High Court Of Punjab & Haryana
Hind Samachar Ltd. vs. Union Of India & Ors.
Section 139(9), 140(c), 239, 240, 292B
Asst. Year 2000-01, 2001-2002, 2002-03
M.M. Kumar & Ajay Kumar Mittal, JJ.
Civil Writ Petn. Nos. 2652, 2715 & 16063 of 2006
11th March, 2008
Counsel Appeared :
Sanjay Bansal with Parvesh Saini, Parshant Bansal & S.K. Mukhi, for the Petitioner : Sanjiv Bansal & Akshay Bhan, for the Respondents
JUDGMENT
AJAY KUMAR MITTAL, J. :
This order will dispose of three writ petitions and two income-tax appeals, as the facts and the question of law involved is common in all these matters. The controversy is between the Hind Samachar Ltd., Jalandhar City, an assessee within the purview of the Income-tax Act, 1961 (for short “the Act”) and the IT Department. The writ petitions (CWP Nos. 2715, 2652 and 16063 of 2005) relating to the asst. yrs. 2000-01, 2001-02 and 2002-03 respectively, have been filed by the assessee whereas the appeals (ITA Nos. 534 and 535 of 2006) relating to asst. yrs. 2000-01 and 2001-02, respectively have been preferred by the IT Department.
For the purpose of this order, the facts have been taken from Civil Writ Petition No. 2715 of 2006 (asst. yr. 2000-01). As per averments made in the petition, the assessee filed its return of income on 30th Nov., 2000 (Annex. P-3) declaring an income of Rs. 31,71,87,310 wherein it made a claim for refund in the sum of Rs. 50,26,733. The verification to this return was signed by one Kultar Krishan (who is neither the managing director nor the director of the petitioner company). According to the petitioner, Kultar Krishan signed the verification in the capacity of an authorized signatory which authority had been bestowed on him by virtue of a resolution passed by the board of directors of the petitioner company in its meeting held on 1st April, 1998. The AO after processing the return under s. 143(1) of the Act, computed the refund payable to the petitioner in the sum of Rs. 60,54,511 (Rs. 49,83,144 + Rs. 10,71,367 on account of interest payable under s. 244A of the Act). The assessing authority wrote a letter dt. 18th July, 2003 (Annex. P-6) to the petitioner company, addressed to Kultar Krishan pointing out that since he had signed the return as authorized signatory of the petitioner company, he should furnish the said authorization for their record. Kultar Krishan was further required to specify the provision of the Act under which he had signed the return of income. The requisite information was required to be furnished on 23rd July, 2003 i.e. within four days of the date of the letter Annex. P-6. Just less than a fortnight, the AO issued a notice dt. 29th July, 2003 (Annex. P-7) under s. 154 of the Act on the petitioner company requiring it to justify the genuineness/validity of the return. While doing so, it was stated with reference to the return that since the authorized signatory (Kultar Krishan) who signed the verification in the return did not fall in the category of persons authorized to sign the return of income under s. 140(c) of the Act, the return in question was not valid.
The notice Annex. P-7 experienced a sharp reaction from the petitioner. In response to the above notice, the petitioner wrote three letters to the AO, dt. 8th Aug., 2003, 30th Sept., 2003 (both marked as Annex. P-8) and dt. 7th Oct., 2003 (Annex. P-9). By communication Annex. P-8, it was conveyed by the petitioner that it was absolutely due to unavoidable circumstances that the return had to be signed by Kultar Krishan. It was mentioned that owing to an impasse going on in the board of directors of the company, a resolution dt. 1st April, 1998 (Annex. P-5) was passed duly authorizing aforesaid Kultar Krishan to sign and file the return on behalf of the petitioner company. It was further stated that the issue of the deadlock in the board of directors was pending before the Company Law Board in Company Petition No. 76 of 1999. With a view to make the controversy more explicit, all that was stated is reproduced here in verbatim : “That the return was signed by Shri Kultar Krishan under the power and the authority given by the board of the company (supra) in view of the exceptional, unavoidable circumstances so as to comply with the necessary legal and statutory formalities and obligations. Shri Kultar Krishan has been authorized to sign and file on behalf of the company, inter alia, for taxation matters which as per legal advice, included signing and filing the return. There being a reasonable cause to do the same, there being a deadlock in the management, this was done to comply with the legal provisions. The return was duly processed and the assessee has received the refund order too. That the signing of the return by Shri Kultar Krishan is only a technical defect, if any, and in fact all efforts have been made for the necessary compliance of the legal requirements of filing the return with the Department and for paying the legitimate taxes on the basis of all the information available and to disclose all the affairs, the return was filed on time. Hence, it is a case of signing and verifying and filing the return and making the necessary compliance and not the case of avoidable escapement of the process of law and the legal formalities as required by the Department. Thus there is no mistake apparent from record. Further, since the return has been processed and even the refund has been received, the return not having been signed by the managing director but by Shri Kultar Krishan may be taken as a technical defect, if at all, under the above-said circumstances and be construed liberally in the interest of justice. In case you feel that even this technical defect, if at all, should be removed, an opportunity may be allowed to us to rectify the same. For this purpose, the director or even the chairman-cum-managing director can attend to sign the return under question.”
