Applicability of section 292B of IT Act in case return contains any mistake, defect or omission

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; the finding that the return or notice etc. is invalid or to what extent it is invalid is unnecessary and counter productive; if in substance and in effect return, notice or assessment is in conformity with or according to intent and purpose of the Act, the mistake defect or omission is to be ignored as per the underlining philosophy of section 292B.

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCHES ‘L’ MUMBAI

I T A No: 3875/Mum/2005
(Assessment Year: 2001-02)

 Date of Judgment: 23^rd January, 2009

O   R   D   E   R

On account of difference of opinion between the learned Vice President, and the learned Accountant Member, of Mumbai “L” Bench, the following question has been referred to me under section 255(4) of the Income Tax Act, 1961: –

“Whether on the facts and circumstances of the case and in law, the four returns filed by the four cells/ units established by the assessee in India can be considered as valid returns of the assessee company in accordance with the provision of section 139(1) r.w.s. 292B of the I. T. Act, 1961 (the Act) and consequently whether the loss assessed by the Assessing Officer can be said to be determined in pursuance of a return filed in accordance with the provisions 0f section 139(3) of the 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?”

2. Facts of the case: – Briefly stated facts of- the case are that the assessee appellant 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

2.1 . 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 30th October 2001. Subsequently, the assessee realized that a consolidated return for all the four cells was required to be filed. Therefore, a revised return dated 29th October 2002 was filed incorporating income 1 loss of all the four cells / sub-divisions. The Assessing Officer noticed that the assessee had derived income from dividend and short term capital loss. The dividend income was claimed to be exempt under section 10(33) of the Income Tax Act. The Assessing Officer (as per the learned Accountant Member, on which the learned Vice President has not differed) has mentioned in the assessment order that on the verification of details of sales and purchase of shares, the claim in respect of short term capital loss as well as claim of dividend income being exempt, was found to be in order.

2.2 The Assessing Officer, however, was of the view that the return filed on 29th October 2002 was to be considered as original return and four returns filed separately by four cells on 30m October 2001 were invalid. Accordingly, a show cause notice was issued to the assessee to explain the above position. In its reply, the assessee explained that earlier the assessee was of the view that its’ four cells had separate legal existence and therefore income (loss) of four cells was returned. It was explained that the original return in respect of each cell did not suffer from any defect as, mentioned under section 139(9) when considered along with provisions of section 2928 of the Income Tax Act. Thus, the original returns were filed on 30th October 2001 and subsequent return incorporating the figures of the original returns was only a revised return. The Assessing Officer was of the view that the original returns filed by four cells are invalid and therefore return filed on 29th October 2002 was the only valid return filed by the assessee. The said return was belated and therefore question of carry forward of losses suffered by the assessee did not arise. Loss claimed was not allowed.

2.3. Aggrieved by the abovelorder, assessee filed an appeal before the learned CIT (A), who after considering facts and circumstances of the case agreed with the view taken by the Assessing Officer. The appeal of the assessee was dismissed. The assessee being aggrieved brought the issue in appeal before the Income Tax Appellate Tribunal (hereinafter referred to as the Appellate Tribunal).

3. After considering facts’ and circumstances of the case and the material available on record, learned Accountant Member, who wrote the leading order, accepted the claim of the assessee that the four returns filed by the assessee by four sub-divisions were valid when those returns are considered in the light of provisions of section 2928 of the Income Tax Act. 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.

3.1 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 Id. 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 3151 October 2001 in order to consider the claim of the assessee for carry forward off 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 the perusal of these returns, it is found that all of them have been signed and verified by one Shri E Blakemoore, who is Director in these cells. Thereafter a consolidated return was filed by the assessee on 29.10.2002, in which the income and other particulars of all the four sub-divisions clubbed. Now (he case of the assessee is that the returns filed by the four sub-divisions be treated as original returns and the benefit of carry forward of loss be granted.

3.2 The ld. Accountant Member also noted Revenue’s claim that four returns filed by sub-divisions were invalid as sub-divisions were not eligible to file returns and since the consolidated return filed on 29th October 2002 was a belated return the benefit of carry forward of loss could not be allowed.

