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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 132/2008
Reserved on: October 29, 2015
Date of decision: November 23, 2015
VINOD KUMAR KHATRI ..... Appellant
Through: Mr. K.R. Manjani with Mr. B.K.
Manjani, Advocates.
versus
DEPUTY COMMISSIONER OF INCOME TAX ..... Respondent
Through: Mr. Dileep Shivpuri, Senior standing
counsel with Mr. Sanjay Kumar, Junior
Standing counsel.
CORAM:
JUSTICE S. MURALIDHAR
JUSTICE VIBHU BAKHRU
JUDGMENT
% 23.11.2015
S. Muralidhar, J.
1. This appeal by the Assessee, Vinod Kumar Khatri, under Section 260A
of the Income Tax Act, 1961 (`Act') is directed against the impugned order
dated 28th September 2007 passed by the Income Tax Appellate Tribunal
(`ITAT') in ITA Nos. 764 & 2795/Del/2004 for the Assessment Year
(`AY') 1992-93.
Background facts
2. The brief facts leading to the filing of the present appeal are that a search
was conducted in the premises of the Assessee on 17 th February 1992.
Thereafter, on 31st August 1992 the Assessee for the first time filed his
ITA 132/2008 Page 1 of 19
original return of income for the AY 1992-93 declaring a total income of
Rs. 22,400. The said return was considered to be defective and incomplete.
Since the Assessee did not respond to intimation sent to him under Section
139 (9) of the Act, this return was lodged. Subsequently, in response to a
notice issued under Section 142 (1) of the Act, the Assessee filed his return
of income on 19th January 1993 declaring again a total income of Rs.
22,400. This was accompanied by a computation of taxable income and
statement of affairs as on 31st March 1992 and an income and expenditure
account for the year ended on 31st March 1992.
3. In the assessment order dated 31st March 1994 the Assessing Officer
(`AO') noted that in the assessment proceedings, notices were issued on
18th November 1992 and 29th December 1992 to the Assessee under
Sections 143 (2) and 142 (1) of the Act. One Mr. Mahender Mahajan,
Chartered Accountant (CA) appeared on behalf of the Assessee and filed
replies dated 21st January 1993 and 8th February 1993 respectively to the
aforementioned notices. Subsequently, notices were issued under Sections
143 (2) and 142 (1) of the Act along with a questionnaire dated 29 th
December 1993. However, no response was given by the Assessee to the
said notices.
4. In response to another notice issued under Section 143 (2) of the Act,
one Mr. Inder Mohan Singh on behalf of the Assessee attended the
assessment proceedings on 27th January 1994 before the AO. A final show-
cause notice (`SCN') dated 15th March 1994 was issued to the Assessee by
the AO along with notices under Section 142 (1) of the Act setting out the
proposals for AY 1992-93. In response to the said final SCN, Mr. Inder
Mohan Singh, authorized representative (AR) of the Assessee, attended the
assessment proceedings on 22nd March 1994 and requested for a short
ITA 132/2008 Page 2 of 19
adjournment to enable the Assessee to file a revised return of income.
5. At this stage it requires to be noticed that in his statement of affairs filed
along with his return of income on 19th January 1993, the Assessee has
shown an opening capital of Rs. 60,500 and on the liabilities side, a sum of
Rs. 12,91,42,945.72 was shown towards advances received from Russia for
exports. On the assets side, the Assessee showed loans and advances in the
names of Dr. Gopal (Rs. 61,26,000), Mr. Deepak Jain (Rs. 30 lakhs), Mr.
H.R. Shiv (Rs. 1.50 crores) and Mr. P.C. Sharma (Rs. 1 crore). He also
showed cash with Income Tax Department (Rs. 8,94,10,873.72) and a
further cash with the income tax department in account of Mr. P.C. Sharma
(Rs. 55,74,912).
6. Mr. Inder Mohan Singh, AR who attended the assessment proceedings
on 22nd March 1994 requested for a short adjournment to enable the
Assessee to file a revised return of income in which he proposes to include
the surrendered amount of Rs. 13.31 cores. The AO in the assessment
order noted that this request was accepted and case was adjourned to 24 th
March 1994. Subsequent thereto, on 30th March 1994 just before the
deadline for finalisation of the assessment, a revised return was filed by the
Assessee. The AO noted in the assessment order that "in order to be fair to
the Assessee who came forward with a revised return before the
completion of the assessment, this revised return is being considered while
passing this order."
