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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • K.N Seth
  • R.R Rastogi, JJ.
Acts
  • Act of 1922, s. 28 refers to sub-ss. (1) and (2) of s. 22,
  • clause (c) of sub-section (1) of section 271; or(c)
  • s. 256(1) of the I.T Act, 1961, hereafter the Act.
  • clause (b), and the provisions of sub-section (8)
  • sub-s. (3) of s. 22 of the Indian I.T Act, 1922,
  • sub-section (4) or sub-section (5) of s.
  • sub-s. (1) of s. 22 of the 1922 Act,
  • sub-section (3) of section 22.
  • section 143 or section 144
  • 70 ITR):Under sub-section (1),
  • s. 22(2A) of the 1922 Act
  • section. Section 24(2)
  • made.8. Sub-section (4)
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Cites
Cited by
Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • K.N Seth
  • R.R Rastogi, JJ.
Acts
  • Act of 1922, s. 28 refers to sub-ss. (1) and (2) of s. 22,
  • clause (c) of sub-section (1) of section 271; or(c)
  • s. 256(1) of the I.T Act, 1961, hereafter the Act.
  • clause (b), and the provisions of sub-section (8)
  • sub-s. (3) of s. 22 of the Indian I.T Act, 1922,
  • sub-section (4) or sub-section (5) of s.
  • sub-s. (1) of s. 22 of the 1922 Act,
  • sub-section (3) of section 22.
  • section 143 or section 144
  • 70 ITR):Under sub-section (1),
  • s. 22(2A) of the 1922 Act
  • section. Section 24(2)
  • made.8. Sub-section (4)
See more information ...
Smart Summary

Factual and Procedural Background

This matter is a reference under s. 256(1) of the Income-tax Act, 1961 from the Income-tax Appellate Tribunal, Delhi Bench 'C' asking whether the assessment framed by the Income-tax Officer (ITO) was barred by limitation under s.153 of the Act. The assessment year involved is 1971-72 (accounting period ended 31 March 1971). The assessee, Dr. S.B. Bhargava, a practicing eye specialist, should have filed his return under s.139(1) by 30 June 1971 but did not receive a notice under s.139(2). He filed a return on 21 December 1971 under s.139(4) and later filed a revised return on 23 March 1974. The assessment was completed on 23 January 1975 (the text also refers to an assessment date of 29 January 1975 in the Tribunal proceedings). The ITO's assessment computed total income at Rs. 30,130 as against disclosed incomes of Rs. 9,525 (original) and Rs. 11,225 (revised). The assessee appealed, raising the contention that the assessment was time-barred because a return filed under s.139(4) could not be revised under s.139(5) and therefore the revised return did not extend the assessment limitation period. The AAC and the Tribunal rejected this contention; the Tribunal relied on a prior Bench decision (I.T.A. No. 969 (Del)/73-74 decided 19 December 1974). The question was referred to this Court for opinion.

Legal Issues Presented

  1. Whether, on the facts and in the circumstances of the case, the assessment framed by the Income-tax Officer is barred by limitation as prescribed under section 153 of the Income-tax Act, 1961?

Arguments of the Parties

Assessee's Arguments (as presented)

  • The return originally filed (21 December 1971) was a return under s.139(4), not under s.139(1) or s.139(2).
  • Section 139(5) does not permit revision of a return filed under s.139(4); it applies only to returns filed under sub-s. (1) or sub-s. (2).
  • Because the revised return filed on 23 March 1974 was not validly filed under s.139(5), it could not extend the period for making the assessment under s.153(1)(c).
  • Accordingly, the assessment completed on 23 January 1975 was beyond the period of limitation (the normal limitation being 2 years from the end of the assessment year for years commencing on or after 1 April 1969) and therefore invalid.

