Case Law Details
RELEVANT PARAGRAPH
2.13 Now, as per admitted facts of this case and as also noted by this Tribunal in their earlier order, the returns where assessee claimed interest were treated as non est returns. Hence, assessee had relied upon Hon’ble Madras High Court in the Narayanan Chettiar Industries case cited above. In this case the Hon’ble High Court was of the opinion that in respect of remission of liability, no admission can be made unless an allowance or deduction is allowed to the assessee in the previous year. After noting these facts the Tribunal had noted that, from the records it was not clear whether any allowance or deduction was allowed to the assessee in the previous year. Hence, the issue was remitted to be examined by the Assessing Officer.
2.14 Now, in the matter pertaining to the sum of Rs.2,43,62,803/ – which was again confirmed by the Assessing Officer, the assessee did not file any appeal against the addition of an amount of Rs. 55,58,381/ – relating to waiver of interest which had been claimed as deduction during the period relevant to assessment year 1988-89 to 1993-94 wherein assessments had been completed and such interest cost has been allowed in those assessments. Balance amounting to Rs. 1,88,04,422/ – pertained to assessment year 1994-95 to 1998-99 for which the returns have been found to be defective by the Assessing Officer and had been treated non est. Opinion of the lower authorities under such circumstances is that, when the assessee had been asked to rectify the defective return, the deduction claimed will be deemed to have been allowed.
2.15 We can gainfully refer here the provisions of Section 139(9) as under:-
“Where the Assessing Officer considers that the return of income furnished by the assessee is defective, he may intimate the defect to the assessee and give him an opportunity to rectify the defect within a period of fifteen days from the date of such intimation or within such further period which, on an application made in this behalf, the Assessing Officer may, in his discretion, allow; and if the defect is not rectified within the said period of fifteen days or, as the case may be, the further period so allowed, then, notwithstanding anything contained in any other provision of this Act, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return :
Provided that where the assessee rectifies the defect after the expiry of the said period of fifteen days or the further period allowed, but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return.”
2.16 A reading of above clearly shows that, when the return has been treated as defective by the Assessing Officer and despite giving an opportunity the assessee has not rectified the defect, the return shall be treated as an invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return. It is settled law that when the language of the Act is plain and unambiguous, no interpolation therein is called for. This proposition draws support from Hon’ble Apex Court decision in the case of Smt. Tarulata Shyam And Others 108 ITR 345 (SC). In the present case, the authorities below had treated such invalid returns as having the effect of meaning that assessee has been allowed the interest claim. In our opinion, this view is not sustainable.
2.17 Income Tax Act postulates only the following under the head assessment:-
i) Intimation u/s 143(1).
ii) Scrutiny assessment u/s 143(3).
iii) Best Judgment Assessment u/s 144.
iv) Re-opening for assessment of income escaping assessment u/s
v) Assessment or re-assessment or recomputation in pursuance of an order or appeal u/s 150.
2.18 Now, none of the prescribed mode of intimation / assessment contemplates any type of inference to be attached to an ‘invalid’ return. The term “invalid” has been defined in the Oxford English Dictionary as meaning “not legally recognized because contravening a regulation or law”. Section 139(9) itself says that in case of such an invalid return, the meaning of such an invalid return will be that assessee had failed to furnish the return. Now, when the assessee has been treated as having failed to file the return, the assessment is also not made u/s 144, the inference drawn by the authorities below that such an invalid return will signify that allowance claimed by the assessee has been allowed, is devoid of cogency. Under such circumstances, the ratio emanating from Hon’ble Madras High Court decision in the case of Narayanan Chettiar Industries case does clearly applies that, unless an allowance or deduction has been made in an earlier year in respect of loss, expenditure or trading liability, there can be no addition u/s 41(1).
2.19 Further, the ratio of Hon’ble Kerala High Court in the case of Vs. Ancherry Pavoo Kakku and Hon’ble Apex Court decision in Saraswati Industrial Syndicate Ltd. Vs. CTT cited above clearly accentuates that unless an allowance or deduction has been made as per Income Tax Act and records, the same will not come under the sweep of Section 41(1). A return treated as non est and `invalid’ can by no stretch of imagination be treated as allowance or deduction as per Income Tax Act and records.
