1981 (2) TMI 76 - HC - Income Tax

High Court Upholds Tribunal Decision on Tax Assessment

The High Court affirmed the Tribunal's decision regarding the validity of the revised return, the applicability of the 1961 Act for assessment, and the ... Applicability of the Income-tax Act, 1961 to assessments for earlier years where returns are filed after commencement - validity of voluntary return filed under s. 139(4) of the Income-tax Act, 1961 - scope of right to file revised return under s. 139(5) of the Income-tax Act, 1961Applicability of the Income-tax Act, 1961 to assessments for earlier years where returns are filed after commencement - The assessment procedure for the assessment year 1960-61 is governed by the 1961 Act where returns for that year were filed after the commencement of the 1961 Act. - HELD THAT: - Section 297(2)(b) of the 1961 Act provides that where a return has been filed after the commencement of the 1961 Act (otherwise than in pursuance of a notice under the old Act) for the assessment year 1961-62 or any earlier year, the assessment shall be made in accordance with the procedure specified in the 1961 Act. The court accepted the Tribunal's view that this provision governs the present case and noted that this position was not contested by the assessee's counsel. Consequently, returns filed in March 1965 and March 1966 must be considered against the relevant sub-sections of s. 139 of the 1961 Act rather than the provisions of the 1922 Act.The 1961 Act governs the assessment procedure for AY 1960-61 in this case.Validity of voluntary return filed under s. 139(4) of the Income-tax Act, 1961 - scope of right to file revised return under s. 139(5) of the Income-tax Act, 1961 - The return dated March 30, 1965 is a valid voluntary return under s. 139(4); the subsequent return dated March 28, 1966 cannot be treated as a revised return under s. 139(5). - HELD THAT: - The March 30, 1965 return was not filed within the periods under ss. 139(1) or (2) and was therefore properly characterised as a voluntary return under s. 139(4), which permits filing any time before assessment but within four years of the end of the assessment year. Section 139(5) by its plain language permits revision only of returns furnished under sub-ss. (1) or (2); it omits any reference to sub-s. (4). The court rejected the contention that a return under s. 139(4) should be equated to one under s. 139(1) or (2) for the purpose of s. 139(5), distinguishing the reasoning in CIT v. Kulu Valley Transport Co. as concerned with a different procedural provision and context. The court also noted legislative design and practical considerations (including that a person availing s. 139(4) may file multiple returns within the four-year window) as support for construing s. 139(5) as limited to returns under ss. (1) and (2). Accordingly, the March 28, 1966 filing could not be upheld as a revised return under s. 139(5), and the Income-tax Officer was justified in ignoring it.March 30, 1965 return is valid under s. 139(4); March 28, 1966 return is not a revisable return under s. 139(5).Final Conclusion: Reference answered in the affirmative against the assessee: the Tribunal was justified in law in not cancelling the assessment order since the March 1966 filing could not be treated as a revised return under s. 139(5), and the March 1965 filing was a valid voluntary return under s. 139(4) governed by the 1961 Act; costs awarded to the Commissioner. Issues Involved:1. Validity of the revised return filed by the assessee.2. Applicability of the 1922 Act vs. the 1961 Act for assessment.3. Tribunal's decision to not cancel the assessment order.4. Procedural correctness of the AAC's order to set aside the assessment.Summary:1. Validity of the Revised Return:The ITO observed that the assessee filed a return u/s 139(4) on March 30, 1965, and a revised return on March 28, 1966. The ITO deemed the revised return invalid as u/s 139(5) allows a revised return only if the original return was filed u/s 139(1) or (2). The AAC, however, considered the revised return valid under s. 22(3) of the 1922 Act. The Tribunal upheld the ITO's view, stating that the revised return could not be treated as valid u/s 139(5) since the original return was filed u/s 139(4).2. Applicability of the 1922 Act vs. the 1961 Act:The AAC believed the 1922 Act applied, but the Tribunal concluded that the 1961 Act governed the assessment procedure due to s. 297(2)(b). The High Court affirmed the Tribunal's view, noting that the return filed on March 30, 1965, was valid u/s 139(4) of the 1961 Act.3. Tribunal's Decision to Not Cancel the Assessment Order:The Tribunal found that the ITO acted legally in ignoring the second return filed by the assessee and thus did not cancel the assessment order. The High Court agreed, stating that s. 139(5) does not permit a revised return for returns filed u/s 139(4), and the Tribunal's decision was correct.4. Procedural Correctness of the AAC's Order:The assessee argued that the AAC should have annulled the assessment instead of setting it aside. The High Court noted that since the Tribunal's view was upheld, this question did not arise. The High Court also mentioned that the Tribunal should have directed the AAC to address the merits of the assessment, but no such plea was raised or referred.Conclusion:The High Court answered the reference in the affirmative, supporting the Tribunal's decision. The Commissioner was entitled to costs in the reference, with counsel's fee set at Rs. 200.