TaxTMI 
TaxTMI 
2009 (8) TMI 847
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....at the assessee had also suffered loss under the head 'Capital gain' which was claimed for set off against the income in the succeeding years. On examination of this return the Assessing Officer found that its verification was not done in accordance with law. The verification part of the return has been reproduced in assessment order at page 2 as under:- "2. VERIFICATION I S.B. BILLIMORIA & CO. (NAME IN FULL AND BLOCK LETTERS) solemnly declare that to the best of my knowledge and belief the information given in this return and the annexures and statements accompanying it is correct and complete and that the amount of total income and other particulars shown therein are truly stated and relate to the previous year(s) relevant to the assessment year 1997-98. *I further solemnly declare that during the said previous year(s)- (a )no other income accrued or arose to or was received by me from any asset held in my name or in the name of any other person; (b )there is no other income, including income of any person, in respect of which I am chargeable to tax under the Income-tax Act, 1961. *I further solemnly declare that during the said previous year(s) - (a )no other income acc....
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....f of the assessee and came to hold that the return filed by the assessee was invalid and to be treated as non est. In that view of the matter the claim for capital loss made in the return was not examined. 5. The learned CIT(A) dismissed the assessee's appeal on the ground that the Power of Attorney appeared to have been issued by the Morgan Stanley Asset Management Inc. USA and signed by some person on behalf of Morgan Stanley Asset Mgt. Inc., but the said signature was not notarized by any authority of that country. Further since the assessee had filed photocopy of the Power of Attorney, the learned CIT(A) held that it was not in fulfilment of the requirement of section 140. He, therefore, upheld the action of the Assessing Officer treating the return as non est and not allowing the carry forward of loss under the head 'Capital gain'. 6. We have heard the rival submissions and perused the relevant material on record. It is noted that the original return filed by the assessee on 30-6-1997 was verified by Constituted Attorney i.e., M/s. S.B. Billimoria & Co., Chartered Accountants. In the beginning of the verification part after the word "I", "S.B. Billimoria & Co." was mentioned....
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....well as the notarization of such PoA, the learned A.R. contended that the learned CIT(A) went out of his jurisdiction in dealing with the issues which were not decided by the Assessing Officer or to find out some defect in the return in terms of section 139(9) which power only vested with the Assessing Officer. It was further stated that it was incumbent upon the ld. first appellate authority to put across his point of view to the assessee so that appropriate reply could have been given, which was not done. The ld. DR countered these arguments by stating the ld. CIT(A) was right in examining the validity or otherwise of the return from any angle, being a matter was open before him. He further stated that the powers of the ld. CIT(A) are co-terminus with that of the Assessing Officer and no fault can be found in his decision. 8. From the above narration of facts of the case, it is clear that the learned CIT(A) decided the controversy against the assessee from an angle different from that of the Assessing Officer. Now the question is : Is the ld. first appellate authority entitled to decide the issue from a different perspective ? We are not convinced with the submission made on beh....
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....f his power in upholding the action of the Assessing Officer on the grounds set out above. However, we agree with the ld. AR that before drawing an adverse inference against the assessee on a point decided by the ld. CIT(A) for the first time, it was necessary for him to give opportunity to the assessee. Rule of consistency 9. The ld. AR has brought to our notice that the returns for preceding as well as succeeding years were filed by the assessee in the same manner which were accepted by the department, without raising any objection to the verification aspect. A copy of the return for assessment year 1998-99 was placed on record in which the verification was done in identical manner and not only the return was held as not invalid, but the assessment order was also passed under section 143(3). Similar position was shown for assessment year 1999-2000 in which again the return was filed in the like way. In the past also the assessee filed return for assessment year 1996-97 on the same pattern which was not disputed by the Assessing Officer. In view of the acceptance of the returns for the earlier as well as later years with similar verification, the ld. AR stated that the principle....
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.... validity or otherwise of the return is an entirely different thing. There may be two plausible views on the question of allowing or not allowing a deduction. Once the revenue has accepted one view, normally that should not be disturbed. But insofar as the question of validity of the return is concerned, that is unexceptionable. If a return is defective or non est, then by no means it can be characterized as 'valid'. If in an earlier year a defective return has been accepted as valid, it cannot be held that the assessee will get licence for filing defective return in all the years to come and still claim them as valid. 11. Though the principle of consistency is applicable but the rule of res judicata does not extend to the income-tax matters. The Hon'ble jurisdictional High Court in Kotak Mahindra Finance Ltd. v. Dy. CIT [2004] 265 ITR 114 (Bom.) considered a case in which higher rate of depreciation was allowed in the past and the assessee claimed that such higher rate be applied on the basis of acceptance of its claim in the last year. Turning down this plea, their Lordships have held that : 'There is no merit in the argument that because higher depreciation was granted by the D....