Revenue's Arguments (as presented)

  • The AAC held that s.139(5) allows revision: any person having furnished a return can file a revised return at any time before the assessment is made if a bona fide omission or wrong statement is discovered; consequently, the revised return extended the time for assessment by one year and the assessment of January 1975 was within time.
  • The revenue relied on Supreme Court authority in CIT v. Kulu Valley Transport Co. P. Ltd. and on a decision in Niranjan Lal Ram Chandra v. CIT to support the proposition that voluntary returns or procedural provisions can be treated so as to make subsequent procedural consequences operative (and that revised returns operate to extend limitation in some circumstances).

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
ITO v. Adarsh Construction Co., [1968] 70 ITR 796 (All) That the plan of the section suggests returns may be filed under three separate provisions and that a supplementary/voluntary return under the third provision is a distinct class, not to be equated with obligatory returns under the other subsections. The Court relied on this decision to support the view that returns under s.139(4) (analogous to the older provision) are of a different category and not covered by provisions referring to returns under s.139(1) or (2); thus a revised return under s.139(5) cannot be read to apply to returns under s.139(4).
Metal India Products v. CIT, [1978] 113 ITR 830 (Full Bench) Held that penalty under s.271(1)(a) cannot be levied in respect of a return filed under s.139(4); explained that s.139 contemplates three distinct periods/types of returns and that a return filed under s.139(4) is a voluntary return (locus penitentiae) which is nevertheless valid if filed within the time specified thereunder. The Court cited and adopted the reasoning to reinforce the distinction between returns under s.139(4) and those under s.139(1)/(2), supporting the conclusion that s.139(5) (which mentions only sub-s. (1) and (2)) does not entitle revision of a s.139(4) return.
O.P. Malhotra v. CIT, [1981] 129 ITR 379 (Delhi High Court) Held that a return filed under s.139(4) could not be rectified/revised under sub-s. (5) of s.139; a revised return filed where the original was under s.139(4) was invalid in law. The Court treated this decision as directly on point and applied it to the present facts to support the ruling that the revised return of 23 March 1974 was invalid because the original return was under s.139(4).
CIT v. Kulu Valley Transport Co. P. Ltd., [1970] 77 ITR 518 (SC) Held that s.22(2A) (1922 Act) was a procedural provision and that once a return is furnished in accordance with it, provisions of the Act apply as if it were a return under s.22(1); thus a voluntary return could be filed after the period mentioned in s.22(2A) so long as assessment had not taken place (context: right to have losses determined and carried forward). The revenue relied on this Supreme Court decision; the Court in the present opinion distinguished Kulu Valley Transport as concerned with a procedural provision and a substantive right (set-off) under a different statutory scheme, concluding Kulu Valley is not authority for treating a s.139(4) return as equivalent to s.139(1)/(2) returns for purposes of revision under s.139(5).
Niranjan Lal Ram Chandra v. CIT, [1982] 134 ITR 352 (All) Held that where the original return had been filed under sub-s. (1) and was revised under sub-s. (5), a second revised return could also be filed and that a revised return supplants the original; filing a revised return extends the period of limitation under s.153(1)(c). The revenue invoked this decision to support its position about revision and limitation. The Court acknowledged the decision but explained it does not help the revenue because in Niranjan Lal the original return was under sub-s. (1); that decision does not support treating an original s.139(4) return as a s.139(1)/(2) return for s.139(5) purposes.
Amjad Ali Nazir Ali v. Commissioner Of Income-Tax, Kanpur, [1977] 110 ITR 419 (All) Authority relied upon (in Niranjan Lal) for the proposition that a revised return supplants the original and that subsequent revisions can correct earlier revisions where original returns were under s.139(1)/(2). Cited in the opinion indirectly (through Niranjan Lal) as supporting the legal principle that revised returns under s.139(5) operate to replace the original return when the original was under s.139(1)/(2); the Court noted this does not assist the revenue in the present facts where the original was under s.139(4).
Dhampur Sugar Mills Ltd. v. Commissioner Of Income-Tax, Delhi Central, [1973] 90 ITR 236 (All) Authority cited (in Niranjan Lal) relating to the law on revised returns and their legal effect where original returns were under s.139(1)/(2). Used to illustrate accepted practice and precedent that revised returns can replace originals when the originals were filed under sub-s. (1) or (2); the Court distinguished that line of authority from the present case in which the original was filed under s.139(4).