4. The learned Accountant Member then referred to provisions of section 2928″ which according to him meant as below: –

“10. On a plain reading of this section, it is observed that the return of income, etc., shall not be considered as invalid merely by ·defect or omission in such return if it is in substance and effect in conformity with the intent and purpose of this Act. The rationale behind this section is that the return of income, assessment notice, summons or other proceedings should not be ‘held to be invalid due to technical mistakes, which otherwise do not have much impact touching its legality provided such return, assessment notice, summons or other 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 AO in which the particulars at 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 AO 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 wey of making adjustments by the .40 and enhancing the stated income to the correct income art by the assessee himself furnishing the correct particulars of income, not warranting any enhancement by the AO. It, therefore, transpires that if a return has been furnished by the assessee which is otherwise in substance 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 ld. DR. The Assessing Officer has accepted in para 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 returns were filed by these sub-divisions of the assessee- company under a mistaken notion that there was a requirement of furnishing the returns separately. For all practical purposes, these separate returns individually represent total loss suffered by the assessee- company as one unit. There was no obligation on the/ part of sub-divisions for furnishing returns in respect of their operations independently de hors the assessee- company. In order words, the liability for filing the return in respect of the four subdivisions fell squarely’ on the assessee- company as they are its part and parcel. Now when the total income as submitted by the four divisions was returned by them separately, it ultimately meant that they were representing a part of the assessee’s total income in themselves. In a way the assessee had originally filed four returns of its income instead of the requirement of one return. The situation would have led to other consequences if these four divisions .had been separate entities in themselves having requirement to file distinct returns casting obligation on the Assessing Officer for framing four separate assessments. It is not the case here as the authorities below have not controverted the fact that these four sub-divisions represents the assessee- company as a whole and only one assessment is called for in the name of the assessee- company. Now when four returns were filed in respect of the assessee’s income, which are otherwise valid and 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. 30. 10. 2001 are valid, returns u/s 139(1} r.w.s. 292B”,

5. The learned Accountant Member thereafter disagreed with the conclusion of Revenue authorities that original return was filed only on ’29th October 2002 and four returns filed earlier by sub-division were invalid within the meaning of section 139(1) and therefore these returns could’ not be revised under section 139(5) of the Income Tax Act, for the reason that there was neither 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.

5.1 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.

6. The learned Vice President did not agree with the above view of the learned Accountant Member. He also noted in Paragraph 14 the names of the four cells I units of the assessee carrying on business of investment in shares. He also noted that the Assessing Officer treated the returns filed by cells as invalid since such, cells would not file the return not being “person” defined under section 2(31) of the Income Tax Act. The revised return was treated by the Revenue as original return. However the same being belated, the loss declared by the assessee was not allowed to be carried forward for set off to the subsequent years.

7. The learned Vice President thereafter posed the question whether the assessee was entitled to carry forward the loss incurred in business of trading of shares by four cells established by the assessee in India? He observed that loss was to be permitted to be carried forward as per provisions of section 80 of the Income Tax Act, to which a detailed reference has been made by him in his proposed order. He noted that the loss was not to be carried forward unless the return was filed in accordance with the provisions/of sub-section (3) of section 139 of the Income Tax Act.

7.1 The learned Vice President in support of his conclusion referred to provisions of sub-section~ (1), (3), (4) and (5) of section 139 of the Income Tax Act, which are reproduced in his proposed order. On perusal of sub-section (3) of section 139 and other relevant provisions, the ld. Vice President concluded that the assessee was required to file its return of income for the year under consideration by 31st October 2001 in order to claim the carry forward of losses for set off to the subsequent years, which was not done.

7.2 The learned Vice President then referred to provisions of section 2(31) of the Income Tax Act, to note as to the “persons” who can file the return. According to him, “company” was one of the persons mentioned in the section, which has to file the return. The cells / units established by the assessee in India could not be considered to be “company” and therefore, these cells could neither file the returns independently nor could returns filed by them be revised under section 139 of the Act. Since the loss was incurred by the assessee company, the return could be filed only by the assessee company. Consequently, four returns filed by these cells / units could not be considered as valid returns.

