KERALA STATE BAMBOO CORPORATION LTD. VS COMMISSIONER OF INCOME-TAX, 2000 PTD-KERALA-HIGH-COURT-INDIA 2369 (1998)

Income-tax---

----Return---Defects in return---Rectification of defects---Scope of sub section (9) of S.139---Power to treat defective return as invalid---Power can be exercised only after assessment for year to which return relates is completed or time for such completion expires---Return submitted by public sector company not accompanied by audit report---Failure due to delay by Central Government in appointing auditor ---Assessee applying for extension of time up to 31-5-1996, for filing audit report---Revised return along-with audit report filed on 25-9-1996---Orders refusing acceptance of return, rejecting revision petition and issuing notice for reassessment---Application of assessee should have been considered as a petition under proviso to S.139(9)---Assessment proceeding pending when revised return was filed-- Orders of Income-tax Authorities rejecting return and revision petition were not valid---Notice for reassessment was not valid---Indian Income Tax Act, 1961,S.139.

Subsection (9) of section 139 of the Income Tax Act, 1961, obliges the Assessing Officer to intimate the assessee the defect, if any, noted in the return. This is for the purpose of affording an opportunity to the .assessee to cure the said defects. The minimum period to be granted for the said purpose is fifteen days but if an application is made by the assessee requiring more time the assessing authority is given power to grant further time. If the assessee does not cure the defect within the time allowed by the assessing authority then notwithstanding any other provision of the Act the return shall be treated as an invalid return and all the consequences of, not filing the return will follow. But it must be noted that this is subject to a rider which is mentioned in the proviso. It clearly says that if the assessee rectifies the defect beyond the time allowed by the Assessing Officer but before the assessment is made the Assessing Officer may condone the delay and treat the return as a valid return. From the above it is amply clear that the question of treating the defective return as invalid and visiting the assessee with consequences of not filing the return will arise only after the assessment for the year for which the defective return is filed is completed or after the time for completion of the assessment is over. This is for the reason that if the assessee filed the return curing the defect at any time before the said date the assessing authority has got the power to condone the delay and to treat the return as valid.

The assessee was a public sector undertaking fully owned by the State of Kerala. For the assessment year 1994-95, the petitioner-assessee filed a return of its income before the second respondent- the Assessing Officer on November 28, 1994. The Assessing Officer, on a scrutiny of the return, found that the return was defective, in that (i) it was not accompanied by the report of the audit mandated by section 44AB of the Act, and (ii) it was not signed by the managing director of the company, and the same was returned on January 24, 1995, to the petitioner for curing the defects. On February 20, 1995, the petitioner thereupon sent a fresh copy of the return filed on November 28, 1994, verified and signed by its managing director on February 15, 1995, with a covering letter in which it was explained that the audit under section 44AB of the Act could be finalised only after the statutory audit mandated by section 619 of the Companies Act, 1956, was done by the auditors to be appointed by the Central Government and that the Central Government had not yet appointed anyone for the said purpose. The petitioner requested for some more time for filing the tax audit report under section 44AB of the Act and the audited statement of accounts. The petitioner sent a petition, dated October 30, 1995, requesting for some more time to submit the tax audit report and the audited statement of accounts. It was pointed out therein that the Central Government issued orders appointing the auditors on September 25, 1995, which was received by the petitioner on October 16, 1995. The petitioner contacted the appointed auditors immediately and requested them to take up the audit of its accounts of 1993-94 immediately. The second respondent passed an order on the said application on November 27, 1995, granting time up to February 28, 1996, for filing the return. The petitioner again sent a petition, dated February 24, 1996, to the second respondent pointing out that the auditors appointed lay the Central Government did not complete the audit and requested for time up to May 31, 1996, for filing the return. The petitioner could get the audit report under section 44AB of the Act along-with the certificate in Form No.3CA from its auditors only on September 24, 1996 and on the very next day, that is, on September 25, 1996, the petitioner filed its revised return for the assessment year 1994-95 along-with all the necessary documents along with a covering letter. The second respondent on receipt of the revised return sent a communication, dated September 30, 1996, to the petitioner stating that as the time granted for filing the return for the year was already over the return filed on September 25, .1996, was beyond the time limit and hence could not be acted upon. The petitioner requested for a reconsideration of the decision but the request was rejected. The petitioner then filed a revision petition which was also rejected. In the meantime a notice of reassessment was served on the petitioner. On a writ petition against the order:

