1996 (4) TMI 5 - SC - Income Tax

Belated income tax return u/s139(4) and attempt to revise u/s139(5) rejected; late assessments time-barred

A dominant issue was whether an assessee who filed a belated return under s. 139(4) of the IT Act could file a revised return under s. 139(5). The SC held ... Revised return under section 139(5) - return furnished under section 139(4) - time-bar under section 153(1) - extension of limitation by invoking section 153(1)(b) linked to section 271(1)(c) - limitation saved by section 153(1)(c) upon filing of a return or revised returnRevised return under section 139(5) - return furnished under section 139(4) - A person who furnishes a return under section 139(4) is not entitled to file a revised return under section 139(5). - HELD THAT: - Sub-section (5) of section 139 grants the right to furnish a revised return only to a person who has filed a return under sub-section (1) or sub-section (2). By necessary implication that right is not conferred upon a person whose original return is filed under sub-section (4). Clause (c) of section 153(1) (which refers to a return or a revised return under sub-sections (4) or (5)) should be read as referring to a return filed under sub-section (4) and a revised return filed under sub-section (5), not as implicitly conferring a right to file a revised return where sub-section (5) does not itself grant it. The court rejected the High Court's contrary construction and held that what was filed as a 'revised return' after a section 139(4) return was not a revised return within the meaning of section 139(5).No revised return under section 139(5) is permissible where the original return was filed under section 139(4).Time-bar under section 153(1) - extension of limitation by invoking section 153(1)(b) linked to section 271(1)(c) - Whether the assessments for the two relevant assessment years were within the extended time-limit under section 153(1)(b) by reason of falling within clause (c) of section 271(1). - HELD THAT: - The court adopted the view earlier taken in CIT v. Suraj Pal Singh that, to attract the extended eightyear period under section 153(1)(b) (which applies in cases falling within section 271(1)(c)), the Incometax Officer must, within the primary limitation period, initiate proceedings under section 271(1)(c) or record an opinion/enter a note indicating that the case falls within section 271(1)(c). Absent such steps within the initial limitation period, the assessment cannot be retrospectively validated by subsequently invoking section 271(1)(c). In the present case no proceedings were initiated nor any record made within the fouryear period, and nothing was communicated to the assessee; accordingly the assessments made after expiry of the primary fouryear period are timebarred and not saved by section 153(1)(b).The assessments for 1964-65 and 1965-66 are barred by time and are not saved by section 153(1)(b).Limitation saved by section 153(1)(c) upon filing of a return or revised return - revised return under section 139(5) - Whether the assessments were saved by section 153(1)(c) by reason of the filing of a return or revised return. - HELD THAT: - Section 153(1)(c) provides that an assessment made within one year from the date of filing of a return or a revised return under subsection (4) or (5) of section 139 is within time. That protection hinges on the existence of a valid revised return under section 139(5). Since the court held that no revised return can be filed after a return under section 139(4), the documents tendered as 'revised returns' were not legally effective to attract section 153(1)(c). Therefore the assessments, though made within one year of those filings, are not saved by section 153(1)(c).Section 153(1)(c) does not save the impugned assessments because no valid revised returns under section 139(5) were filed following returns under section 139(4).Final Conclusion: The appeals are allowed. A revised return under section 139(5) is not available where the original return was filed under section 139(4); accordingly the purported revised returns are invalid, section 153(1)(c) is not attracted, and because no proceedings or record under section 271(1)(c) were initiated within the primary limitation period the assessments for 1964-65 and 1965-66 are timebarred and void. Issues Involved:1. Validity of filing a revised return under Section 139(5) when the original return is filed under Section 139(4).2. Time-limit for making assessments under Section 153(1)(b) of the Income-tax Act, 1961.3. Applicability of Section 271(1)(c) for extending the period of assessment.Detailed Analysis:Issue 1: Validity of Filing a Revised Return under Section 139(5)The primary question was whether a person who files a return under Section 139(4) is entitled to file a revised return before the assessment is made. The court held that a revised return under Section 139(5) is permissible only for returns filed under Section 139(1) or Section 139(2). The court emphasized that the right to file a revised return is explicitly given to those who file under Section 139(1) or Section 139(2), thereby implicitly denying this right to those who file under Section 139(4). The court disagreed with the High Court's interpretation that Section 153(1)(c) indirectly allowed for a revised return in cases where the original return was filed under Section 139(4). The court concluded that no revised return could be filed under Section 139(5) if the original return was filed under Section 139(4). Consequently, the revised returns filed by the assessee were not valid, and Section 153(1)(c) was not applicable.Issue 2: Time-limit for Making Assessments under Section 153(1)(b)The second issue was whether the assessments made by the Income-tax Officer for the assessment years 1964-65 and 1965-66 were within the time-limit prescribed by Section 153(1)(b). The court examined the ambiguous language of Section 153(1)(b), which allows for an extended period of eight years for making an assessment in cases falling under Section 271(1)(c). The court noted two streams of thought: one requiring the initiation of proceedings or recording of a finding within the original four-year period, and the other not imposing such a requirement. The court referred to its earlier decision in CIT v. Suraj Pal Singh, which supported the first stream of thought-that the Income-tax Officer must initiate proceedings or record a finding within the four-year period to avail of the extended eight-year period. Applying this understanding, the court held that the assessments were barred by time as the Income-tax Officer had not initiated proceedings under Section 271(1)(c) within the prescribed four-year period, nor had he made any record or note indicating that it was a case falling under Section 271(1)(c).Issue 3: Applicability of Section 271(1)(c) for Extending the Period of AssessmentThe third issue was whether the cases for the assessment years 1964-65 and 1965-66 fell within clause (c) of sub-section (1) of Section 271, thereby allowing for an extended period of assessment. The court reiterated that since no revised returns could be filed under Section 139(5) for returns originally filed under Section 139(4), the assessments made beyond the prescribed period of four years were not saved by Section 153(1)(c). The court upheld the view that the orders of assessment for both assessment years were invalid as they were made beyond the prescribed period and were not justified under Section 153(1)(b) or Section 153(1)(c).Conclusion:The appeals were allowed, and the court answered the questions as follows:1. In the case of a return filed under Section 139(4), a revised return under Section 139(5) cannot be filed.2. The orders of assessment for the said two assessment years were barred by time and not saved by Section 153(1)(b).3. The assessments made beyond the prescribed period of four years were not saved by Section 153(1)(c).There shall be no order as to costs.