ORDER
A.D. Jain, J.M.
1. These are Department’s appeals for the asst. yrs. 2000-01 and 2001-02, respectively, against the consolidated order of the CIT(A), Jalandhar:
2. The common ground raised is that the learned CIT(A) has erred in quashing the order under Section 154 of the IT Act, wherein it has been held that return of income, being not properly signed and verified is invalid, as held by the Hon’ble Supreme Court in the case of Commr. of Agrl. IT v. Keshab Chandra Mandal .
3. The facts are that for both the years under consideration, the assessee filed returns of income, the verifications whereof were signed by Shri Kultar Krishan, an employee of the assessee, whereas as per the requirement of Section 140(c) of the IT Act, the managing director or the director of the assessee company was required to sign such verification. The returns were processed under Section 143(1). Refunds were computed and made over to the assessee. Thereafter, notice under Section 154 was issued to the assessee stating that since the returns had not been verified by the proper person, a mistake apparent from the record had occurred and the refund had wrongly been issued.
4. In response to the said notice, the assessee stated before the AO, inter alia, that there had been a deadlock in the board of directors of the company, due to which, through a resolution of the board of directors, Shri Kultar Krishan had been authorised to sign and file, inter alia, the returns of income; that the said deadlock in the board of directors had led to litigation going upto the Hon’ble Supreme Court; that the returns of income had been filed suo moto bona fide by the assessee in time; that the returns were signed by the assessee’s employee under due power and authority given by the board of directors of the company; that the said power was given in view of exceptionally unavoidable circumstances i.e. the deadlock in the board of directors; that the returns had been duly processed and the refund orders had been issued and the assessee had received the refund also; that defect, if any, in signing the returns be taken as a technical defect and the same be allowed to be removed by affording opportunity to the assessee.
5. The assessee further contended that for both the years, later on, returns duly signed by the managing director had been filed, whereby, the defect in the original returns stood cured.
6. The AO, however, did not agree with the stand taken by the assessee. It was held that by virtue of the orders passed under Section 154 of the Act, the returns filed by the assessee were invalid, also invalidating the action taken by the AO on the basis of such invalid returns. The refund issued and interest paid therein were, therefore, withdrawn.
7. On appeal, the learned CIT(A), by virtue of the impugned consolidated order, quashed the orders passed by the AO under Section 154 of the Act.
8. Aggrieved, the Department has filed the present two appeals “before us.
9. Impugning the orders of the learned CIT(A), the learned Departmental Representative has argued that it is Section 140(c) of the Act, which is operative here. This section categorically provides that the return in the case of a company, shall be signed and verified by the managing director thereof, or where for any unavoidable reason such managing director is not able to sign and verify the return or where there is no managing director, by any director of the company. In the present case, the returns filed by the assessee were invalid ab initio, since they were not filed by either the managing director or the director of the company. Mere resolution of the board of directors cannot over ride the specific provisions of Section 140(c). Therefore, the alleged delegation of powers, by resolution of board of directors, to an employee of the assessee company does not validate the returns filed. In the present case, the returns were processed and refunds were issued. This was a mistake apparent from the record, the returns being invalid. This defect was correctly rectified by the AO under Section 154 of the Act. The learned CIT(A) erred in not accepting such order of the AO. The learned CIT(A) has failed to take into consideration the decision of the Hon’ble Supreme Court in the case of Keshab Chandra Mandal (supra), wherein it has been held that if the statute requires personal signature of a person, that signature must be that of the man himself and that there must be physical contact between that person and the signature put on the document. Further, the learned CIT(A) has also failed to consider the decision of the Hon’ble Madhya Pradesh High Court in the case of Khial Dass & Sons v. CIT , wherein it has been held that Section 292B of the Act merely states that no return of income shall be invalid merely by the reason of any mistake, defect or omission therein, if the return is, in substance and effect, in conformity with or according to the intent and purpose of the Act; that the idea is that if any minor defect is there which does not militate against the intent and purpose of the Act, such minor defect can be cured, but according to Section 140, which is mandatory, every return has to be signed and verified and if it is not so signed and verified, it is in breach of the provisions of Section 140 of the Act and, therefore, it cannot be a defect which can be cured and any return which has been filed without signature and verification of the assessee, will not be treated as a valid return. The learned Departmental Representative has also placed reliance on the decision of the Hon’ble Calcutta High Court in the case of National Insurance Co. v. CIT , wherein it has been held, inter alia, that it is only when a return contains any of the specified defects and the ITO, in his discretion, intimates the defect to the assessee and the assessee fails to rectify the same within the specified period, that the ITO may treat the return as an invalid return; thus, the first return which was not signed and verified by the managing director was not a defective return, it was an invalid return in the absence of any explanation. So, it was held that this aspect could not be cured even by taking recourse to the provisions of Section 292B of the Act.