4. In letter dt. 30th Sept., 2003 (Annex. P-8), the petitioner while repeating the same stand, added further that due to deadlock in the board of directors and pendency of the matter before the Company Law Board, the petitioner company was advised in the manner noticed below : “In this connection, we were advised that given the extraordinary circumstances leading to unavoidable reasons wherein managing director or any other director is unable to sign or verify the return, a person unanimously authorized by the board of directors to act on behalf of the company may do the needful.”
5. In the above context, reference to certain judicial enunciations and the bare provisions of the Code of Civil Procedure on the subject was also made, which shall be referred to at the appropriate place, if so at all required. It was urged with vehemence that even if the issue being talked about in the instant matter is viewed by applying the parameters of the relevant provisions of the CPC, the non-signing of the return by the managing director or any other director is at best a curable defect. This defect is curable by the AO by calling upon the assessee to rectify the defect in the signatures in the return. A prayer was thus made that in view of the aforesaid circumstances and in the light of the judicial verdicts including that of the apex Court, no action be taken to hold that the return for the aforesaid assessment year was invalid. Further prayer was made that an opportunity may be afforded to the petitioner to rectify the aforesaid defect. Through yet another communication (Annex. P-9), the same prayer was reiterated.
6. Notwithstanding the above facts when the issue was yet pending, the petitioner company refiled its return for the same assessment year along with letter dt. 13th Oct., 2003 which was acknowledged in the Income-tax office on 26th Feb., 2004, (Annex. P-10) which, according to it, had been duly signed by the chairman-cum-managing director of the petitioner. With this, the petitioner pleaded that the defect as pointed out by the AO in the return under reference stood rectified.
7. The AO did not pay any heed to the pleas made by the petitioner that the non-signing of the return of income by the managing director as provided by s. 140(c) of the Act was a technical and curable defect in view of the provisions of s. 139(9) of the Act. Following the judgments relatable to the controversy, the return earlier filed by the petitioner was declared as invalid being void ab initio by order dt. 27th July, 2004 (Annex. P-11) passed in exercise of its power under ss. 154(6) and 244A(3) of the Act. Consequently, the interest paid in the sum of Rs. 10,71,367 and the refund of Rs. 49,83,144 were ordered to be withdrawn.
8. Dissatisfied with the impugned action of the respondents (Annex. P-11), the petitioner preferred appeal. The Commissioner of Income-tax (Appeals), Jalandhar [hereinafter to be referred to as “CIT(A)”], after considering various legal aspects and the judgments on the point and by placing reliance on s. 292B of the Act held that if the return is not signed by the person mentioned in s. 140 of the Act, it is only a curable defect, reversed the order (Annex. P-11) vide order dt. 9th Sept., 2004 (Annex. P-12). The operative part of the appellate order deserves to be and is noticed hereunder : “I have considered all the decisions submitted by the counsel in support of his view that the return filed was not invalid. After going through all the decisions and relevant record, I am of the considered opinion that after the introduction of s. 292B, if the return of income is not signed by the person mentioned in s. 140, it is only a curable defect and a notice for curing the defect has to be given and the return not be treated as invalid just like that. In the present case, the case is strongly in favour of the assessee as the action taken under s. 154 is beyond the provisions of law. Accordingly, the order under section …. (sic) is quashed. The order under s. 154 for the asst. yr. 2000-01 having been passed on identical facts is also quashed. In the result the appeals for both the years i.e. 2000-01 and 2001-02 are allowed.”