Held, that the Assessing Officer had not issued any declaration to the effect that the returns filed by the petitioner on November 28, 1994, or on February 20, 1995, were invalid and that he had declined to exercise the power vested in him under the proviso to subsection (9) of section 139 on the ground that no request in that regard was made by the petitioner. The Assessing Officer was bound to consider the petition keeping in mind the provisions of the proviso to subsection (9) of section 139 of the Act. He had failed to do so. The revised return or the correct return was filed on September 25, 1996, and, therefore, there was time till March 31, 1998, to complete the assessment. Therefore, it was clear that on the date when the petitioner had submitted the return along with all the required documents on September 25, 1996, the assessment of the petitioner for the year 1994-95 was pending. Hence, the orders passed including the notice of reassessment were not valid and were liable to be quashed.

The Assessing Officer was directed to consider the petitioner's application treating it as a petition for condonation of delay by invoking the provisions of the proviso to subsection (9) of section 139 of the Act. He was directed to afford an opportunity of being heard to the petitioner in the matter.

Collector, Land Acquisition v. Mst. Katiji (1987) 167 ITR 471 (SC); (1987) 62 Comp. Cas. 370; (1987) 66 STC 228; (1987) 71 FIR 143; Kerala State Drugs and Pharmaceuticals Ltd. v. CIT (1994) 210 ITR 1042 (Ker.) and National Insurance Co. Ltd. v. CIT (1995) 213 ITR 862 (Cal.) ref.

P. G. K. Warriyar, Mathew Cherian and P. Balakrishnan for Petitioner.

N. R. K. Nair and P. K. R. Menon for Respondent.

JUDGMENT

The matter arises under the Income Tax Act,. 1961 (for short "the Act"). The petitioner-c6mpany is a public sector undertaking fully owned by the State of Kerala and controlled and managed through, the director appointed by it from amongst its various Departments and bodies. It is incorporated with the primary objective of carrying on activities which provide employment to and the upliftment of thousands of the weaker sections of traditional and tribal bamboo cutters and weavers scattered throughout the State of Kerala.

For the assessment year 1994-95, the petitioner-assessee filed a return of its income before the second respondent, the Assessing Officer, on November 28, 1994. The Assessing Officer, on a scrutiny of the return, found that the return is defective, in that, (i) it is not accompanied by the report of the audit mandated by section 44AB of the Act and (ii) that it is not signed by the managing director of the company and the same was returned on. January 24, 1995, to the petitioner for curing the defects. On February 20, 1995, the petitioner thereupon sent a fresh copy of the return filed on November 28, 1994, verified and signed by its managing director on February 15, 1995, with a covering letter in which it was explained that the audit under section 44AB of the Act could be finalised only after the statutory audit mandated by section 619 of the Companies Act is done by the auditors to be appointed by the Central Government and that the Central Government had not yet appointed any, one for the said purpose. The petitioner requested for some more time for filing the tax audit report under section 44AB of the Act and the audited statement of accounts.

The second respondent sent a communication, dated October 17, 1993, with reference to the earlier communication, dated January 24, 1995, wherein it is stated that the defects pointed out still remained uncured and that the return already field will be treated as an invalid one. Then the petitioner sent a petition, dated October 30, 1995, requesting for some more time to submit the tax audit report and the audited statement of account. It was pointed out therein that the Central Government issued orders appointing the auditors on September 25, 1995, which was received by the petitioner on October 16, 1995, who contacted the appointed auditors immediately and requested them to take up the audit of its accounts of 1993-94 immediately. The second respondent passed an order on the said application on November 27, 1995, granting time up to February 28, 1996, for filing the return. The petitioner again sent a petition, dated February 24, 1996, to the second respondent pointing out that the auditors appointed by the Central Government did not complete the audit and requested for time up to May 31, 1996, for filing the return. The petitioner got the audit report on April 9., 1996, which was approved by the board of directors on April 10, 1996, and thereafter wrote to its auditors requiring them to complete the tax audit of the year to enable it to file its return for the assessment year 1994-95 before May 31, 1996. It is stated that the petitioner could get the audit report under section 44AB of the Act along-with the certificate in Form No.3CA from its auditors only on September 24, 1996, and on the very next day, that is, on September 25, 1996 the petitioner filed its revised return for the assessment year 1994-95 along-with all the necessary documents along-with a covering letter.