The assessment order
7. In the assessment order, the AO noted that from the bank accounts of the
Assessee's two proprietary concerns, viz., M/s. Trinity International
Corporation (TIC) and M/s. Daffodil International Corporation (DIC) in
ITA 132/2008 Page 3 of 19
the course of the raid, an amounts of Rs. 8,94,10,873.72 was seized. The
AO also set out the origin of the money into the bank accounts. The AO
also noted that during the course of search on 26th February 1992 the
Assessee admitted the fact of the money received in his bank accounts and
further that the money belonged to him and that it represented his
unaccounted income.
8. The assessment order then proceeded to set out the Assessee's stat ement
recorded on 26th February 1992, during the course of search, as under:
"Regarding deposit of Rs. 12.914 crores
Q.1: Shri Vinod Kumar Khatri you are proprietor of M/s.
Trinity International Corporation, having current account No.
9958 in Bombay Mercantile Cooperative Bank Ltd.,
Daryaganj, New Delhi. In the account money worth Rs. 12.89
crores have been received out of which at present you have a
balance of Rs. 10,17,340. From the statement of account it is
understood that large sums of money have been withdrawn in
cash as well as by transfer through DDs. In this respect
statement of yours was recorded on 17th February 1992 what
do have to say in respect of this money which has come to
your bank account.
Ans. As already stated in my statement under Section 131 of
IT Act, 1961 dated 17th February 1992 I am not in the
knowledge about the details of the money received and the
purpose of various withdrawals. As I have already stated on
17th February 1992 I have acted on the instructions of mainly
Dr. Gopal, I cannot explain the sources of these
receipts/withdrawals from the aforesaid current account No.
9958.
Being a proprietor of M/s. Trinity International Corporation, I
offer this unexplained income for taxation under Section 134
(4) read with explanation 5 of Section 271 (1)(c) which has
been duly explained and understood by me. I may be
exempted therefore from penalty and prosecution proceedings.
The aforesaid amount may be treated as my unexplained
ITA 132/2008 Page 4 of 19
income. I am voluntarily willing to pay taxes on the aforesaid
unexplained income of Rs. 12.89 crores."
9. The AO noted that the surrendered amount of Rs. 12.89 crores was
corrected to Rs. 12.914 crores in the subsequent statement recorded on 26th
February 1992. The assessment order also set out the statement with regard
to deposit of Rs. 40,00,500 in the account of DIC by the Assessee as under:
"Q. 1 Shri Vinod Kumar Khatri You are proprietor of M/s.
Daffodil International Corporation having current account No.
10024 in Bombay Mercantile Cooperative Bank Ltd., Darya
Ganj, New Delhi. In this account, an amount of Rs. 40.00
lakhs was deposited. In this respect statement of yours was
recorded on 17th February 1992. What do you have to say in
respect of this money which has come to your bank account?
Ans.: As already stated in my statement on 17th February 1992
I am not in the knowledge about the details of sources of the
money received as aforesaid. I have already stated on 17 th
February 1992 that I have acted on the instructions of mainly
Dr. Gopal. I cannot explain the sources of receipts in the
current account No. 10024. Being the proprietor of M/s.
Daffodil International Corporation, I offer this unexplained
income for taxation under Section 132 (4) read with
explanation 5 of Section 271 (1) (c) which has been duly
explained and understood by me. I may be exempted therefore
from penalty and prosecution proceedings. The aforesaid
money may be treated as my unexplained income. I am
voluntarily willing to pay taxes on the aforesaid unexplained
income of Rs. 40 lakhs."
