TaxTMI 
TaxTMI 
2009 (1) TMI 301
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.... (iii) NACM Institutional Investors LLC Emerging Countries Class (iv) NACM Institutional Investors LLC Small CAP Engineering Countries Class. 3. The returns in respect of these four sub-divisions were originally filed separately within the time prescribed under section 139(1) of the Income-tax Act, 1961, on October 30, 2001. Subsequently, the assessee realized that a consolidated return for all the four divisions was required to be filed. Therefore, a revised return dated October 29, 2002 was filed incorporating the income/loss of all the four sub-divisions. The Assessing Officer noticed that the assessee had derived income from dividends as well as short-term capital loss. The dividend income of Rs. 5.61 lakhs was claimed as exempt under section 10(33). The short-term capital loss was shown at Rs. 32.54 crores, in support of which the assessee filed necessary supporting evidence towards purchase and sale of shares in the form of Contract notes. The Assessing Officer has mentioned in paragraph 2.1 of the assessment order that on the verification of the details furnished by the assessee, the claim in respect of short-term capital loss as well as dividend income a....
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....he requirement for having a separate SEBI registration account. He contended that the original four returns were filed within time. However, it was realized later on that one single return was required to be furnished consolidating the results of the four divisions and as such a return was prepared and filed in which the trading activities as well as the resultant profits from operation were clubbed as a single unit. He further submitted that section 292B was applicable in his case as the returns were in substance and effect in conformity with the purpose of this Act. He contended that the benefit for carry forward of loss was erroneously denied to the assessee as it had fulfilled the necessary conditions. He relied on certain decisions for contending that the subsequent return filed by the assessee on October 29, 2002 be taken as in substitution of the original returns. 5. Sounding the contra note, the learned Departmental representative, besides strongly relying on the impugned order, contended that the assessee had filed four returns which were invalid because section 2(31) dealing with "person" includes "a company and not the sub-division of a company". She contended that th....
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....suant to notice issued under section 142(1), he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Section 139(3) deals with loss return and provides that if any person has sustained a loss under the head "Profits and gains of business or profession" or under the head "Capital gains" and claims that the loss should be carried forward, he may furnish a return of loss within the time allowed under sub-section (1). 8. After going through the relevant sections for our purpose, we now advert to the facts of the instant case. The due date for filing return under section 139(1) was October 31, 2001. This return could have been revised within one year from the expiry of the assessment year, viz., up to, March 31, 2003. Suppose an assessee had not furnished any return for this year, he could have filed a belated return under section 139(4) up to March 31, 2003. In order to claim the benefit of carry forward of loss, it was required to furnish the return within the time prescribed under section 139(1), i.e., up to October 31, 2001. Now we have to decide the cl....
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....proceedings, etc., are otherwise in conformity with the purpose of the Act. The "purpose of the Act" is to charge income tax on the total income of the assessee. This "purpose" is best fulfilled if the correct income is determined and tax is charged thereon. It involves the making of assessment by the Assessing Officer in which the particulars of income as furnished by the assessee are scrutinized for determining the correct total income. There may be a case in which the assessee has intentionally or unintentionally claimed wrong deductions or exemptions, etc., to which he is not entitled. In that case the Assessing Officer makes the disallowances as per law. Still in another situation the assessee may have stated the correct income and no disallowance etc. are required. The purpose of the Act is achieved when the correct total income is determined either by way of making adjustments by the Assessing Officer and enhancing the stated income to the correct income or by the assessee himself furnishing the correct particulars of income not warranting any enhancement by the Assessing Officer. It, therefore, transpires that if a return has been furnished by the assessee which is otherwis....
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.... complete, in our considered opinion, the assessee has complied with the intent and purpose of this Act, which is to assess the total income correctly. When that is the position, the provisions of section 292B get fully attracted and the assessee's case cannot be shunted out simply on the ground that subsequently one return combining the figures of the four divisions was separately filed. We, therefore, hold that the four returns filed on October 30, 2001, are valid returns under section 139(1) read with section 292B. 10. Now we turn to the subsequent return filed by the assessee in a consolidated manner on October 29, 2002. It is noted that the Revenue has treated it as an original but belated return. In view of our conclusion in the foregoing paragraph that the original returns filed by the four sub-divisions are valid returns within the meaning of section 139(1) read with section 292B, there cannot be any question of treating the subsequent single return as original return. In the peculiar circumstances prevailing in this case, the return can also not be characterized as a revised return under section 139(5) for the reason that there was neither any "omission" nor any "wr....
