High Court clarifies assessment sections, rules in favor of assessee due to form error

Maya Debi Bansal Versus Commissioner Of Income-Tax, West Bengal II

Maya Debi Bansal Versus Commissioner Of Income-Tax, West Bengal II - [1979] 117 ITR 125, 9 CTR 235 Issues involved:
The issues involved in this case are related to the validity of the assessment made by the Income Tax Officer (ITO) under section 143(3) of the Income-tax Act, 1961, based on a return not filed in the prescribed form, and the subsequent actions taken by the Appellate Assistant Commissioner (AAC) and the Tribunal regarding the assessment.

Judgment Summary:

Validity of Assessment and Correct Form Submission:
The assessee, an individual, was required to file her income tax return for the assessment year 1960-61. The Income Tax Officer (ITO) completed the assessment under section 143(3) of the Income-tax Act, 1961, based on a return filed in a blank form provided by the ITO. The Appellate Assistant Commissioner (AAC) held the assessment invalid as the return was not filed in the prescribed form, directing the ITO to proceed as if no return was filed. The Tribunal, however, set aside the AAC's order, stating that the assessment should be treated as one made under section 144 of the Act, emphasizing the mandatory nature of filing returns in the proper form.

Legal Obligations and Jurisdiction:
The Tribunal held that the ITO had no legal obligation to issue the correct form and that the assessee was required to file the return in the proper form despite the error in the form provided. Referring to the Supreme Court decision in Hazari Mal Kuthiala v. ITO, the Tribunal emphasized that the exercise of power should be referable to a valid jurisdiction. The Tribunal concluded that the assessment should be treated as one made under section 144 due to the incorrect form submission.

Applicability of Sections 143 and 144:
The Tribunal's decision to treat the assessment under section 144 was challenged, arguing that the principles in Hazari Mal's case did not apply as there was no mistake by the ITO. The High Court concurred, stating that the provisions of sections 143 and 144 are distinct, with section 144 applicable in the absence of a return. The High Court emphasized that the assessment under section 143(3) was based on the return, albeit invalid, and could not be equated to a best judgment assessment under section 144.

Conclusion:
The High Court held that the Tribunal was not justified in treating the assessment as one under section 144, as the return was filed in the incorrect form. The Court highlighted the assessee's entitlement to challenge an assessment made under section 144 through an application under section 146, which was not possible in this case due to the Tribunal's direction. The Court ruled in favor of the assessee, emphasizing the mandatory nature of filing returns in the prescribed form and the consequential impact on the assessment process.