10. The AO noted that from the statement of declaration recorded on 26 th
and 27th February 1992 under Section 132 (4) of the Act, the Assessee had
surrendered the deposits in the bank accounts totalling to Rs. 13.314 crores
thereby claiming immunity from penalty and prosecution proceedings. By
a letter dated 27th February 1992 addressed to the Commissioner of Income
Tax, New Delhi [`CIT, New Delhi'], the Assessee requested that the seized
amount should be adjusted towards his existing liability on account of
ITA 132/2008 Page 5 of 19
advance tax on the amount declared by him under Section 132 (4) of the
Act. In the said letter he had worked out his advance tax liabilities to the
extent of Rs. 7,45,43,028. He had also enclosed the advance tax challan to
the said amount. Subsequently, during the proceedings under Section 132
(5) of the Act, the Assessee retracted from his earlier admission of
unaccounted income declared under Section 132 (4) made by him on 26 th
and 27th February 1992. The Assessee now claimed that the said amount of
Rs. 12.91 crores, which have been received from Russia through official
banking channels represented 100 % advance money for supplying, by way
of export, a certain number of nickel and cadmium batteries to a party in
the USSR for which TIC had entered into a contract. The AO further noted
that the Assessee could not substantiate the above claim and had in fact
surrendered the said sum of Rs. 12.91 crores by filing the revised return of
income on 30th March 1994 declaring a total income of Rs. 12,91,97,398.
11. As regards a sum of Rs. 40 lakhs received into the bank account of DIC
by way of clearing on 23rd January 1992, the Assessee claimed that this
represented an equal amount which was withdrawn in cash from the bank
account of TIC and was given as a short-term advance to one Mr. Radha
Krishnan of M/s. P.B.R. Engineering. Mr. Radha Krishnan had returned it
to him on 23rd January 1992 by way of a draft/pay order which was
deposited by the Assessee into the account of DIC. However, the Assessee
was unable to produce any confirmation of these facts from Mr. Radha
Krishnan. Consequently, the AO added a sum of Rs. 40 lakhs to the
Assessee's total income. However, the AO observed that the Assessee was
at liberty to approach the CIT if he could prove the above facts within the
limitation period under the Act. Since the Assessee failed to include the
said sum in his revised return of income, the AO noted that notice was
being issued to the Assessee under Section 271 (1) (c) of the Act. The AO
ITA 132/2008 Page 6 of 19
also noted that the Assessee was unable to produce any confirmation
regarding advance a sum of Rs. 3,41,26,000. This was despite being asked
to provide the details by a questionnaire dated 29th February 1992.
Consequently, the AO estimated a reasonable rate of return of 12% on the
said advances which worked out to Rs. 40,95,120 which was, therefore,
added to the total income of the Assessee. The calculation of the total
income of the Assessee was computed by the AO and was rounded off to
Rs. 13,73,70,620.
Proceedings before the CIT (A)
12. Initially the appeal filed by the Assessee against the aforesaid order
was dismissed by the Commissioner of Income Tax (Appeals) [`CIT (A)']
by an order dated 27th July 1995 as being time-barred. However, the ITAT
by its order dated 2nd January 2002 passed in the Assessee's appeal, ITA
No. 5629/Del/1995 directed the CIT (A) to condone the delay and decide
the appeal on merits after allowing an opportunity to the Appellant.
Thereafter, the CIT (A) passed an order dated 30th January 2004 sustaining
some of the additions made by the AO.
13. The Assessee also filed an application before the CIT (A) under
Section 154 of the Act seeking rectification of the order dated 30 th January
2004. This was dismissed by the CIT (A) on 19 th April 2004. Against both
the aforementioned orders, the Assessee filed ITA Nos. 764 &
2795/Del/2004 before the ITAT.
Appeals before the ITAT
14. The ITAT first took up ITA No. 764/Del/2004 for consideration. Of the
five grounds urged in the appeal, the Assessee pressed only the following
two:
ITA 132/2008 Page 7 of 19
"3. The CIT (A) has erred on facts as well as in law in holding the
amount of Rs. 2,91,42,945 as taxable only because the Appellant
had shown it in revised return under the pressure of the department.
5. The CIT (A) has erred on facts as well as in law in holding
amount of Rs. 40,00,000 received from Shri Radha Krishnan is as
unexplained even though the same was against money paid to him
from withdrawals from the bank even though there is no increase in
funds of the Appellant by this amount."
