Machino Techno Sales Ltd. vs Commissioner of Income Tax

Y.R. Meena, J.—On an application u/s 256(1) of the Income Tax Act, 1961, the Tribunal has referred the following question for our opinion :

"Whether, on the facts and circumstances of the case and on an interpretation of sections 139, 147 and 153 of the Income Tax Act, 1961, the Tribunal was correct in holding that the assessment was not barred by limitation ?"

For the assessment year 1987-88, the last date for filing the return u/s 139(1) of the Income Tax Act, 1961, was July 31, 1987. The assessee filed an application for extension of time on August 3, 1987. The time was allowed until October 31, 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 until February 28,1988. Even then the return was not filed by the assessee. The Assessing Officer has issued the notice u/s 148 on October, 1988. On March 30, 1989, the assessee filed the return declaring an income of Rs. 49,65,690. The assessment was made on August 22, 1990, u/s 143(3) read with Section 147(a) of the Act of 1961.

In appeal before the Commissioner of Income Tax (Appeals), the assessee has taken the ground that the return was filed u/s 139(4) of the Act of 1961 and limitation for making the assessment is only one year. As the assessment has been made after limitation the order of the Income Tax Officer is time barred. The Commissioner (Appeals) has taken the view that the return is filed in pursuance of the notice u/s 148, for that the limitation is four years and the assessment is completed on August 22, 1990. That is well within the limitation. The appeal was dismissed.

Before the Tribunal the same plea was taken. The Tribunal also found that the return was filed in pursuance of the notice u/s 148 that the return cannot be treated as a return u/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 u/s 256(1) of the Act of 1961. The Tribunal has referred the aforesaid question.

Learned counsel for the assessee, Dr. Pal, submits that when there is a period for filing" the return u/s 139(4) of the Income Tax Act and the assessee has filed the return within that period, the return should be treated u/s 139(4) of the Act of 1961. He placed reliance on the decision of this court in the cases of Satyanarayan Bhalotia Vs. Commissioner of Income Tax, ; Kareemsons Pvt. Ltd. v. CIT [19921 198 ITR 543 ; Commissioner of Income Tax, Punjab Vs. Kulu Valley Transport Co. P. Ltd., and Kumar Jagdish Chandra Sinha (dead) Through LRs. etc. Vs. Commissioner of Income Tax, West Bengal, .

Learned counsel for the Revenue submits that when the return is filed in pursuance of the notice u/s 148 of the Income Tax 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 cases of Balish Singh and Co. Vs. Commissioner of Income Tax, ; Kumar Jagadish Chandra Sinha Vs. Commissioner of Income Tax, and Iqbal Singh Atwal Vs. Commissioner of Income Tax, .

The facts are not in dispute that for the assessment year 1987-88, the last date for filing the return u/s 139(1) of the Income Tax Act was July 31, 1987. When the return was not filed till October 25, 1988, the Assessing Officer has issued the notice u/s 148 of the Income Tax Act, 1961, on October 26, 1988. The assessee has filed the return declaring income of Rs. 49,65,690 on March 30, 1989.

Therefore, the limited controversy before us is whether the return filed on March 30, 1989, should be taken u/s 139(4) of the Act or should be taken in response to the notice u/s 148 of the Act of 1961. If the return is taken in response to the notice u/s 148, the assessment made is not barred by limitation.

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

In the case of Assam Consolidated Tea Estates Ltd. Vs. Income Tax Officer, "A" Ward and Others, , the controversy before this court was when the assessee has filed the return for the assessment year 1957-58, can the Income Tax Officer issue the notice under section? This court has taken the decision that the Income Tax Officer cannot issue the notice u/s 148, ignoring the return filed for the assessment year 1957-58. In the case in hand no return has been filed before notice u/s 148. Therefore, the decision has no application.

In AUTO and METAL ENGINEERS Vs. UNION OF INDIA AND ANOTHER, the issue before the Punjab and Haryana High Court was that when the return was filed beyond the extended period and thereafter notice was issued u/s 148. The assessee claimed that the assessment made was time barred as the notice u/s 148 was illegal.

The court has taken the view that the provisions contained in Section 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 Income Tax Officer could have reason to believe that the income for the said year had escaped assessment and was empowered to take action u/s 147 of the Act.

In Iqbal Singh Atwal Vs. Commissioner of Income Tax, , the controversy before this court was whether, when the return was filed before the notice u/s 148 and the request of the assessee was that his return already filed be treated in response to the notice u/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 and Co. Vs. Commissioner of Income Tax, , the dispute before this court was when the return was filed within the period permitted u/s 139(4) and thereafter revised return was filed u/s 139(5) whether the revised return filed was a valid return and whether the assessment was barred by limitation. This court held that the assessment made on the basis of the revised return was not barred by limitation.