Court's Reasoning and Analysis

The Court's analysis proceeded from statutory text to statutory purpose and precedent, using the following steps (as expressly stated in the opinion):

  1. Statutory framework: The Court set out the structure of s.139 and s.153. It identified three distinct kinds of returns under s.139: returns under sub-s. (1) (voluntary but obligatory when income exceeds exemption limit), returns under sub-s. (2) (filed in response to notice), and returns under sub-s. (4) (a voluntary enabling provision permitting filing before assessment within specified extended periods). The Court observed sub-s. (8) separately mentions interest for returns filed under these three provisions, demonstrating legislative awareness of three distinct classes.
  2. Textual reading of s.139(5): Sub-s. (5) explicitly refers to a "person having furnished a return under sub-section (1) or sub-section (2)" and grants such a person the right to furnish a revised return before assessment. The subsection does not mention sub-s. (4). On the plain text, therefore, s.139(5) does not apply to returns filed under sub-s. (4).
  3. Legal and conceptual distinction between sub-s. (4) returns and sub-s. (1)/(2) returns: The Court emphasised that returns under sub-s. (1)/(2) are of a different character from sub-s. (4): sub-s. (1)/(2) returns attract penalties for non-compliance and are obligatory in form; a sub-s. (4) return is voluntary and designed to avoid ex parte assessment. Given these differing purposes and consequences, the Court refused to equate sub-s. (4) returns with sub-s. (1) returns by implication.
  4. Interaction with s.153 limitation rules: Section 153(1)(c) makes an assessment time-barred one year after filing of a return or revised return under sub-s. (4) or sub-s. (5), whichever is later. The Court reasoned that because s.139(5) does not permit revision of a sub-s. (4) return, a purported revised return filed after an original s.139(4) return is invalid and cannot trigger the one-year extension under s.153(1)(c).
  5. Application to the facts: The Court applied the statutory construction to the timeline: original return under s.139(4) filed 21 December 1971 (valid under s.139(4) timeline), revised return filed 23 March 1974 was invalid because s.139(5) does not apply to s.139(4) returns. Consequently the assessment completed on 23 January 1975 was beyond the applicable limitation period (two years from the end of the assessment year for the year in question, and absent any valid revised return that would have extended limitation). The Court therefore concluded the assessment was time-barred.
  6. Precedent support and distinction: The Court relied on decisions (Adarsh Construction; Metal India Products; O.P. Malhotra) holding that returns under the "voluntary" provision are a distinct class and that revision under provisions applicable to mandatory returns is not available to them. It distinguished Kulu Valley Transport (Supreme Court) as concerned with a different procedural-substantive context in the 1922 Act and not an authority for equating s.139(4) returns with s.139(1)/(2) returns. It also distinguished Niranjan Lal (which upheld second revised returns) because the original return in that case had been filed under sub-s. (1), and therefore the line of authority about revisions replacing originals does not assist the revenue here.
  7. Conclusion from analysis: The revised return of 23 March 1974 was invalid; it could not extend the limitation period; the assessment dated 23 January 1975 was made after the applicable limitation period and hence was invalid in law.

Holding and Implications

Holding:

Answer to the referred question: In the affirmative, in favour of the assessee and against the department.

Direct consequences and remedies:

  • The Court held that a return filed under s.139(4) cannot be revised under s.139(5); therefore the revised return dated 23 March 1974 was invalid for the purpose of extending limitation.
  • The assessment completed on 23 January 1975 (as framed by the ITO) was barred by limitation and thus was invalid in law.
  • The assessee was awarded costs assessed at Rs. 250.

