ORDER
R. Acharya, Accountant Member
1. The assessee has instituted this appeal against the order of the CIT (Appeals) for the assessment year 1987-88.
2. Ground Nos. 1, 2 & 3 relate to objection that the CIT(A) erred in confirming the assessment when the same was barred by limitation, when the notice under Section 148 issued was bad in law and when the return filed is to be treated as a return under Section 139(4) of the Income-tax Act, 1961 (in short ‘the Act’).
3. Briefly stated the facts of this case are that the assessee failed to file return of income within the time allowed under Section 139(1) of the Act. The return in this case was due to be filed under Section 139(1) on 31-7-1987. No application for extension of time in Form No. 6 was filed by 31-7-1987. The application for extension of time in Form No. 6 is filed only on 3-8-1987 requesting for extension of time up to 31-10-1987. The reason given in Form No. 6 is that ‘audit is in progress and finalisation of account was not complete’. The second application for extension of time in Form No. 6 was filed on 10-11-1987 requesting the extension of time up to 28-2-1988. No specific ground was given in Form No. 6 as to why the extension of time for filing the return was sought for.
4. As no return was filed till 25-10-1988 a notice under Section 148 was issued on the same day and was served on the assessee on 26-10-1988, requesting the assessee to file the return of income as income chargeable to tax has escaped assessment due to failure on the part of the assessee to file the return. Ultimately, the return of income was filed on 30-3-1989, along with two audit reports – first dated 24-7-1987 and the second dated 16-9-1987 and the total income was declared at Rs. 49, 65, 690. The assessment was completed on 22-8-1990 by the Assessing Officer (in short ‘AO’) under Section 143(3) read with Section 147(a) and the total income was determined at Rs. 56, 86, 760.
5. Being aggrieved by the assessment order the matter was carried in appeal to the CIT(A). Before the CIT(A) it was submitted that the AO was not competent to issue notice under Section 148 unless the limitation for filing the return under Section 139(4) expires and, therefore, the return filed on 30-3-1989, even after service of notice under Section 148 is a return under Section 139(4) of the Act. The assessee further contended that the notice issued under Section 148/147 would be non est in law in view of such return under Section 139(4). The CIT(A) rejected these arguments as not tenable in view of provisions of Section 148. According to the CIT(A), the assessee’s arguments run contrary to the principles laid down by the Supreme Court in the decision reported in the following cases:
(i) State of Assam v. Deva Prasad Barua [1970] 75 ITR 18(SC);
(ii) CTT v. S. Raman Chettiar [1965] 55 ITR 630(SC);
(iii) CIT v. Ranchhoddas Karsondas [1959] 36 ITR 569(SC); and
(iv) Balchand v. ITO [1969] 72 ITR 197 (SC).
He also placed reliance on Calcutta High Court decision in the case of Assam Consolidated Tea Estates Ltd. v. ITO [1971] 81 ITR 699 (SC) wherein what has been laid down is that notice under Section 148 cannot be issued if a valid return has been filed within the period prescribed under Section 139(4). He, therefore, held that as there was no valid return before the notice was issued, the notice under Section 148 issued by the AO is valid. He, therefore, rejected the grounds of the assessee and confirmed the assessment. Being aggrieved by the order of the CIT(A) the assessee has preferred this appeal to the Tribunal.