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.... (b) NACM Global Technologies Class (c) NACM Institutional Investors LLC Emerging Countries Class (d) NACM Institutional Investors LLC Small Cap Engineering Countries Class. (ii) These cells were independently registered with SEBI. Further, separate permanent account numbers were also allotted to these cells by the Income-tax Department. (iii) The above four cells/units filed separate returns on 30th October, 2001 in their own respective names in respect of the year under conside ration under section 139(1) of the Act. All the cells/units declared losses in respect of the business carried on by these cells/units. (iv) The assessee-company filed a revised return on October 29, 2002 declaring the consolidated losses of the above cells/units. (v) The Assessing Officer treated the returns filed by the cells as invalid returns since such cells could not be considered as person defined under section 2(31) of the Act. The revised return filed by the assessee company was treated as original return. Since this return was filed after the period prescribed under sub-section (1) of section 139, the same was not treated as return filed ....
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....t or under any other law for the time being in force, the 30th day of September of the assessment year ; (b) in the case of a person other than a company, referred to in the first proviso to this sub-section, the 31st day of October of the assessment year ; (c) in the case of any other assessee, the 31st day of July of the assessment year. (3) If any person who has sustained a loss in any previous year under the head 'Profits and gains of business or profession' or under the head 'Capital gains' and claims that the loss or any part thereof should be carried forward under sub-section (1) of section 72, or subsection (2) of section 73, or sub-section (1) or sub-section (3) of section 74, or sub-section (3) of section 74A, he may furnish, within the time allowed under sub-section (1), a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the other provisions of this Act shall apply as if it were a return under sub-section (1). (4) Any person who has not furnished a return within the time allowed to him under sub-section (1), or within the time....
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.... whether incor porated or not, (vi) a local authority, and (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. Further, perusal of section 139(1) shows that in case of a company, it is the company which has to file the return. The cells/units established by the assessee in India neither can be considered as a company defined in section 2(17) of the Act nor can be said to be covered by any of the entities mentioned in section 2(31) of the Act. Therefore, it cannot be said that return filed by these cells/units were in accordance with the provisions of section 139(1) or 139(3) of the Act. Further, perusal of sub-section (1) and sub-section (3) of section 139 shows that there must be relationship between the person filing the return and the person who has incurred the loss. If the company has incurred a loss then it is the company who must file the return of loss under sub-section (1) of section 139 or under section 139(3) of the Act as the case may be. Since the loss was incurred by the assessee-company, the return could be filed by the assessee-company only and consequently the four returns filed by its cells/units could....
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.... existence which was filed by the assessee in accordance with section 139(1). Since in the present case, no such return was filed by the assessee-company itself, the provisions of sub-section (5) of section 139 could not be invoked. Therefore, the return filed by the assessee on October 29, 2002 could only be treated as the belated return under section 139(1) or a return under section 139(4) but the same could not by any logic be treated as a return under section 139(3) since such return was not filed within the time prescribed under section 139(1). 20. In view of the above discussion, it is held that the returns filed by the cells/units in their own names cannot be treated as valid returns under section 139(1) and therefore question of filing any return under section 139(5) did not arise. The Assessing Officer was therefore justified in considering the revised return filed by the assessee as original return under section 139(1) read with section 139(4) of the Act and consequently, the said return cannot be treated as return under section 139(3) as the said return was not filed within the time allowed under section 139(1) of the Act. The contention of the assessee's counsel ....
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....he Act so as to entitle the assessee to carry forward such losses for setting off the same in the subsequent year in terms of the provisions of section 80 of the Act ?" Facts of the case Briefly stated the facts of the case are that the assessee is a company incorporated in Mauritius under the Protected Cells Companies Act, having the following four cells or sub-divisions : (i) NACM Emerging Countries Class (ii) NACM Global Technologies Class (iii) NACM Institutional Investors LLC Emerging Countries Class (iv) NACM Institutional Investors LLC Small CAP Engineering Countries Class The returns of income of four cells for the assessment year 2001-02 were filed within the time prescribed under section 139(1) of the Income-tax Act on October 30, 2001. Subsequently, the assessee realized that a consolidated return for all the four cells was required to be filed. Therefore, a revised return dated October 29, 2002 was filed incorporating income/loss of all the four cells/sub-divisions. The Assessing Officer noticed that the assessee had derived income from dividends and short-term capital loss. The dividend income was claimed to be exempt under ....
