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PETITIONER:

KUMAR JAGDISH CHANDRA SINHA (DEAD) THROUGH LRS. ETC.

Vs.

RESPONDENT:

COMMISSIONER OF INCOME-TAX, WEST BENGAL

DATE OF JUDGMENT: 23/04/1996

BENCH:

B.P. JEEVAN REDDY, K.T. THOMAS

ACT:

HEADNOTE:

JUDGMENT:

J U D G M E N T

B.P. JEEVAN REDDY.J.

These appeals are preferred against the Judgment of the

Calcutta High Court answering the three questions referred

to it under Section 256(1) of the Income-Tax Act against the

assessee and in favour of the Revenue the three questions

are:

"1. Whether, on the facts and in

the circumstances of the Tribunal

was correct in law in holding that

the return of income furnished by

the assesses by virtue of the

provisions contained in sub-section

(4) of Section 139 of the Income

Tax Act, 1961 beyond the time

allowed under sub-section (1) or

sub-section (2) of the said

section, could not be construed as

a return furnished under either of

the later sub-section and in that

view holding that view holding that

the assesses was not entitled to

file the revised return under sub-

section (5) of Section 139 of the

Income Tax act, 1961?

2. Whether, on the facts and in

the circumstances of the case, the

assessment made by the Income Tax

Officer for the assessment years

1964-65 and 1965-66 were section

the time limit prescribed in

section 153(1) (b) of Income Tax

Act, 1961?

3 Whether, on the facts and in

the circumstances of the case, the

tribunal was correct in law in

holding that the cases for the

assessment years 1964-65 and 1965-

66 were such as `failing within

clause (c) of sub-section (1) of

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section 271?"

While Question No.1 was referred at the instance of the

Revenue, Questions 2 and 3 were referred at the instance of

the assessee. The two assessment years concerned herein are

1964-65 and 1965-66.

For the assessment year 1964-65, the assessee did not

furnish a return within the period prescribed by sub-section

(1) of Section 139. No notice under sub-section (2) of

Section 139 was served upon him. The assessee submitted a

return or August 13, 1964 disclosing a total income of

Rs.42,131/-. This return, it is not in dispute, was filed

under, and taking advantage of the provision contained in,

sub-section (4) of Section 139. On January 18, 1969 he filed

a revised return disclosing a total income of Rs.40,388/-.

The assessee also disclosed in this revised return a capital

loss of Rs.1,60,672/- on the sale of a plot of land. The

Income Tax Officer did not complete the assessment within

four years of the expiry of the assessment year 1964-65

i.e., on or before 31.3.1969. He made the assessment order

on January 15,1970. He also initiated penalty proceedings

under Section 271(1)(c) and referred the same to Inspecting

Assistant Commissioner as required by law in force at that

time.

In respect of the assessment Year 1965-66 also, the

assessee did not file a return within the period prescribed

by Section 139(2) was served upon him. He filed a return

under Section 139(4) on December 17, 1965 disclosing an

income of Rs.3,76,628/- which included a capital gain of

Rs.3,52,420/-. On July 17, 1969 the assessee filed a revised

return showing the total income at Rs.2,50,719/-. This

figure was arrived at after reducing the capital gains form

Rs.2,52,420/- (as disclosed in original return) to

Rs.2,52,119/- The income Tax Officer deed not completes the

assessment before the expiry of four years form the end of

the assessment year 1965-66 i.e., on or before 31st March,

1970. He made the assessment order only on July 6, 1970. In

this year too, the Income Tax Officer initiated penalty

proceedings and referred the same to Inspecting Assistant`

Commissioner.

Against the orders of assessment in respect of both the

assessment Commissioner. In these appeals he disputed the

vary validity of the assessment orders on the ground that

they have been made beyond the prescribed period of four

years. He submitted that the revised returns filed by him

inadmissible in law and therefore could not serve to extend

the period for marking the assessment as provided by Section

153 (1) (c). He also disputed the correctness of various

additions made by the Income Tax Officer. The Appellate

Assistant Commissioner allowed the appeals on the ground

that the assessment or orders having been made beyond of

four years prescribed by Section 153(1)(a)(i) (as in force

at the relevant time), they are bed in law. He held that

inasmuch as the returns in both the assessment years ware

filed under Section 139 (4), no revised that sub-section (5)

of Section 139 permits a revised return to be filed only

where the return is filed under sub-section (1) or sub-

section (2) of Section 139 but not where the returns is

filed under sub-section (4) of Section 139. In this view of

the matter, the Appellate Assistant Commissioner held, the

Income Tax Officer cannot claim the benefit of extended

provided by clause (c) of subsection (1) of Section 153.