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....cation part of the return. It is further noted that in all the three returns filed by the assessee, original as well as revised, the signatures are done by some partner of M/s. S.B. Billimoria & Co. not in his own name but as 'S.B. Billimoria' in his handwriting. Further the assessee has contended before the Assessing Officer that rule 12 should not be considered but the substantive provision contained in section 140(c) will be applicable, which permits the verification of the return of income by a valid Power of Attorney. The Assessing Officer held the return as invalid because it was not properly verified. The ld. CIT(A) followed the suit and upheld the action of the Assessing Officer but on the ground that PoA was not properly notarized and further its original was required to be filed as against the copy of PoA filed by the assessee. 14. There is no dispute on the fact that the assessee executed a Power of Attorney in favour of M/s. S.B. Billimoria & Co., Chartered Accountants, a copy of which is available in the paper book. It authorized the said CA firm to file the return on its behalf through its partner. It is further noted that assessee did file its returns through M/s. S....
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....is no managing director, then by any director thereof. The first proviso to clause (c) states that : "where a 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". Clause (cc) of section 140 applying to a firm provides that the return shall be signed by the managing partner thereof, or where for any unavoidable reasons 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. Under this clause also there is no provision for the signing of the return by the holder of a valid Power of Attorney. Clause (e) states that in case of any other association, the return shall be signed and verified, by any member of the association or the principal officer thereof. 16. On going through various clauses of section 140, it is seen that whereas clauses (a) and (c) contain the provision for the signing of the return by a valid power of attorney holder, other clauses do not have such provision. Thus there is a clear line of demarcation between the classes of assessees, w....
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....he correct status of the assessee is company but inadvertently the return was filed wrongly in Form No. 3 and further by mistake Code No. 7 was mentioned against the column status. 18. The learned A.R. raised a preliminary objection to the raising of this controversy about the correct status of the assessee. He submitted that it was not permissible to the Tribunal to raise such a question for the first time, which was not examined by either the Assessing Officer or the CIT(A). Referring to the judgment of the Hon'ble Bombay High Court in Puranmal Radhakishan & Co. v. CIT [1957] 31 ITR 294 and the Hon'ble Gauhati High Court in Assam Co-operative Apex Bank Ltd. v. CIT [1978] 112 ITR 257 he claimed that it has been held in these cases that the Tribunal cannot give a finding adverse to the assessee so as to place him in a position worse than what it was before appeal. 19. We are not inclined to agree with preliminary objection raised on behalf of the assessee. Primarily we are not raising a ground which will work adversely to the assessee as has been laid down by the Hon'ble jurisdictional High Court in the case of Puranmal Radhakishan & Co. (supra). The only question decided by the ....
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....ribunal being a final fact finding authority cannot ignore such patent deficiencies. Moreover, the only question before us is to examine the validity or otherwise of the return. When we have to adjudicate upon this issue, all the aspects concerning it are open for inspection. It cannot be heard that the Tribunal has no power to consider the same question from a different angle. There is difference in raising a new dispute for the first time and considering a new aspect of the existing dispute. There is no impediment on its power to consider that very issue from a different angle. The Hon'ble Madras High Court in the case of CIT v. Indian Express, (Madurai) (P.) Ltd. [1983] 140 ITR 705 has held that the Tribunal's jurisdiction is plenary in respect of questions of fact or law arising from assessment. The Tribunal is not precluded from examining a point for the first time merely because it has not been forwarded at the earlier stages of the proceedings. The Full Bench of the Hon'ble jurisdictional High Court in the case of Ahmedabad Electricity Co. Ltd. v. CIT [1993] 199 ITR 351 (Bom.), has held that the Tribunal has jurisdiction to permit additional grounds to be raised before it ev....