10. On the other hand, the learned Counsel for the assessee has supported the order of the learned CIT(A). It has been argued that the defect in question was definitely a curable defect. Rather, in both the cases, it was cured by filing returns duly signed by the managing director of the assessee company before service of the orders under Section 154 of the Act. It has been submitted that otherwise too, a refund cannot be withdrawn taking recourse to Section 154 of the Act. Moreover, the issue, if not taken as a settled one in favour of the assessee, is, at best, a debatable issue and debatable issues are not ones to be adjudicated upon under Section 154 of the Act;. The learned Counsel for the assessee has placed reliance on the following case laws:
(1) B.F. Goodrich Co. v. Dy. CLT (1997) 57 ITD 309 (Cal);
(2) IAC v. Punjab United Pesticides & Chemicals Ltd. (1989) 31 ITD 535 (Chd);
(3) MP State Industrial Development Corporation Ltd. v. Asstt. CIT (1995) 53 TTJ (Ind) 262;
(4) Dy. CIT v. Hindustan Dorr Oliver Ltd. (1994) 48 TTJ (Bom) 552;
(5) Remfry & Sons and Anr. v. CIT ;
(6) Asstt. CIT (Inv.) v. Prime Securities Ltd. (2005) 96 TTJ (Mumbai) 553 : (2005) 95 LTD 249 (Mumbai);
(7) CIT v. Masoneilan (India) Ltd. .
11. The learned Counsel for the assessee has submitted that in view of the above, the appeals of the Department be dismissed.
12. We have heard the rival contentions and have perused the material on record. The sole issue here is as to whether the returns of the assessee, signed by an employee of the assessee company instead of managing director or director, as required by Section 140(c), were valid returns and as to whether the refund issued to the assessee on processing these returns could be withdrawn under Section 154 of the Act.
13. The facts are not disputed. The stand of the Department is that the provisions of Section 140(c) of the Act could not be overridden by a mere resolution of the board of directors of the assessee company, authorising an employee to sign and verify the returns. The returns so signed and verified were entertained and refund issued. This was a mistake apparent on record which was correctly rectified by passing orders under Section 154 of the Act. This action of the AO was in accordance with law and was wrongly undone by the learned CIT(A) by passing the impugned order. On the contrary, the assessee asserts that the defect in the returns, if any, was a defect curable under Section 292B of the Act, which was duly cured by filing returns signed by the managing director of the assessee company in time, i.e., before service of the orders under Section 154 of the Act. Moreover, the refund once issued to the assessee and received by the assessee cannot be withdrawn by taking recourse to Section 154 of the Act. There is no mistake apparent from the record, which could be rectified under the provisions of Section 154 of the Act.
14. Having considered the arguments of both the parties as well as the material placed on record before us, we are of the considered opinion that there is no error in the order under challenge. The Department has sought to place reliance on the decision of the Hon’ble Supreme Court in the case of Sri Keshab Chandra Mandal (supra), wherein, it has been laid down that if the Act requires personal signature of a person, the signature needed to be appended must be of that person alone and none other. However, undisputedly, this decision was rendered prior to the insertion of Section 292B in the Act whereby, inter alia, a return of income filed in pursuance of any of the provisions of the Act, shall not be invalid merely by reason of any mistake, defect, or omission in such return, if such return of income is, in substance and effect, in conformity with and according to the intent and purpose of the Act. Section 292B thus proposes to do away with invalidation of a return containing any mistake, where the return conforms to effectively, with the intent and purpose of the Act. The intent and purpose of the Act is to tax the income of an assessee. The returns filed in the present case cannot be disputed to have been filed in conformity with this purpose. They merely contained a procedural irregularity, which was the action undisputedly, duly rectified. Procedure, it is trite law, is the handmaid of justice.
15. The Department has also sought to place reliance on the decision of the Hon’ble Calcutta High Court in the case of National Insurance Co. (supra). There is no dispute in the proposition laid down in that decision. However, the facts attending that case are not pan materia with the ones present hereunder. There the first return which was not signed and verified by the managing director, was held to be an invalid return in the absence of any explanation. This, we see, is not the case here. In the present case, the assessee duly submitted an explanation, and a plausible one at that, that due to deadlock in the board of directors of the assessee company, the returns could not be signed by the managing director.