Broader implications: The opinion reasons from statutory text and existing authority to treat s.139(4) returns as a distinct category that cannot be revised under s.139(5). The judgment applies settled distinctions in precedent rather than announcing a novel legal principle; the Court did not frame any additional broad rule beyond its application to the statutory provisions and precedents discussed.

Show full summary ...

    Dr. S.B Bhargava v. Commissioner Of Income-Tax, Lucknow.

    Rastogi, J.:— This is a reference under s. 256(1) of the I.T Act, 1961, hereafter “the Act”. The Income-tax Appellate Tribunal, Delhi Bench ‘C’, Delhi, hereafter “the Tribunal”, has referred the following question for the opinion of this court:

    “Whether, on the facts and in the circumstances of the case, the assessment framed by the Income-tax Officer is barred by limitation as prescribed under section 153 of the Income-tax Act, 1961?”

    2. The, assessment year involved is 1971-72, the accounting period ended March 31, 1971. Dr. S.B Bhargava, the assessee, is a qualified eye specialist and has been in practice since long. For the assessment year 1971-72, the assessee should have filed his return under s. 139(1) of the Act by June 30, 1971. No notice was issued to him under s. 139(2) of the Act. He filed a return on December 21, 1971, which would be a return under s. 139(4) of the Act. Thereafter, he filed a revised return on March 23, 1974. The assessment was completed on January 23, 1975, and as against the disclosed income of Rs. 9,525 in the original return and Rs. 11,225 in the revised return, the total income was computed at Rs. 30,130. Aggrieved, the assessee filed an appeal and apart from challenging the assessment order on merits raised a legal plea. That plea was that the assessment made by the ITO on January 29, 1975, was barred by limitation. The assessment for this year should have been completed by March 31, 1974. According to the assessee since the return has been filed under s. 139(4) it could not be revised under sub-s. (5) of s. 139 and that return did not extend the period for making the assessment. Therefore, the assessment was beyond time. The AAC did not accept this contention on the view that under s. 139(5) any person having furnished a return can file a revised return at any time before the assessment is made in case he discovers any omission or any wrong statement therein. The time for making the assessment, therefore, stood extended by one year and so the assessment framed by the ITO on January 2, 1975, was well within time.

    3. In the quantum of income some relief was allowed. Still aggrieved, the assessee took up the matter in further appeal before the Tribunal. The assessee again urged before the Tribunal that the return filed under s. 139(4) cannot be revised under sub-s. (5) of s. 139 and hence the revised return filed by him did not extend the period for completing the assessment and the assessment framed on January 29, 1975, was thus beyond the time provided under s. 153. The Tribunal, for the reasons given in the order passed by the Delhi Bench ‘B’ in I.T.A No. 969 (Del)/73-74 decided on December 19, 1974, repelled this contention and held that the assessment order was valid in law. Now, at the instance of the assessee, the question mentioned above has been referred to this court.

    4. It was submitted before us on behalf of the assessee by his learned counsel, Sri R.K Gulati, that admittedly the return filed by the assessee in this case was a return under s. 139(4), that s. 139(5) does not give any right to the assessee to revise the return filed under s. 139(4) and that being so, the revised return filed by the assessee could not extend the period of limitation for completing the assessment. The assessment for this year in the normal course should have been completed by March 31,. 1974. A revised return, as noted above, was filed on March 23, 1974, and the assessment was completed on January 23, 1975. In case it is accepted that a return filed under s. 139(4) cannot be revised under s. 139(5), then this assessment was made beyond the period of limitation prescribed under s. 153(1)(a)(iii) of the Act. After hearing counsel for parties we find that there is considerable merit in this contention.