7.3 The learned Vice President then referred to provisions of secti0n 292B of the Income Tax Act, which is reproduced in his order. He was of the view that reliance on above section by the assessee was misplaced. His reasons in the proposed order for 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 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 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 would not arise. As already held in the preceding para, the returns filed by the four cells/units of the company can not be said to be in conformity with the provisions of the Act.’ In my opinion, the reliance of assessee’s counsel on the provisions of section 292B is therefore misplaced”.

7.4 In view of the above, the learned Vice President held that the assessee, on account of belated return, was not entitled to carry forward the loss for set off in the subsequent years. Accordingly, the learned Vice President; in-his proposed order, upheld the action of the Revenue authorities and dismissed the appeal of the assessee.

8. In the light of above difference of views, the matter has been placed before me. I have heard Shri Firoze B Andhyarujina, learned counsel for the assessee and Smt. Malathi Sridharan, learned departmental representative for the revenue-. The learned counsel for the assessee reiterated the submissions advanced on behalf of the assessee before the revenue authorities. He submitted that four cells were registered with SEBI and were advised to file four returns. However, when it was realized that each cell could not file a separate return, a consolidated revised return was filed on 29th October 2002: There was not a single paisa difference between the revised return and original four returns submitted by the four cells. This is accepted even by the Revenue authorities and on appeal by the learned Members of the Appellate Tribunal. However, this return has been treated as original and belated return and therefore short term loss suffered by the assessee has not been allowed to be carried forward by the revenue authorities. The learned counsel read out relevant Paras from the ‘proposed orders of learned Accountant Member and learned Vice President. The learned counsel contended that following propositions were involved in the controversy before me: –

(1) Provisions of section 139(1), 139(3) and 139(4) must be harmoniously construed.

(2) Section 139 is a machinery provision as against a fiscal provision, and must be interpreted in a liberal and equitable manner.

(3) The original returns filed by the cells have only been consolidated in the subsequent returns dated October 29, 2002 and as observed by this Hon’ble Tribunal that there is no malafide intention on the part of the appellant in 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 I. T. Act that no return of income furnished or made shall be invalid or shall be deemed to be invalid merely by reason of nay 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”.

9. The learned counsel referred to 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.

9.1 The four returns disclosed total income of the assessee and therefore in substance conform to statutory, requirements. May be they did not comply strictly with provision. However, the defect here was fully curable under section 292B of the Income Tax Act.

9.2 All the four returns were filed simultaneously with the same Assessing Officer giving complete information; thus no loss or prejudice was caused to the Revenue. The assessee did not intend to cause loss of Revenue and no mala fide or mischief on the part of the assessee at any stage has been alleged.

9.3 What has been done is mere consolidation of figure in one return, which is supplementing the original four returns. There is no deviation at all in the consolidated return. So, the four returns are substituted by a consolidated return. Therefore, the original returns must, in the circumstances of the case, be treated as returns filed within the time allowed under sub-section (1) of section 139 of the Income Tax Act and treated as valid.

9.4 The learned counsel for the assessee submitted that error involved in dispute related to procedure of filing the return and as per settled law, procedural provisions are required to be given a liberal interpretation so as to make the machinery work.

9.5 The learned counsel for the assessee drew my attention to the following decisions: –

(1)        Trustees of Tulsidas Gopalji Charitable and Chaleshwar Temple Trust vs. CIT, (1994) 207 ITR 368 (Born): In the above case their Lordships of the High Court applied the ratio of the decision of Hon’ble Supreme Court in the case of CIT vs. Kulu Valley Transport Co. P. Ltd., (1970) 77 ITR 518 (SC) to the case of a charitable institution. There was delay in the exercise of option under clause (2) of Explanation to section 11 of the Income Tax Act for extending period in respect of un utilized portion of income of the Trust. The exemption claimed was denied to the assessee on account of above delay. On considering facts of the case in the light of statutory provisions, their Lordships held that the time limit of one year for application of income of Trust for specified period is mandatory but the question for consideration in the decided case was whether the requirement of ,exercising the option within the specified time is also mandatory. It was held, “On careful reading of 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 favor of the assessee.

