National Insurance Co. Ltd. vs. CIT (1995) 127 CTR (Cal)

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HITESH KHONA (Querist)
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12 July 2011 Hi All,
I require the above mentioned case law. If anybody have it handy please mail it to me

Thanks in Advance.
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my email id :- hiteshdkhona@gmail.com

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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12 July 2011 NATIONAL INSURANCE CO. LTD. vs. COMMISSIONER OF INCOME TAX
HIGH COURT OF CALCUTTA
Ajit K. Sengupta & Shyamal Kumar Sen, JJ.
IT Ref. No. 94 of 1991
30th January, 1992
(1995) 127 CTR (Cal) 238 : (1995) 213 ITR 862 (Cal) : (1994) 72 TAXMAN 161
Sections 139(9), 140(c), 292B,
Asst. Year 1977-78
Decision in favour of Revenue
Counsel appeared
Sukumar Bhattacharjee, for the Assessee : Sunil Mitra, for the Revenue
AJIT K. SENGUPTA, J. :
In this reference under s. 256(2) of the IT Act, 1961, the following question of law has been referred to this Court
:"Whether, on the facts and in the circumstances of the case, and on a proper interpretation of ss. 140(c) and 292B
of the IT Act, 1961, the Tribunal was justified in law in holding that the return of income filed on 14th Feb., 1978,
over the signature and verification of Mr. N.L. Kanodia, a director, was invalid ?"
2. Shortly stated, the facts are that for the asst. yr. 1977-78, the assessee-company filed a return of income on 14th
Feb., 1978. The return was signed and verified by one Shri N.L. Kanodia, director-cum-general manager of the
company. Since this verification was not in accordance with the provision of s. 140(c), the ITO sent a letter to the
managing director of the company pointing out the provision of s. 140(c). It was further pointed out that in case
the managing director was unable to sign the return due to any unavoidable reason the return of income could be
signed by any other director. The managing director was required to let the ITO know whether he was prevented
from signing the verification due to any unavoidable reason. On 28th Jan., 1980, the assessee-company submitted
a fresh return duly verified by the company's managing director. Along with the return, the assessee-company
filed a letter dt. 24th Jan., 1980, stating that the return filed on 14th Feb., 1978, was signed by Shri N.L. Kanodia
because Shri K.P. Modi was not available and that Shri Kanodia, being a director, was competent to sign the
return. The ITO found that neither the assessee-company nor its managing director had indicated that Shri K.P.
Modi was prevented from signing the return due to any unavoidable reason. The ITO held that the return filed on
14th Feb., 1978, was not properly verified and hence it was invalid. The return filed by the assessee on 28th Jan.,
1980, was held to be the first valid return.
The matter was carried in appeal before the CIT(A), who on a consideration of the facts of the case, held that it is
difficult to arrive at a finding that the managing director was unable to sign and verify the return and treated the
first return as invalid.
The assessee thereafter appealed to the Tribunal. After considering the submissions made on behalf of the parties
and having regard to the facts of the case and the requirement under s. 140 (c), the Tribunal found that the CIT(A)
was justified in not accepting the claim of the assessee on this point, particularly when the assessee had not given
any specific reason before the ITO as to why the return was not signed by the person concerned.