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.... He noted that all the four sub-divisions were separately registered with SEBI and these were having separate permanent account number and registration as FII. This was as per the requirement of the relevant rules. He further noted that there was no controversy on the fact that the loss declared by four cells (sub-divisions) was subsequently clubbed as a consolidated figure without any variation therein. 24.1. Thereafter, the learned Accountant Member considered the provisions of section 139 with sub-sections (1), (3), (4) and (5). Referring to the facts involved in the case, the learned Accountant Member has observed that in order to claim the benefit of carry forward of loss, the assessee was required to furnish the return within the time prescribed under section 139(1), i.e. up to October 31, 2001 in order to consider the claim of the assessee for carry forward of loss of Rs. 32.54 crores sustained by it, whose computation and otherwise eligibility has been accepted by the Assessing Officer. The learned Accountant Member further observed four returns were filed by the cell companies individually, copies of which have been placed in the paper book. On perusal of these returns,....
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....fficer and enhancing the stated income to the correct income or by the assessee himself furnishing the correct particulars of income not warranting any enhancement by the Assessing Officer. It, therefore transpires that if a return has been furnished by the assessee which is otherwise in sub stance and effect in conformity with or according to the intent and purpose of this Act, then any technical defect in it would not render it to be invalid. In such a situation the provisions of section 292B would come to the rescue of the assessee and thus debar the Revenue authorities from declaring such return to be invalid. The instant case falls under the second category. It is not the case of the Revenue that the assessee had evaded any tax by furnishing four returns separately or by submitting one consolidated return. Neither any mischief or mala fide on the part of the assessee either in bifurcating or clubbing its income has been brought to our notice by the learned Departmental representative. The Assessing Officer has accepted in paragraph 2.1 that the claim of the assessee in respect of short-term capital loss as well as dividend income is perfectly in order. We observe that separate....
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....her any "omission" nor any "wrong statement" in those returns. He held that the substituted return consolidated the same information and particulars which were earlier given in four separate returns and there is no deviation, worth the name, in any of the particulars of income or otherwise, which could bring it within the purview of "revised return". In fact the subsequent return is nothing but a consolidated return. This later return would not have the effect of effacing but supplementing the original return and hence would relate back to the date when four returns were filed. 26.1. With the aforesaid observation, the learned Accountant Member accepted the claim of the assessee. According to him the benefit of carry forward of loss cannot be denied to the assessee as it filed returns of loss before the due date within the time allowed under section 139(1) of the Income-tax Act. Therefore, in the proposed order, the learned Accountant Member set aside the impugned orders and held that the right of the assessee to carry forward the loss cannot be snatched away from it. 27. The learned Vice-President did not agree with the above view of the learned Accountant Member. He also no....
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....sident then referred to the provisions of section 292B of the Income-tax Act, which is reproduced in his order. He was of the view that reliance on the above section by the assessee was misplaced. His reasons in the proposed order for the above view are as under : "The perusal of the above shows that no return of income shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income if such return of income is in substance and effect in conformity with or according to the intent and purpose of this Act. In order to invoke the provisions of section 292B, the mistake, defect or omission must be in the return of income filed by the assessee and such return of income must be in conformity with the provisions of the Act. The present case cannot be said to be a case of any mistake, defect or omission in the return since no return of income was filed by the company itself. Section 292B pre-supposes a return of income or loss which is in accordance with the provisions of the Act. If the return of income itself is not in accordance with the provisions of the Act then question of invoking the provisions of section 292B w....
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....n doing so. (4) Benefit under section 139 cannot be denied on technical grounds. (5) The information contained in the revised return dated October 29, 2002, is congruent to the information provided in the four separate returns filed by the cells and there is no variance whatsoever, hence there is no loss of revenue. Further, information contained in the belated return cannot be held as invalid so as to be overlooked by the Assessing Officer. (6) It is provided under section 292B of the Income-tax Act that no return of income furnished or made shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, if such return of income is in sub stance and effect in conformity with or according to the intent and purpose of this Act." 30. Learned counsel referred to the provisions of section 292B of the Income-tax Act and submitted that the "purpose" of the Income-tax Act is to achieve/determine the correct total income and when correct total income was given in four returns filed simultaneously and later in the return consolidating figures were given, the original four returns filed were valid. ....