9. The averments in the petition further proceed on the premise that in order to give effect to the appellate order (Annex. P-12), the assessing authority issued notice dt. 25th Nov., 2004/1st Dec., 2004 (Annex. P-13) to the petitioner requesting as under : “It is clear that the return filed by you is defective and as such you are requested to remove the defects for necessary action at this end.”
10. The petitioner in turn responded to letter Annex. P-13 and wrote a letter dt. 8th Dec., 2004 (Annex. P-14) to the assessing authority that after the defect in the return had been held to be a curable defect, a notice was required to be issued to it by the assessing authority to remove the alleged defect. The petitioner, however, reminded the AO that even though no such notice had been issued to it, a return form duly signed by its managing director had already been filed which stood acknowledged in the office of the AO on 26th Feb., 2004 and by doing so, the defect stood cured. The assessing authority by another letter dt. 1st Feb., 2005 (Annex. P-
15) addressed to the principal officer of the petitioner company complained of non-compliance of what was asked for vide letter Annex. P-13 and once again requested the petitioner to remove the defect in the return. Vide Annex. P-16, the petitioner reiterated the same version as reflected in Annex. P-14.
11. The assessing authority finally rejected all pleas raised by the petitioner, vide order dt. 2nd May, 2005 (Annex. P-1) whereby the respondents refused to entertain the claim made by the petitioner for refund, on the ground of the same having not been in order, inasmuch as the same was held to be beyond the permissible time- limit fixed under the Act. It was stated in the order Annex. P-1 that notwithstanding the fact that the CIT(A) had held that defect under reference was a curable defect, the claim for issue of refund could not be entertained. It was further observed that in the aforesaid facts and circumstances, the petitioner was not eligible for refund even after the order under s. 154 of the Act (Annex. P-11) had been quashed by the CIT(A). The petitioner lodging strong protest against the order rejecting its claim, submitted vide letter dt. 18th July, 2005 (Annex. P-2) that the order Annex. P-1 was contrary to law and violative of the appellate order passed by the CIT(A). It was further stated that the same had been issued in complete violation of the principles of natural justice. A prayer was thus made on behalf of the petitioner to withdraw order Annex. P-1 and for issue of relevant refund voucher.
12. Thereafter a communication dt. 25th Aug., 2005, Annex. P-17, was sent to the principal officer of the petitioner company by the office of the Addl. CIT, Range-III, Jalandhar, pointing out some differences in figures against certain items contained in the return for the asst. yr. 2000-01 requesting him to produce relevant documents in his office. The petitioner responded the letter (Annex. P-17) vide letter dt. 29th Aug., 2005 (Annex. P-18). The petitioner attached with the petition a copy of resolution dt. 1st April, 1998 (Annex. P-19) whereas another copy of the same resolution is also available on record as Annex. P-5.
13. It is primarily this order (Annex. P-1) which has been sought to be quashed in the instant writ petition (CWP No. 2715 of 2006). Similar challenge has been made by the petitioner in the other two writ petitions pertaining to rest of the assessment years. Now it would be apt to notice the stand of the respondents in the written statement. In the written statement filed on behalf of the respondents all that has been stated is the repetition of the facts and the objection regarding petitioner’s claim for refund being beyond the time mentioned in the Act. By referring to provisions of s. 239 of the Act, it was stated that no claim for refund can be made after the expiry of one year from the last day of the assessment year. An endeavour was made to justify the refusal of petitioner’s claim on this count by stating that the claim for refund could validly be made upto 31st March, 2002 only but, since the verification on the return filed on 30th Nov., 2000 and signed by Kultar Krishan, was made by the managing director only on 8th March, 2005, the petitioner’s claim for refund was beyond the time specified in s. 239 of the Act even though the pointed defect had been removed. In other words, it was plainly stated that notwithstanding the orders passed by the appellate authorities in favour of the assessee, the return filed by the petitioner could not be considered to be a valid return in the eye of law. It was reiterated that the claim for refund was governed by a separate and independent provisions of the Act (s. 239) and the assessee had failed to fulfil the conditions specified therein and, therefore, the refund was rightly declined to the petitioner. Adverting to appeals, it needs be mentioned that IT Appeal No. 534 of 2006 filed under s. 260A of the Act by the Department, has arisen out of the order dt. 12th May, 2006 (Annex. P-III) [reported as Asstt. CIT vs. Hind Samachar Ltd. (2007) 106 TTJ (Asr) 441)—Ed.] passed by the Income-tax Appellate Tribunal, Amritsar Bench, Amritsar (for short “Tribunal”). It requires a specific reference that the IT Department filed appeal against the order of the CIT(A). The Tribunal concurred with the view taken by the CIT(A) and consequently, dismissed the appeal by order Annex. P-III. The order impugned in IT Appeal No. 535 of 2006 (relating to asst. yr. 2001-02) is also the same as in IT Appeal No.