(2) CIT Vs. Masonellan (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 292(b) 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’ means a blemish, fault or imperfection – action under section 154 was warranted if mistake is one which is apparent from cord – held, action under Section 154 not warranted”.’ .

(3) Sujani Textiles (P) Ltd. Vs. ACIT, (2004) 88 ITD 317 (Mad) : In this case, the “B” Bench of ITA T Madras, laid down the following proposition: –

“Ratio:

If the assessee has filed a loss return under sub-section (3) of section 139 within the period provided under the Act, and if the assessee has filed a revised loss return under sub-section (5) thereof, again within the prescribed time limit, the assessing officer is bound to take cognizance of the revised return, because the original return is replaced by the revised return”.

(4) Niranjan Lal Ram Chandra vs. CIT, (1982) 134 ITR 352 (All): In the said case relating to assessment year 1996-97, the assessee filed the return showing income of Rs.55,489/-. It afterwards filed a revised return on 2nd March 1971, showing income of Rs.50,273/-. A second revised return was filed on 8^th February 1972, showing an income of Rs. 38,138/-. The assessment was made on 6th February 1973. In appellate proceedings the assessee contended that the second revised return was invalid and’ therefore the assessment, made is beyond the period’ of limitation. This contention was rejected by the Assessing Officer and on appeal, by CIT(A) and the Tribunal. The Hon’ble Allahabad High Court also rejected this contention with the following objection: –

“The logical result of Amjad Ali’s case (1977) 110 ITR 419 (All) is that a revised return supplants the original return by effecting a revision therein. From this it follows that a return file under Section 139(5) being voluntary return is of the nature of a return under Section 139(l), or at best a return under both these provisions. The same consequence results from the view taken by Hari Swarup J. in Dhampur Sugar Mills; case (1973) 90 ITR 236 (All). For, if the original return filed under Section 139(1) is taken to be withdrawn and the revised return substitutes itself in its place, it becomes a return under Section 139(1). This being ,the position of – a return filed under Section 139(5), we feel no difficulty in holding that a second revised return can be filed 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. vs. CIT, ITR 244/1984, decided on 27.08.2007: In that case the question was that Secretary of the company had signed the original return filed. However, subsequently, the said return was revised, which was signed by 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 Reference, their Lordships of Delhi High Court held that there can hardly be any doubt, Secretary otherwise is a person competent to sign docun1’Bnts 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 assess.ee, a fresh return was filed, which was signed by the. Managing Director the fresh return, it was held, would (e:/ate back to the original filing of the return. The decision of the Hon’ble Kerala High Court in the case of CIT vs. Masonellan (India) Ltd. (supra) was applied.

(6) CIT vs. K Ramasamy, (2008) 296 ITR 358 (Mad): In the said case, the Hbn’ble High Court held that information given even in a belated return is a valid information and can be taken as’ given by the assessee to the Assessing Officer to determine undisclosed income of the assessee for the block assessment.

(7) CIT Vs. Valli Cotton Traders Pvt. Ltd. (Unit of Loyal Textile Mills Ltd.), (2007) 288 ITR 400 (Mad): This decision was cited for the proposition that all the sub-sections of section 139 are to be read together harmoniously and in a fair and reasonable manner. The benefit should not be denied to the assessee, which is due on a technical ground.