    5. We may first set out the relevant provisions. Section 139 provides for a return of income. It consists of eight sub-sections. Under sub-s. (1) every person is bound to furnish voluntarily a return of his total income or the total income of any other person in respect of which he is assessable if such income during the previous year, exceeded the maximum amount which is not chargeable to income-tax. An exception to this mandatory provision for filing the return is made in the case of those salaried employees who fulfil the conditions of sub-s. (1A). Under sub-s. (2), the ITO may, in any case, serve a notice on an assessee or representative assessee whose total income, in the ITO's opinion, which is final on the point, renders him liable to income-tax requiring him to furnish within thirty days such a return. Such notice may be issued at any time in the course of the assessment year. If a notice is not issued in the course of the assessment year and the assessee does not voluntarily submit a return, and the income is not assessed in the normal course under s. 142, the ITO must proceed under ss. 147 and 148 if he wants to assess such income in the subsequent years.

    6. Under sub-s. (3) if any person who has not been served with a notice under sub-s. (2), 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 ss. 72(1), 73(2), 74(1) or 74A(3), he may furnish, within the time allowed under sub-s. (1) or within such further time, which on an application made in the prescribed manner, the ITO may, in his discretion, allow, a return of loss in the prescribed form and verified in the prescribed manner. Then comes sub-s. (4) which is in the following terms:

    “(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.”

    7. In the present case, it would be sub-cl. (iii) of cl. (b) which would be applicable and the return under this provision could be filed before 31st of March, 1974, of course, before the assessment had been made.

    8. Sub-section (4) provides for the filing of a return of income of a charitable or religious trust. Then comes sub-s. (5) which reads:

    “(5) If any person having furnished a return under sub-section (1) or sub-section (2), discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the assessment is made.”.

    9. Under this sub-section a revised return can be furnished at any time before the assessment is made. The benefit can be claimed only if any bona fide mistake has occurred in the original return. The benefit cannot be claimed by a person who has made a false return knowing it to be false. This sub-section speaks of a return filed under sub-s. (1) or sub-s. (2) and not a retnrn filed under sub-s. (4) and the question that falls for our consideration is as to whether a revised return under this provision can be filed in case where a return has not been filed under sub-s. (1) or (2) but has been filed Under sub-s. (4).

    10. It is not necessary to refer to sub-ss. (6A) and (7). Under sub-s. (8) interest is payable if the return is not furnished at all or is not furnished in time under sub-s. (1) even though it is furnished within the time specified in a notice under sub-s. (2) or the time prescribed under sub-s. (4). What we propose to show is that this sub-section specifically makes a mention of the return filed under sub-s. (4).

    11. We may also refer to s. 153 which provides for a time-limit for the completion of the assessment and reassessment. Sub-section (1) of this section which is relevant for our purposes is in the following terms:

    “153. (1) No order of assessment shall be made under section 143 or section 144 at any time after—

    (a) the expiry of—

    (i) four years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or before the 1st day of April, 1967;

    (ii) three years from the end of the assessment year in which the income was first assessable, where such assessment year is the assessment year commencing on the 1st day of April, 1968;

    (iii) two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the first day of April, 1969; or

    (b) the expiry of eight years from the end of the assessment year in which the income was first assessable, in a case falling within clause (c) of sub-section (1) of section 271; or

    (c) the expiry of one year from the date of the filing of a return or a revised return under sub-section (4) or sub-section (5) of s. 139,

    whichever is latest.”

