1. In the captioned appeals by the revenue and cross-objections by the assessee, we have before us very interesting legal issues. In order to appreciate why these legal issues arose and why the parties have their respective grievances, it is very essential to have a very accurate factual background of the case which, as culled out from the record and the papers filed before us, is as under.
2. The assessment years involved in these appeals are 1979-80, 1980-81 and 1982-83. The assessee is a corporation in which the Government of Punjab is substantially interested. Its business consists of manufacture and sale of 'Malathion Technical'. The assessee maintains books of accounts on mercantile system of accounting. Its previous year ends on 30th September. Thus, for the assessment years under appeals, the previous years ended respectively on 30th September, 1978, 30th September, 1979 and 30th September, 1981. In accordance with the provisions of law, the return of income from the assessee was due on or before 30th of June of the relevant assessment year. The assessee filed the return of income signed by its Secretary, Shri R. Narayanan, on 28-6-1979 for the assessment year 1979-80. In this return, the assessee, inter alia, claimed loss of Rs. 5,03,470 and also made a claim for carry forward of Rs. 26,09,436 as investment allowance etc.
On the basis of this return, the Income-tax Officer started the assessment proceedings on 3-9-1979. These proceedings continued and culminated in an assessment order made Under Section 144 of the Act on 29-3-1982. On receipt of this order made ex parte Under Section 144 by the assessing authority, the assessee made an application Under Section 146 of the Act on 7-4-1982. On the basis of this application, the assessing authority cancelled the ex parte order, mentioned supra, by order dated 19-4-1982.
3. Thereafter, on 20/23-1-1985, the assessee received a letter bearing No. 965 on the subject of return for the assessment year 1979-80 filed on 28-6-1979. In this letter, the Inspecting Assistant Commissioner of Income-tax(Asst.) Chandigarh, projected to the assessee that the above return, "is signed and verified by Secretary, who is not a competent authority in view of the provisions of Section 140(c) and as such this return is not a valid return". The attention of the assessee was also invited to a judgment of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Dr. Krishan Lal Goyal [1984] 148 ITR 283, wherein, it was pointed out to the assessee by the Inspecting Assistant Commissioner of Income-tax (Asst.), it had been held that a return in order to be valid must comply with the conditions prescribed in Section 139/140 of the Income-tax Act, 1961 and Rule 12(1) of the Income-tax Rules, 1962. It was thus projected to the assessee that the above return made on 28-6-79 was, "invalid and the subsequent assessment framed Under Section 144 on the basis of such an invalid return is also invalid".
4. On 19-9-1984, i.e. before the letter No. 965 dated 22/23-1-1985 was received by the assessee, the assessee had filed another return which was signed by the Director and it is common ground that but for the fact that in place of the Secretary of the company signing the verification of the return filed on 28-6-1979, the return filed on 19-9-1984 had been signed by the Director, otherwise the two returns were identical in their contents and claims. Therefore, when the assessee received the letter No. 965, mentioned supra, it sent a reply to the Inspecting Assistant Commissioner of Income-tax(Asst.) on 30-1-1985. In this reply, appearing at pages 5 to 13 of the paper book filed by the assessee, it was pointed out that on receipt of the return on 28-6-79, the Income-tax Officer had started the process of assessment and after due process of law completed the assessment on 29-3-1982. This letter also projects that last hearing on the basis of that return was given to the assessee on 29-3-1982 itself. There is also averment in this letter that, "at that hearing, the Inspecting Assistant Commissioner of Income-tax(Asst.) informed the company that in the absence of certain details asked for by him and not supplied by the assessee, it was not possible for him to complete the assessment.
Further, he stated that he was not in a position to give any further time as the assessment was getting time-barred on 31st March, 1982".