The second respondent on receipt of the revised return sent a communication, dated September 30, 1996, to the petitioner stating that as the time for filing the return of the year granted is already over the return filed on September 25, 1996, is beyond the time limit and hence cannot be acted upon. The petitioner thereupon filed Exh. P-12 petition before the second respondent explaining the circumstances and requested for reconsidering the decision taken and intimated in Exh. P-11 and to complete the assessment on the basis of the said return. The said request was rejected by the second respondent by communication, dated November 1, 1996 (Exh.P-13). Aggrieved by the said decision, the petitioner filed a revision before the first respondent-Commissioner of Income-tax under section 264 of the Act which was rejected as per order, dated March 18, 1997 (Exh. P-15). In the meantime, the second respondent issued a notice, dated March 4, 1997, under section 148 of the Act asking the petitioner to file its return of income for the year 1994-95.

In this original petition, the petitioner has sought for a direction or order quashing Exhs. P-11 and P-13 orders issued by the second respondent and Exh. P-15 order issued by the first respondent. The petitioner has also sought for a declaration that the notice Exh. P-I6 issued by the second respondent is illegal and without jurisdiction. The petitioner has further sought for a direction to the second respondent to accept the return filed on February 20, 1995, as revised by Exh. P-10 filed by it and to complete the, assessment on- its basis.

A counter-affidavit is filed by the first respondent. It is stated therein that for the assessment year 1994-95, the petitioner filed a return on November 28, 1994, declaring a-total income of Rs.58,000 after setting off brought forward loss of Rs.48,42,000 signed by the secretary-cum-finance manager, and that on verification of the said return certain defects were noted and a memo as envisaged by section 139(9) was issued to the petitioner. It is admitted that the petitioner field a -return signed by the managing director and requested for further time to file the tax audit report and audited statement of accounts on February 20, 1995, and that time was extended up to February 28, 1996. It is also admitted that on February 24, 1996, the assessee again asked for further extension of time up to May 31, 1996, due to the delay in appointment of the statutory authority, which is not seen refused or allowed by the Assessing Officer. In addition to what is stated in Exh.P-15 order, the first respondent stated as follows:

"It is submitted that the main reason for the delay in filing the audit report is due to the delay in appointing the statutory auditors by the concerned Department of the Government of India. This is not the first year of filing of the return by the assessee. They know the statutory liability to file the return in time and in the prescribed manner, for which the accounts are to be audited and audit reportobtained well in time. They should have taken up the matter with the authorities concerned well in advance. The petitioner invites attention to the decision of the Supreme Court in Collector, Land Acquisition v. Mst. Katiji (1987) 167 ITR 471, 472 and specifically to the observation of the Court that the Legislature has conferred the power to condone delay by enacting section 5 of the Limitation Act, 1963, in order to enable the Courts to do substantial justice to parties by disposing of matters on merits'. The principles of the above decision cannot be applied here since the time limit prescribed under section 139(1) for filing the return for the assessment year 1994-95 ends on March 31, 1996. This is either by way of filing revised return or by way of filing return at any time before the assessment is completed. The statute also does not give power to the Assessing Officer to extend the time limit for filing the return under sections 139, 139(1), 139(4) or 139(5) beyond March 31, 1996. Section 139(9) gives power to cure the defect in the return of income. That is, a defective return is to be made valid by curing the defect. This curing and making the return, valid under section 139(9) cannot go beyond the time limit prescribed under section 139(4). This is what has been highlighted in the order under section 264 in dismissing the revision petition.

The decision of the Kerala High Court in Kerala State Drugs and Pharmaceuticals Ltd.'s case (1994) 210 ITR 1042, also cannot be relied on to help the case of the assessee, since that decision was rendered in the circumstance in which when the statute conferred specific power to the Assessing Officer to condone the delay in filing the return of income."