    12. On a reading of the provisions extracted above it would appear that s. 139 broadly contemplates the filing of three returns; one under sub-s. (1), the other under sub-s. (2) and the third one under sub-s. (4). The returns contemplated under sub-ss. (1A) and (3) are to be treated as returns under sub-s. (1) and so also the return required under sub-s. (4A). The returns required to be filed under sub-ss. (1) and (2) are obligatory returns while the return which an assessee may file under sub-s. (4) is purely a voluntary return. It is an enabling or permissive provision which empowers an assessee to file a return at any time before the completion of the assessment with a view to avoid the penalty of an ex parte assessment. A return required under sub-s. (1) is also a voluntary return but it is not of the same type as a return which an assessee can file under sub-s. (4) in the sense that it is obligatory on every person to furnish voluntarily a return of his total income or the total income of any other person in respect of which he is assessable, if such income during the previous year, bona fide calculated by him exceeded the maximum amount which is not chargeable to income-tax. Similarly, under sub-s. (2) when a notice is served on an assessee or a representative assessee whose total income in the opinion of the ITO renders him liable to income-tax, such an assessee is bound to furnish a return within thirty days of the notice or within such time which the ITO may extend within his discretion. Failure to comply with these provisions renders an assessee liable to penalty under s. 271(1)(a) and prosecution under s. 276CC of the Act whereas no such penalty is leviable in regard to a return filed under sub-s. (4). For charging of interest under sub-s. (8) there is a specific mention of returns filed under these three separate provisions. In other words, an assessee filing a return under sub-s. (4) is equally liable to pay interest as is chargeable in respect of returns filed in sub-ss. (1) and (2). The Legislature is, thus, conscious of the three different types of returns and since sub-s. (5) does not give a right to an assessee to revise a return filed under sub-s. (4), we cannot intend such a provision therein by equating the return filed under sub-s. (4) with a return filed under sub-s. (1).

    13. Now, we can consider this question from yet another aspect and it is that different time-limits for completion of assessment have been provided in respect of cases where a return has been filed under sub-s. (4) or a revised return has been filed under sub-s. (5). Sub-section (5) does not provide for any separate category of return. It only gives a right to an assessee to revise the return filed under sub-s. (1) or sub-s. (2). When a revised return is filed the original return stands supplanted or withdrawn. In other words, if the original return is under sub-s. (1) and a revised return is filed, then the revised return would be a return under sub-s. (1) and so will be the position if the original return was under sub-s. (2). In our opinion, therefore, the return provided for under sub-s. (4) stands in a category different from those provided in sub-s. (1) or sub-s. (2) and such a return cannot be revised under sub-s. (5) because that sub-section does not say so. That being the position, where a return is filed under sub-s. (4), the limitation for completing the assessment is two years from the end of the assessment year in which the income was first assessable, where such assessment year is an assessment year commencing on or after the 1st day of April, 1969. The revised return filed on March 23, 1974, was an invalid return and could not extend the period for completing the assessment.

    14. We are fortified in the view which we have taken above from the decisions of our own court and some other courts. In ITO v. Adarsh Construction Co., [1968] 70 ITR 796 (All), almost similar questions had come up for consideration. In that case on October 13, 1961, the respondent-assessee filed a return under sub-s. (3) of s. 22 of the Indian I.T Act, 1922, with respect to income for the assessment years 1959-60 and 1960-61. The same day, the ITO issued a notice to the assessee under s. 22(4). The assessee having failed to comply with the same, the ITO passed an order under s. 23(4) and raised a demand. The assessee challenged that assessment order by way of a writ petition. It was allowed by a learned single judge and the matter came up before a Division Bench by way of special appeal. The question raised in the appeal was “whether the notice under s. 22(4) was valid, and whether action could be taken under s. 23(4)”. In other words, whether a return filed under s. 23(3) can be treated as a return under s. 22 for the purpose of s. 22(4) of the Act. Referring to the plan of s. 22 it was observed (p. 799 of 70 ITR):

    “Under sub-section (1), a person has to furnish a return of income within a certain period in pursuance of the general notice. Under subsection (2), an individual assessee has to furnish a return within the prescribed period in pursuance of a separate notice issued to him. If a person fails to take action under either of these two provisions, he may furnish a return as provided under sub-section (3). One of the situations mentioned in sub-section (3) is where a return has been filed under sub-section (1) and it is found that that return is incomplete. In such a case the person may furnish a supplementary return. It is difficult to accept the contention that a supplementary return is also under sub-section (1). The supplementary return is clearly under sub-section (3) of section 22. The plan of section 22 suggests that returns may be filed under three separate provisions contained under section 22 of the Act. There should be no difficulty in treating returns filed under sub-section (3) as a distinct class.”