9.6 The learned counsel for the assessee accordingly supported the proposed order of the learned Accountant Member.

10. Smt Malathi Sridharan, the learned Departmental Representative supported the proposed order of learned Vice President. She pointed out that there was difference, though minor, between the four returns filed on 29^th October 2001 and the revised return, relating to date of incorporation and serial number of receipt of original return. With reference to Page 33 of the Paper Book, she pointed out that in Column Number 12 of the revised return, only one of the receipt of four returns was mentioned. Names and dates of incorporation of units and of the assessee in returns were different. She further submitted that only a valid return can be revised under sub-section (3) of section 139 to enable the assessee to carry forward the losses. She also read out provisions of section 80 and commented that filing of the return in terms of section 139(3) is ‘mandatory requirement of the section. To have benefit of section 80, it must be shown that conditions of provisions of sub-section (3) of section 139 were satisfied. She also made reference to section 2(31) to contend that “Company” is a person, entitle to file return of income. A cell or a sub-division is not a “Company” and cannot file the return under the Income Tax Act. The liability of the Company cannot be discharged by cell of the Company. It was accordingly contended that the returns filed by four cells were invalid. The word “income” used in the section 139 clearly means total income of the person. A cell or sub-division of a Company cannot show total income of the Company. So, conditions of section 139 were not satisfied. She made reference to the decision .of the Hon’ble Supreme Court in the case of CIT Vs. Smt P K Kochammu Amma Peroke, (1980) 125 ITR 624 (SC), in support of the contention that “his income” means total income. Therefore, the return without total income was invalid. The learned DR also placed reliance on the decision of the Allahabad High Court in the case of Abhey Ram Chunni Lal, In Ref (1933) 1 ITR 126 (All). 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 OR also relied upon the decision of ITAT, Delhi “B” Bench, in the case of ITO Vs. Atea Spa, (1992) 42 TTJ (Del) 80. In the said case the return filed by Indian company on behalf of a non-resident company signed by Managing Director of Indian company was held to be invalid and non est. The defect was held to be not curable under section 139(9) or section 292B of the Income Tax Act. The learned DR placed reliance on all the above quoted decisions.

11. The learned DR then referred to provisions of section 292B of the Income Tax Act and argued that the word “purpose” of filing return was to make an assessment of total incom9 of the assessee. There is no provision in the Act enabling the assessee to show only a partial income as was done by four cells in this case. There is no right to amend such a return either with the assessee or with the Assessing Officer. There is no statutory provision under the Income Tax Act to take or consolidate four returns as one return. Best judgment assessment can be made but that is a separate power vested with the Assessing Officer. Four returns taken as such did not serve the purpose of making assessment of the company. These different returns’ did not comply with the provisions of statute in substance and in ‘effect. .’ Four return’s could’ not be independently’ assessed. The learned Accountant Member, in the proposed order, has held that four original returns were valid but the said validity has been judged with reference to the revised return, which was a subsequent event. According to the DR there was an error in the approach of the learned Accountant Member as subsequent return was of no consequence and could not make earlier four honest returns as valid returns. She also pointed out that second return filed by the assessee company on 29th October 2002 was not a revised return. The aforesaid finding has been recorded “by the Id. Accountant Member in favor of the revenue. The return was definitely a belated return and therefore conditions of section 80 are not satisfied. As mandatory provisions of section 139 and section 80 were not followed, the four returns submitted by four cells were invalid and such defect could not be cured under section 292B of the Income Tax Act. She contended that error in dispute was not that of procedure. Provisions of section 80 violated in this case cannot be taken-to procedural. It was further added by learned DR that if four assessments were made on the basis of four returns, the assessee could have easily argued that such assessments were invalid. Identical situation prevailed here. With the above submissions, the learned DR supported the impugned order of the learned Vice president.

12. In’1ebuttal, the learned counsel for the assessee’iried to meet points raised by the learned DR. In the first place, he argued that there was no difference between four returns and the return filed on 29th October 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. The learned counsel reiterated that four returns filed in this case were .valid when the matter is considered in the light 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 t:-‘e 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 technical grounds when in substance and in effect these statutory provisions have been complied with. The returns were bonafidely filed and therefore their “effect” is required to be considered in this case, as has been done by the learned Accountant Memb8r in tile proposed order.

13. have given careful thought to the rival submissions of the parties and examined them in the light of material available on record. I have also carefully considered the reasons given by my learned Brothers for taking different views in the matter the material difference is that four returns submitted by four cells have been held to be invalid and non est by the learned Vice President, whereas learned Accountant Member has held that these returns contained mistake, defect or omission, which were covered under section 292B of the Income Tax Act and, therefore, on facts, provisions of section 80 were satisfied. Therefore, the real difference is on the application of provisions of section 292B of the Income Tax Act. The legal proposition is that in order to carry forward the loss suffered by the assessee, the return has to be filed in terms of sub-section (3) of section 139 within the time prescribed by sub-section (1) of section 139. The .above provisions are to be read with the provisions of section 80 of the Income Tax Act There is no dispute on application of above provisions. I, therefore, proceed to consider provision of section 292B of the Act, introduced through the Taxation Laws (Amendment), Act, ) 975, with effect from.01.10.19975, as under:-

“292B. No return of income, assessment, notice, summons or other proceeding, furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of this Act shall be invalid or shall be deemed to be invalid merely by reason· of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act.