The Revenue challenged the decision of the Appellate

Assistant commissioner before the Tribunal. The Tribunal

agreed with the Appellate Assistant Commissioner that no

revised return can be filed by an assesses who has field the

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return under Section 139(4) and that, therefore, the so-

called revised returns filed by the assesses were not valid

in law . The Tribunal, however, allowed the appeals filed by

the Revenue on the ground the assessment orders must be

held to have been made within the time prescribed by clause

(b) of sub-section (1) of Section 153. in other words, the

Tribunal was of the opinion that since their was prima facie

case for initiating action under Section 271(1)(c), the

assessment order could have been made within a period of

eight years from the end of the relevant assessment year, as

provided by clause (b) of subsection (1) of Section 153, as

stood at the relevant time.

At the request of Revenue and the assessee, as stated

above, three questions were referred by the Tribunal under

Section 256 (1). The High Court discussed the legal position

at length and held that even in the case of a return filed

under Section 139 (4), a revised return is permissible in

law. Accordingly, the High Court held, the assessment orders

made must be deemed to have been made within the period of

limitation provided by Section 153 (1)(c). The High Court

also held that the Tribunal was right in holding that in the

facts and circumstances of the case, the larger period of

eight years provided by clause (b) of sub-section (1) of

Section 153 was also attracted in this case and that on this

count also, the assessment orders must be held to have been

made within the period of limitation prescribed by the Act.

Mr. Ashok Sen, learned for the assessee seeks to

canvass the correctness of the view taken by the High Court.

It would be appropriate to set out the relevant

provisions of the Act as obtaining at the relevant time for

a proper appreciation of the questions arising herein. Sub-

sections (1), (2), (4) and (5) of Section 139 read thus:

"139. Return of income.- (1) Every

persons, if his total income or the

total income of any other person in

respect of which he is assessable

under this Act during the previous

year exceeded the maximum amount

which is not chargeable to income-

tax shall furnish a return of his

income or the income of such other

person during the previous year in

the prescribed form and verified in

the prescribed manner and setting

forth such other particulars as may

be prescribed -

(a) in the case of every person

whose total income, or the total

income of any other person in

respect of which he is assessable

under this Act, includes any income

from business or profession, before

the expiry of six months from the

end of the previous year or where

there is more than one previous

year, from the end of the previous

year which expired last before the

commencement of the assessment

year, or before the 30th day of

June of the assessment year,

whichever is later;

(b) in the case of every other

person, before the 30th day of June

of the assessment year)

(proviso omitted as unnecessary).

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(2) In the case of any person who,

in the Income-tax Officer's

opinion, is assessable under this

Act, whether on his own total

income or on the total income of

any other person during the

previous year, the Income-tax

Officer may, before the end of the

relevant assessment year, serve a

notice upon him requiring him to

furnish, within thirty days from

the date of service of the notice,

a return of his income or the

income or such other person during

the previous year, in the

prescribed form and verified in the

prescribed manner and setting forth

such other particulars as may be

prescribed :

(Proviso omitted as unnecessary).

[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 clause (iii) of the

proviso to sub-section (1) shall

apply in every such case. [Subs. by

Finance Act No. 19 of 1968 (w.e.f.

1.4.1968)].

(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 years.]

(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."

Sub-section (1) of Section 153, which alone is relevant

for our purposes read thus:

"153. Time-limit for completion

of assessments and re-assessments.

- (1) No order of assessment shall

be made under Section 143 or

Section 144 at any time after -

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[(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 1st

day of April, 1969; or] [Subs. by

Finance Act, 1968 (w.e.f.

1.4.1969)].

(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 return or

a revised return under sub-section

(4) or sub-section (5) of Section

139,

whichever is latest."

--------------------

Section 271 (1) (c) ran thus:

"271. Failure to furnish returns,

comply with notices, concealment of

income. etc. - (1) If the Income-

tax Officer or the Appellate

Assistant Commissioner in the

course of any proceedings under

this Act, is satisfied that any

person -

(clause (a) and (b) omitted as

unnecessary)

(c) has concealed the particulars

of his income or [* * *] (The word

"deliberately" omitted by Finance

Act, 1964 (w.e.f. 1.4.1964)]

furnished inaccurate particulars of

such income,

he may direct that such person

shall pay by way of penalty,-

...................................

[(iii) in the cases referred to in

clause (c), in addition to any tax

payable by him, a sum which shall

not be less than, but which shall

not exceed twice, the amount of the

income in respect of which the

particulars have been concealed or

inaccurate particulars have been

furnished."]