    15. On this view, since sub-s. (4) of s. 22 makes no reference to the returns filed under sub-s. (3), the notice issued under s. 22(4) was held to be invalid. In the Act of 1922, s. 28 refers to sub-ss. (1) and (2) of s. 22, but makes no reference to sub-s. (3) of the said section. The Bench repelled the argument of the revenue that s. 28 suggests that a return filed under sub-s. (3) of s. 22 is covered by s. 28. It was observed that the returns to be furnished under sub-, ss. (1) and (2) are obligatory. On the other hand, the return furnished under sub-s. (3) is voluntary, and that being so, “the Legislature rightly decided that there should be penalty for non-compliance with the requirements of sub-ss. (1) and s. (2) but there is no need for prescribing a penalty for failure to furnish a voluntary statement under sub-s. (3) of s. 22.”

    16. Our attention was invited to a Full Bench decision of our court rendered in Metal India Products v. CIT, [1978] 113 ITR 830. The question under consideration was whether penalty under s. 271(1)(a) of the Act could be levied in respect of a return filed under s. 139(4). The answer was given in the negative. It was ruled that s. 139 lays down three periods of limitation for filing a return. A return may be filed within the time allowed under sub-s. (1) or if a notice has been issued by the ITO under sub-s. (2) within the time allowed under it and, thirdly, under sub-s. (4) (as it stood before its amendment by Act 19 of 1968) within four years from the end of the assessment year and before the assessment order is passed. Sub-ss. (1) and (2) of s. 139 provide a definite date up to which alone a return can be filed while sub-s. (4) gives to the assessee a locus penetentiae. He may file a return at any time before the assessment has been made and before the expiry of four years. Even though the assessee may have defaulted in filing the return within the time prescribed by sub-ss. (1) and (2), yet if he files the return within the time-limit mentioned under sub-s. (4), the return is valid and is bound to be taken into consideration in making an assessment.

    17. There is a decision of the Delhi High Court as well which is directly on all fours with the present case. In O.P Malhotra v. CIT, [1981] 129 ITR 379, for the assessment year 1960-61, the assessee filed a return on March 30, 1965, and a revised return on March 28, 1966. The ITO made an assessment treating the revised return filed on March 28, 1966, as invalid in law as the return filed on March 30, 1965, had not been filed either under sub-s. (1) or sub-s. (2) of s. 139 of the Act. On appeal, the assessee claimed that the return filed on March 28, 1966, was a valid return. This contention found favour with the appellate authority and the assessment was set aside and the case was remanded for completing the assessment afresh taking note of the revised return. The assessee preferred a further appeal contending that the AAC ought to have annulled the assessment and not set it aside for being redone. That appeal was dismissed by the Tribunal. On a reference, it was held by the Delhi High Court that the return filed on March 30, 1965, could be treated only as a return filed by the assessee under s. 139(4) of the Act. Sub-section (5) of s. 139 does not refer to sub-s. (4) and, therefore, does not entitle an assessee to rectify or revise a return filed under s. 139(4). On that view, the revised return filed on March 28, 1966, was held invalid in law.

    18. Learned counsel for the revenue, however, placed reliance on the decision of the Supreme Court in CIT v. Kulu Valley Transport Co. P. Ltd., [1970] 77 ITR 518 (SC) and a decision of this court in Niranjan Lal Ram Chandra v. CIT, [1982] 134 ITR 352. In Kulu Valley Transport Co., the assessee-company had filed voluntary returns showing losses from business for the assessment years 1953-54 and 1954-55 in January, 1956. The ITO took the view that as the returns had not been filed within the time prescribed under sub-s. (1) of s. 22 of the 1922 Act, they had not been validly filed under s. 22(2A) of the Act and, therefore, the assessee could not claim that the losses should be determined and carried forward. The High Court of Punjab took a contrary view and held that even if the return was filed beyond the period prescribed by s. 22(1) and disclosed loss, the ITO was bound to determine the loss so that it could be carried forward to the following year. That decision was affirmed by the Supreme Court. It was ruled (p. 527):

    “Section 22(2A) is merely a procedural provision and it also provides that once a return has been furnished in accordance therewith, all the provisions of the Act become applicable as if it were a return under subsection (1). That would attract section 22(3) and, therefore, a voluntary return can be filed even after the period mentioned in sub-section (2A) has expired so long as the assessment has not taken place.”

