Orissa H.C : revised statement of income after filing original return other than by way of filing revised return as contemplated under Section 139(5) of the I.T. Act

High Court Of Orissa

Orissa Rural Housing Development Corpn. Ltd. vs. ACIT, Circle – 1(1)

Section : 139, 4, 143, 142, 264, 237

V. Gopala Gowda, Cj. And B.N. Mahapatra, J.

W.P. (C) No. 4554 Of 2011

December 15, 2011

JUDGMENT

B.N. Mahapatra, J. – This writ petition has been filed for quashing the following orders:-

(i) The order of assessment dated 23.12.2008 (Annexure-1) passed by opposite party No. 1-Asstt. Commissioner of Income Tax, Circle-I (1), Bhubaneswar (for short, “Assessing Officer”);

(ii) The order issued under Section 264 of the I.T. Act dated 11.03.2010 (Annexure-1A) passed by the Commissioner of Income Tax, Bhubaneswar; and

(iii) The order dated 15.09.2010 (Annexure-1B) passed by the Commissioner of Income Tax (Appeals)-I, Bhubaneswar.

The further prayer of the petitioner is for refund of tax collected on the ground that such collection is without authority of law.

2. Petitioner’s case in a nutshell is as follows:

The Government of India as well as Government of Orissa in their respective Policies decided to finance the Housing Sector and it was conceived that the same shall be done through agencies and instrumentality of the State, both in the Centre as well as the State through non-banking financial companies. In furtherance of such a policy, the State Government through its Housing and Urban Development Department decided to promote and float a Public Limited Company in the name and style of Orissa Rural Housing Development Corporation Ltd. and accordingly the petitioner Company was incorporated on 19.08.1994 under the Companies Act, 1956. The authorized share capital was Rs. 50 crores divided into equity share of Rs. 10 each and there was redeemable preference share of Rs. 100/- each for Rs. 10.0 crores whereas share capital was Rs. 48,16,00,000/- which was paid entirely by the State of Orissa.

3. The petitioner carries on the business of a non-banking financial institution. To carry on its business, the petitioner borrows and lends money under various schemes, either on its own approval or concurrence from the Government. The petitioner maintains details of account for the purpose of Income Tax. It commenced its business during the year 1994-95 and follows mercantile system of accounting to recognize income and expenses to compute its total income. It had got its account audited for the financial year ending on 31st March, 1995 and up to 31st March, 2006 and returns of income were filed with the Income Tax Department for those periods. Difficulty of the petitioner arose when the statutory auditors were not appointed in time and its own appointed auditor delayed in completing its audit.

4. The petitioner submitted its return for the assessment year 2006-07 on 30.11.2006 within the due time wherein it disclosed its total loss at Rs. 1,94,48,311/-. The Assessing Officer issued notice (Annexure-3A) to the petitioner on 10.10.2007 under Section 143(2) of the Income Tax Act (for short, “I.T. Act”) requiring the petitioner to attend his office on 09.01.2008 either in person or by a representative duly authorized in writing on this behalf or produce or cause to be produced any documents, accounts and any other evidence on which the petitioner may rely in support of the return filed by it. Subsequently, on 03.10.2008 a notice (Annexure-3B) under Section 142(1) of the I.T. Act was issued to the petitioner to produce or cause to be produced accounts and documents mentioned in the said notice for the assessment year 2006-07. On 08.12.2008, the petitioner filed a petition under Annexure-3C before opposite party No. 1-Asstt. Commissioner of Income Tax, Circle-1, Bhubaneswar (for short ‘Assessing Officer’) for revising its return of income. Learned Assessing Officer without taking this fact into consideration passed the impugned order dated 23.12.2008 (Annexure-1) computing the income at Rs. 22,52,92,540/- and demanded Rs. 7,58,33,470/- towards tax, surcharge and education cess and also charged interest under Section 234B for Rs. 2,50,25,022/-, total of which was Rs. 10,08,58,492.