The first question is whether a person who files a

return under Section 139(1) is entitled to file a revised

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return before the assessment is made. We think not. The

furnishing of a revised return is provided by sub-section

(5) of Section 139. According to this sub-section "any

person having furnished a return under sub-section (1) or

sub-section (2)" may furnish a revised return at any time

before the assessment is made if he discovers any omission

or any wrong statement in the original return. The very fact

that this right is given to a person who has filed a return

under sub-section (1) or sub-section (2) of Section 139

means by necessary implication that such a right is denied

to a person who files the return under Section 139 (4). The

High Court has, however, taken the other view relying upon

the language of clause (c) of sub-section (1) of Section

153. Sub-section (1) of Section 153 prescribes the time

limits for completing the assessment. In the present case,

it is not in dispute, the period allowed for making the

assessment is four years from the end of the relevant

assessment year as provided by Section 153(1)(a)(i). Section

153 (1)(c) provides an alternate period of limitation. It

says that if the assessment is made before "the expiry of

one year from the date of the filing of return or a revised

return under sub-section (4) or sub-section (5) of Section

139" it would yet be within limitation notwithstanding the

fact that it may be barred under other provisions contained

in sub-section (1) of Section 153. The High Court is or the

opinion that language employed in clause (c) of Section

153(1) contemplates the filing of a revised return even in a

case where original return is filed under sub-section (4).

We find it difficult to agree. Clause (c) employ both the

expressions return and revised return and refers to both the

sub-sections (4) and (5) of Section 139. Reasonably read it

means the return filed under sub-section (4) and the revised

return file under sub-section (5) of Section 139. It would

not be reasonable to construe the said clause as indirectly

conferring a right which is not conferred directly by sub-

section (5) of Section 139. The High Court has drawn a

distinction between a revised return and a rectified return.

May be, there is a distinction. We are not concerned here

with a rectified return but what was avowedly a revised

return and which was in truth a new return. We find it

equally difficult to agree with the rest of the reasoning of

the High Court on this aspect. We are, therefore, of the

opinion that no revised return can be filed under sub-

section (5) of Section 139 in a case where the return is

filed under Section 139 (4). Once this is so the revised

returns filed by the assessee for both the said assessment

years were not valid in law and could not have been treated

and acted upon as revised returns contemplated by sub-

section (5) of Section 139 - which means that Section

153(1)(c) was not attracted in this case. Indeed this is the

view taken by all the High Courts as conceded by Mr. Ashok

Sen. See O. P. Malhotra v. Commissioner of Income Tax (129

I.T.R. 379 Delhi), Dr. S.B.Bhargava v. Commissioner of

Income Tax (136 I.T.R. 559 All), Vimal Chand v. Commissioner

of Income Tax (155 I.T.R. 593-Raj.) and Eapen Joseph v.

Commissioner of Income Tax (168 I.T.R. 26 - Kerala). Only

the Calcutta High Court has taken the contrary view with

which we are unable to agree.

The understanding of clause (b) of sub-section (1) of

Section 153, however, appears to be a difficult one,

because of the ambiguous language employed therein. It says

that "in a case falling within clause (c) of sub-section (1)

of Section 271", the period for making an order of

assessment is eight years. Now what do the words "in a case

falling within clause (c) of sub-section (1) of Section 271"

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mean? Different High Courts have spoken in different voices.

Broadly speaking there are two streams of thought. The first

one is this: within the period of four years (or whatever

the applicable period of limitation), the Income Tax Officer

must either initiate proceedings under Section 271 (1)(c) or

record his opinion that it is a case falling under Section

271(1)(c); unless any such step is taken, it cannot be said

that it is a case falling under Section 271(1)(c); if this

safeguard is not provided, the Income Tax Officer would be

armed with a dangerous weapon and the assessee would be at

his mercy; the Damocle's sword would be kept hanging over

the head of the assessee all the time. (This was said in the

context of the provisions of 1922 Act where, in such a

situation, no period of limitation was prescribed). An

Income Tax Officer - the argument runs further - who is

remiss in performance of his duties and does not make an

order of assessment within the period prescribed, would make

an assessment thereafter and start proceedings under Section

271(1)(c) to justify the making of the order of assessment

beyond the prescribed period. As against this, the second

stream of thought runs thus: the power conferred by Section

153 (1)(b) is a power conceived in the interest of public

and is designed to curb concealment of income by the

assesses; while construing the said provision, the

possibility of abuse or misuse should not be the guiding

consideration; the law presumes, and the Court must also

presume that every power would be used fairly and for

advancing the purposes which the provision seeks to achieve.