At the hearing before us, Mr. Sukumar Bhattacharjee, learned advocate appearing for the assessee, contended that
the ITO was not justified in holding that the first return which had been filed was not an invalid (sic) return in
view of the fact that the then managing director was prevented, by sufficient cause, from signing the return.
Secondly, if the return was defective it was the duty of the ITO to allow an opportunity to the assessee to rectify
the defect and that was not done and, thirdly, there was sufficient compliance with the requirements of law and as
such the authorities should have invoked the provisions of s. 292B to hold that the return was not invalid. Mr.
Sunil Mitra, learned advocate for the Revenue, has contended to the contrary.
We have considered the rival contentions. In our view, none of the contentions raised by Mr. Bhattacharjee has
any substance. Sec. 140(c) provides that in the case of a company the return of income shall be signed by the
managing director thereof, or where for any unavoidable reason such managing director is not able to sign and
verify the return, by any director thereof. Thus, it is obligatory on the company to have its return signed and
verified by the managing director thereof and only in a case where for any unavoidable reason such managing
director is not able to sign and verify the return, can any other director of the company sign and verify the return.
In this case the return which was originally filed had been verified by one Niranjan Kanodia general manager of
the assessee-company. Since this verification was not in accordance with the provisions of s. 140(c) of the Act, the
ITO addressed a letter dt. 28th Feb., 1979, to the managing director of the assesseecompany drawing his attention
to the provisions of s. 140(c). He, further pointed out that in case the managing director was unable to sign the
return due to any unavoidable reason the return of income could be signed by another director. In the said letter,
the ITO requested the managing director of the company to let him know whether he was prevented from signing
the verification on 14th Feb., 1978, due to any unavoidable reason. He further pointed out that if there was no
such cause, the return of income would be invalid and in that event a duly signed and verified return should be
filed. On 28th Jan., 1980, the assessee-company submitted a fresh return duly signed and verified by the managing
director of the assessee-company. Along with such return, the assessee-company filed a letter dt. 24th Jan., 1980,
signed by an assistant general manager that the return filed on 14th Feb., 1978, had been signed by N.L. Kanodia
because K.P. Modi was not available and that the said N.L. Kanodia being a director was competent to sign and
verify the return of income but neither the assessee-company nor its managing director indicated that K.P. Modi
was prevented from signing and verifying the return due to any unavoidable reason. The ITO also took into
account that no reason was given by the then managing director who did not sign and verify the return originally
filed on 14th Feb., 1978. The first return was not properly verified. No explanation was given by the assesseecompany
and furthermore the first return was marked "provisional" and the assessee-company submitted a fresh
and duly verified return on 28th Jan., 1980, which was treated to be a valid return.
From the facts narrated hereinbefore, it would be evident that the ITO afforded an opportunity to the assesseecompany
to either specify the reason why the first return was not signed and verified by the managing director or
to file a fresh return.
Mr. Bhattacharjee relied on the provisions of s. 139(9) of the Act. The said sub-s. (9) was inserted by the Finance
(No. 2) Act, 1980, effective from 1st Sept., 1980. Therefore, the new provision would apply in relation to the
return of income filed on or after 1st Sept., 1980, whether for the asst. yr. 1980-81 or any earlier or later
assessment year. But in this case, the first return was filed on 14th Feb., 1978, and the second return was filed on
28th Jan., 1980. Therefore, the question of application of s. 139(9) would not apply. Even if sub-s. (9) was
applicable, this subsection empowered the ITO to call upon the assessee to rectify a defect in the return. A return
of income has to be regarded as defective only if it contains any of the defects referred to in Expln. to s. 139(9). In
other words, the provisions of s. 139(9) will not be applicable in the case of returns which do not contain any of
the specified defects. For the purpose of sub-s. (9), a return of income shall be regarded as defective unless the
following conditions are fulfilled : (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 of income is accompanied by the following, namely : (i) a
statement showing the computation of the tax payable on the basis of the return; (ii) the proof of the tax, if any,
claimed to have been deducted at source and the advance tax and tax on self-assessment, if any, claimed to have
been paid; (iii) the proof of the amount of compulsory deposit, if any, claimed to have been made under the
Compulsory Deposit Scheme (Income-tax Payers) Act, 1974; (iv) where regular books of account are maintained
by an assessee,— (1) copies of the manufacturing account, trading account, profit and loss account or income and
expenditure account or any other similar account and balance-sheet; (2) in the case of a proprietary business or
profession, the personal account of the proprietor; in the case of a firm, AOP or BOI, personal accounts of the
partners or members; and in the case of partners or members of a firm, AOP or BOI, also their personal account in
the firm, AOP or BOI; (v) where the accounts of the assessee have been audited, copies of the audited P&L
account and balance sheet and a copy of the auditor's report; (vi) where regular books of account are not
maintained by the assessee, a statement indicating the amounts of turnover or gross receipts, gross profit, expenses
and net profit of the business or profession and the basis on which such amounts have been computed, as also of
the amounts of total sundry debtors, sundry creditors, stock-in-trade and cash balance as at the end of the previous
year. Thus, the provision makes a distinction between a defective return and an invalid return. A defective return
is not ipso facto to be regarded as an invalid return. It is only when a return contains any of the specified defects
and the ITO, in his discretion, intimates the defect to the assessee and the assessee fails to rectify the same within
the specified period, that ITO may treat the return as an invalid return. Thus, the first return which was not signed
and verified by the managing director was not a defective return as contested by Mr. Bhattacharya, it was an
invalid return in the absence of any explanation.
In this connection, a reference may be made to s. 292B of the Act which came into force from 1st Oct., 1975. It,
inter alia, provides that no return of income shall be invalid merely by reason of any mistake, defect or omission,
if such return is, in substance and effect, in conformity with or according to the intent and purpose of the Act. Sec.
292B has been inserted to provide against purely technical objections without substance coming in the way of the
validity of the assessment proceedings. In the instant case, the original return was invalid as it was not signed and
verified by the person competent to do so. It may be mentioned that the provision in s. 139(9) would override the
other provisions of the IT Act including s. 292B in a case where any of the specified defects is not removed within
the time allowed, in which case the return shall be treated as an invalid return. Even assuming that the assesseecompany
was entitled to a notice of the defect in the return, such notice was given by the Assessing Officer, which
the assessee-company did not avail of and the defect was not removed. Therefore, the first return was rightly
treated as an invalid return.
Having regard to the facts and circumstances of this case, we are of the view that the first return filed by the
assessee-company on 14th Feb., 1978, was invalid. We, therefore, answer the question in this reference in the
affirmative and in favour of the Revenue.
There will be no order as to costs.
SHYAMAL KUMAR SEN, J. :
I agree.

HITESH KHONA

HITESH KHONA (Querist)
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12 July 2011 thanks A Lot Sir.
REgards

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