5. Being aggrieved by the said order, the petitioner filed a revision petition on 18.02.2009 before opposite party No. 2-Commissioner of Income Tax. On 11.02.2009, the petitioner moved a petition before the Additional Commissioner of Income Tax, Range-I, Bhubaneswar for grant of stay of the tax demanded till disposal of the case under Section 264 of the Income Tax Act. The Asstt. Commissioner refused to grant stay by order dated 05.05.2009 (Annexure-3/F). Being aggrieved by such order, the petitioner approached the Commissioner of Income Tax on 27.07.2009 and the learned Commissioner disposed of the revision petition by his order under Annexure-1A refusing to interfere with the assessment on the ground that the assessee after filing original return cannot make a fresh claim other than by way of filing a revised return. The petitioner on receiving the order of the Commissioner filed First Appeal on 26.03.2010 before the Commissioner of Income Tax (Appeals), who dismissed the appeal inter alia holding that the delay in filing the appeal is not condonable and that the appeal is not maintainable as the appellant has waived its right to appeal by going for a revision under Section 264 of the Act. The C.I.T. (Appeal) further held that the order of the Assessing Officer against which an appeal is sought to be filed has since merged with the order passed under Section 264 of the I.T. Act by the Commissioner of Income Tax no appeal before him can lie against the order passed by the learned CIT. Hence, the present writ petition.

6. Mr. B.K. Mahanti, learned Senior Advocate appearing on behalf of the petitioner submitted that learned Assessing Officer has committed an error by not considering the revised statement of income filed before him on 08.12.2001 while passing the order of assessment. At the time of filing the return, the statutory audit was not completed. Returns were filed on the basis of the provisional accounts and interest on Non-Performing Asset (for short, ‘NPA’) account was wrongly recognized in contravention with the provisions of National Housing Bank (for short, ‘NHB) guidelines and the petitioner-assessee has also claimed expenses in contravention of Section 43D of the I.T. Act. On the basis of petition dated 08.12.2001, though the petitioner explained before the learned Assessing Officer that the National Housing Bank Act (for short, ‘NHB Act’) has overriding effect over the Income Tax Act and on a reworking of the figure the loss shown would go up to Rs. 43,63,93,492/-. the learned Assessing Officer has not considered the same. Both the learned Assessing Officer and the Commissioner of Income Tax are wrong in holding that the petitioner-assessee has no right of claim fresh exemption before the Assessing Officer after filing the original return other than by way of filing revised return. Even if the assessee-follows mercantile system of accounting to recognize income and expenses to compute its total income there is no bar for the assessee to revise its return of income by way of filing revised statement of income as the income of NPA account was wrongly recognized in contravention of National Housing Bank guidelines expenses were claimed in contravention of Section 43B of the I.T. Act. The learned Assessing Officer should have issued notice under Section 139(9) to rectify the defect in the return. Notice under Section 143(2) without issue of notice under Section 142(1) was premature. Notice issued under Section 142(1) itself was time-barred having served after one year from the date of filing of the return. The statutory audit was over on 06.12.2010 and approval of the CAG has been given on 07.02.2011. Thereafter, the petitioner had submitted a revised return by registered post. The petitioner is subjected to an unjust and undue assessment against which the petitioner has no redressal, and particularly because, the petitioners business would come to a standstill when it will be forced to pay tax which is not payable under law.

7. Mr. Mohanty further submitted that after disposal of the revision petition by learned Commissioner, the Assessing Officer on 17.03.2009 has collected Rs. 16,47,224.00 by an attachment from the petitioner’s bank account as informed by its bankers, the SBI, Union Bank of India and UCO Bank. Unless there is a direction of this Court, the petitioner would not get the refund of amount collected by attachment. The petitioner has no real income and it is liable to pay back the amount borrowed from HUDCO.

8. Mr. A.K. Mohapatra, learned Senior Standing Counsel appearing on behalf of the Income Tax Department submitted that there is no infirmity or illegality in the orders passed by the Assessing Officer under Annexure-1, the order passed by the Commissioner of Income Tax dated 11.03.2010 (Annexure-1A) as well as order of the Commissioner of Income Tax (Appeals) dated 15.09.2010 (Annexure-1B) for the reasons stated in the respective orders. Placing reliance on the judgment of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323/ 157 Taxman 1 , it is submitted that the Assessing Officer has no power to entertain a fresh claim made by the Assessee after filing of the original return other than by filing of a revised return. Supporting the order of the Commissioner of Income Tax (Appeals), Mr. Mohapatra submitted that the petitioner having invoked the provision of Section 264 of the IT Act, thereafter he has no right to approach the Commissioner of Income Tax (Appeals) invoking its appellate jurisdiction. Referring to Section 264(4) of the I.T. Act, he further submitted that the statute in this regard is amply clear and therefore, the Commissioner of Income Tax (Appeals) is justified to hold that the appeal filed by the petitioner before him is not maintainable. Concluding his argument, Mr. Mohapatra prayed for dismissal of the writ petition.