Learned counsel appearing for the petitioner submitted that the assessee had filed its return for the assessment year 1994-95 before the due date on November 28, 1994, and that pursuant to defect memo. the first defect was cured by affixing the signature of the managing director in the return and also requested for time for rectifying the other defect by explaining the circumstances of February 20, 1995. He submitted that though the assessee requested for time up to May 31, 1996, for filing the audit report, it could file the return along-with all necessary documents including the audit report only on September 25, 1996, with a covering letter. Counsel submitted that the second respondent has got power under section 139(9) of the Act to condone the delay in curing the defect and that in fact the petitioner has sought for the same in the covering letter accompanying the revised return filed on September 25, 1996. He, in support of his contention relied on the non obstante clause used in section 139(9), the proviso to section 139(5), the circular issued by the Board and the decision in Kerala State Drugs and Pharmaceuticals Ltd. v. CIT (1994) 210 TR 1042 (Ker.), He submitted that the second respondent acted illegally in declining to exercise the powers vested under the proviso to section 139(9) and in treating the return as invalid. He further submitted that the first respondent also acted arbitrarily and illegally in rejecting the revision petition.

Learned senior Central Government standing counsel appearing for the respondent contended that in spite of the defect being pointed out, the petitioner did not cure both the defects even in the return filed on February 20, 1995, and consequently both the returns were declared as invalid in Exh.P-4, dated October 17, 1995. Counsel further submitted that this order was not challenged by the petitioner either before the first respondent or in this writ petition. Counsel submitted that the returns filed on November 28, 1994 and on February 20, 1995, are invalid in the light of the decision in National Insurance Co. Ltd. v. CIT (1995) 213 ITR 862 (Cal.). He contended that the third return filed on September 25, 1996, along-with the audited report is out of time and, therefore, the same cannot be acted upon. In other words, his contention is that once the return already filed in invalidated any subsequent event cannot validate the same. Regarding the expressions "before an assessment is made" used in the proviso to section 139(9) of the Act it is stated that the same has no application to a case where an officer has passed an order under section 139(9) declaring the return as invalid. He points out that the proviso speaks of before an assessment is made and not before the time or period for an assessment and further, the words "treat the return as a valid return" obtaining in the proviso can have reference to the return filed within time. He submitted that a return, filed within time may be defective and if the defects are cured within the time allowed, the curing will relate back to the date of filing of the return and if the defects are not cured within the time allowed the illegality will continue and the return will remain invalid. Counsel summed up' his submission by saying that a return, in order to be valid, must be one filed within the time stipulated in sections 139(1), 139(4) or 139(5) and if the defects pointed out are not cured within the time fixed or allowed, original return will be invalid. He submitted that the petitioner did not cure the defects within the time allowed and, therefore, the returns are invalid. Counsel alternatively submitted that the Court may not declare the return valid and if, for any reason, Court feels that the matter requires reconsideration the Assessing Officer may be directed to consider the return without the two defects or as if the two defects have been cured.

I have considered the rival submissions. In order to decide the controversy it is necessary to refer to the relevant provisions regarding the filing of returns as it obtained in the assessment year in question. Section 139 of the Act as it stood then with the relevant clauses, reads as follows:

"139. Return of income.---(1) Every person, 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, on or before the due date, 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 froth such other particulars as may be prescribed.

Explanation---In this subsection; due date means---

(a) where the assessee is a company, the 30th day of November of the assessment year;

(b) where the assessee is a person other than a company,---

(i) in a case where the accounts of the assessee are required under this Act or any other law to be audited, or where the report of an accountant is required to be furnished under section 80HHC or section 80HHD or in the case of a cooperative society,, the 31st day of October of the assessment year;

(ii) in a case where the total income referred to in this subsection includes any income from business or profession, not being a case falling under sub-clause. (i); the 31st day of August of the assessment year;

(iii) in any other case, the 30th day of June of the assessment year .....

(3) If any person who 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 subsection (1) of section 72 or subsection (2) of section 73, or subsection (l) or subsection (3) of section 74 or subsection (3) of section 74A, he may furnish, within the time allowed under subsection (1) a return of loss in the prescribed form and verified in the prescribed manner and containing such other particulars as may be prescribed, and all the provisions of this Act shall apply as if it were a return under subsection (1).

(4) Any person who has not furnished a return within the time allowed to him under subsection (1), or within the time allowed under a notice issued under subsection (1) of section 142, may furnish the return for any previous year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier:

(5) If any person, having furnished a return under subsection (1), or in pursuance of a notice issued under subsection (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, which is earlier: .....

(9) 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 provisions 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.