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....urred fell within the terms of section 10(2)(v), though not under section 10(2)(vib), it had jurisdiction to admit that expenditure as a permissible in the computation of the taxable income of the assessee.' Similar view has been expressed by several other High Courts holding that the power of the Tribunal extends to examining the subject-matter of appeal from any perspective. In the following cases where disallowance of expenses was made by the revenue under one section, the Hon'ble High Courts have held that the Tribunal has the power to uphold the disallowance under another section. It has further been laid down that the Tribunal did not go outside the subject-matter of the appeal when it sustained disallowance on the same issue but under some different provision : - Steel Containers Ltd. v. CIT [1978] 112 ITR 995 (Cal.) - P. Ibrahim Haji v. CWT [1998] 232 ITR 253 (Ker.). 22. In the backdrop of the present factual matrix, we are not inclined to agree with the viewpoint of the ld. AR that the Tribunal's hands are tied for examining the validity of the return from a fresh angle. It is axiomatic that the subject-matter of the appeal is the validity or otherwise of the return. Wh....
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....the Tribunal had no other alternative except to dismiss the Department's appeal and thereby affirm the order of the AAC cancelling even the lesser penalty imposed by the ITO overlooking section 271(2). The expression "as it thinks fit" is wide enough to include the power of remand to the authority competent to make the requisite order in accordance with law in such a case even though the Tribunal itself could not have made the order enhancing the amount of penalty. The power of the AAC under section 251(1)(b) includes the power even to enhance the penalty subject to the requirement of sub-section (2) of section 251 of a reasonable opportunity of showing cause against such enhancement being given to the appellant, assessee. This could have been done in the assessee's appeal itself filed in the present case. The Tribunal was not justified in taking the view that it had no other alternative except to affirm the order of the AAC cancelling even the lesser penalty imposed by the ITO. In view of section 251(1)(b), it is also clear that the AAC was wrong in taking the view that he had no power to enhance the penalty in accordance with law on reaching the conclusion that the computation of....
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....ct 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 Assessing Officer 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 section 44AB, or, where the report has ....
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.... given in Explanation of sub-section (9) and if the deficiency is not so covered, then the return shall be rendered as invalid. We are not convinced with this proposition that the list as given in the Explanation is exhaustive. If, apart from the items mentioned in the Explanation, there are certain other irregularities which are not of such a magnitude in terms of its effect so as to render the return as invalid, those can very well be considered as making the return as defective and not invalid. Thus the list of items spelled out in the Explanation is only inclusive and not exhaustive. Our view is fortified by the judgment in CIT v. Rai Bahadur Bissesswarlal Motilal Malwasie Trust [1992] 195 ITR 825 (Cal.). The Hon'ble High Court has held in this case as under :- "Of course, the Assessing Officer cannot ignore the specified defects and must get them rectified but to contend that only the defects specified can be got rectified and no other defects would be putting unnecessary restrictions on the power of the Assessing Officer leading to inconvenient consequences and absurd result not intended by the Legislature. There is no such fetters on the powers of the Assessing Officer unde....
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....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 proceedings 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." 32. A bare perusal of this section reveals that no return of income etc., shall become 'invalid' or deemed to be invalid merely by reason of any mistake, defect or omission in such return if it is in substance and effect in conformity with the intent and purpose of the Act. The intent and purpose of the Act is to make assessment at correct figure. If there is some technical defect in the return which does not affect the overall taxability of the income, section 292B comes into play to take care of such technical defect by considering it as not invalid return of income provided such return is in substance and effect in conformity with the Act. 33. Let us test the facts of the instant case on the touchstone of section 292B. It is noted that M/s. S.B. Billimoria & Co., Chartered Accountants were appointed by the assessee to file the return. Shri N.B. Bugwadia....
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....f India [2008] 169 Taxman 302 (Punj. & Har.) by holding that a return which is signed and verified by a person other than the one authorized under the Act, has to be treated as defective and is amenable to provisions of sections 292B and 139(9). On going through the above judicial pronouncements it is vivid that the signing of return by an unauthorized person cannot invalidate the return, but would make the return defective. 36. At this juncture it will be relevant to take note of a recent order passed by the Mumbai Bench of the Tribunal in Nicholas Applegate South East Asia Fund Ltd. v. Assistant Director of Income-tax (International Taxation) [2009] 117 ITD 299 , which has been relied on by the ld. AR. In this case, it has been held as under :- "On a plain reading of this section, it is observed that the return of income, etc., shall not be considered as invalid merely by defect or omission in such return if it is in substance and effect in conformity with the intent and purpose of this Act. The rationale behind this section is that the return of income, assessment, notice, summons or other proceedings should not be held to be invalid due to technical mistakes, which otherwise ....