The letter points out that in so completing the assessment, the Inspecting Assistant Commissioner of Income-tax(Assessment) ignored the losses claimed and the carry forward of investment allowance by taking the income as 'nil'. Thereafter, there is narration of the historical development as to how application Under Section 146 was filed and the assessment was cancelled. This letter also projects that the order Under Section 146 of the Act was made on 19-4-82, i.e. during the financial year 1982-83, and, therefore, in accordance with the provisions of law, the de novo assessment had to be made on or before 31-3-1985. It is only towards the close of this period that the assessee was informed that the best judgment assessment made Under Section 144 on the basis of the return dated 28-6-1979 and cancelled by an order Under Section 146 on 19-9-1982 was invalid.
5. The assessee projected to the Assessing Officer that the company had no Managing Director or wholetime Director as it was a joint sector company established in collaboration with P.S.I.D.C.(Punjab State Industrial Development Corporation). The company was managed, it was pointed out, by a Board of Directors through a Chief Executive and a Secretary. The Secretary was the principal officer of the company and under a bona fide belief, he had been given the powers, in respect of various matters under the Companies Act and various other laws to act as its principal officer. The Board of Directors had given the Secretary Power of Attorney in this behalf. Therefore, it was submitted that even if the Secretary was not competent to sign the return, he signed in a bona fide manner and that return was subsequently ratified without any change by one of the Directors of the company on 19-9-1984.
6. Since the assessing authority had referred to the judgment of the Hon'ble Punjab and Haryana High Court in the case of Dr. Krishan Lal Goyal (supra), the assessee distinguished that judgment. The assessee also projected that Section 292B of the Act provides that no return of income shall be invalid or shall be deemed to be invalid merely by reason of a mistake, defect or omission therein, if the return "is in substance and effect in conformity with or according to the intent and purpose of this Act". The return, in the light of this provision, filed on 28-6-1970 therefore, could not be treated as invalid as claimed by the assessing authority. A reference was also made in this letter to the provisions of Section 140(c) of the Act.
7. The assessee felt intrigued as to why such a letter about the invalidity of the return filed on 28-6-1979 for the assessment year 1979-80 had been issued when the Department had for the assessment years 1977-78 and 1978-79 acted upon the returns filed under the signature of the Secretary of the company and had completed the assessments of the basis of such returns without demur. It was also projected that till ex parte assessment was made on 29-3-82, the Department never raised an objection about the invalidity of the return which had been filed as far back as 28-6-1979. It was also projected to the Assessing Officer that for the assessment year 1980-81, when it was found that return for that year had been filed by the Secretary, the assessee was given an opportunity to rectify the mistake. If such an objection had been raised for the year 1979-80 as well in time, before completion of ex parte assessment Under Section 144, the assessee could have rectified the defect within time to satisfy the requirements of the Assessing Officer. It was thus complained of that by completing the assessment ex part6 long after the filing of the return on 28-6-1979 without raising any objection about its validity, the revenue by letter issued in January 1985 was denying the assessee an opportunity of amending the return to make it in accordance with law as desired.
Thereafter, certain authorities were cited to convince the assessing authority that it is merely a procedural defect as, in substance, the return was the same and only the signature of the Director had been placed on the return which in fact tantamounts to ratification of the original return as the return filed on 19-9-84 was identical except for the signature of the Director.
8. As mentioned supra, on receipt of the letter from the Inspecting Assistant Commissioner of Income-tax (Asst.) about the invalidity of return dated 28-6-1979 and the subsequent ex parte assessment raised thereon, the assessee had sent a reply dated 30-1-1985. We have obstructed important portion of this reply above to bring out the controversy. However, on receipt of this letter, the Inspecting Assistant Commissioner of Income-tax (Asst.) proceeded and made an order on 22-2-1985 bearing No. 377 without giving any section of the Act under which this order was made. Nonetheless, this order in the form of a letter addressed to the assessee held that "your return for the assessment year 1979-80 filed on 28-6-79 is an invalid return.
Further, the Hon'ble Punjab & Haryana High Court has also held that any assessment passed on such a :return is invalid and subject to cancellation Under Section 154. I hold that the assessment framed Under Section 144 on your return was also invalid. It follows that all proceedings on the basis of an invalid return were invalid. The subsequent return filed by you on 19-9-84 during the course of proceedings cannot be taken cognisance of, as it is filed out of time provided Under Section 139(4) and hence is non est in law. Hence the return for the assessment year 1979-80 filed by you on 28-6-79 is filed being an invalid return".
