The Tribunal has referred the aforesaid question.

The learned counsel for the assessee Dr. Pal submits that when there is a period for filing the return under s. 139(4) of the IT Act, 1961 and assessee has filed the return within that period, the return should be treated under s. 139(4) of the Act, 1961. He placed reliance on the decision of this Court in the cases of Satyanarayan Bhalotia vs. CIT (1993) 113 CTR (Cal) 429 : (1994) 207 ITR 1030 (Cal) : TC S9.1048, Kareemsons (P) Ltd. vs. CIT (1992) 103 CTR (Kar)(FB) 247 : (1992) 198 ITR 543 (Kar)(FB) : TC 9R.361, CIT vs. Kulu Valley Transport Co. (P) Ltd. (1970) 77 ITR 518 (SC) : TC 9R.269 and Kumar Jagdish Chandra Sinha vs. CIT (1996) 133 CTR (SC) 143 : (1996) 220 ITR 67 (SC) : TC S9.1054.

The learned counsel for the Revenue submits that when the return is filed in pursuance of the notice under s. 148 of the IT Act,1961 for that limitation is four years. Thus, the assessment made was within limitation and that is not barred by limitation. He placed reliance on the decision of this Court in the case of Balish Singh & Co. vs. CIT (1986) 56 CTR (Cal) 88 : (1987) 165 ITR 575 (Cal) : TC 9R.430, Kumar Jagdish Chandra Sinha vs. CIT (1982) 26 CTR (Cal) 323 : (1982) 137 ITR 722 (Cal) : TC R9.429 and Iqbal Singh Atwal vs. CIT (1983) 34 CTR (Cal) 179 : (1984) 147 ITR 599 (Cal) : TC 9R.349.

The facts are not in dispute that for the asst. yr. 1987-88, the last date for filing the return under s. 139(1) of the IT Act was 31st July, 1987. When return was not filed till 25th Oct., 1988, the AO has issued the notice under s. 148 on 26th Oct., 1988. The assessee has filed the return declaring income of Rs. 46,65,690 on 30th March ,1989. Therefore, the limited controversy before us is whether the return filed on 30th March, 1989, should be taken under s. 139(4) of the Act or should be taken in response to notice under s. 148 of the Act. If the return is taken in response to notice under s. 148, the assessment made is not barred by limitation.

Before we proceed we would like to refer to the decision on which both the sides have placed reliance and also referred by the Tribunal.

In case of Assam Consolidated Tea Estates Ltd. vs. ITO (1971) 81 ITR 699 (Cal) the controversy before this Court was when assessee has filed the return for the asst. yr. 1957-58, can ITO issue the notice under s. 148. This Court has taken the decision that the ITO cannot issue the notice under s. 148, ignoring the return filed for the asst. yr.1957-58. In the case in hand no return has been filed before notice under s. 148. Therefore, the decision has no application.

In Auto & Metal Engineers vs. Union of India (1978) 111 ITR 161 (P&H) : TC 9R.152 the issue before Punjab & Haryana High Court was that when the return was filed beyond the extended period and thereafter, notice was issued under s. 148. The assessee claimed that the assessment made was time-barred as the notice under s. 148 was illegal.

The Court has taken the view that the provisions contained in s. 153(1)(a)(iii) were inapplicable. The plea that the assessment for 1972-73 had become time-barred was without merit. When the assessee failed to file the return even within the outside limit, the ITO could have reason to believe that the income for the said year had escaped assessment and was empowered to take action under s. 147 of the Act.

In Iqbal Singh Atwal’s case (supra) the controversy before this Court was whether, when the return was filed before the notice under s. 148 and request of the assessee was that his return already filed be treated in response to notice under s. 148, and the assessment was completed on the basis of those returns, the assessment was valid. This Court has taken the view that the assessment was valid.

In the case in hand the notice was issued when no return was filed within the period extended for filing of the return.

In Balish Singh & Co.’s case (supra) the dispute before this Court was when the return was filed within the period permitted under s. 139(4) and thereafter revised return was filed under s. 139(5), whether the revised return filed was the valid return and whether the assessment was barred by limitation. This Court held that the assessment made on the basis of revised return was not barred by limitation.

In Kulu Valley Transport Co.(P) Ltd.’s case (supra) the fact before their Lordships was that assessee filed voluntarily returns disclosing loss for the asst. yrs. 1953-54 and 1954-55 and the question was whether the loss had to be determined and carried forward under s. 24(2) of the Indian IT Act, 1922, (‘the 1922 Act) though the returns were not filed within the time specified in the general notice under s. 22(1) and the time had not been extended by the ITO. No notice had been served on it under s. 22(2) of the Act of 1992. Their Lordships held that the losses had to be determined and carried forward on the basis of return filed within the time permitted under s. 22(3) of the Act of 1992, as that permits the filing of the return before assessment is made and that return should not be ignored. Their Lordships further held that even if two opinions are possible, the view which is in favour of the assessee must be accepted.