As per Circular No.179 of CBDT dated 30th September 1975, this provision has been made to provide against purely technical objections without substance coming in tile way of the ‘validity of assessment proceedings.

13.1 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 Sec. 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. 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 return or notice is in substance and in effect in conformity with or in accordance with the intent and purpose of the Act and not the invalidity of the return e.g. If it is shown that return of income, notice, etc. have the same or substantially the same effect as would return, notice etc without mistake, defect or omission would have, such return, notice etc. must be given effect to and cannot be treated as invalid. If in substance and in effect, the intent and purpose of the enactment has been served, the action (return, notice, etc.) cannot be held to be invalid.

13.2 Substance over form theory is the underlining philosophy of section 292B. If in substance and in effect return, notice or assessment is in conformity with or according’ to intent and, purpose of the Income-tax Act, the mistake, defect or omission is to be ignored. It is ho doubt true as agreed to by both the parties, that purpose of the Income-tax Act is to get information on income, compute income (including loss), find tax thereon and recover the same from the assesses. This purpose is achieved through charging, machine of and other miscellaneous provisions. In the given case it is necessary to see the purpose of a specific provision like sub-section (1) & (3) of 8:139 and S.80asit is a case of loss. The provision insists on filing of return of loss in time. The obvious purpose is’ to get all information from the assessee ·in the prescribed form and within the prescribed time so that such claim is scrutinized and loss is allowed to be carried forward, if permissible under the law. The Revenue wants minimum time allowed under the Statute in such cases and therefore insists on filing of loss return within time.

13.3 Whether above purpose is satisfied in substance and in effect in this case is the pertinent question. Along with it, there is a related question whether each of the four returns submitted by the four cells is to be independently considered· or all the four returns are to be taken together into consideration. In my considered opinion, if significance of words “substance” and “effect” is kept in mind, there is no justification to take four returns separately and in not considering them together. All the four returns were filed at the same time with the same Assessing Officer and signed by the same competent and authorized person. When total effect of all the four returns is taken into account, it is clearly found that assessee did disclose full information of total loss in time as was needed by the revenue to compute 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 effect 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 bf the assessee company. However, that mistake, otherwise rendering the return’s invalid, is fully taken care of by Provision of s.292B of the Income-tax Act.

14. I n 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 vs. CIT, (1989) 176 IT~ 291 (P & H). In the said case the assessee died during the pendency of the assessment proceedings. The assessment was completed after impleading the legal representative of the deceased but, in the assessment order, the name of the deceased was shown instead of the legal heir. Before the first appellate authority, the legal representative contended that the assessment was null and void as it was made on a dead person. The Revenue, on the other hand, relied upon the provisions of section 292B to support the assessment. The Appellate Assistant Commissioner and on appeal, Tribunal upheld the assessment since the legal heirs of the deceased assessee were imp leaded and were heard. It could not be -said that the assessment was made on a dead person. The High Court agreed with the abov8view holding asunder:

“We are of the opinion that the Tribunal came to correct conclusion. There is clearly a clerical eror or omission in the heading of the assessment order. The correct description of the assessee to b@ given in the heading against item No.2 should have been Sain Dass Abbi, deceased, through Smt Swaran Kanta, legal heir. It has to be seen whether an order could be read to mean to the aforesaid effect on the peculiar facts of this case. Section 159 of the Income tax Act, 1961 (for short “the Act), relates to the liability of the legal representative of the deceased assessee. According to section 159(2)(a) of the Act, any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued, against the legal representative from the stage at which it stood on the date of death of the deceased and for completing the proceedings by virtue of section 159(2)(c) of the Act, the provisions thereof are to of applied accordingly. Sub-section (3) of section 159 of the Act further provides that the legal representative of the deceased shall, for the purposes of this act, be deemed to be an assessee. Therefore, the deceased is an original assessee and the legal representative becomes the deemed assessee for the purposes of completion of the proceedings and for recovery of any tax from the estate of the deceased in the hands of the legal representative. The Income-tax Officer followed the procedure correctly as provided by section 159 of the Act and completed the proceedings.