534 of 2006. Surprisingly, it deserves to be noticed that the appeals filed on behalf of the Revenue which were filed at a later point of time than the time during which written statements were filed by them to the writ petitions, there is not even a slightest whispering not to talk of a specific plea that the claim for refund was invalid being beyond the time specified in s. 239 of the Act, which, as stated already, provides that no claim for refund can be made after the expiry of one year from the last day of the assessment year. Challenge made by the Revenue to the orders passed by the appellate authorities including that of the AO, in the appeals in hand is primarily on the ground that the whole approach adopted by the authorities under the Act that the defect in the return was a curable defect and the return could not be treated as invalid, was misconceived. It has been further stated that the view taken by the authorities is against the spirit of the observations made in various enunciations of this Court as well as the apex Court. According to the contention raised on behalf of the Revenue (i.e. the appellant in the appeals), the order of the Tribunal gives rise to the following substantial question of law and the appeals were admitted for the consideration of this substantial question of law by this Court :
“Whether in the facts and circumstances of the case, the Tribunal was right in law in dismissing the appeal of the Revenue thereby confirming the order of the CIT(A) ignoring the provisions of s. 140 (c) of the IT Act, 1961, and whether the AO was justified in taking recourse to s. 154 of the Act ?”
The above being the only primary question involved and in the facts and circumstances, referred to above, the writ petitions as well as the appeals are being disposed of by a common order. We have heard the learned counsel for the parties in detail and have perused the record with their assistance.
Learned counsel for the petitioner submitted that it was not mandatory for the managing director to have signed/verified the return under s. 140(c) of the Act. The return having been filed, signed and verified by Shri Kultar Krishan who had been duly authorized by a resolution passed by the company, the refund could not have been withheld by the Revenue. He also submitted that the real intention of the expression ‘shall’ is to be seen in the context in which it is used. By relying upon the apex Court judgment in Sainik Motors & Ors. vs. State of Rajasthan AIR 1961 SC 1480, the learned counsel urged that the word ‘shall’ contained in s. 140(c) of the Act is to be read as ‘may’ and wherever possible, the return is to be signed by the managing director but that is not sine qua non for valid filing of the return as in the given circumstances it can also be signed and verified by a duly authorised person.
The learned counsel then next contended in the alternative that the defect which had resulted into the filing of the original return was a curable defect under s. 292B of the Act and the AO in terms of provisions of s. 139(9) of the Act ought to have provided an opportunity to rectify the said mistake in the return which was filed on 30th Nov., 2000. He buttressed his submission by relying upon CIT vs. Masoneilan (India) Ltd. (1999) 157 CTR (Ker) 482 (2000) : (2000) 242 ITR 569 (Ker); Vanaja Textiles Ltd. vs. CIT (2001) 166 CTR (Ker) 177 : (2001) 249 ITR 374 (Ker) and Vidyawati Gupta & Ors. vs. Bhakti Hari Nayak & Ors. (2006) 2 SCC 777.
