ORDER
K.B. Menon, Judicial Member
1. This appeal by the department relates to the assessment year 1977-78, for which the relevant previous year ended on 30-4-1976.
2. The only ground taken in the appeal is that the Commissioner (Appeals) erred in setting aside the assessment order with directions to the ITO that the fresh assessment should be made after taking into cognizance a revised return filed on 7-8-1980.
3. For appreciating the dispute involved in the present appeal, it is necessary to set out certain dates :
30-6-1977 Date on which return was due 31-10-1977 Return filed under Section 139(2) of the Income-tax Act, 1961 ('the Act') 14-6-1978 A revised return filed 22-3-1980 Draft order under Section 144B of the Act sent to the assessee by the ITO 31-3-1980 Last date for completion of the assessment but for Section 144B proceedings 5-4-1980 Objections filed 7-4-1980 Objections forwarded to the IAC 11-7-1980 Further objections filed and forwarded 7-8-1980 to the IAC Revised return filed
4. The return on 31-10-1977 had declared a net loss of Rs. 18,80,620. This was revised as net loss of Rs. 20,51,430 by the revised return filed on 14-6-1978. The enhanced loss was on account of a claim for weighted deduction of Rs. 1,70,804 under Section 35B of the Act. In the further objections dated 11-7-1978, the assessee had claimed deductions of Rs. 27,02,223 which was made up of duty drawback and some cash assistance claimed by the assessee, but not accepted by authorities. The assessee also claimed Rs. 39,572 in respect of pending claims for cash assistance and duty drawback on export sales relating to earlier years. The revised return filed on 7-8-1980 was for regularising the above claims made by the assessee.
5. The ITO ignored the revised return filed on 7-8-1980 on the ground that the assessee had already filed a revised return on 14-6-1978 and that it was not open to the assessee to file another revised return.
6 The Commissioner (Appeals) held that under Section 139(5) more than one revised return could be filed and that the assessee can file tiny number of revised returns before the assessment is completed. He also held that a revised return filed after the forwarding of the draft assessment order to the IAC can be processed by the ITO by informing the IAC about the filing of the return and the TAC by directing the ITO to treat the draft order already forwarded as cancelled and to examine the claims in the revised return and forward a fresh draft order. He also pointed out that the bar of limitation in completing the assessments will be adequately taken care of by the provisions of Section 153(1)(c) of the Act, under which the time will be extended by one year from the date of filing of the revised return. Aggrieved by this order, the department has come up in appeal.
7. The arguments of the learned departmental representative were to the following effect : only one revised return could be filed under Section 139(5). No revised return could be accepted after the draft assessment order has been forwarded by the ITO to the IAC under Section 144B(2). It is also not permissible for the ITO to forward more than one draft order. The proceedings before the IAC are quite different from the assessment proceedings. The assessment proceedings cannot be said to be pending after the forwarding of the draft order to the IAC. The extended period available under Section 144B read with Section 153 is available only for completing the assessment and it cannot be used by the assessee for filing a revised return.
8. On the other hand, the arguments of the learned counsel for the assessee were to the following effect : Under Section 139(5), any number of revised returns could be filed before the completion of the assessment. There is nothing in Section 144B which takes away this right of the assessee. The question of limitation is adequately taken care of by Section 153 which provides for extension of the period of limitation from the date of filing a revised return. The assessment is not complete by the forwarding of the draft assessment order to the IAC. The assessment is complete only when the ITO completes the assessment after receipt of the instructions from the IAC. The ITO cannot, therefore, ignore any revised return filed before the completion of the assessment.