15. The ITAT dismissed the appeal after holding that the revised return
was filed voluntarily by the Assessee on 30th March 1994 on the basis of
the surrender of the amount declared by him in the statement recorded
under Section 132 (4) of the act during the course of search. The Assessee
had been unable to explain the source of this receipt and offered it as
income in the form of unexplained credit. The declaration made by the
Assessee was voluntary and he also expressed his willingness to pay the
tax on the said undisclosed income. The Assessee was unable to
substantiate that the amount received from Russia was a windfall without
there being any source. The ITAT also noted the observations of the CIT
(A) that once the assessment had been completed under Section 143 (3) of
the Act, the Assessee could not be permitted to withdraw the revised
return. The ITAT rejected the plea of learned counsel for the Assessee that
the revised return filed on 30th March 1994 by the Assessee was under
coercion.
16. The ITAT negatived the principal contention of the Assessee that since
the original return was not filed within the due date prescribed under
Section 139 (1) of the Act, the Assessee could not have validly revised the
return under Section 139 (5) of the Act. The ITAT noted that the original
return was filed on 31st August 1992, i.e., within the due date prescribed
ITA 132/2008 Page 8 of 19
under Section 139 (1) of the Act. The return subsequently filed on 19th
January 1993 was only to rectify the defects pointed out by the AO under
Section 139 (9) of the Act. After having rectified the defects, the return
would relate back to the date of the original filing, i.e., 31 st August 1992.
Therefore, the Assessee was competent to file the revised return under
Section 139 (5) of the Act and it could have been taken cognizance by the
AO.
17. The ITAT also distinguished the decision of the Supreme Court in
Kumar Jagdish Chandra Sinha v. CIT (1996) 220 ITR 67 (SC). In the
said case, the original return was not filed within the time prescribed under
Section 139 (1) of the Act. The time limit within which the assessment had
to be completed under Section 153 (1) (a) of the Act was exceeded.
However, in the present case, the assessment was completed on 31 st March
1994 within the time limit prescribed under Section 153 (1) (a) of the Act.
Further, the Assessee had admitted to the deposits in the bank accounts of
his proprietory concerns. This circumstance corroborated the finding of the
AO that the deposits in the bank account were unexplained and therefore,
liable to tax.
18. As regards the retraction by the Assessee of the statement made by him
under Section 132 (4) of the Act, the ITAT observed that although the
statement was not available in the records, its existence was never denied
by the Assessee in the course of assessment proceedings. The ITAT
declined to accept the contention of the Assessee that no such statement
under Section 132 (4) of the Act was recorded. The ITAT referred to Rule
10 of the Income Tax (Appellate Tribunal) Rules, 1963 (`ITAT Rules') in
terms of which an affidavit had to be filed stating clearly and concisely
about an alleged fact which cannot be borne out by, or is contrary to, the
ITA 132/2008 Page 9 of 19
records. No such affidavit had been filed by the Assessee. The ITAT
observed that "the onus is on the person retracting to demonstrate that the
amount surrendered was not an income rather than the duty of the AO to
bring evidence for accepting the admission made." The ITAT noted that
"till today the Assessee has never supplied any such goods nor refunded
the amount. This shows the conduct of the Assessee and also demonstrates
that the amount received was never for supply of goods under the so called
contract. These are merely an eye wash."
19. Referring to the sequence of events, the ITAT noted that apart from the
fact that there was no material to substantiate the Assessee's allegations
that the revised return was filed under coercion, such coercion could not
have persisted after 22nd March 1994 since the Assessee filed a revised
return as late as 30th March 1994. The ITAT noted that till date, i.e., in the
proceedings before them, "the Assessee has not been able to file any
evidence to suggest that the amount deposited in the bank account as
explained and not unexplained deposit." Again in respect of addition of
Rs.40 lakh, no material was produced before the ITAT to suggest that the
amount withdrawn from the bank account was given as short term advance
to Mr. Radha Krishnan. There was no confirmation letter from the side of
Mr. Radha Krishnan who alleged to have repaid the said sum. The ITAT
disposed of ITA No. 764/Del/2004 upholding the order of the AO and CIT
(A).
20. As regards the other appeal, ITA No. 2795/Del/2004, against the order
of the CIT (A) declining to rectify the order dated 30th January 2004, the
ITAT in its para 10 of the said decision noted that learned counsel for the
Assessee did not press the grounds set out in the said appeal. The ITAT
accordingly dismissed ITA No. 2795/Del/2004 as having become
ITA 132/2008 Page 10 of 19
infructuous.