6. The learned counsel for the assessee Sri S. M. Surana appeared for the assessee and filed a paper book containing 33 pages with Annexure-A which is a list of cases on which reliance is placed by him. The learned counsel for the assessee invited our attention to the list of dates placed at page-1 of the paper book and argued that in this case notice under Section 148 was issued as the return was not filed by the assessee under Section 139(1) & (2) and, therefore, the notice under Section 148 is illegal. According to him, no notice under Section 148 could be issued before 31-3-1990 which is the due date for filing of the return under Section 139(4} as Section 139 includes all sub-sections. In order to support his contention the learned counsel relied on the Calcutta High Court decision in the case of Calcutta Chromotype (P.) Ltd. v. ITO [1971] 80 ITR 627 wherein it was held that if in Section 10 of Super Profits Tax Act only Section 6 is mentioned and not Section 6(1), Section 6(2) etc., the same will include all the sub-sections and penalty cannot be imposed since return was filed under Section 6(3) and Section 6 also includes Section 6(3). Sri Surana also relied on another Calcutta High Court decision in the case of Presidency Medical Centre (P.) Ltd. v. CIT[1977] 108 ITR 838 (Cal.), wherein it was held that Section 80 speaks only of Section 139, hence loss is to be carried forward. He further argued that failure to file the return under Section 139 means Section 139 as a whole including Sections 139(1), 139(2), 139(3), 139(4) etc. and, therefore, notice under Section 148 could be issued only when the assessee had failed to submit the return under Section 139(4). According to the learned counsel, the notice under Section 148 prior to due date of filing of return under Section 139(4) i. e., 31-3-1990 was bad in law. Sri Surana further contended that any return for the assessment year 1987-88 filed before 31-3-1990 even if filed after issue of notice under Section 148, has to be treated as a return under Section 139(4). The learned counsel relied on the following decisions as per Annexure-A to his paper book to support his contentions:
1. ITR 52 Banarasi Silk Return filed within 4 years -
page 227 House (All.) The ITO has no jurisdiction to
proceed under Section 34.
2. ITR 48 K.S. Ratnaswami A return if it is to operate
page 568 v. ITO (Mad.) to exclude the operation of
at p. 571 Section 34 of this Act should be
one that is filed before the
assessment is completed i. e.,
such a return should be filed
before the expiry of four years
referred to.
3. ITR 111 Auto & Metal Engg. When the assessee failed
page 161 (Punjab) to submit the return within
at p. 166 the outside limit notice under
Section 148 can be issued.
4. ITR 143 Co-operative Return filed after issue
page 99 Marketing Society of 148 notice but within
Ltd. (MP) time allowed under section
139(4) to be treated as a return
under Section 139(4).
7. Then while placing reliance on Bombay High Court decision in the case of New Kaisre-I-Hind Spg. & Wvg. Co. Ltd. v. CIT [1977] 107 ITR 760 the learned counsel for the assessee submitted that since the re-opening of assessment is an extraordinary jurisdiction the section must be strictly construed.
8. Sri Surana further contended that the assessment was barred by limitation because the return was filed on 30-3-1989 within the time allowed under Section 139(4) and the same should have been completed by 31-3-1990. He also pointed out that the assessment was barred by limitation as the notice under Section 148 issued prior to 31-3-1990 cannot take away the right of the assessee to file the return under Section 139(4) of the Act. On the basis of these arguments and the contentions the learned counsel urged that the issue framed by the AO and confirmed by the CIT(A) should be declared as illegal and should accordingly be quashed.
9. The learned departmental representative Sri D. P. Kar on the other hand contended that notice issued under Section 148 is a legal notice as it was issued when the assessee failed to file the return voluntarily. It was also pointed out that the return filed by the assessee on 30-3-1989 is in response to notice under Section 148 issued by the department and, therefore, the return cannot be treated as return under Section 139(4). The learned departmental representative (DR) further argued that the assessment made by the AO is within time prescribed and decisions cited by the learned counsel for the assessee are not applicable to the instant case. He also relied on para-2 of page 2 of the order of the CIT(A) particularly on the decisions cited by the CIT(A). In order to support the stand taken by the CIT(A) the learned DR also placed reliance on Calcutta High Court decision in the case of Balish Singh & Co. v. CIT [1987] 165 ITR 575.
10 We have carefully considered the rival contentions, relevant facts and material placed on the record. We have also gone through all the decisions on which reliance has been placed by contending parties. On analysing the facts and the legal position of this case we find that following main issues are involved in these grounds:
(i) Whether the notice issued under Section 148 on 25-10-1988 is a valid notice ?
(ii) Whether the return filed on 30-3-1989 is a return to be treated as a return furnished under Section 148 or under Section 139(4) .