9. The order so made by the Inspecting Assistant Commissioner of Income-tax (Asst.) on 22/23-2-1985 holding that the return filed by the company on 28-6-79 was non est as it did not comply with the provisions of Section 140 of the Act and the return filed on 19-9-84 was invalid being out of time was challenged in appeal before the Commissioner of Income-tax (Appeals). His impugned order dated 13-8-1985 indicates the extent of the arguments that were addressed to him during the course of appeal proceedings. In nut-shell, it may be summed up that it was submitted before him that the major share holdings of the company belonged to the Punjab Government and the company did not have at the point of time any Managing Director as such, that there was Chief Executive Officer of the rank of Indian Administrative Service, that the main functionary of the company apart from the Chief Executive Officer was the Secretary of the company as its Principal Officer, that if the return is defective, there is a provision in Section 139(9) of the Act for giving an opportunity to the assessee to rectify the same, that the returns for the assessment years 1977-78 and 1978-79 were signed by the Secretary of the Company and assessments were raised thereon, that the return filed under the signature and verification of the Secretary on 28-6-79 was accepted and acted upon in making a best judgment assessment Under Section 144 and that given notice within time the assessee could remove the defect if there was any in the return filed on 28-6-79, that no notice was given to the assessee and thus the assessee's valuable right was robbed off by inaction on behalf of the assessing authority. For the assessment year 1980-81, opportunity was granted, to rectify the mistake so made, by the revenue to the assessee, that the defect, if any, in the return filed on 28-6-79 in view of the requirement of Section 140(c) of the Act was also made good by the subsequent return filed on 19th Sept., 1984 and the return this dated back to 28-6-79, that the second return filed on 19-9-84 was not really a return Under Section 139(4) because this return merely made good a defective return by removing the defect in the original return which was filed within the time required under law that the defect was removed by the assessee voluntarily and that so validated return which should have been treated as substituted for the earlier return was bound to be considered for the purpose of assessment. The authorities below, therefore, erred in acting in the manner as they did. They be directed to accept the return and allow to the assessee various claims made thereunder.
10. The learned Commissioner of Income-tax (Appeals), after careful consideration of the submissions made before him and the reasons recorded in the orders of the Inspecting Assistant Commissioner of Income-tax (Asst.), accepted the submissions of the assessee and directed that, "the appellant is allowed to carry forward of losses of Rs. 5,03,470. Carry forward of investment allowance amounting to Rs. 26.09 lakhs and carry forward of unabsorbed 80-J allowance as claimed".
In the result, the appeal was allowed.
11. For the assessment year 1980-81, the return of income was due on or before 30-6-80. Return signed by the Secretary of the company was filed on 28-6-80. This return was not proceeded with in the manner as was one with the return filed on 28-6-79 for the preceding assessment year, namely, 1979-80. On 7-3-1983, the assessee filed a return signed by a Director. The Income-tax Officer proceeded to make the assessment on the basis of the return filed on 7-3-1983. He made an order on 25-5-84 after making a reference Under Section 144B of the Act to the inspecting Assistant Commissioner of Income-tax (Asst.). In this order, the Income-tax Office has mentioned that the assessee-company filed the original return on 28-6-80, which was invalid in terms of Section 140 as it was not signed by the person authorised to do so. The Income-tax Officer, however, treated the return filed on 7-3-83 in which nil income was shown as having been filed Under Section 139 (4) of the Act.
The assessment was completed on 25-5-84. In other words, assessment for the assessment year 1980-81 was completed before disposing of the return for the assessment year 1979-80. Therefore, in the body of the assessment order for the year 1980-81, the Income-tax Officer has observed that the assessee has claimed unabsorbed depreciation at Rs. 5,03,470 and unabsorbed investment allowance at Rs. 26,09,436 for the assessment year 1979-80 for set off against the income of the year under consideration. Since however, the claim is not yet quantified and determined, no set off is allowed. The Income-tax Officer however, made an observation that this will be allowed Under Section 154 of the Act if found in the order at the time of assessment for the assessment year 1979-80. And we have already described how two returns filed for the assessment year 1979-80 were disposed of without allowing these claims and how on appeal the learned Commissioner issued directions for their allowance.