16. In CIT v. MX. Gupta 1978 CTR (All) 36 : (1978) 113 ITR 473 (All), it was held, inter alia, that Section 292B makes a clear departure from the pre-existing legal position; and that for that reason also, it cannot be held that this section is retrospective in its operation. Thus, the case laws rendered prior to the introduction of Section 292B cannot and do not act detrimental to the case of the assessee. The decision of the Hon’ble Calcutta High Court in the case of National Insurance Co. (supra) too, as discussed above, is different on facts. In that case, a notice regarding the defect in the return was issued to the assessee by the AO, which is a fact materially different; here no such notice was ever issued to the present assessee.
17. In B.F. Goodrich & Co. (supra), the Calcutta Bench of the Tribunal held, inter alia, that there is a consensus of judicial opinion that the absence of, or a defect in, the signature of a party in a document is a curable defect and it does not invalidate the document; that Section 292B of the IT Act also gives effect to this legal position.
18. In Punjab United Pesticides & Chemicals Ltd. (supra), the return of income was signed by the secretary of the company. It was followed by another return signed by the director. The subsequent return was, however, filed beyond the limitation provided. The Chandigarh Bench of the Tribunal held that the return signed by the director filed subsequently should have been accepted by way of rectification of the original returns. The assessing authority was directed to treat the same as validly made and to make the assessment de novo in accordance with law.
19. In MP State Agro Industrial Development Corporation Ltd. (supra), the original return was filed by the Chief Accounts Officer. The revised return was duly signed by the managing director. The irregularity was held to have been cured, relating back to the date on which the return was originally filed.
20. In Hindustan Dorr Oliver Ltd. (supra), the appeal memo was signed and verified by the director, instead of the managing director of the company. Subsequently, a fresh memo, properly signed, was filed. The CIT(A) was held by the Bombay Bench of the Tribunal to have rightly treated the same as a technical default duly cured. It was also held that a memo signed by wrong person is a curable defect and not fatal, and when a properly signed memo is filed subsequently, it relates back to date on which the original memo was filed.
21. In Remfry & Sons (supra), where the first appeal was dismissed by the CIT(A) on the ground that it was not signed by a competent person and the Tribunal affirmed this view, the Hon’ble Delhi High Court held that the irregularity committed by the assessee was curable and could be rectified on the date of its filing and even subsequent thereto, as the appeal admittedly was filed within the period of limitation. The Supreme Court decision in Sri Keshab Chandra Mandal (supra) was referred to.
22. In Prime Securities Ltd. (supra), the Mumbai Bench of the Tribunal held that where the assessee’s return was signed by the secretary of the company and not by its director or managing director and was treated as an invalid return, whereas a subsequent return was filed after curing the defect and was treated as the original return, the issue as to whether the provisions of Section 292B saved the return as originally filed, was held to be one on which more than one view was possible, but where the preponderance of the judicial opinion was more in favour of the assessee. It was held that as such, the AO should have treated the assessee as having filed the defective return earlier which was cured later on.
23. In Masoneilan (India) Ltd. (supra), the Hon’ble Kerala High Court held that the defect of the return of assessee company not having been signed by a person as mentioned in Section 140 was a defect curable under Section 292B. It was also held that rectification proceedings under Section 154 to declare the return as non est were not valid. This judgment is squarely applicable to the facts of the present case.
24. On having considered the above legally settled position, we find that looked from any angle, the stand taken by the Department is incorrect. In T.S. Balaram, ITO v. Volkart Brothers and Ors. , the Hon’ble Supreme Court crystallised the position that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established only by a long drawn process of reasoning on points on which there may be conceivably two opinions; and that a decision on a debatable point of law is not a mistake apparent from the record. Evidently, the issue as to whether Section 292B saves the returns originally filed by the assessee, once such returns were rectified later, is an issue where more than one view is possible and one on which judicial opinion, as discussed hereinabove, decidedly tilts more in favour of the assessee. That being so, at best, the issue is a debatable one, falling outside the scope of consideration under Section 154 of the Act. Therefore, the orders withdrawing the refund issued to the assessee, by taking recourse to Section 154 of the Act, were not sustainable in the eye of law. They were correctly quashed by the learned CIT(A) by virtue of the impugned order. We, thus, hereby uphold the consolidated order of the learned CIT(A). The grievance raised by the Department is found to be shorn of merit and is rejected as such.
25. In the result, both the appeals of the Department are dismissed.