Learned counsel projected that once it was held that the defect in the return was a curable defect and in terms of s. 139(9), the AO was under duty to have provided an opportunity to remove the defect, recourse to s. 154 of the Act was totally without jurisdiction. In case the assessee had failed to cure the defect, it was only then that s. 154 of the Act could have been invoked. He placed reliance on CIT vs. Hero Cycles (P) Ltd. (1997) 142 CTR (SC) 122 : (1997) 228 ITR 463 (SC) and Masoneilan (India) Ltd.’s case (supra). Concluding his submission, learned counsel laid stress on the plea that against the order dt. 27th July, 2004 of the AO passed under s. 154 of the Act whereby the original return dt. 30th Nov., 2000 was held to be non est and void, an appeal was carried by the petitioner and the CIT(A) while accepting the appeal had directed the AO to get the defect of non-signing by the managing director rectified and then to give relief to the petitioner company by treating the original return filed on 30th Nov., 2000 as valid one. The counsel next submitted that the said defect was cured as the chairman managing director in compliance thereto signed and verified the return, and the AO was precluded from denying the refund to the assessee petitioner by raising new plea, by wrongly invoking the provisions of s. 239 of the Act as in remand proceedings only those issues can be agitated on which the remand had been made by the appellate authority. He placed reliance on Baldev Singh Giani vs. CIT (2001) 168 CTR (P&H) 252 : (2001) 248 ITR 266 (P&H) in support of his submission and further urged that an assessee, under s. 240 of the Act, is not required to file any claim for the refund of the amount and the Revenue is obliged to issue refund of its own wherever assessee is found entitled for the same. According to the learned counsel, the Revenue was in error in taking aid of s. 239 for denying the refund to the assessee. He relied upon a Delhi High Court judgment in CIT vs. Goodyear India Ltd. (2001) 168 CTR (Del) 407 : (2001) 249 ITR 527 (Del) and of Gujarat High Court in Atmaram J. Hathiwala vs. Smt. S. Sarup, ITO (1994) 121 CTR (Guj) 332 : (1994) 209 ITR 456 (Guj), and the apex Court’s decision in CIT vs. Shelly Products & Anr. (2003) 181 CTR (SC) 564 : (2003) 261 ITR 367 (SC) in support of the submission.
On the other hand, Shri Sanjiv Bansal, learned counsel appearing for the Revenue, vehemently controverted the aforesaid submissions. According to the counsel, s. 292B does not come to the rescue of the petitioner as the non-signing of the return is not a curable defect which otherwise goes to the root of the validity of the return, and the said return thus, is non est and invalid in the eyes of law. The AO having committed mistake apparent on the record in ordering refund in the original assessment order could invoke provisions of s. 154 of the Act and rectify the said error which was apparent on the face of the record. The counsel placed reliance on a catena of judgments reported in CIT vs. Dr. Krishan Lal Goyal (1984) 43 CTR (P&H) 135 : (1984) 148 ITR 283 (P&H); National Insurance Co. Ltd. vs. CIT (1995) 127 CTR (Cal) 238 : (1995) 213 ITR 862 (Cal); Khialdas & Sons vs. CIT (1998) 146 CTR (MP) 742 : (1997) 225 ITR 960 (MP); CIT vs. Ram Lal Babu Lal (1998) 148 CTR (P&H)
643 : (1998) 234 ITR 776 (P&H); Electrical Instrument Co. vs. CIT (2001) 171 CTR (Del) 77 : (2001) 250 ITR 734 (Del) and CIT vs. Aparna Agency (P) Ltd. (2004) 189 CTR (Cal) 355 : (2004) 267 ITR 50 (Cal).
We have thoughtfully considered the respective submissions of the learned counsel for the parties. We find force in the arguments of learned counsel for the assessee. The controversy raised in the present petition can be categorized into four sub-headings as mentioned hereinbelow :
(a) Whether a return filed under the IT Act by a company is mandatorily required to be signed by its managing director under s. 140(c) of the Act or it can be filed by an authorized signatory duly appointed by a resolution of the board of directors ?
(b) Whether under s. 292B of the Act, non-signing of a return by its managing director, or where there is no managing director, by any director thereof, is a curable defect and the AO is required to provide opportunity to the assessee under s. 139(9) of the Act to cure such a defect ?
(c) Whether the assumption of jurisdiction by the AO under s. 154 of the Act is legal and valid ? (d) Whether in the facts and circumstances of the present case, the claim of the assessee for the refund under the Act could be denied on the ground that the same was time-barred under the provisions of s. 239 of the Act ?