12. In the present proceedings, we are not seized with the assessment for the year 1981-82. However, for the assessment year 1982-83, we find that the return which was due on or before 30-6-1982 was filed as signed by the Secretary of the company on 28-6-82. Another return was filed on 21-1-1985 signed by the Director of the company. The Inspecting Assistant Commissioner of Income-tax (Asst.) completed the assessment on 27-3-85. In the impugned assessment made Under Section !43(3), there is again reference to Section 140(c) for the purpose of treating the return signed by the Secretary and filed on 28-6-82 as invalid return. The return filed on 21-1-85 was taken as return Under Section 139(4). The assessment was completed on 27-3-1985 and it was challenged in appeal. The assessee had also filed an appeal before the Commissioner of Income-tax (Appeals) against the assessment made for the assessment year 1980-81 on 25-5-84. The learned Commissioner of Income-tax (Appeals) vide his order dated 13-8-85 directed that the losses of assessment year 1979-80 had been held by him to be carried forward to the subsequent assessment year and the same was, therefore, to be allowed. These observations he made with regard to ground No. 3 in which the claim of loss, unabsorbed depreciation and investment allowance for the assessment year 1979-80 had been required to be quantified and set off against the income for the assessment year 1980-81. Hence, apparently, he allowed the appeal of the assessee for 1980-81.
13. Similarly, for the assessment year 1982-83, he held that by his order made for the assessment year 1979-80, he had considered the issues in detail and directed that unabsorbed investment allowance of Rs. 26,09,436, unabsorbed depreciation of Rs. 5,03,470 and unabsorbed relief Under Section 80J of the Act for the assessment year 1979-80 and unabsorbed investment allowance of Rs. 91,371 and unabsorbed relief Under Section 80J of the Act be allowed to be carried forward and set off against the income for the assessment year 1982-83. Incidentally, the income assessed without allowing the relief which had been the subject matter of appeal and allowed by the learned Commissioner was Rs. 20,12,524 for the assessment year 1980-81 and Rs. 1,96,366 for the assessment year 1982-83. The result of these orders of the learned Commissioner of Income-tax (Appeals) was that the revenue felt aggrieved and has come up in appeals before us. On the other hand, cross-objections have been filed by the assessee only by way of support for the decisions arrived at and directions issued.
14. We have heard the parties before us. On behalf of the revenue, it was contended that in terms of Section 140(c) of the Act, only Managing Director or in his absence, any Director of the Board of Directors of the company, could sign the return. Since the returns were signed by the Secretary of the Company originally, those returns were invalid.
However, it was not controverted that prior to the amendment of Section 140(c) by the Taxation Laws(Amendment) Act, 1975, w.e.f. 1-4-1976, a return signed by the Secretary of the company so authorised to sign was considered signed and verified in accordance with law. It was argued that in the present case, all the proceedings as noted above were rightly taken by the assessing authority and the ld. Commissioner of Income-tax (Appeals) erred in issuing the directions for carry forward of losses, investment allowance and deficiency regarding deduction Under Section 80J as he did for each of the assessment years under appeal. The orders of the ld. Commissioner may, therefore, be reversed and that of the assessing authority restored.
15. It was emphasised that for the asst. year 1979-80, return filed on 28-6-79 was non est in law because it contained basic infirmity and it could not be amended or ratified. Section 139(9) was brought on the statute book by Finance Act,1980 w.e.f. 1-9-1980 wherein the Income-tax Officer could call upon the assessee to amend the return but this provision was also not available to the assessee for 1979-80. Reliance was placed upon the judgment of Nagpur High Court in the case of Waman Padmanabh Dande v. CIT [1952] 22 ITR 339 and Supreme Court judgment in the case of CAIT v. Sri Keshab Chandra Mandal [1950] 18 ITR 569.