Explanation.---For the purposes of this subsection, a return of income shall be regarded as defective unless all the following conditions are fulfilled, namely:---

(a) the Annexures, statements and columns in the return of income relating to computation of income chargeable under each head of income, computation of gross total income and total income have, been duly filled in;-

(b) the return is accompanied by a statement showing the computation of the tax payable on the basis of the return;

(bb) the return is accompanied by the report of the audit obtained under section 44AB; .....

(e) where the accounts of the assessee have been audited, the return is accompanied by copies of the audited profit and loss account and balance-sheet and the auditor's report and, there an audit of cost accounts of the assessee has been conducted, under section 233B of the Companies Act, 1956 (1 of 1956), also the report under that section; "

Under section 139(1) of the Act, every person, whose total income during the previous year exceeds the maximum amount which is not chargeable to income-tax is obliged to furnish voluntarily a return of his income on or before the due date specified therein. As per Explanation 1(a) to the said subsection the due date in the case of an assessee which is a company is November 30, of the assessment year. Subsection (3) provides for filing of a return within the time allowed under subsection (1) if the assessee has sustained a loss in any previous year under the head "profits and gains of business or profession" and claims that the loss or any part thereof should be carried forward under subsection (1) of section 72 or section 73(2) or section 74(1) and (3). Subsection (4) enables an assessee, who has not furnished a return within the time allowed under subsection (1) to furnish the return for such year at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Subsection (5) enables an assessee who has furnished a return under subsection (1), or in pursuance of a notice issued under section (1) of section 142, if he discovers any omission or any wrong statement therein, to furnish a revised return at any time before the expiry of one year from the end of the relevant assessment year or before the completion of the assessment, whichever is earlier. Subsection (9) which is the relevant provision so far as this case is concerned provides that 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 the Assessing Officer may, in his discretion, allow, if a petition is filed there for in that regard. It also provides that if the defect is not rectified with the period mentioned above, 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. The proviso to subsection (9) gives power to the Assessing Officer to condone the delay and treat the return as a valid one, if the assessee rectifies the defect after the expiry of the time allowed, but before the assessment is made. The Explanation to the said subsection states that for the purposes of this subsection a return of income shall be regarded as defective unless all the conditions provided therein are fulfilled. It is relevant to note that clause (bb) of the said Explanation specifies one of the defects. The defect is no accompaniment of the report of audit referred to in section 44AB. In the, instant case, as already stated, the petitioner filed his return of income for the year 1994-95 on November 28, 1994. Two defects were pointed out by the Assessing Officer of which one was cured by the petitioner by filing of copy of the return on February 20, 1995, and requested for time for curing the second defect which defect is the one mentioned in clause (bb) of the Explanation to subsection (9) of section 139. Section 139(9) give power to the Assessing Officer td grant time for cuffing the defects if an application is made therefore by the assessee. In this case, the petitioner along-with the return, dated February 20, 1995, applied for time and the Assessing Officer has granted time till February 28, 1996. It is also admitted that the petitioner sought for further time till May 31, 1996, though the Assessing Officer has not passed any orders therein. The petitioner has filed the return styled as a revised return on September 25, 1996, along with all the required documents including the audit report contemplated under section 44AB. Though subsection (9) of section 139 provides that if the assessee does not cure the defects within the time allowed by the Assessing Officer the return shall be treated as an invalid return, the proviso gives power to the Assessing Officer to condone the delay and to treat to the return as a valid return provided a proper return is filed by curing the defects before the assessment is made. In this context, it is relevant to refer to the provisions of section 144 of the Act providing for best judgment assessment. As per the said section if any person fails to make the return required under subsection (1) of section 139 and has not made a return or a revised return under subsection (4) or subsection (5) of that section or having made a return, fails to comply with all the terms of a notice issued under subsection (2) of section 143, the Assessing Officer, after taking into account all the relevant materials which the Assessing Officer has gathered shall, after giving the assessee an opportunity of being heard, make the assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment.

The petitioner, admittedly, is a public limited company of the State of Kerala incorporated with the primary objective of carrying on activities which provide employment to and the upliftment of thousands of the weaker sections of traditional and tribal bamboo cutters and weavers scattered throughout the State of Kerala. The statutory auditors of the company are to be appointed by the Central Government as provided under section 619(2) of the Companies Act, 1956. The Central Government appointed the auditors only by their order, dated September 25, 1995, and received by the petitioner only on October 16, 1995. The petitioner immediately thereafter contacted the auditors, as is evident from Exh. P-5 communication and requested for expediting the audit. For reasons beyond their control, the audit reports could be obtained from the statutory auditors only on April 9, 1996 and April 10, 1996. The said reports were approved by the board of directors and thereafter the petitioner wrote to the auditors requesting for completing the tax audit to enable it to file its return for the year 1994-95 before May 31, 1996. It so happened that the petitioner could get the report from its auditors only on September 24, 1996, and on the very next day it filed the return with all necessary documents.