In Commissioner of Income Tax, Punjab Vs. Kulu Valley Transport Co. P. Ltd., , the facts before their Lordships were that the assessee filed voluntarily returns disclosing loss for the assessment years 1953-54 and 1954-55 and the question was whether the loss had to be determined and carried forward u/s 24(2) of the Indian Income Tax Act, 1922, though the returns were not filed within the time specified in the general notice u/s 22(1) and the time had not been extended by the Income Tax Officer. No notice had been served on it u/s 22(2) of the Act of 1922. Their Lordships held that the losses had to be determined and carried forward on the basis of the return filed within the time permitted u/s 22(3) of the Act of 1922, 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.

In Satyanarayan Bhalotia Vs. Commissioner of Income Tax, , the issue before this court was when a notice u/s 148 of the Income Tax Act was issued and the return was filed before the time limit permitted u/s 139(4) whether the assessee is entitled to carry forward and set off of its loss even if the loss is determined in pursuance of a return filed u/s 148. This court had taken the view that carry forward and set off of its loss should be allowed on the basis of the return filed within the time permitted u/s 139(4) of the Act of 1961.

In Kareemsons (P.) Ltd. Vs. Commissioner of Income Tax the dispute before the Karnataka High Court was when the return was voluntarily filed after notice u/s 148, but before the time permitted u/s 139(4) of the Act, the return should be treated u/s 139(4) of the Act and the assessee is entitled to carry forward loss declared in its return.

In Kumar Jagdish Chandra Sinha (dead) Through LRs. etc. Vs. Commissioner of Income Tax, West Bengal, one of the issues before their Lordships was when the return was filed u/s 139(4), can the assessee file the revised return under Sub-section (5) of Section 139. Their Lordships answered it in the negative and reversed the decision of this court in Kumar Jagadish Chandra Sinha Vs. Commissioner of Income Tax, . Their Lordships held that the assessee could not file the revised return under Sub-section (5) of Section 139 in a case where he has filed the return u/s 139(4), the provisions of Section 153(1)(c) is not attracted.

In the case in hand we have no such dispute, no revised return has been filed under Sub-section (5) of Section 139, after filing the return u/s 139(4) of the Act of 1961.

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 u/s 148 should it be taken to be a return u/s 139(4) or a return in response to the notice u/s 148 of the Act of 1961. Whether the return is filed in response to the notice u/s 148 of the Act or is a return filed u/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 July 31, 1987. The assessee filed an application for extension of time to file the return. Extension was allowed until October 31, 1987. The second time also the assessee prayed for extension of time for filing the return. The time was allowed up to February 28, 1988. The return was not filed till October 25, 1988. On October 26, 1988, notice u/s 148 of the Income Tax Act was issued and served, return filed only on March 30, 1989.

In the return there was no specified note that the return was filed u/s 139(4) of the Act of 1961. On the contrary, we found on the record that the assessment was made u/s 143(3) read with Section 147(a) of the Act, on August 22, 1990, treating the return in response to the notice u/s 148. No objection was raised by the representative of the assessee, that the return filed was u/s 139(4), therefore, the assessment is time barred. For the first time before the Commissioner of Income Tax (Appeals) the ground has been taken that the return filed by the assessee be treated u/s 139(4) of the Act and if it is treated u/s 139(4) the assessment made by the Income Tax Officer was time barred.

The Commissioner of Income Tax (Appeals) as well as the Tribunal on appreciation of facts found that the return filed by the assessee was in response to the notice u/s 148 and that is a question of fact. When the Commissioner of Income Tax (Appeals) as well as the Tribunal found that the return was in response to the notice u/s 148 we found no justification to interfere in that finding.

We have also noted the fact that though the return was filed beyond the extended period but before the time permitted u/s 139(4) of the Act. Therefore, that return was treated as valid and considered for making the assessment for the assessment year 1987-88. It is also pertinent to note that no explanation has been given during the argument if the assessee filed the return u/s 139(4), why objection was not raised before the Income Tax Officer, that the return was filed u/s 139(4) and the Income Tax Officer 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 the assessee in pursuance of the notice u/s 148. The assessee''s representative was appearing regularly in the proceeding for order u/s 143(3) read with Section 147 of the Act. That means the return was also accepted by conduct that the return was in pursuance of the notice u/s 148 of the Act. Thereafter how can that fact be challenged in appeal which was accepted before the Assessing Officer by conduct. Thus, the question is not that the return should be treated u/s 139(4) or in response to the notice u/s 148 of the Act of 1961. The real question is whether the return is filed u/s 139(4) of the Act of 1961 or in pursuance of the notice u/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 u/s 148 of the Act of 1961.

When the return was filed in response to the notice u/s 148 of the Act the limitation for assessment is provided u/s 153(2) of the Act which provides where the assessment, reassessment or recomputation is to be made under Clause (a) of that section, after the expiry of four years from the end of the assessment year in which the notice u/s 148 was served. Admittedly, the assessment is made within four years from the date 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.