Reliance was also placed upon the judgment of the Allahabad High Court in the case of Bhawani Shanker v. State [1968] 68 ITR 873. The ld.Departmental Representative also tried to draw a distinction between non-filing of return and filing of an incorrect return and invited attention of the Bench to the judgment of the Calcutta High Court in the case of Mohindra Mohan Sirkar v. ITO [1978] 112 ITR 47. It was also submitted that the judgment of the Punjab and Haryana High Court in the case of Dr. Krishan Lal Goyal (supra), was applicable to the facts of the case.
16. A point was made by the revenue that Section 292B, which is not retrospective in nature, was brought on the statute book mainly to protect the interest of the revenue and it could not be applied in a manner so as to give any benefit to the assessee. Reliance for this proposition was placed on the case of CIT v. M.K. Gupta [1978] 113 ITR 473 (All.). As such, absence of signature by the proper person on the return made it non est in law irretrievably. Reliance was also placed upon Kerala High Court judgment in the case of P.N. Sasikumar v. CIT [1988] 170 ITR 80. The revenue also referred to sections 72(1) and 80to support its submissions.
17. The learned counsel for the assessee, on the other hand, submitted that the conduct of the revenue is contradiction in terms. The return filed under the signature and verification of the Principal Officer of the company, who was the Secretary at that point of time, is a valid return and was as such ascepted and acted upon to make assessments for the assessment years 1977-78 and 1978-79. These assessments have become final. If the conduct of the revenue is taken into account, it shows that assessments for 1977-78 and 1978-79 are also non est in law and as such invalid. But they stand on record of the revenue undisturbed.
18. It was submitted that even if the returns had not been signed by the Managing Director or in his absence by any of the Directors, the peculiar facts of the case and the nature of the ownership of the corporation, clearly established that when the assessee filed the returns, verified by the Principal Officer, i.e. the Secretary of the company, there was conscious effort to comply with the provisions of law. To such facts, hypertechnicalities contained in law could not be brought into play to deny the basic rights and substantial justice to the assessee. The ld. Commissioner did well to render justice to the assessee and the revenue had not made out a case for an interference therein.
19. It was further contended that the assessee required a better treatment and appreciation of the facts of case. On the other hand the manner and method of completion of the impugned assessments and the chronological order in which it has been done, indicates that on one pretext or the other, substantial rights of the assessee were denied and the Commissioner of Income-tax (Appeals) properly appreciated the grievance of the assessee in appeal in issuing directions to set right the wrongs done to the assessee. The orders made by the learned Commissioner of Income-tax (Appeals) are, in substance and in law, on the facts of the case, fully justified and the revenue has not made out any case for an interference therein. The appeals of the revenue may, therefore, be dismissed.
20. We have carefully considered the rival submissions. Before we come to examine the contentions of the parties before us on the issues that we have to determine, we would like to have a look at the relevant provisions of law to which the assessing authorities referred to and upon which they relied, to deny to the assessee various claims as narrated in factual backdrop of the case above. Section 140(c) was brought on the statute book by substitution for Clauses (c) and (d) by Taxation Laws (Amendment) Act, 1975 w.e.f. 1-4-76. Therefore, w.e.f.
1-4-76, i.e. for and from the assessment year 1976-77, Section 140(c) requires that the return Under Section 139 shall be signed and verified in the case of a company by the Managing Director thereof or where for any unavoidable reason, such Managing Director is not able to sign and verify the return or where there is no Managing Director, by any Director thereof. Chapter XIV of the Act deals with procedure for assessment and Section 140 is part thereof. This chapter provides the actual assessment to be made Under Section 143. Section 144 provides for best judgment assessment. Section 147 deals with cases of income escaping assessment. Thus Sections 143, 144 and 147 deal with the process of making and completion of assessment. We do not find any powers from Section 140(c) wherein the Income-tax Officer can make an order projecting to the assessee as if he was making an assessment to hold that the return was invalid or non est in law on account of its improper verification.