The respondents have no case in the impugned proceedings that the reasons stated by the petitioner for the delay in obtaining the audit report from the statutory auditors as well as its auditors were not bona fide. They had also no case that the delay in curing the defects by filing the revised return on September 25, 1996, is also without any bona fides. It is true that in the counter-affidavit filed by the first respondent, who has passed Exh.P-15 order, it is stated that this is not the first year of the filing of the return by the assessee, that they know the statutory liability to file the return in time and in the- prescribed manner for which the accounts have to be audited and the audit report obtained well in time and that they should have taken up the matter with the authorities well in advance. The petitioner brought the above facts to the notice of the second respondent and requested for time for curing the defects till May 31, 1996, which is admitted. The proviso to section 139 (9) gives ample power to the second respondent to condone the delay and to treat the return as a valid return. Though the said power appears to be discretionary, it has to be exercised objectively and with reference to the facts and circumstances of the case. In the instant case, the second respondent granted time to the petitioner to cure the defects till February 28, 1996, and the petitioner's application for further time till May 31, 1996, was also pending before the second respondent. In the letter dated September 25, 1996, accompanying the revised return the petitioner had stated that "the revised Income-tax return in Form No. l is duly filled in, verified and signed by the managing director. The original provisional return has already been filed on November 28, 1994, under Receipt No.148" The said letter gave the details of documents accompanying the said return which included copy of the audited balance-sheet as at March 31, 1994, together with the auditors' and directors' reports attached thereto and also report in Forms Nos.3CA and 3CD, dated September 24, 1996, for the year 1994-95 together with the annexures attached thereto. It is also stated that the return is now filed subject to the above in order to avoid the delay in filing of the return and that the petitioner had submitted advance tax challans three numbers along-with the original/provisional return.

The case of the respondents is that though the petitioner had filed the return on November 28, 1994, and cured one of the defects by filing another return on February 20, 1995, the petitioner did not cure the other defect within the time allowed by the second respondent; i.e., on or before February 28, 1996. Their case is. that by virtue of the provisions of subsection (9) of section 139 of section 139 of the Act, the return originally filed has become invalid and it has been so declared by the second respondent in the communications; dated October 17, 1995 (Exh. P4), and September 30, 1996 (Exh. P11), and further on November 1, 1996 (Exh.P-13). The further case is that a return which has been declared as invalid cannot be resurrected by the subsequent event of filing a revised return. In this context, it has to be noted that the defects in the original return were pointed out by the second respondent in the communication, dated January 24, 1995, and without noticing the reply submitted by the petitioner, he issued communication, dated October 17, 1995, stating that the petitioner did not cure the defects and, therefore, he has to treat the return as an invalid one. However, considering the petition submitted by the petitioner on October 30, 1995 (Exh. P-5), the second respondent issued Exh. P-6 communication, dated November 27, 1995, granting time up to February 28, 1996, for filing the return. The petitioner submitted another application, dated February 24, 1996 (Exh. P-7), requiring for further extension of time up to May 31, 1996. The second respondent did not pass any order thereon. The petitioner filed the return accompanying all the required documents alongwith the covering letter, dated September 25, 1996. Then the second respondent issued a communication, dated September 30, 1996, stating that the time for filing the return was granted only up to February 28, 1996, that the petitioner has filed the return of income along-with the accounts only on September 25%. 1996, and that since the said return is filed beyond the time allowed it cannot be acted upon.