9. On the rival contentions of the parties, the following questions fall for consideration by this Court:-

(i) Whether an assessee can revise his return of income by way of filing a revised statement of income after filing original return other than by way of filing revised return as contemplated under Section 139(5) of the I.T. Act?

(ii) Whether the learned Assessing Officer as well as the Commissioner of Income Tax is justified in holding that the petitioner-assessee has no right to claim fresh exemption before the learned Assessing Officer after filing of the original return other than by way of filing revised return?

(iii) Whether an assessee who follows Mercantile system of accounting and furnishes the return of income on the basis of accrued interest income can revise its return of income by way of filing a revised statement of income on the ground that the interest on NPA account was wrongly recognized in contravention of NHB guidelines and expenses were claimed in contravention of Section 43D of the I.T. Act?

(iv) Whether the National Housing Bank Act, 1987 overrides the Income Tax Act, 1961?

(v) Whether there is any sequence prescribed under the Income Tax Act as to in what manner two notices, i.e., notice under Sections 142(1) and 143(2) of the I.T. Act are to be issued so far production of documents and/or accounts is concerned?

(vi) Whether the Commissioner of Income Tax (Appeals) is justified in holding that the appeal filed by the petitioner after rejection of its petition under Section 264 by the Commissioner of Income Tax is not maintainable under the Income Tax Act?

(vii) Whether any refund can be granted by exercising power under Articles 226 and 227 of the Constitution when refund does not flow from an order passed under the Statute?

10. Question Nos.(i), (ii) and (iii) being interlinked, they are dealt with together.

11. The undisputed facts are that the petitioner assessee follows mercantile system of accounting and has filed its return of income for the financial year 2005-06 on 30.11.2006. Subsequently, on 08.12.2008 the petitioner filed a petition before opposite party no.1-Assessing Officer with a revised statement of income stating therein that at the time of filing of returns, the statutory audit was not completed. The returns were filed on the basis of the provisional account and interest on NPA was wrongly recognized in contravention of NHB guidelines and it also claimed expenses in contravention of Section 43D of the I.T. Act. On the basis of the original return filed on 30.11.2006 notice was issued on 10.10.2007 under Section 143(2) of the I.T. Act. Notice under Section 142(1) dated 03.10.2008 was also issued to the petitioner to produce the documents/accounts. Assessment was completed under Section 143(3) on the basis of the original return on 23.12.2008. The petitioner filed a revised return by registered post on 07.01.2011.

12. It is quite possible and natural that in submitting a return, some bona fide omission or wrong statement may have occurred. In order to obviate this possibility the legislature has made provisions in section 139(5) enabling an assessee to furnish a revised return. Thus, the assessee has a right to file revised return if he discovers any omission or any wrong statement in the originally filed return. Such a revised return can be furnished at any time before expiry of one year from the end of the relevant assessment year or the completion of the assessment, whichever is earlier. Thus, the statute provides safeguard to an assessee in case he discovers any omission or wrong statement in his original return to file a revised return. The further requirement is that this omission or wrong statement in the original return must be due to a bona fide inadvertence or mistake on the part of the assessee.

13. There is a distinction between a revised return and a correction in the originally filed return. If an assessee files an application for correcting a return already filed or for making some amendments therein, it would not certainly mean that he has filed a revised return. Such a petition is not recognized under the Income Tax Act. The basis of assessment is the return filed by the assessee. If a revised return is filed under Section 139(5) of the I.T. Act the assessment can be completed only on the basis of revised return and not otherwise.

14. Where an assessee, following mercantile system of accounting, furnishes a return of income on the basis of accrued income, the filing of a revised statement of income, on the ground that such interest income had not been received during the relevant previous year, is of no avail. In absence of the revised return as provided under Section 139(5), the Assessing Officer is bound to make assessment on the basis of original return. Further, a change over from mercantile system to cash system is not permissible by filing a revised return much less a revised statement of income.

15. There is no provision under the Income Tax Act to enable an assessee to revise his income by way of filing a revised statement of income as has been done by the petitioner. In the instant case, a revised statement of income was filed on 08.12.2008 before the Assessing Officer after commencement of assessment proceedings. If such revised statement of income is accepted, then the very purpose of enacting Section 139(5) under the I.T. Act for filing revised return shall be frustrated and provision of said section becomes redundant. During the relevant time, as the assessee had maintained the accounts on mercantile basis, it was bound to file the returns on that basis.

