23 April 1996
Supreme Court


Case number: C.A. No.-001604-001605 / 1985
Diary number: 66811 / 1985






DATE OF JUDGMENT:       23/04/1996




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



    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



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).



    (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 -



    [(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



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"



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



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



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 ------------------------------------------------------------ * 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.