    19. We do not think that according to this decision a return filed under s. 139(4) can be equated with a return filed under sub-s. (1) or sub-s. (2). In Kulu Valley Transport's case, [1970] 77 ITR 518 (SC), the court was considering s. 22(2A) of the 1922 Act which was a procedural section. Section 24(2) was the substantive section and granted an unqualified right of set-off and thus the view taken was that the words used in s. 22(2A) should not be given a narrow and restricted meaning confining them only to returns filed within the time mentioned in sub-s. (1). The case is thus distinguishable. It has been explained by the Delhi High Court in Malhotra's case, [1981] 129 ITR 379, as also by our Full Bench in Metal India Products' case, [1978] 113 ITR 830; some other High Courts also have explained it and we respectfully agree with the reasons mentioned in those decisions. In our opinion, therefore, Kulu Valley Transport's case, [1970] 77 ITR 518 (SC), is not an authority on the controversy raised in the instant case.

    20. In Niranjan Lal Ram Chandra, [1982] 134 ITR 352 (All), the question which came up for consideration was whether the second revised return was a valid return under the provisions of sub-s. (5) of s. 139 and, further, whether it could extend the period of limitation for completing the assessment. The answer given was in the affirmative. In that case, the original return had been filed under sub-s. (I). Thereafter, it was revised under sub-s. (5). A second revised return was filed. The question was whether a second revised return could be filed under sub-s. (5). It was held that the word “therein” occurring in sub-s. (5) indicates that a revised return may be-furnished at any time before the assessment is made by a person, who has furnished the return under sub-s. (1) or sub-s. (2) and once a revised return has been filed the original return is supplanted by the revised return. For this view reliance was placed on Amjad Ali Nazir Ali v. Commissioner Of Income-Tax, Kanpur., [1977] 110 ITR 419 (All) and Dhampur Sugar Mills Ltd. v. Commissioner Of Income-Tax, Delhi Central., [1973] 90 ITR 236 (All). It was further held that there was no difficulty in holding that a second revised return can be filed under sub-s. (5) correcting omissions or wrong statements made in the first revised return, for the first revised return filed under sub-s. (5) would in law be a return under sub-s. (1) also. The result of filing a second revised return would be to extend the period of limitation for purposes of s. 153(1)(c). In taking this view the Bench was mindful of the prevalent practice of filing more than one revised return which the department has been accepting consistently.

    21. According to the learned standing counsel, if the assessee's contention is accepted, then this decision would become wrong because sub-s. (5) does not say that a revised return filed under this section can be further revised. The contention is misconceived because, as noted above, sub-s. (5) provides for furnishing a revised return in a case where the return has been furnished under sub-s. (1) or sub-s. (2). When such a return is revised, the revised return takes the place of the original return filed under either of these two sub-sections. The revised return itself becomes a return under sub-s. (1) or sub-s. (2), as the case may be. In case there is any omission or wrong statement in such original return, it can surely be corrected by a subsequent revised return if filed before the assessment is made. This decision does not support the revenue in its contention that a return filed under sub-s. (4) should be treated as a return filed under sub-s. (1) and thus can be revised under sub-s. (5). In our opinion, therefore, the revised return filed on March 23, 1974 was invalid. It would not extend the period of limitation for making the assessment and the assessment made on January 23, 1975, being made beyond the period of limitation, was invalid in law.

    22. We, therefore, answer the question in the affirmative, in favour of the assessee and against the department. The assessee is entitled to costs which we assess at Rs. 250.

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    Comments

    Dr. S.B Bhargava v. Commissioner Of Income-Tax, Lucknow.
    (May 26, 1982)