17. In Satyanarayan Bhalotia’s case (supra), the issue before this Court was when a notice under s. 148 was issued and return was filed before the time-limit permitted under s. 139(4), whether assessee is entitled to carry forward and set off of its loss even if the loss is determined in pursuance of a return filed under s. 148. This Court had taken the view that carry forward and set off of its loss should be allowed on the basis of return filed within the time permitted under s. 139 (4) of the IT Act, 1961.

18. In Kareemsons (P) Ltd.’s case (supra) the dispute before the Karnataka High Court was that when the return was voluntarily filed after notice under s. 148 but before the time permitted under s. 139(4) of the Act, the return should be treated under s. 139(4) of the Act and the assessee is entitled to carry forward loss declared in its return.

19. In Kumar Jagdish Chandra Sinha’s case (supra) one of the issues before their Lordships was when the return was filed under s. 139(4), can assessee file the revised return under sub-s. (5) of s. 139. Their Lordships answered it in the negative and reversed the decision of this Court in Kumar Jagadish Chandra Sinha’s case (supra). Their lordships held that the assessee could not file the revised return under sub-s. (5) of s. 139 in the case when he has filed the return under s. 139 (4), the provisions of s. 153(1)(c) are not attracted.

20. In the case in hand, we have no such dispute, no revised return has been filed under sub-s. (5) of s. 139, after filing the return under s. 139(4).

From the judgments referred to above we have seen that there is no direct decision on the issue that when a return was filed after notice under s. 148 should it be taken as a return under s.139(4) or a return in response to notice under s. 148 of the Act of 1961. Whether the return filed in response to notice under s. 148 of the Act or return filed under s. 139(4) depends upon the facts of each case. Therefore, for that we have to consider the facts available on record.

The facts available on record are not in dispute that the last date for filing of the return was 31st July, 1987. The assessee filed an application for extension of time to file the return. Extention was allowed uptil 31st Oct., 1987.The second time also assessee prayed for extention of time for filing the return. Time was allowed up to 28th Feb., 1988. The return was not filed till 25th Oct., 1988. On 26th Oct., 1988 notice under s. 148 of the IT Act was issued and served, return filed only on 30th March, 1989.

In the return there was no specified note that the return was filed under s. 139(4). On the contrary we found on record that assessment was made under s. 143(3), r/w s. 147(a) on 22nd Aug., 1990, treating the return in response to notice under s. 148. No objection was raised by the representative of the assessee that the return filed was under s. 139(4), therefore, the assessment is time-barred. For the first time before the CIT(A), the ground has been taken that the return filed by the assessee should be treated under s. 139(4) of the Act and if it is treated under s. 139(4) the assessment made by the ITO was time-barred.

The CIT(A) as well as the Tribunal on appreciation of facts found that the return filed by the assessee was in respect to notice under s. 148 and that is a question of fact. When the CIT(A) as well as the Tribunal found that the return was in response to the notice under s. 148, we found no justification to interfere with that finding.

We have also noted the fact that though the return was filed beyond the extended period but before the time permitted under s. 139(4) of the Act, therefore, that return was treated as valid and considered for making the assessment for the asst. yr. 1987-88. It is also pertinent to note that no explanation has been given during the argument that if assessee filed the return under s. 139(4), why objection was not raised before the ITO, that the return was filed under s. 139(4) and the ITO cannot make the assessment as the assessment is time-barred. Even no objection was raised when the assessment proceeding was taken treating the return of assessee in pursuance of the notice under s. 148. The assessee’s representative was appearing regularly in proceeding for order under s. 143(3), r/w s. 147 of the Act. That means return was also accepted by conduct that return was in pursuance of notice under s. 148. Thereafter how that fact can be challenged in appeal which was accepted before the AO by conduct. Thus, the question is not that the return should be treated under s. 139(4) or in response to the notice under s. 148 of the Act of 1961. The real question is whether the return was filed under s. 139(4) of the Act of 1961 or in pursuance of notice under s. 148 of the Act of 1961. In view of the aforesaid facts we are of the view that the return was filed in response to the notice under s. 148. When the return was filed in response to the notice under s. 148 of the Act, the limitation for assessment was provided under s. 153(2) of the Act which provides where the assessment, reassessment or recomputation is to be made under cl. (a) of that section after the expiry of four years from the end of the assessment year in which the notice under s. 148 was served. Admittedly, the assessment is made within four years from the date of issue of notice. Therefore, it cannot be said that the assessment is barred by limitation.

In the result we answer the question in the affirmative, that is, in favour of the Revenue and against the assessee.

[Citation : 247 ITR 451]

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