(iii) Whether re-assessment completed in this case on 22-8-1990 is barred by limitation ?
11. For the sake of convenience we will take up these issues one by one. As regards the validity of notice issued under Section 148 the first condition laid down in Section 148(1) for issuance of notice is that it should be issued before making assessments, re-assessment and re-computation of income. In this case we notice that the notice under Section 148 is issued on 25-10-1988 and the assessment was completed on 22-8-1990. Thus, in accordance with the provisions of Section 148(1) the notice issued under Section 148 is valid as it is issued before the assessment is made.
12. Then according to the provisions envisaged and limitation laid down in Section 149(1) of the Act no notice under Section 148 shall be issued in cases falling under Clause (a) of Section 147 for the relevant assessment year if eight years have elapsed from the end of that year. In this case relevant assessment year is 1987-88 and 8 years from the end of that year will elapse in 1996. But we find that notice under Section 148 is already issued on 25-10-1988 and is, therefore, well within prescribed time limit of eight years i. e., before 31-3-1990.
13. Here it is not the case of the assessee that notice is invalid on the ground that no income has escaped assessment.
14. The assessee’s contention that notice under Section 148 issued prior to 31-3-1990 cannot take the right of the assessee to file the return under Section 139(4) is also not tenable as the Calcutta High Court in the case of Assam Consolidated Tea Estates Ltd. (supra) has laid down that notice under Section 148 cannot be issued if a valid return has already been filed within the period fixed and specified under Section 139(4) of the Act. In the instant case no return was furnished before the issuance of notice under Section 148. Moreover, there is no provision in the Act to invalidate the notice under Section 148 by furnishing of return after issue of such notice. Looking from all the angles we come to the conclusion that notice under Section 148 issued by the AO is valid in all respects.
15. The notice issued under Section 148 is in the nature of notice under Section 139(2) and it was issued in this case as no return was filed by the assessee and the AO had reason to believe, that income has escaped assessment as per Section 147(a) of the Act. It is found in this case that notice under Section 148 is issued on 25-10-1988 and the return of income is filed by the assessee on 30-3-1989. As the return is filed after issue of notice under Section 148 it is certainly a return submitted in response to notice under Section 148. Although the return is filed before 31-3-1990 and it is a belated return, it cannot be treated as a return furnished under Section 139(4), as it is not filed voluntarily by the assessee, In our opinion, there is no clash between the provisions of Sections 139(1) and 139(4) on the one hand and Section 139(2) on the other. For the sake of convenience Sub-section (4) of Section 139 is extracted as under: –
139(4). (a) Any person who has not furnished a return within the time allowed to him under Sub-section (1) or Sub-section (2) may, before the assessment is made, furnish the return for any previous year at any time before the end of the period specified in Clause (b), and the provisions of Sub-section (8) shall apply in every such case.
(b) The period referred to In Clause (a) shall be-
(i)Where the return relates to a previous year relevant to any assessment year commencing on or before the 1st day of April, 1967, four years from the end of such assessment year;
(ii) Where the return relates to a previous year relevant to the assessment year commencing on the 1st day of April, 1968 three years from the end of the assessment year;
(iii) Where the return relates to a previous year relevant to any other assessment year, two years from the end of such assessment year.
16. It is evident from the provisions of Sub-section (4) itself that only the person who has not furnished the return under Section 139(1) and (2) is authorised to file the return under Section 139(4). In the instant case as the assessee has furnished the return in response to notice under Section 148 which is treated as a notice under Section 139(2), the assessee is not entitled to furnish a return under Section 139(4) of the Act. Therefore, the return furnished by the assessee is held to be a return filed under Section 139(2)/section 148 and not a return under Section 139(4). We hold it accordingly. Our view is duly supported by the following Calcutta High Court decisions: –
(i) Iqbal Singh Atwal v. CIT [1984] 147 ITR 599; and
(ii) Balish Singh & Co. ‘s case (supra).