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....section 11(1) and in particular clause (2) of the Explanation thereto, in the light of the scheme and object of this provision, we are of the clear opinion that the requirement of exercising the option within the specified time is directory and the assessing authority has the power to condone the delay in exercise of the option, if he is satisfied about the sufficiency of cause shown for the delay." Their Lordships, on the facts of the case, held that the Appellate Tribunal, for a sufficient cause had condoned the delay in the exercise of the option by the assessee. So the question was answered in favour of the assessee. (2) CIT v. Masoneilan (India) Ltd. [2000] 242 ITR 569 (Ker) : In the aforesaid case, their Lordships held as under : "Direct Taxation-Defect-Sections 139, 140, 154 and 292B of Income-tax Act, 1961-Assessee public limited company-Return filed by assessee not signed by persons named in section 140- Whether in view of section 292B return cannot be questioned if it was in substance and in effect in conformity with intent and purpose of Act and action under section 154 not warranted-Return cannot become void if there is no 'defect'-'Defect&....
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....d under section 139(5) correcting omissions or wrong statements made in the first revised return, for the first revised return filed under section 139(5) would, in law be a return under section 139(1) also." (5) Bharat Nidhi Ltd. v. CIT [2008] 306 ITR 230 (Delhi). In that case the question was that the secretary of the company had signed the original return filed. However, subsequently, the said return was revised, which was signed by the managing director of the company and the defect was removed. The Assessing Officer held that the original return signed by the secretary was invalid. On a reference, their Lordships of the Delhi High Court held that there can hardly be any doubt, secretary otherwise is a person competent to sign documents on behalf of the assessee, which is a company. It was found that he had been signing returns in the past. The moment the defect was pointed out to the assessee, a fresh return was filed, which was signed by the managing director. The fresh return, it was held would relate back to the original filing of the return. The decision of the hon'ble Kerala High Court in the case of CIT v. Masoneilan (India) Ltd. [2000] 242 ITR 569 was applie....
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.... satisfied. She made reference to the decision of the hon'ble Supreme Court in the case of CIT v. Smt. P. K. Kochammu Amma [1980] 125 ITR 624, in support of the contention that "his income" means total income. Therefore, the return without total income was invalid. The learned Departmental representative also placed reliance on the decision of the Allahabad High Court in the case of Abhey Ram Chunni Lal, In re [1933] 1 ITR 126. In the said case the assessee filed a return in respect of income from two branches alone and not from others. The Income-tax Officer extended time to enable the assessee to comply with notice under section 22(2) of 1922 Act. Even then the assessee did not comply and failed to file complete return of total income of the concern. In the above circumstances, it was held that return without disclosing income from all branches was no return within the meaning of section 22(2) of 1922 Act. It was not a bona fide return. The learned Departmental representative also relied upon the decision of the Income-tax Appellate Tribunal, Delhi "B" Bench, in the case of ITO v. Atea Spa. [1992] 42 TTJ (Del) 80. In the said case the return filed by the Indian company on beh....
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....e made on the basis of four returns, the assessee could have easily argued that such assessments were invalid. Identical situations prevailed here. With the above submissions, the learned Departmental representative supported the impugned order of the learned Vice-President. 33. In rebuttal, learned counsel for the assessee tried to meet points raised by the learned Departmental representative. In the first place, he argued that there was no difference between four returns and the return filed on October 29, 2002. Four cells are part and parcel of the company. The cells were incorporated on different dates but that has no relevancy to the issue involved. Learned counsel reiterated that four returns filed in this case were valid when the matter is considered in the light of the provisions of section 292B of the Income-tax Act, as has been elaborately discussed by the learned Accountant Member. Total income of the assessee was disclosed in the four returns. Therefore, four returns read together serve intent and purpose sought to be achieved by the Income-tax Act. These were valid returns. It was reiterated that benefit in the light of statutory provision should not be denied on te....
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....validity of assessment proceedings. 34.1. It is clear from the language of the provision, that its aim is to prevent any return of income, assessment, notice or other proceedings being treated as invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, other proceedings which are in substance and effect in conformity with or according to the intent and purpose of this Act. The question of application of section 292B cannot be prejudged by finding that return, notice, etc. is not as per the requirement of the statute and is/are invalid. This way the very purpose of the section to prevent declaration of return, notice, etc. as invalid is defeated. The finding that the return or notice etc. is invalid or to what extent it is invalid is unnecessary and counter productive. Invalid in my view is quite a strong word and "mistake, defect or omission" in the return, notice, etc. are governed and must take colour from the later part of the section requiring to consider whether such return etc. "is in substance and in effect in conformity with or according to the intent and purpose of this Act". In other words, it is to be seen whether such ....