Section 154 of the Act authorizes the income tax authority, referred 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 2928 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 reason of any mistake, defect or omission in the assessment if the assessment is in substance and effect in conformity with or according to the intent and purpose of the Act. As already noted, 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 2928 of the Act’.”

14.1 In the case of CIT vs. K Saraswathi Ammal, (1984)146 ITR 486 (Mad) the Assessing Officer had raised demand for advance tax for 1965-66 on the basis of provisional assessment for 1964-65. Subsequently, on the rectification of the provisional tax demand for’ 1964-65, the ITO rectified the advance tax demand for 1965-66 and issued a fresh notice to the assessee. However, before such rectification, no notice under section 154(3) was issued. As the assessee did not pay the advance tax demand on the basis of the rectified demand, the ITO issued a letter asking the assessee to pay the balance of advance tax on or before c1 particular date and further stating that on failure to pay before the said date the assessee had to show cause why penalty should not be imposed for non-payment of advance tax. As no payment was made, the officer levied’ penalty of Rs.16,700 under section 221. The AAC set aside the order of penalty on the ground that, (3) before levying penalty, no proper show-cause notice was issued requiring the assessee to show cause as to why penalty should not be levied as contemplated under s. 221(1), proviso; and (b) the demand for advance tax based on the provisional assessment for 1964-65 was itself invalid as the rectification of the advance tax had been done without any show-cause notice. The Tribunal confirmed this ord2r on the first reasoning and hence did not go into the second reasoning. On a reference:

“Held, that whether a show-cause notice as contemplated by the first proviso to s. 221(1) was issued as part of the order granting time for payment or separately later on, the effect was the same, as in both cases the assessee would be given an opportunity to show good and sufficient reason for the default in payment of the advance tax. Consequently, the Tribunal in the instant case was not justified in holding that no proper show cause notice was issued. Having regard to the purport of the notice and the provisions of s.292B, the show-cause notice given in the same notice directing to pay the advance tax on or before a particular date was valid.”

14.2 In the case of Shirish Madhukar Dalvi vs. ACIT, (2006) 287 ITR 242 (Bom), for the block assessment notice issued to the assessee did not mention block period for which the return was to be 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 30^th June 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 the section 292B is recorded by their Lordships as under: –

“Mr. Sathe, while developing another shed of his submission leading 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 resorting 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 to the introduction of section 292B of the Act.”

Their Lordships, after considering all the relevant provisions and case law, observed as under: –

“Having examined the factual matrix, the statutory provision, the law laid down by various courts presently holding the field, if one turns to the facts of the case at hand, it is not in dispute that notice dated July 6, 1998, did’ not mention the correct provisions of the Act; it did not mention the correct block period for which the return was required to be filed; it did not give 15 days clear notice. Though the said notice was defective, it did not cause any prejudice to the appellant. The undisputed factual matrix reveals that the appellant was served with another notice dated September 17, 1998, mentioning the block period for which the return was required to be filed incorporating the correct reference to the sections applicable to the case in question and it mentioned that the period of 45 days for filing the return was available to the appellant of which the appellant did not avail. He was directed to file a return.

Pursuant to the above notice dated September 17, 1998, the appellant approached the Deputy Commissioner of Income-tax vide his letter dated September 28, 1998, and sought further extension of 45 days for filling the block period return. He has, accordingly, filed his return on November 2, 1998, declaring a total income of Rs 1,01,33,700. The same was accordingly assessed vide assessment order dated June 30, 2002.

It is not in dispute that notice dated July 6, 1998, did not cause any prejudice to the appellant. During the course of hearing, we specifically asked Mr. Sathe as to what prejudice was suffered by the appellant on account of the alleged defective notice dated July 6, 1998. He made a positive statement that no specific prejudice was suffered by the appellant. At any rate, the notice dated July 6, 1998, suffered from only technical defects, if any, and, in our opinion, it was protected under the umbrella of section 292B of the Act.”