In the case of Iqbal Singh duplicate return already filed by the assessee was treated on the basis of letter as a return in response to notice under Section 148 and assessment completed on that was declared to be valid. In the instant case the return furnished after issue and receipt of notice under Section 148 is, therefore, certainly to be treated as a return furnished in response to notice under Section 148 and assessment made on that return is valid in accordance with the ratio of the decision of the Calcutta High Court in the case of Iqbal Singh Atwal (supra). In the case of Balish Singh & Co. (supra), it was held “that the returns filed originally by the assessee were nothing but returns that were required to be filed under Section 139(1). These were filed beyond the time limit prescribed by Section 139(1) but before the assessments were made by virtue of enabling provisions of Section 139(4). Therefore, the second set of returns were returns under Section 139(1) which had been filed belatedly under the provisions of subsections (4) and (5) of Section 139. The assessments were not barred by time”. In the instant case as the return was filed in response to notice under Section 148, the return is rightly treated as furnished under Section 139(2).
17. On the other hand, the assessee has relied on several decisions to support its contention but in our opinion, none of them is applicable to the instant case as the facts and circumstances are altogether different. In the case of Benarsi Silk Palace [1964] 52 ITR 220 (All.) it was held that if no return is filed within the time prescribed in the general notice issued under Section 22(1), Section 34(1) (a) would be attracted if (i) no return was filed before the expiry of four years or (ii) a return is filed before the expiry of four years and the assessment order was passed on it and later found that on account of the assessee not disclosing true and full facts income had escaped assessment. It was further held that if a return is filed within four years of the end of the proper assessment year and before an assessment is made, the ITO would have no jurisdiction to proceed under Section 34. Thus, we find that the Allahabad High Court’s decision does not favour the assessee, rather it favours the case of the department. In the case of the assessee as no return was filed under Section 139(4) the AO had legal and valid jurisdiction to proceed under Section 147 (a) /148. Then in the case of K. S. Ratnaswami v. Addl ITO [1963] 48 ITR 568, the Madras High Court held that if with a valid return filed by the assessee before it, the department fails to complete the assessment within the period of four years, the department would lose the right to send a notice under Section 34(1) of the Act. This case law also does not come to the rescue of the assessee as in the instant case no return was filed before the notice under Section 148 was issued. The assessee has also placed reliance on Punjab and Haryana High Court’s decision in the case of Auto & Metal Engineers v. Union of India (1978) 111 ITR 161 wherein it was held as under: –
The return filed on May 12, 1975, having been filed beyond time, the Income-tax Officer was not unjustified in treating the same as non est. Therefore the ground that the notice under Section 147 could not be issued because the return already filed by the petitioner was pending, was unsustainable.
As the provisions contained in Section 153(1)(a)((iii) were inapplicable, the plea that the assessment for 1972-73 had become time barred was without merit. When the assessee failed to file the return even within the outside limit, the Income-tax Officer could have reason to believe that the income for the said year had escaped assessment and was empowered to take action under Section 147.