25. Adverting to the first issue, it would be material to reproduce provisions of s. 140(c) of the Act, which read thus : “Section 140—Return by whom to be signed.—The return under s. 139 shall be signed and verified—
…………. (c) In the case of a company, by the managing director thereof, or where for any unavoidable reason such managing director is not able to sign and verify the return, or where there is no managing director, by any director thereof : Provided that where the company is not resident in India, the return may be signed and verified by a person who holds a valid power of attorney from such company to do so, which shall be attached to the return :
Provided further that,—
(a) Where the company is being wound up, whether under the orders of a Court or otherwise, or where any person has been appointed as the receiver of any assets of the company, the return shall be signed and verified by the liquidator referred to in sub-s. (1) of s. 178;
(b) Where the management of the company has been taken over by the Central Government or any State Government under any law, the return of the company shall be signed and verified by the principal officer thereof;
(c) In the case of a firm, by the managing partner thereof, or where for any unavoidable reason such managing partner is not able to sign and verify the return, or where there is no managing partner as such, by any partner thereof, not being a minor;”
26. Before delving on the said issue, it would be essential to refer to the legislative history of the said provision. The Taxation Laws (Amendment) Act, 1975 substituted the existing cl. (c) w.e.f. 1st April, 1976. Prior to its amendment, the provision provided that in the case of a company, the return could be signed by the principal officer of the company. However, after amendment, it has specifically been provided that a valid return shall be signed by the managing director of the company and in his absence, by any director thereof. It is well-settled that wherever the statute provides for carrying out a particular thing in a specified manner, then it has to be done in that manner and in no other manner. The tenor of the language used in the aforesaid provision leaves no manner of doubt that the provision is mandatory and the word ‘shall’ has to be read in that context and it cannot be read to mean ‘may’. In Khialdas & Sons case (supra), the Hon’ble Chief Justice speaking for the High Court of Madhya Pradesh, observed that : “Sec. 140 says that a return under s. 139 shall be signed and verified. The word ‘shall’ has been used which shows that it is mandatory that every return should be signed and verified and if it is not signed and verified, then it is in breach of the provisions of s. 140 of the Act.” Accordingly, it is held that the return is required to be signed mandatorily by the managing director of the company and in his absence, due to certain reasons, by the director thereof and the reliance of the assessee in the circumstances, on the apex Court’s decision in Sainik Motors & Ors. case (supra) is of no advantage to him.
27. The second question which is the primary question and goes to the root of the case requires attention of this Court. In order to appreciate the controversy, it would be apposite to refer to ss. 139(9) and 292B of the Act which at the relevant time read thus : “Section 139—Return of Income…………. (9) Where the AO considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the AO may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return : Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the AO may condone the delay and treat the return as a valid return. Explanation : For the purposes of this sub-section, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely : (a) the annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have been duly filled in; (b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return; (bb) the return is accompanied by the report of the audit referred to in s. 44AB, or, where the report has been furnished prior to the furnishing of the return, by a copy of such report together with proof of furnishing the report; (c) the return is accompanied by proof of— (i) the tax, if any, claimed to have been deducted at source and the advance tax and tax on self- assessment, if any, claimed to have been paid; (ii) the amount of compulsory deposit, if any, claimed to have been made under the Compulsory Deposit Scheme (Income-tax Payers) Act, 1974 (38 of 1974); (d) where regular books of account are maintained by the assessee the return is accompanied by copies of—(i) manufacturing account, trading account, P&L a/c or, as the case may be, income and expenditure account or any other similar account and balance sheet; (ii) in the case of a proprietary business or profession, the personal account of the proprietor; in the case of a firm, AOP or BOI, personal accounts of the partners or members; and in the case of a partner or member of a firm, AOP or BOI, also his personal account in the firm, AOP or BOI; (e) where the accounts of the assessee have been audited, the return is accompanied by copies of the audited P&L a/c and balance sheet and the auditor’s report and, where an audit of cost accounts of the assessee has been conducted, under s. 233B of the Companies Act, 1956 (1 of 1956), also the report under that section; (f) where regular books of account are not maintained by the assessee the return is accompanied by a statement indicating the amounts of turnover or, as the case may be, gross receipts, gross profit, expenses and net profit of the business or profession and the basis on which such amounts have been computed, and also disclosing the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous year. Section 292B—Return of income, etc., not to be invalid on certain grounds.—No return of income; assessment, notice, summons or other proceedings, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.”