9. In support of the proposition that only one revised return could be filed, the learned departmental representative relied upon the ruling of the Delhi High Court in the case of O.P. Malhotra v. CIT [1981] 129 ITR 379. In that case, the return filed was one under Section 139(4). The decision only says that in such a case, no revised return could be filed under Section 139(4). This decision is not an authority for the position that only one revised return could be filed when the return is under Section 139(1) or 139(2). It was then contended by the learned departmental representative that if a revised return filed after the forwarding of the draft order to the IAC is to be acted upon, then the ITO will have to forward another draft order to the IAC on the basis of the revised return and that it has been held in Sudhir Sareen v. ITO [1981] 128 ITR 445 (Delhi) that the ITO cannot forward more than one draft order under Section 144B. In this case, the question whether the earlier draft order could be recalled and whether a fresh draft order could be forwarded when the assessee has filed a revised return, was not considered by the High Court. As rightly pointed out by the learned counsel for the assessee, this ruling is only an authority for the position that a second draft order cannot be forwarded when nothing intervenes. The next contention of the learned departmental representative was that the proceedings before the IAC are different from the one before the ITO and that the assessment proceedings cannot be said to be pending when the ITO has forwarded the draft order and the matter is pending before the IAC. We are unable to accept this contention also. Section 139(5) confers on the assessee in unequivocal terms a right to furnish revised return at any time before the assessment is made. In the present case, the assessment is made under Section 143(3) of the Act. Before making the assessment, the ITO had to comply with Section 144B. Sub-section (1) of Section 144B clearly shows that the procedure prescribed in the section is to be complied with prior to the making of the assessment under Section 143(3). Sub-section (3) makes it very clear that the assessment is to be completed only after complying with the procedure prescribed in Section 144B. The assessment cannot, therefore, be said to be complete during the pendency of the proceedings under Section 144B. If so, a revised return filed during the pendency of Section 144B proceedings is one filed before the assessment is made. What is important is that the revised return has to be filed before completing the assessment and this requirement has been complied with in the present case. The ruling of the Delhi Bench ‘B’ of the Tribunal in IT Appeal No. 972 (Delhi) of 1978-79, dated 26-6-1981, relied upon by the assessee is also to this effect.
10. It was then argued by the learned departmental representative that the revised return has been filed during the extended period of limitation, consequent on the initiation of proceedings under Section 144B and that the ITO is bound to take notice only of a revised return filed during the normal period of limitation. There is nothing in the Act which restricts the time for filing the revised return up to the commencement; of the proceedings under Section 144B. This is sufficient to reject the contention of the department. It is true that it is settled law that a return or revised return which is filed beyond the period of limitation prescribed for making the assessment is non est and cannot be acted upon. But the test is whether the return is filed at a time when an assessment could have been lawfully made. In the present case, the assessment could have been made and was actually made only after completing the procedure prescribed under Section 144B and the revised return was filed before the making of the assessment. It will not be correct to treat the extra time available to the ITO to complete the assessment because of the initiation of proceedings under Section 144B as a grace period given to the ITO for completing the assessment. It is incorrect to treat the period mentioned in Clause (iv) of Explanation 1 to Section 153 as something lying outside the prescribed period of limitation. The true construction of Section 153 is that there is only one period of limitation for completing the assessment. What Explanation 1 does is to exclude the period mentioned in the Explanation from the period of limitation. Therefore, the period excluded is treated as non est in computing the period of limitation prescribed and it is not, therefore, correct to treat the period to be excluded as a period permitted over and above the prescribed period of limitation. There is only one period of limitation which terminates on the expiry of the period of two years which will be calculated after excluding the period mentioned in Explanation 1(iv). The ITO cannot, therefore, deny to the assessee the right conferred by Section 139 to file a revised return merely for the reason that the ITO has forwarded the draft order to the IAC.
11. It is true that the filing of a revised return after the forwarding of the draft order will create some practical problems. The Commissioner (Appeals) has indicated one method by which this could be got over. In any case, the practical difficulties that may be involved will be no reason for denying to the assessee the absolute right conferred under Section 139(5) to file a revised return before the completion of the assessment. We, therefore, confirm the order of the Commissioner (Appeals) by which he has set aside the assessment and has restored the matter to the ITO to do the assessment afresh after taking cognizance of the revised return filed on 7-8-1980.
12. In the result, the appeal is dismissed.