Thus it is evident that the ratio of this decision does not help the case of the assessee but supports the case of the department. The assessee’s contention that notice under Section 148 can be issued only when the assessee fails to submit the return within outside limit is absolutely wrong as notice under Section 148 could be issued in this case before the assessment was made and within the limitation laid down in Section 149(1) i. e., 8 years from the end of that year. In view of these, provisions of law as construed by the learned counsel for the assessee, cannot be accepted. Reliance is also placed on MP High Court decision in the case of Cooperative Marketing Society Ltd. v. CIT [1983] 143 ITR 99 wherein it was held that the returns had been filed within the time allowed under Sub-section (4) of Section 139. Hence the loss determined by the ITO for the relevant assessment years could be said to be loss determined in pursuance of the returns filed under Section 139. Therefore, the Tribunal was not justified in declining to allow the benefit of carry forward and set off of the losses computed by the ITO in respect of assessment years 1972-73 and 1973-74. This case law also does not come to the rescue of the assessee firstly because in that case return filed in response to notice under Section 148 was a returned loss and secondly, the present issue regarding notice under Section 148 raised in question No. 3 in that case was not decided and answered by the Hon’ble High Court. The main issue involved in that case was carry forward of loss in the case of belated return and, therefore, the High Court followed the Supreme Court decision in the case of CIT v. Kulu Valley Transport Co. (P.). Ltd. [1970] 77 ITR 518 and allowed carry forward of loss disallowed by the AO. So is the case with the Calcutta High Court decision in the case of Calcutta Chromotype (P.) Ltd. (supra). This case law pertains to Super Profits Tax Act, 1963 and the imposition of penalty under that Act and, therefore, this decision is also not applicable to the instant case. In the case of Presidency Medical Centre (P.) Ltd. (supra) the Calcutta High Court decided that if a return is filed within time specified by Sub-section (4) of Section 139 it would be deemed to be in accordance with the law and loss has to be determined and carried forward as a matter of course under Section 72(1) read with Section 80 of the Act, even though the return was not filed within time provided by Section 139(1). This case law has nothing to do with the present case and it is just like the MP High Court decision in the case of Co-operative Marketing Society Ltd. (supra) discussed above. In the case of New Kaisre-I-Hind Ltd. (supra) the Bombay High Court held that since the re-opening of the assessment is an extraordinary jurisdiction the section must be construed strictly. As the provisions of Sections 147(a) and 148 are construed strictly there is no infringement and violation of the directives issued by the High Court.
18. Thus, it can be safely concluded that the return filed on 30-3-1989 is a return to be treated as a return filed under Section 139(2)/148 of the Act.
19. The third ground of the appeal is that the assessment is barred by limitation, as the return was filed on 30-3-1989 and the assessment should have been completed by 31-3-1990, while it was completed on 22-8-1990. This contention of the assessee is based on the argument that the return furnished on 30-3-1989 should be treated as a return under Section 139(4). As the latter contention of the assessee is rejected and the return furnished on 30-3-1989 is treated as a return under Section 148/ 139(2), the former contention is also not tenable and cannot be accepted under any provisions of law. In this view of the matter the assessment is not barred by limitation.
20. The limitations for making the assessment in such cases are laid down in Sub-section (2) of Section 153, which is reproduced as under for the sake of convenience: –
153(2). No order of assessment, reassessment or recomputation, shall be made under Section 147-
(a) Where the assessment, reassessment or recomputation is to be made under Clause (a) of that section, after the expiry of four years from the end of the assessment year in which the notice under Section 148 was served;
(b) Where the assessment, reassessment or recomputation is to be made under Clause (b) of that section, after-
(i) the expiry of four years from the end of the assessment year in which the income was first assessable, or
(ii) the expiry of one year from the date of service of the notice under Section 148, whichever is later.
21. In this case as the assessment is re-opened under Section 147(a), provisions of Section 153(2) (a) are applicable. According to these provisions no assessment is to be made after expiry of four years from the end of assessment year in which the notice under Section 148 was served. In the instant case, as the notice under Section 148 was served on 26-10-1988, the limitation for assessment expires on 31-3-1993 i. e., four years from the end of assessment year 1988-89. We find that the assessment in this case is completed on 22-8-1990 and, therefore, it is well within limitation prescribed in the Act. Under no circumstances and under no provisions of Act, it can be said that the assessment is barred by limitation as contended by the learned counsel for the assessee. In this view of the matter we reject the contentions of the assessee and hold that the assessment made in this case is within prescribed limits of time and is a valid assessment.
22. Thus, after critical analysis of the facts and correct application of law and judicial pronouncement we come to the conclusion and hold that the notice issued under Section 148 is a valid notice, the return furnished in compliance with the notice under Section 148 is a return to be treated as furnished under Section 139(2) and the assessment made is within limitations and, therefore, is a valid assessment. In this way ground Nos. 1, 2 & 3 fail and the order of the CIT(A) is upheld.
23 to 31. [These paras are not reproduced here as they involve minor issues.]