21. We find that not only the Legislature inserted clause(c) substitution for Clauses (c) & (d) of Section 140 by the Taxation Laws (Amendment) Act, 1975 but the Legislature also inserted by the same Act w.e.f. 1-10-75 Section 292B in the Act. This section provides that no return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of. any of the provisions of this Act (emphasis added) shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income, assessment, notice, summons or other proceeding if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act (emphasis added). We also find that Section 139 provides in Sub-section (4) filing of returns by any person who has not furnished a return within the time allowed to him under Sub-section (1) or Sub-section (2). On these subjections, there are judgments of the Hon'ble Courts and one of the outstanding judgments on these sub-sections is that of Hon'ble Supreme Court in the case of CIT v. Kullu Valley Transport Co. (P.) Ltd. [1970] 77 ITR 518.
22. In Section 139, the Legislature inserted, by Finance (No.2) Act, 1980 w.e.f. 1-9-80, Sub-section (9). It provides that where the Income-tax 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 defect within a period of 15 days from the date of such intimation or within such further period which, on an application made in this behalf, the Income-tax Officer may, in his discretion, allow and if the defect is not removed, the return shall be treated as invalid return and the provisions of this Act shall apply as if the assessee had failed to furnish the return. Before we go further, we would like to record, for the purpose of emphasis, that this provision is intended to give an opportunity to the assessee to remove the defects in the return because a proviso has been added to this sub-section to the effect that where the assessee rectifies the defect after the expiry of the period provided in this sub-section but before the assessment is made, the Income-tax Officer may condone the delay and treat the return as a valid return. Before we go further, we would like to express surprise that this provision contained in Section 139(9) being on the statute book w.e.f. 1-9-80, the assessing authorities did not avail of the same and did not project to the assessee any defect in filing the return despite the fact that all assessments in appeal were completed after this provision came on the statute book.
23. Now, Section 72 provides for carry forward and set off of business losses. It contains detailed provisions as to how the losses have to be carried forward and set off - provided they are losses incurred in business. Section 80, which is contained in Chapter VI of the Act dealing with aggregation of income and set off or carry forward of loss, provides that notwithstanding anything contained in this Chapter, no loss which has not been determined in pursuance of a return filed Under Section 139 (emphasis added) shall be carried forward and set off under Sub-section (1) of Section 72 or Sub-section (2) of Section 73 or Sub-section (1) of Section 74 or Sub-section (3) of Section 74A. In the earlier narrative, we did not refer to sections 73, 74 and 74A as we considered that Section 72 was more relevant to the facts of the case.
At this stage, all that we would like to observe is that Section 80 prohibits carry forward of loss which has not been determined in pursuance of a return filed . Under Section 139. We have added emphasis to these words supra because the Legislature in its wisdom has referred to Section 139 as a whole in Section 80 and not to any sub-section thereof and, therefore, return filed under any of the sub-sections of Section 139 will have to be considered to make an order whether loss claimed therein is of such character that it falls to be considered Under Section 80 or not. When we keep these provisions in the statute book in focus and examine the facts of the case, we find that the assessee has been unfairly treated. We say so because the character and ownership of the corporation was not appreciated by the authorities below. It is a joint venture undertaking in which the Government of Punjab is substantially interested. The set up of the corporation was such that at the material time there was no Managing Director. Section 140(c) itself provides to meet such a situation because it incorporates a provision that where for any unavoidable reason, Managing Director is not able to sign or where there is no Managing Director, the return may be signed by any Director thereof. There is no controversy about the fact that the assessee-corporation did not have a Managing Director at the relevant time. The Secretary of the Company was having power of attorney to act on behalf of the Board of Directors in routine matters.
The Secretary of the company was also its Principal Officer. Therefore, he signed the returns for the assessment years 1977-78 and 1978-79.