16. The Hon’ble Supreme Court in the case of Goetze (India) Ltd. (supra), held that the Assessing Officer has no power to entertain fresh claim made by the assessee after filing of the original return other than by filing of revised return.

17. Law is well-settled that when the statute requires to do certain thing in certain way, the thing must be done in that way or not at all. Other methods or mode of performance are impliedly and necessarily forbidden. The aforesaid settled legal proposition is based on a legal maxim “Expressio unius est exclusion alteris”, meaning thereby that if a statute provides for a thing to be done in a particular manner, then it has to be done in that manner and in no other manner and following of other course is not permissible. (See Taylor v. Taylor [1876] 1 Ch.D.426; Nazir Ahmed v. King Emperor AIR 1936 PC 253; Ram Phal Kundu v. Kamal Sharma [2004] 2 SCC 759 and Indian Bank’s Association v. Devkala Consultancy Service AIR 2004 SC 2615).

18. Therefore, we are of the view that the learned Assessing Officer is fully justified in completing the assessment under Section 143(3) of the I.T. Act on the basis of the original return filed under Section 139(1) without taking into consideration the revised statement filed on 08.12.2008 in absence of the revised return as contemplated under Section 139(5) of the I.T. Act and the CIT is also justified in confirming the view of the learned Assessing Officer.

19. Question No.(iv) is as to whether the National Housing Bank Act, 1987 overrides the Income Tax Act, 1961?

Though both the Acts are Central Act they are occupying different fields. The purpose of enacting both the Acts are different. Income Tax Act has been enacted to levy tax on income which is covered under Entry No.82 of List-I-Union List of Seventh Schedule to the Constitution. The National Housing Bank Act, 1987 has been enacted to promote housing finance institutions both at local and regional levels to provide financial and other support to such institutions which are covered under Entry-45 of List-I-Union List of Seventh Schedule to the Constitution of India. There is no such provision in the National Housing Bank Act that it will override the Income Tax Act. Since the impugned orders are passed under the Income Tax Act, 1961, they are governed by the provisions of Income Tax Act. Therefore, the contention of the petitioner that National Housing Bank Act, 1987 overrides the Income Tax Act, 1961 is wholly untenable in law.

20. Question No.(v) is as to whether there is any sequence prescribed under the Income Tax Act as to in what manner two notices, i.e., notice under Sections 142(1) and 143(2) of the I.T. Act are to be issued so far as production of documents and/or accounts is concerned?

21. Under Section 142(1) of the I.T. Act, the Assessing Officer for the purpose of making assessment may serve on any person who has made a return under Section 139 or in whose case time allowed under Section 139(1) for furnishing return has expired, a notice requiring him on a date therein specified:

(i) Where such person has not made a return within the time allowed under Section 139(1) to furnish a return of his income or income of any person in respect of whom he is assessable under the Act in the prescribed Form, or

(ii) To produce or cause to be produced such accounts or documents as the Assessing Officer may require or to furnish in writing and verify in the prescribed manner on such points or matter as the Assessing Officer may require.

Thus, as stated above, Section 142(1), inter alia, empowers the Assessing Officer to issue notice under Section 142(1) for production of accounts and/or documents for the purpose of making assessment.

22. At this juncture, it is necessary to reproduce Section 143(2) of the I.T. Act:

“143. Assessment

** ** **

(2) Where a return has been furnished under Section 139, or in response to a notice under sub-section (1) of section 142, the Assessing Officer shall,-

(i)

where he has reason to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible, serve on the assessee a notice specifying particulars of such claim of loss, exemption, deduction, allowance or relief and required him, on a date to be specified therein to produce, or cause to be produced, any evidence or particulars specified therein or on which the assessee may rely, in support of such claim:

Provided that no notice under this clause shall be served on the assessee on or after the 1st day of June, 2003,

(ii) notwithstanding anything contained in clause (i), if he considers it necessary or expedient to ensure that the assessee has not under stated the income or has not computed excessive loss or has not under paid the tax in any manner, serve on the assessee a notice requiring him, on a date to be specified therein, either to attend his office or to produce, or cause to be produced there, any evidence on which the assessee may rely in support of the return:

Provided that no notice under [clause (ii)] shall be served on the assessee after the expiry of twelve months from the end of the month in which the return is furnished.”