There are not words in the clause, - this argument runs

further - which indicate by necessary implication that

either the proceedings under section 27(1)(c) should be

initiated or that some order should be passed or record made

by the Income Tax Officer within the period of four years to

indicate that it is a case falling under Section 271(1)(c);

imposing such a requirement would in effect amount to

amending the clause and reading words into it which are not

there; if in a given case, the Income Tax Officer invokes

the said provision without justification, the assessee is

not without a remedy; the Act provides adequate remedies by

way of appeals, revisions and reference to rectify any

misuse of abuse of powers by the Income Tax Officer; if an

Income Tax Officer makes an assessment order after the

expiry of four years and within eight years relying upon

Section 271(1)(c) and if it is found by the higher

authorities that is was not a case falling within Section

271(1)(c), it is obvious, the assessment order will be set

aside, besides quashing the penalty proceedings. It is,

therefore, not necessary, - it is argues - that within the

period of four years (or the other applicable period of

limitation as the case may be), the Income Tax Officer

should issue a notice or pass an order or make a record that

it is a case falling within Section 271(1)(c) and that the

validity of the assessment order should be judged with

reference to the date on which the assessment order is made.

We find that both the streams of thought aforesaid are

equally attractive. Each has an appeal of its own. We are,

however, relieved or making a choice in the matter because

of the decision of this Court in Commissioner of Income Tax

v. Suraj Pal Singh [(1991) 68 I.T.R. 297]. It was an appeal

against the decision of the Allahabad High Court in

Commissioner of Income Tax v. Surajpal Singh [(1977) 108

I.T.R. 746]. The Allahabad High Court discussed this problem

at length (at pages 752 and 753), but ultimately did not

express any final opinion for the reason that it was not

necessary to do so in view of the facts of an findings

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recorded in that case. We do not think it necessary to set

out the entire reasoning of the High Court. It is sufficient

to state that it espouses the first stream of thought

mentioned above. On appeal, this Court purported to affirm

the said line of thought which is evident from the following

observations in the judgment, which, in effect, is

practically the whole of the judgment:

"The Income-tax Appellate Tribunal

referred the following question to

the High Court :

'Whether, on the facts and in the

circumstances of the case, the

Tribunal was right in holding that

the assessment made by the Income-

tax Officer was barred by

limitation.'

The High Court, on a detailed

consideration of the facts and

circumstances of the case, held

that the Tribunal was right in

holding that the case was not one

to which the provisions of section

271(1)(c) of the Income-tax Act,

1961, corresponding to section

28(1)(c) of the old Act apply

inasmuch as the Income-tax Officer

had not recorded any finding or

brought any material on record

within a period of 4 years to show

that it was a case of concealment.

The High Court agreed with the

findings recorded by the Tribunal

that the assessment was clearly

time-barred.

After hearing learned counsel for

the appellant, we do not find any

good reason to take a different

view. The appeal fails and is,

accordingly, dismissed. There will

be no order as to costs."

Since this Court has already taken one view and because

the said view is one of the two possible views of the

matter, we follow the same and accordingly uphold the first

stream of thought mentioned above.

Applying the above understanding of Section 153(1)(b),

it must be held in this case that the assessment is barred

by time. Admittedly the Income Tax Officer had not initiated

the providing under Section 271(1)(c) within a period of

four years prescribed by Section 153(1)(a)(i) (which is

applicable provision herein) nor had be made any order or

record or a note in the relevant file indicating that it is

a case falling under Section 271(1)(c). [(f he made any such

order of note in the file as aforesaid, he should have

communicated it to the assessee - the expression

"communicated" being understood as explained by this Court

in State of Punjab v. Khemi Ram [1970 (2) S.C.R. 657].* In

such a situation it must be held that the orders of

assessment in respect of both the assessment orders

concerned herein are barred by time and must be held to be

invalid in law.

For the above reasons, the appeals are allowed.

Question No. 1 is answered in the affirmative holding that

in case of a return filed under sub-section (4) of Section

139, a revised return contemplated by sub-section (5) of

Section 139 cannot be filed. Question No. 2 is answered in

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the negative. It is held that the orders of assessment made

in respect of the said two assessment years are barred and

are not saved by Section

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* Which means that it is enough if it is put in the course

of transmission before the expiry of the relevant period; it

is not necessary that it should also be received by the

assessee or his representative within the said period.

153(1)(b). Question No. 3 is really consequential to

Question No. 1. Once we hold that no revised returns could

be filed by the assessee for the said two assessment years,

the assessments made beyond the prescribed period of four

years (but within five years) are not saved by Section

153(1)(c).

There shall be no order as to costs.