There is no dispute that these, despite the provisions of Section 140(c) being on the statute book w.e.f. 1-4-76, were proceeded with and assessment framed thereon. These assessments still stand on the record of the revenue. It is, therefore, very surprising that only when return for the assessment year 1979-80 was filed in a similar manner that the authorities acted in a very contradictory manner. First the return was accepted, notices were issued and an ex parte assessment was made thereon. It goes beyond comprehension of any reasonable person that if the return was invalid, why statutory notices were issued on the basis of that return and why an assessment was made ex parte for their non-compliance with relation to that return filed on 28-6-79 as signed by the Secretary of the Co. Not only this, when an application Under Section 146 was made to cancel that best judgment assessment, the assessment was duly cancelled by the assessing authority. It is only thereafter that letter has been issued to the assessee Under Section 140(c) asking why the return should not be treated as invalid.
24. In this context it is surprising to note that before this letter was issued, assessment for the year 1980-81 had been completed and in that assessment it had been mentioned that if loss and other things, which were to be carried forward from assessment year 1979-80, are so found allowable that assessment for assessment year 1980-81 shall be rectified Under Section 154. However, the assessing authority wrote letter to the assessee to which there was a reply and thereafter a letter Under Section 140 was issued to the assessee declaring that the return is invalid, non est in law and nothing follows therefrom.
25. We find that the assessee-corporation was trying to comply with the provisions of law in every manner as all the returns for the three years under appeal signed by the Secretary were filed before the last date on which they were due. For the assessment years under appeal, the provisions of Section 139(9) were applicable because Sub-section (9) of Section 139 had been inserted w.e.f. 1-9-1980. This being a procedural section should have been applied to all pending assessments in which returns had been filed. The narrative of the factual backdrop of the case given supra shows that all the returns were filed and were pending for assessment when this provision came on the statute book. We fail to understand why a show-cause notice was not issued to the assessee for removal of the defect, if any, by the assessing authority regarding verification of the return by a Director in place of Secretary of the company. This is clearly a failure which cannot be ignored in deciding these appeals.
26. We also find that Section 292B is not a section which is, as contended by the revenue, meant to protect the interest of the revenue only. This is very clear from a simple reading of the section which even provides that no return of income shall be deemed to be invalid merely by reason of any mistake, defect or omission in such return of income. Here again, it is very surprising that in view of this section, why the authorities below, i.e. the assessing authorities, did not take this into account in making the assessments to give opportunity in accordance with the provisions of law to the assessee to remove the defects.
27. However, the issue now is what is the way out of the impasse created. The Commissioner of Income-tax (Appeals) has held that the losses and other allowances claimed by the assessee for the assessment year 1979-80 have to be allowed to the assessee. We endorse his view.
The claims were properly made in the original returns verified by the Secretary of the company and filed before the due dates. When, subsequently a Director of the company signed the returns and filed before the authorities, they were identical but for the signature of the Director being in place of the signature of the Secretary. In our opinion, these were returns more by way of ratification of the original returns and technical compliance with the provisions of law. This should have been accepted if the assessing authorities were to act in accordance with the intent and substance of Sections 140(c), 139(9), 292B and Other relevant sections, mentioned supra, for making the assessments. The Commissioner of Income-tax (Appeals) has issued directions to the assessing authorities to allow the claims as made. We uphold his directions for asst. years 1980-81 and 1982-83. We would, however, not endorse his directions as it is for the assessment year 1979-80 because no assessment was made as such. These claims have therefore been not examined. But the losses and other allowances have to be determined in accordance with law. We , therefore, modify the directions of the Commissioner of Income-tax (Appeals) to say that order made by the assessing authority holding the returns invalid is set aside with the directions to treat the returns as validly made in time and proceed to make assessment de novo in accordance with law taking into consideration our observations made supra, particularly the relevant provisions of law referred to and explained above. We direct accordingly.
28. In the cross-objections, the assessee seeks no relief but merely supports the orders of the learned Commissioner of Income-tax (Appeals). These are dismissed as infructuous.
29. In the result, the appeal for 79-80 is considered allowed for statistical purposes and appeals for 80-81 and 82-83 are dismissed. The cross-objections are also dismissed.