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....vidually represent total loss suffered by the assessee-company as one unit. There was no obligation on the part of sub-divisions for furnishing returns in respect of their operations independently de hors the assessee-company. In other words, the liability for filing the return in respect of the four sub-divisions fell squarely on the assessee-company as they are its part and parcel. Now when the total income as submitted by the four divisions was returned by them separately, it ultimately meant that they were representing a part of the assessee's total income in themselves. In a way the assessee had originally filed four returns of its income instead of the requirement of one return. The situation would have led to other consequences if these four divisions had been separate entities in themselves having requirement to file distinct returns casting obligation on the Assessing Officer for framing four separate assessments. It is not the case here as the authorities below have not controverted the fact that these four sub-divisions represents the assessee-company as a whole and only one assessment is called for in the name of the assessee-company. Now when four returns were filed in....
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....gainst the intent and purpose of verification part of the return. 40. There is no dispute on the fact that when a valid Power of Attorney is executed in favour of someone, the return can be filed, if permitted by law, on the basis of such Attorney by the person who has been so authorized and such Power of Attorney should be attached along with the return of income. There is no quarrel on the fact that a Power of Attorney was executed on 23-6-1994, copy of which is available at page 57 of the paper book in which M/s. S.B. Billimoria & Co., Chartered Accountants have been empowered inter alia to sign and submit the return "acting through their partners". It is further noted that the original return as well as two revised returns were filed indicating appropriately that it was signed by Power of Attorney holder - M/s. S.B. Billimoria & Co., Chartered Accountants, a copy of which was attached along with the return. However, the mistake occurred when a partner of M/s. S.B. Billimoria & Co., instead of putting his own signature signed the name of S.B.Billimoria at the space required for verification. Naturally the non-signing of the return by the partner in own name did not make the ret....
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.... of the Assessing Officer in relation to the return for assessment year 2000-01 and the Assessing Officer while passing order under section 154 in respect of wrong charging of interest under section 234A, recorded the status as non-resident company. It was further claimed by the ld. AR that the filing of return in the wrong form did not make the return as defective or invalid. In his opinion so long as the correct particulars of income are forthcoming from the return, it shall be valid, notwithstanding the fact that it is filed in wrong form. We are unable to agree with the ld. AR on this point. Firstly the correct status of the assessee in the year in question is still in dispute. The mere fact that the Assessing Officer in passing order under section 154 has mentioned the status of the assessee as a non-resident company and that too in relation to the assessment year 2000-01 cannot be considered as the admission of this status even in relation to the year in question. 43. The next contention raised is that a return filed in wrong Form be considered as valid. We are unable to accept this view point. The Income-tax Rules, 1962 prescribe different types of return forms in which ret....
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....defect as per the prescription of this sub-section and the assessee will be under obligation to remove the defect. If the defect is cured as per section 139(9), then such return becomes valid. If the assessee fails to remove such defect, then the defective return is converted into invalid return. Hence it is clear that section 292B saves the return from being declared invalid, but it does not per se cures the defect. The defect has to be removed by the assessee on being brought to his notice by the Assessing Officer. In the case of Nicholas Applegate South East Asia Fund Ltd. (supra), relied on behalf of the assessee, the defect was removed and a correct return was filed before the completion of assessment, that is why it was held to be valid. However, in the instant case the Assessing Officer has opined that only the defects enumerated in Explanation to section 139(9) are liable to be considered for treating the return as defective and not any other defect, such as wrong verification. It is further seen that the Assessing Officer held the return to be invalid on the sole ground that the return was not properly signed and verified. He did not proceed further to examine whether it w....
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.... words 'a copy of' clear the intention that only the filing of the original PoA is the fulfilment of the requirement of section and not its copy. 46. The learned A.R. has produced before us the Power of Attorney in original. Since the learned CIT(A) has not given any opportunity to the assessee to file the original and declared the return as invalid on that count, in our considered opinion, the return without the original Power of Attorney cannot be treated as invalid and non est, without providing opportunity to the assessee to file such Power of Attorney in original, more so when the original Power of Attorney is in existence. We, therefore, hold that the filing of the copy instead of the original Power of Attorney, in the given circumstances, is only an irregularity and cannot invalidate the return. 47. Now we are back to square one that the assessee filed its three returns in Form which is not applicable to the corporate assessee and claimed the status as an AoP. Before the Assessing Officer the submission was made that the provisions of section 140(c) are applicable, which are relevant for corporate assessee. If, however, we go by the status of the assessee as mentioned in t....