Their Lordships further held that notice under section 158BC relates to procedure for assessment and cannot be equated with notice under section 148 or with charging section 158BA(2). The notice only provides for procedure to be adopted for block assessment. It does not confer jurisdiction to assess in favour of the assessee.

In the course of the decision. their Lordships quoted with approval the observations in the case of State Bank of Patiala vs. S K Sharma, (1996) 3 SCC 364; P T Rajah vs. T P M Sahir, (2003) 8 see 498. They also quoted from Crawford on Statutory Construction at Page 254 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 td 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. s a rule, all such procedural rules are designed to afford a full and proper opportunity to the subject to defend himself.”

The case of Dove Investments P Ltd. vs. Gujarat Industrial Investment Corporation, (2006) 129 Company Cases 929 (SC) has been reproduced at Page 255:

“In the case of Dove Investments P. Ltd. v. Gujarat Industrial Investment Corporation . [2006) 129 Comp Cases 929 (SC); [2006]? see 619 the apex court has observed that. regard must be had to the context, the subject matter and object of the statutory provision in question in determining whether the same is mandatory or directory. No universal principle of law could be laid down in that behalf as to whether a particular provision or enactment shall be considered mandatory or directory. It is the duty of the court to try to get the real intention of the Legislature by carefully analyzing the whole scope of the statute or section or a phrase under consideration.”

15. In the light of above decision, I am inclined to hold that four cells of the assessee, by filing four returns, in which total loss claimed by the assessee was disclosed, did comply in substance and in effect with the intent and purpose of the Act. All the relevant and correct information in the prescribed time was given so that assessment could be made after proper scrutiny. Their Lordship of Supreme Court in the case of Kullu Valley Transport Co. P. Ltd. (supra) had held that even if loss is claimed in the revised return, the same should/also be considered and allowed. To override above decision statutory changes were made w.e.f. 01.04.1989 in section 80. The Statute now insist on filing return of loss’ within the time prescribed under 5.139(1) of the Act for reasons already discussed. In the present case, no doubt there was a defect and a bonafide mistake in filing four returns instead of one. But above defect is not material in the light of provisions of section 2928. When total information needed by the Revenue in the return was fully furnished; the returns in substance and in effect confirmed to the requirement of the provision. In other words, the effect of four returns taken together was really the same as would have been the case if only one return was filed by the assessee. It is nobody’s case that any prejudice was caused to the Revenue because of the above defect and mistake. It is merely technical that instead of the assessee company, the returns were filed by four cells, in this case. In my opinion, Revenue authorities, in holding that the return was not filed by the company, has not given effect to the provision of sec. 292B. As noted by their Lordships of Bombay High Court, from the decision of the Supreme Court in the Case of State Bank of Patiala (supra), “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 bonafidely 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. The revised return would in such circumstances relate back to the date of filing of 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 date of four returns is to ignore provision of S.292B of the Act. In my considered opinion, the Revenue authorities and the learned Vice President took a very narrow view of statutory provisions of section 292B and thus defeated the very purpose of the provision. It could only advance injustice on account of a technical default. Whereas provision of section 292B aims to prevent such injustice. The learned Accountant lv1ember, in my considered opinion, has taken right view of the matter. I therefore agree with him and answer the question in the affirmative.

16. Before closing, it needs to be mentioned that the decisions cited on behalf of the Revenue are not applicable. The view taken by the Tribunal in the case of Atea Spa (supra) is contrary to the view taken by different High Courts and cannot be followed. ‘The decision in the case of Smt P K Kochammu Amma Peroke (supra) has no application to the facts of the case. The case of Abhey Ram Chunni Lal (supra) infact supports the assessee as opportunity to file income Of total return was not availed of; this act of the assessee has been held to be not bonafide. Here the facts are, in the converse. For all the aforesaid reasons, I agree with the view taken by the learned Accountant Member.

17. The matter should now be placed before the regular Bench for passing a fresh order in accordance with law.

 _________________________________________________________

IN THE INCOME TAX APPELLATE TRIBUNAL

MUMBAI BENCHES ‘L’, MUMBAI

ITA No. 3875/Mum/2005
Assessment Year 2001-02