Sec. 139(9) specifies the circumstances in which a return would be regarded as a defective return. The list of defects mentioned in the Explanation thereof is illustrative and not exhaustive. Sec. 292B of the Act provides that no return of income shall be invalid merely by reason of any mistake, defect or omission, if such return is, in substance and effect in conformity with or according to the intent and purpose of the Act. The section has its applicability to those cases where purely technical objection without substance arises in a case of a return of income. Sec. 139 (9) of the Act contains a non obstante clause, namely, ‘notwithstanding anything contained in any other provision of this Act’ and would, therefore, override the other provisions of the IT Act including s. 292B. If any curable defect is noticed in the return, the AO is required to provide an opportunity to the assessee to rectify the same within the stipulated time and in a case where any of the specified defects is not removed within the time allowed under s. 139(9), the return shall be treated as an invalid or non est return.
30. It would, thus, be concluded that a return of income filed by a company which is signed and verified by a person other than the one authorized under the Act, the return in such circumstances shall be treated to be defective which shall be amenable to the provisions of ss. 292B and 139(9) of the Act. The assessing authority in such circumstances shall provide an opportunity under s. 139 (9) before treating the same to be invalid and non est. However, a different situation would arise where a return is not signed and verified at all. The question of removal of defect in such a situation does not arise as the defect goes to the very root and jurisdiction of the validity of the return. A Division Bench of this Court in CIT vs. Norton Motors (2006) 200 CTR (P&H) 604 : (2005) 275 ITR 595 (P&H) while interpreting s. 292B of the Act had observed : “A reading of s. 292B of the IT Act, 1961, makes it clear that a mistake, defect or omission in the return of income, assessment, notice, summons or other proceeding is not sufficient to invalidate an action taken by the competent authority, provided that such return of income, assessment, notice, summons or other proceeding in substance and effect is in conformity with or according to the provisions of the Act. To put it differently, s. 292B can be relied upon for resisting a challenge to the notice, etc., only if there is a technical defect or omission in it. However, there is nothing in the plain language of that section from which it can be inferred that the same can be relied upon for curing a jurisdictional defect in the assessment notice, summons or other proceeding. In other words, if the notice, summons or other proceeding taken by an authority suffers from an inherent lacuna affecting its jurisdiction, the same cannot be cured by having resort to s. 292B.”
31. Where the return was signed by an executive director instead of managing director or other authorized director, it was held by Kerala High Court in Vanaja Textiles Ltd.’s case (supra), to be a curable defect.
32. In the light of the legal position crystallized above, it would be pertinent to see the applicability thereof to the facts of the present case. In the case in hand, the return for the asst. yr. 2000-01 was signed by Kultar Krishan, an employee of the petitioner company, who had been duly authorized by a resolution of the board to do so as there was litigation between the management which was pending in Company Petition No. 76 of 1999 before the Company Law Board. The return was, thus, not signed by an authorised person in terms of s. 140(c) of the Act. However, the return was got signed and verified by managing director and filed along with letter dt. 13th Oct.,
2003 which was acknowledged in the income-tax office on 26th Feb., 2004, (Annex. P-10). Even on an opportunity provided by the AO to remove the curable defect in pursuance to the order of CIT(A), the managing director, Shri Vijay Chopra attended the office of the AO on 8th March, 2005 and signed the verification portion of the return. In such circumstances, the return filed by the company could of not be treated to be invalid or non est.
33. In the light of answer to second proposition, the third question is rendered only academic. The assessee was afforded an opportunity to remove the defect in the return under the provisions of the Act and the assessee having fulfilled the same, the return could not be held to be non est or invalid. The return having been held to be valid, the initiation of proceedings under s. 154 of the Act could not be taken recourse to.
