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Judgment
A.K. Yog and Prakash Krishna, JJ.—The Income Tax Appellate Tribunal, Allahabad has referred the following two questions of law for the opinion of this Court, u/s 256(1) of the Income Tax Act 1961 (hereinafter referred to as the Act):
Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that an appeal lay against the order u/s 139(9) before the First Appellate Authority u/s 246 of the Income Tax Act, 1961 by treating the order u/s 139(9) as virtually an order u/s 143(3) of the Act?
Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in upholding the order of the C.I.T. (A) setting aside the order passed u/s 139(9) of the Income Tax Act and directing the Assessing Officer to frame an assessment?
Assessment year 1989-90 is involved in the present reference. On 29th December, 1989 the assessee filed a return of loss of Rs. 2,07,42000/- and also brought forward losses of earlier years amounting to Rs. 1,30,22,414/-. The return was filed on the basis of operational result and complete profit and loss account and balance sheet could not be filed. The Assessing Officer by means of a letter asked the assessee to remove the defects by January, 31, 1990. The assessee sought for and was allowed time till March, 31st, 1990. The defects were neither removed within the aforesaid time nor further time was sought for. The Assessing Officer on June, 26, 1990 passed an order u/s 139(9) of the Act, holding the return as invalid and non-est. The order dated June, 26, 1990 passed by the Assessing Officer was challenged before the CIT (A) successfully. The contention of the assessee that the order passed u/s 139(9) was virtually an order u/s 143(3) as it was passed only after notice u/s 143(2) dated March, 28, 1990 was accepted and it was held by the CIT (A) that although the order before him was passed u/s 139(9) of the Act but it was in fact an order u/s 143(3) of the Act. The CIT (A) further directed the Assessing Officer to pass a fresh assessment order. The Department filed an appeal before the Tribunal on the ground that notwithstanding the issue of notice u/s 143(2), the order passed u/s 139(9) of the Act was not appealable. The said contention was repelled by the Tribunal and it confirmed the order passed by the CIT (A), holding that the appeal before the CIT (A) was maintainable.
Heard the counsel for the parties and perused the record. The learned standing counsel for the department has reiterated the submissions which were raised before the Tribunal to the effect that the order dated June, 26, 1990 was passed u/s 139(9) of the Act and such an order is not appealable u/s 246 of the Act. By making a reference to the order in question it was pointed out that the heading of the order reads as "order u/s 139(9) of the Income Tax Act 1961". It was submitted that the assessee was allowed time to remove the defects by March, 31, 1990 but it failed to do so nor sought further time and as such the order dated June, 26, 1990 cannot be treated as an order passed u/s 143(2) of the Act.
In contra, the learned Counsel for the assessee submitted that it has come on record that the assessment proceedings were initiated by issuing a notice u/s 143(2) of the Act. Therefore, any order passed subsequent to the issuance of said notice tantamounts to passing of assessment order u/s 143(3) of the Act.
The learned standing counsel has placed reliance upon U.P. Rajya Vidyut Utpadan Nigam Ltd. and U.P. State Sugar Corporation Ltd. Vs. Deputy Commissioner of Income Tax (Asstt.), We find no application of the ruling to the issue presently involved in the case in hands. It was held therein that the Assessing Authority has committed no mistake in holding that since the income tax returns filed by the assessee were defective in as much as the profit and loss accounts submitted by the assessee were provisional in nature. The question as to whether an appeal would lie when a notice for assessment u/s 143(2) of the Act was issued even in the case of defective return and the Assessing Officer passed the order u/s 139(9) of the Act subsequently was not involved therein even remotely. Similarly in the case of National Insurance Co. Ltd. Vs. Commissioner of Income Tax, it has been held that when the income tax return of a company has not been signed and verified by the Managing Director, the return is not valid, has no application to the controversy in hands. For the same reasons Sudhir Sareen Vs. Commissioner of Income Tax and Another, has no application as the court was concerned with the nature of revisional power of the Commissioner of Income Tax conferred on him u/s 264 of the Act. The Court was not called upon to adjudicate about the appellate power conferred on the appellate authority u/s 246 of the Act. Therefore, the aforesaid case has hardly any application to the present case.
For the same reason Gopal Glass Works Pvt. Ltd. Vs. Commissioner of Income Tax, is distinguishable on facts. In this case, the Gujrat High Court has held that the order of the Assessing Officer holding that the return is invalid, when the assessee failed to remove the defects in the return as pointed by the Assessing Officer, cannot be interfered with under Article 226 of the Constitution of India.