23. Thus, notice issued under Section 143(2) is issued requiring the assessee to produce his accounts, evidence, and particulars on which the Assessee may rely in support of his claim made in the return. The return is the basis on which the Assessing Officer examines the accounts and/or documents and passes the order of assessment. In the instant case, return of income for the assessment year 2006-07 was filed on 30.11.2006 and notice under Section 143(2) was issued on 10.10.2007, which is within the period of limitation, i.e., before expiry of twelve months from the end of the month in which the return was furnished.

24. The purpose of service of notices issued under Section 142(1) and 143(2) is different. There is no sequence prescribed as to in what manner two notices are to be issued. Therefore, there is nothing to say that the notice under Section 142(1) should precede notice under Section 143(2) so far as production of documents/accounts is concerned.

25. Question No.(vi) is as to whether the Commissioner of Income Tax (Appeals) is justified in holding that the appeal filed by the petitioner after rejection of his petition under Section 264 by the Commissioner of Income Tax is not maintainable under the Income Tax Act.

26. Under Section 264 of the I.T. Act, the Commissioner is empowered to revise the order passed by an authority subordinate to him on his own motion or an application filed by the assessee for such revision. Section 264(4) of the I.T. Act provides the circumstances where the Commissioner shall not revise any order under Section 264. For better appreciation, Section 264(4) of the I.T. Act is reproduced below:

“264. Revision of other orders

** ** **

(4) The Commissioner shall not revise any order under this section in the following cases:-

(a) where an appeal against the order lies to the Deputy Commissioner (Appeals) or to the Commissioner (Appeals) or to the Appellate Tribunal but has not been made and the time within which such appeal may be made has not expired, or, in the case of an appeal to the Commissioner (Appeals) or to the Appellate Tribunal, the assessee has not waived his rights of appeal.”

** ** **

[Emphasis supplied]

27. Thus, the assessee can invoke the provisions of Section 264 of the I.T. Act only after the time for filing the appeal is expired or after waiver of his right of appeal. Section 264 of the I.T. Act is an alternative remedy available to the petitioner-assessee, who does not want to avail remedy by way of appeal. Thus, remedy available under section 264 of the I.T. Act is an alternative remedy and not an additional remedy and the assessee is not permitted to pursue both the remedies either simultaneously or one after another. In the instant case, it is only after rejection of the petition under Section 264 by the Commissioner of Income Tax, the assessee has filed appeal, which right as stated above, by approaching the Commissioner under Section 264, the petitioner has lost. Apart from the above, once the revisional power vested with the Commissioner under Section 264 of the I.T. Act is invoked and the Commissioner passes the order by exercising his jurisdiction under that section, the order of assessment merges with the order of revision. The order passed by the Commissioner under Section 264 is also not an appealable order under Section 246/246A of the I.T. Act.

28. In view of the above, the Commissioner of Income Tax (Appeals) is justified in not entertaining the appeal filed by the petitioner before him on the ground that the same is not maintainable.

29. Question No.(vii) is as to whether any refund can be granted by exercising power under Article 226 and 227 of the Constitution when refund does not flow from an order passed under the Statute.

30. The prayer in the present writ petition is for grant of refund. Since we have not quashed the order of assessment dated 23.12.2008 (Annexure-1), order dated 11.03.2010 passed under Section 264 of the I.T. Act (Annexure-1A)and first appellate order dated 15.09.2010 (Annexure-1B) for the reasons stated above, no order granting refund of tax collected against the demand raised in the impugned assessment order can be passed. Moreover, such a prayer in the writ petition is thoroughly misconceived in law because refund must flow from an order passed under the Statute. While exercising power under Article 226 of the Constitution, the High Court is not acting as authority under any Statute.

31. The Hon’ble Supreme Court in the case of Suganmal v. State of Madhya Pradesh [1965] 56 ITR 84, held that though the High Courts have power to pass any appropriate order in the exercise of the powers conferred under Article 226 of the Constitution, such a petition solely praying for the issue of a writ of mandamus directing the State to refund the money is not ordinarily maintainable for the simple reason that a claim for such a refund can always be made in a suit against the authority which had illegally collected the money as a tax.

32. In view of the above, the prayer of the petitioner in this writ petition for grant of refund cannot be granted.

33. For the reasons stated ( supra), the writ petition is dismissed.

No order as to costs.

[Citation : 343 ITR 316]

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