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....all the four returns is taken into account, it is clearly found that the assessee did disclose full information of total loss in time as was needed by the Revenue to compute the assessee's income/loss. The Revenue has not pointed out any information needed but not given in the four returns submitted by the four cells. The minor errors pointed out by the learned Departmental representative, during the course of hearing, are not significant as those cannot affect materially the computation of the income/loss in any case. Therefore, it is to be held that four returns in substance and in effect were in conformity with or according to the intent and purpose of the Income-tax Act. No doubt there was a mistake in filing four returns instead of one consolidated return of total loss of the assessee-company. However, that mistake, otherwise rendering the returns invalid, is fully taken care of by the provision of section 292B of the Income-tax Act. 35. In order to illustrate the point, I would like to refer to the decision of the hon'ble Punjab and Haryana High Court in the case of Swaran Kanta v. CIT [1989] 176 ITR 291. In the said case the assessee died during the pendency of th....
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....e-tax authority, refer red to in section 116 of the Act, to rectify any mistake apparent from the record and amend the order accordingly. The slight mistake, if any, could be rectified under this provision. The law-framers were not satisfied with this provision alone and inserted section 292B of the Act, which came into effect from October 1, 1975. It, inter alia, provided that an assessment made in pursuance of any of the provisions of the Act shall not be invalid nor deemed to be invalid merely by rea son of any mistake, defect or omission in the assessment if the assess ment is in substance and effect in conformity with or according to the intent and purpose of the Act. As already noticed, the entire proceedings were conducted after the death of the original assessee in accordance with law. After death, the legal representative is also deemed to be an assessee. Therefore, the title of the order, which was not happily worded, would not make the assessment order invalid as was sought to be declared by the Appellate Assistant Commissioner. The Tribunal was fully justified in restoring the order of assessment in exercise of its powers under section 292B of the Act." 35.1. In the ....
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....filed, section under which it was issued and period within which return was to be filed. The Assessing Officer also issued a second notice containing all missing particulars, which was acted upon by the assessee. The question was whether the aforesaid notice issued on June 30, 1995 with the defects mentioned above could be taken to be valid when read in the light of the provisions of section 292B. The specific objection of the assessee to the application of section 292B is recorded by their Lordships as under (page 248 of 287 ITR) : "Mr. Sathe, while developing another shed of his submission lead ing to the shelter of section 292B of the Act taken by the respondents, urged that the glaring defects and/or infirmities in the notice going to the root of the jurisdiction of the authority cannot be cured by resort ing to the provision of section 292B. The refuge of section 292B cannot be allowed to be taken in all cases to get over vital defects in the notice. If the defects are merely technical in nature, then such defects can be cured by the provision of section 292B of the Act. In support of his submission he pressed into service the Statement of Objects and Reasons leading ....
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....our of the assessee. In the course of the decision, their Lordships quoted with approval the observations in the case of State Bank of Patiala v. S. K. Sharma [1996] 3 SCC 364 ; P. T. Rajan v. T. P. M. Sahir [2003] 8 SCC 498. They also quoted from Crawford on Statutory Construction at page 254 of 287 ITR as under : "In the case of State Bank of Patiala v. S. K. Sharma [1996] 3 SCC 364, the apex court ruled that in the case of a procedural provision which is not of a mandatory character, the complaint of violation has to be examined from the standpoint of substantial compliance. The order passed in violation of such provision can be set aside only where such violation has occasioned prejudice to the subject. It further went on to observe that even a mandatory requirement can be waived by the person concerned, if such mandatory provision of law is conceived in his interest and not in the public interest. The conduct of the subject must be borne in mind while examining a complaint of non-observance of procedural rules governing such enquiries. As a rule, all such procedural rules are designed to afford a full and proper opportunity to the subject to defend himself." The....
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....ells, in this case. In my opinion, the Revenue authorities, in holding that the return was not filed by the company, has not given effect to the provision of section 292B. As noted by their Lordships of the Bombay High Court, from the decision of the Supreme Court in the case of State Bank of Patiala [1996] 3 SCC 364 (page 255 of 287 ITR) : "the conduct of the subject must be borne in mind while examining a complaint of non-observance of procedural rules". It has already been noted how four returns of loss were bona fidely filed and on discovery of the mistake, the assessee filed a consolidated return, in which figures of four different returns were consolidated and the figure of total loss was shown. In such a situation, it is not correct to hold that returns filed earlier were invalid, ineffective and of no legal consequences. This revised return would in such circumstances relates back to the date of filing of the original return. The said return has to be taken along and considered with the original four returns, which contained complete information for making assessment. The technical mistake in the four returns stood removed on filing of the consolidated return. To ignore dat....