34. Lastly, it may be noticed that the fourth limb of argument of the learned counsel for the petitioner again has considerable force. A Division Bench of this Court in Baldev Singh Giani’s case (supra), while describing the scope of remand proceedings had laid down as under : “We have thoughtfully considered the respective submissions. In our opinion, the initiation of reassessment proceedings by respondent No. 3 and the direction given by respondent No. 2 to the said respondent to continue with the said proceedings are vitiated by patent error of law and deserve to be quashed. At the cost of repetition, we may mention that while allowing the appeal filed by the petitioner against the order dt. 24th March, 1995, passed by the CIT(A), the Tribunal had directed the CIT(A) to record a finding on the petitioner’s plea that initiation of reassessment proceedings was contrary to s. 148(2) of the Act and observed that if the reasons are not found recorded, appropriate order be passed in the light of the decisions of the Supreme Court, Patna High Court and Bombay High Court and the proceedings be quashed. That order acquired finality because the Revenue did not challenge the same by seeking reference under s. 256 of the Act or otherwise. Therefore, the CIT(A) and respondent Nos. 2 and 3 were bound to confine their consideration to the question as to whether the file available with the Department contained reasons recorded by the AO and such reasons were communicated to the petitioner. However, instead of doing that, the CIT(A) remanded the case to respondent No. 3 and by procuring letter dt. 26th Nov., 1999, from Shri R.S. Jain, the said respondent tried to create evidence to show that the reasons had been recorded by the then AO but the papers containing those reasons are not available and in this manner, he travelled beyond the parameters laid down by the Tribunal. In our opinion, respondent No. 3 was bound to act within the four corners of the order passed by the Tribunal and he did not have the jurisdiction to create fresh evidence on the issue of recording of reasons and communication thereof.”
35. The AO having failed to raise any issue with regard to the plea of s. 239 of the Act at appropriate stage and the CIT(A) having remanded the case for purposes of getting the defect cured and to give effect to that order, could not raise a new plea inconsistent with the remand order. Still further, in the present case, the provisions of s. 240 of the Act would be attracted whereunder an obligation is cast upon the Revenue to refund the amount to the assessee without having to make any claim in that regard in cases of refund arising on account of appeal or other proceedings under the Act. The contention of the Revenue is thus rejected being meritless.
36. In all fairness to the learned counsel appearing for the Revenue, we refer to the case law relied upon by him.
37. In Dr. Krishan Lal Goyal’s case (supra), the issue before the Division Bench of this Court related to an unsigned return prior to the incorporation of provisions of s. 292B in the statute book. The observations made therein in this behalf would have no bearing on the issue under consideration.
38. In Ram Lal Babu Lal’s case (supra), the question before the Court was with regard to the scope of s. 154 of the Act. As observed earlier, in the present case there was no occasion for the AO to have taken recourse to s.
154 of the Act. The said decision also does not help the Revenue.
39. The Madhya Pradesh High Court in Khialdas & Sons’case (supra), wherein the return was not at all signed, held that return of income shall be non est. The relevant observations are extracted as under : “Sec. 292B of the Act only says that no return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act. The idea is that if any minor defect is there which does not militate against the intent and purpose of the Act, then such minor defect can be cured but according to s. 140, which is mandatory, every return has to be signed and verified. Sec. 140 says that a return under s. 139 shall be signed and verified. The word “shall” has been used which shows that it is mandatory that every return should be signed and verified and if it is not signed and verified, then it is in breach of the provisions of s. 140 of the Act. Therefore, this cannot be a defect which can be cured and any return which has been filed without signature and verification of the assessee, will not be treated as a valid return.”
40. The issue before Delhi High Court in Electrical Instrument Co. case (supra) and Calcutta High Court in National Insurance Co. case (supra) was, where the return of income was not signed and verified at all. Again, before the Calcutta High Court, in Aparna Agency (P) Ltd.’s case (supra), the issue was with regard to, whether the defect in an unsigned notice could be cured, which is not the position in the present case. The reported cases thus, have no application to the controversy under discussion.
41. In view of the above, the substantial question of law raised in the appeals is disposed of in the light of the discussion above and finding no merit in the appeal, the same are dismissed. The writ petitions, however, succeed and order dt. 2nd May, 2005 Annex. P-1, is quashed. The respondent No. 3 i.e. the Asstt. CIT, Range- IlI, Jalandhar, is directed to refund the amount to the assessee in accordance with law. No costs.
[Citation : 330 ITR 266]