It is relevant to note that the second respondent has not stated in the said communication that the earlier returns are invalid or have been declared as invalid. It is in these circumstances, the petitioner had submitted Exh.P-12 petition explaining all the circumstances and requested the second respondent to complete the assessment on the basis of the said returns. In other words, the request of the petitioner in Exh. P-12 petition, dated October 11, 1996, was for condonation of delay in the submission of the return after curing the defects by invoking the powers vested in him under the proviso to section 139(9). The second respondent in the said communication also does not say that the earlier two returns have been treated as invalid. He had only stated that the petitioner has not cured the defect within the time allowed, that is before February 28, 1996, and that further extension applied was only up to May 31, 1996, beyond which there is not even an application also. It is on account of the above, the second respondent has stated that the present return of income filed is out of time and cannot be acted upon. It would appear that if the petitioner had filed an application for extension of time for curing the defects either before May 31, 1996, or along-with the return filed on September 25, 1996, he would have considered the question of condoning the delay in curing the defects. In other words, the second respondent has not treated Exh. P-12 petition as one for condoning the delay in curing the defects. The first respondent Commissioner of Income-tax in revision conceded that the Assessing Officer has power to condone the delay, but stated that the assessee has not- made any application for condonation of delay beyond February 28, 1996. It must be noted in this context that the second respondent in the communication, dated November 1, 1996, had clearly admitted that the petitioner applied for extension of time till May 31, 1996. Further, this is admitted in the counter affidavit filed by the first respondent also.

From the above it is clear that the statement of the first respondent that the petitioner did not make an application for time beyond February 28, 1996 is factually incorrect. The first respondent further noted that there is substantial variation in respect of the figures furnished in the return, dated November 28, 1994, and in the return filed on September 25, 1996, and, therefore, it cannot be said that the defect in not filing the audit report was a minor one or an immaterial one. The first respondent considered the matter further in the light of subsections (4) and (5) of section 139 and observed that the return filed shall be treated as invalid, if the defect is not cured notwithstanding any other provisions of the Act and, therefore, the return filed on September 25, 1996, has been validly rejected by the Assessing Officer. Both the respondents, according to me, misunderstood the scope of the proviso to subsection (9) of section 139 of the Act and also committed a factual mistake by surmising that the petitioner did not make any request for condonation of delay in curing the defects. Since counsel for the respondents have taken a contention that a return once treated as invalid as per subsection (9) of section 139 of the Act and a declaration to that effect is made by the Assessing Officer the subsequent filing of the return by curing the defect beyond the time granted by the Assessing Officer cannot be validated though it is unnecessary on the facts of this case, I shall deal with the same.

The contention of counsel is that if the assessee cures the defects in the return pointed out by the Assessing Officer within the time allowed by the Assessing Officer, the filing of such return will relate back to the date of filing of the original return, but if the return curing the defect is filed beyond the time allowed by the Assessing Officer the invalidity attached to the original return cannot be removed.

The correctness of the said submission can be tested in the light of the provisions of subsection (9) of section 139 itself. The said subsection, as already noted, obliges the Assessing Officer to intimate to the assessee the defect, if any, noted in the return. This is for the purpose of affording an opportunity, to the assessee to cure the said defects. The minimum period to be granted for the said purpose is fifteen days but if an application is made by the assessee requiring more time the Assessing Authority is given power to grant further time. If the assessee does not cure the defect within the time allowed by the assessing authority then notwithstanding any other provision of this Act the return shall be treated as an invalid return and all the consequences of not filing the return will follow. But it must be noted that this is subject to a rider which is mentioned in the proviso. It clearly says that if the assessee rectifies the defect beyond the time allowed by the Assessing Officer but before the assessment is made, the Assessing Officer may condone the delay and treat the return as a valid return. From the above it is amply clear that the question of treating a defective return as invalid and visiting the assessee with consequences of not filing the return will arise only after the assessment for the year for which the defective return is filed is completed or after the time for completion of the assessment is over. This is for the reason that is the assessee files the return curing the defect at anytime before the said date the Assessing Authority has got the power to condone the delay and to treat the return as valid. If this is the true legal position it has to be held that there is no merit in the contention raised by counsel for the respondent. The decision of the Calcutta High Court in National Insurance Co. Ltd. v. CIT (1995) 213 ITR 862, relied on by counsel does not support the stand taken by the Revenue. The Court in that case noted the distinction between a defective return and an invalid return and observed that a defective return is not ipso -facto to be regarded as an "invalid return". It was also observed that it is only when a return contains any of the specified defects and the officer intimates the defect to the assessee and the assessee fails to rectify the same within the specified period that the officer may treat the return as an invalid return. It was also observed that the provisions of section 139(9) would override the other provisions of the Act including section 292B and that in a case where any of the specified defects is not removed within the time allowed the return shall be treated as an invalid return. In that case the first return was filed in February, 1978, and the second return was filed on January 28, 1980. Subsection (9) of section 139 of- the Act was inserted by the Finance (No.2) Act, 1980, effective from September, 1, 1980, and, therefore, the said provision did not apply to the said case. However, the Court considered the scope of the said subsection and made the observations mentioned earlier. The Court took the view that a return filed without complying with the provisions of section 140(c) of the Act is an invalid return from the inception and that no explanation was given in the matter. The said observation was made, it must be noted, since the defect mentioned is not the one falling under the Explanation to sub section (9) of section 139 specifying the defects. That apart, since the Court had taken the view that the provisions of section 139(9) had no application to the facts of that case there was no occasion to consider the effect of the proviso to the said subsection. The broad observations of the Court in regard to the scope of section 139(2) of the Act are consistent with the view which I have taken in this case.