Section 246 of the Act makes certain orders appealable before the First Appellate Authority. It contains a list of appealable orders. In the said list an order passed u/s 139(9) of the Act does not find place. Meaning thereby, an order passed u/s 139(9) of the Act is not appealable. It is settled beyond pale of doubt that right to file an appeal is a statutory remedy. Unless an order is made appealable under statute, no appeal can be filed or entertained by higher court. We find absolutely no difficulty in holding that an order passed u/s 139(9) is not appealable. But that is not end of the matter.
The Tribunal has recorded a categorical finding that notwithstanding the failure on the part of the assessee to remove the defects as pointed out by the Assessing Officer, the Assessing Officer issued a notice u/s 143(2) of the Act. The very opening words of Sub-section (2) of Section 143 reads "where a return has been made u/s 139...served on the assessee a notice requiring him..." to produce any evidence on which the assessee may rely in support of the return. The Tribunal has found that unquestionably a notice purporting u/s 143(2) of the Act was issued by the Assessing Officer. The assessee, in view of the said notice, rightly entertained the belief that the assessment proceeding has commenced and the return though was initially treated as invalid by the Assessing Officer, is not being treated as invalid and computation of income as per return has to take place.
Once an assessment proceeding has commenced, the assessment of income has to take place either by accepting the returned income or by making additions, adjustments etc. as the Assessing Authority may deem fit, in accordance with law and to pass an order u/s 144 to the best of his judgment commonly known as best judgment assessment. After the issuance '' of notice u/s 143(2), the Assessing Officer has to proceed in accordance with the statutory mandate to complete the assessment under Sub-section (3) or Sub-section (4) of Section 143. Meaning thereby an order is required to be passed either u/s 143(3) or u/s 143(4) read with Section 144 of the Act. Such orders are appealable before the First Appellate Authority under Clause (a) of Section 246(1) of the Act. Therefore, we are of the opinion that any order passed by the Assessing Authority making the assessment of income either by accepting returned income or rejecting the returned income is an order passed u/s 143 of the Act, and is appealable. In this view of the matter, we find no illegality in the order of the Tribunal holding that in such circumstances, the totality of circumstances has to be appreciated and the period allowed for removing the defects might not have been sufficient as there were more than 200 depots and regional offices and the assessee was still sorting out the details when it received the notice u/s 143(2) which naturally conveyed to the assessee that now concentration is on compliance of the notice u/s 143(2) of the Act. The tribunal is right in making observation that the department cannot put back the entire machinery in the reverse gear and it cannot take recourse to an order u/s 139(9) which for all intents and purposes was a closed chapter when a notice u/s 143(2) was issued by the Assessing Officer. At this juncture, it may be noted that though order is titled as the one passed u/s 139(9) of the Act but we are of the opinion that the said order, is in the eyes of law was an order u/s 143(3) of the Act. It is settled proposition of law that the mere quoting or mentioning of a wrong section will not invalidate an order if the power to pass an order can be traced under the provisions of Act [(see 1985 AIR SC 232 ; J.K. Steel Ltd. Vs. Union of India (UOI), ; and State of Karnataka Vs. Muniyalla,
Para 10 of P. Balakotaiah Vs. The Union of India (UOI) and Others, is reproduced below:
It is argued that when an authority passes an order which is within its competence, it cannot fail merely because it purports to be made under a wrong provision if it can be shown to be within its power under any other rule, & that the validity of an order should be judged on an instruction of its substance and not its form. No explanation can be taken to this proposition....
In J.K. Steel Ltd. Vs. Union of India (UOI), it has been stated that if the exercise of power can be traced to a legitimate source, the fact that the same was purported to have been exercised under a different power does not vitiate the exercise of power in question.
The same view has been reiterated in State of Karnataka Vs. Muniyalla,
We are of the opinion that the order which was challenged in appeal before the First Appellate Authority was an order passed in the course of assessment proceedings which commenced on 29th of March, 1990 when the notice u/s 143(2) was issued.
There is yet another aspect of the matter. The assessee filed the return of the income for relevant assessment year declaring the total loss of Rs. 2,07,42,000/- and brought forward losses of Rs. 1,30,22,140/-. The effect of treating the return as invalid and non-est after issuing of the assessment notice u/s 143(2) is that the assessee would not be entitled to carry forward the losses in the subsequent years. The Tribunal has also noticed that in the earlier years also similar returns had been filed.
In view of the above discussion we are of the opinion that issuance of notice u/s 143(2) of the Act has changed the entire complexion of the matter and the order though passed u/s 139(9) would legitimately be termed as an order u/s 143(3) and hence it was appealable.
In the result we answer both the questions referred to above accordingly in affirmative i.e. in favour of the assessee and against the department.
However, no order as to costs.