From the above discussion, it will be clear that the second respondent-Assessing Officer has not issued any declaration to the effect that the returns filed by the petitioner on November 28, 1994, or on February 20, 1995, are invalid and that he had declined to exercise the power vested in him under the proviso to subsection (9) of section 139 on the ground that no request in that regard was made by the petitioner. The first respondent also was under the impression that no such application was made by the petitioner before the second respondent. In this context, it is relevant to note that the proviso to subsection (9) of section 139 only states that the Assessing Officer may condone the delay and treat the return as a valid return, if the defects have been rectified at any time before the assessment is made. The second respondent has no case that any assessment was made for the year 1994-95 in respect of the assessee either before or after the filing of the revised return on September 25, 1996. The time for completion of the assessment for the year 1994-95 expires only on March 31, 1997, i.e., on the expiry of two years from the end of the assessment year in which the income was first assessable only on March 31, 1996, i.e., one year from the end of the financial year which relates to the assessment year (sic).

In this case the revised return or the correct return was field on September 25, 1996, and, therefore, there was time till March 31, 1998 to complete the assessment. Therefore, it is clear that on the date when the petitioner had submitted that return along-with all the required documents on September 25, 1996, the assessment of the petitioner for the year 1994-95 was pending. The proviso to subsection (9) of section 139 does not in terms say that the application for condonation of delay and for treating the return as a valid return is required to be made. However, reading the main provisions of subsection (9); it would appear that 'the power to extend the time for curing the defect can be exercised by the Assessing Officer only if a petition in that regard is filed before him. Therefore, it can be inferred that the proviso also contemplates an application for condoning the delay and for treating the return as a valid return. In the instant case when the second respondent refused to act on the return filed on September 25, 1996, in spite of the fact that there was no defect in the said return the petitioner filed Exh.P-12 petition before the second respondent requesting for treating the return as a valid one and to complete the assessment on that basis. Though the petitioner has not, stated in so many words that this is a petition under the proviso to subsection (9) of section 139, 1 am of the view that the second respondent should have treated the same as a petition requesting for exercising the powers vested under the proviso to section 139(9). The second respondent Assessing Officer declined to consider the same on the -surmise that no such request was made by the petitioner. This. is the mistake committed by the first respondent also. According to me, the second respondent-Assessing Officer was bound to consider the petition, dated October 11, 1996 (Exh. P-12), keeping in mind the provisions of the proviso to subsection (9) of section 139 of the Act. He has failed to do so.

Accordingly, I quash Exhs. P-11 and P-13 communications issued by the second respondent. I also quash Exh. P-15 order passed by the first respondent. I direct the second respondent assessing authority to consider Exh.P-12 application treating it as a petition for condonation of delay by invoking the provisions of the proviso to subsection (9) of section 139 of the Act. The second respondent is directed to afford an opportunity of being heard to the petitioner in the matter. It is open to the petitioner to make further representations and to let in further materials in support of its claim for condonation of delay and for treating the return as a valid one.

In view of the course which I have already adopted, I do not think it necessary to consider the scope of Exh. P-16 notice issued under section 148 of the Act. I quash the said notice. This is without prejudice to the right of the, second respondent to issue notice under section 148 of the Act in accordance with law in subsequent proceedings.

Though counsel appearing for the petitioner as well as the respondents have referred to and relied on various other decisions of this Court and of the other Courts, I do not think it necessary to deal with any of those decisions in the view which I have taken as above.

The original petition is allowed as above.

M.B.A./4129/FC Petition allowed.