Proceedings before this Court
21. Initially this appeal was dismissed by the Division Bench on 31 st
August 2010 with liberty to the Assessee to file a writ petition challenging
the order of the ITAT. This was because during the pendency of the said
appeal, the ITAT rejected an application filed by the Assessee under
Section 254 (2) of the Act seeking rectification of the purported mistakes.
That application had been dismissed on technical grounds. The appeal filed
against the said order was dismissed with liberty to file a writ petition.
Learned counsel for the Assessee informed the Court that the Assessee was
proposing to file a writ petition. By an order dated 31st August 2010 the
Division Bench of this Court observed as under:
"Since the entire case of the Appellant, in this appeal, is also
founded on the purported mistakes committed by the Tribunal,
it would be the outcome of the proposed writ petition, which
the Assessee is contemplating to file, that will determine the
fate of the aforesaid two additions made by the AO and
sustained by the Tribunal.
We accordingly dismiss this appeal with liberty to the
Assessee to file the writ petition challenging the order of the
Tribunal. We make it clear that if that writ petition is
allowed and based thereupon the impugned order of the
Tribunal also needs revision, if would be open to the Assessee
to seek revival of this appeal."
22. Subsequently on 3rd September 2012 an order was passed by the Court
noting that after dismissal of the writ petition challenging the order of the
ITAT, the Assessee's fresh application under Section 254 (2) of the Act
was dismissed on technical grounds. The said second rectification
application was dismissed on 16th March 2012. The Court noted that the
Assessee's appellate remedy under Section 260A of the Act had not been
ITA 132/2008 Page 11 of 19
exhausted. It accordingly directed that the present appeal ITA No. 132 of
2008 be restored to file.
23. Consequent upon the above order dated 3rd September 2012, the
present appeal was revived. On 28th January 2013, the following questions
were framed for consideration:
"1. Whether the return filed on 30th March 1994 is a valid revised
return?
2. If the answer to question (1) above is in the negative, whether
the surrender made in that return dated 30th March 1994 can be
regarded as a piece of evidence?
3. Whether the Income Tax Appellate Tribunal could have relied
on a purported statement made by the Assessee under Section 132
(4) when the Tribunal specifically noted that the statement was not
available on the record?
The Assessee fails to prove coercion
24. Since one of the issues concerns the statement made by the Assessee,
which was not available in the file, this Court by its order dated 9th
September 2015 directed the learned Senior standing counsel for the
Revenue to keep ready for perusal by the Court all the original records of
the assessment proceedings, the proceedings before the CIT (A) as well as
the ITAT. However, despite their best efforts, the Revenue was unable to
trace out the record containing the statement in original made by the
Assessee. Nevertheless, the Court has proceeded to decide the case on
merits. The reason for this is that at no stage of the assessment
proceedings, or even in the memo of appeal filed before the CIT (A), was it
urged by the Assessee that he had not made any statement of declaration
under Section 132 (4) of the Act in the course of the search. This was too
crucial an issue for the Assessee to have omitted mentioning. As rightly
ITA 132/2008 Page 12 of 19
pointed out by the ITAT, if as is sought to be contended by the Assessee,
no statement was given by him in the first place, then the question of
having to retract such statement would not arise. The Assessee is,
therefore, not consistent in his plea regarding the statement made in the
first place and its retraction subsequently. In the absence of any affidavit
filed and at any point in time, in terms of Rule 10 of the ITAT Rules,
categorically stating that what has been set out in the assessment order was
not the statement made by him, the Assessee cannot be said to have
discharged the onus of showing that a fact not borne by the record was
stated in the order of the AO or the CIT (A).
25. There is no reason why the AO should have `compelled' the Assessee
to file a revised return. Such an allegation ought not to be permitted to be
casually made. An Assessee who makes such allegation will have to take
the risk of stating it on affidavit at the earliest point in time. If it is done
belatedly at the appellate stage, the Assessee will have to satisfy the
appellate forum that there were good and genuine reasons that prevented
the Assessee from making such allegation earlier. The rationale behind
Rule 10 of the ITAT Rules will have to be borne in mind. A report will
then have to be called for from the concerned authority, in this instance the
AO, and thereafter a decision taken on whether such a plea can be
accepted. In the present case, the Assessee has failed to discharge the onus
of showing even prima facie that he was compelled to make a statement
during the search or to file a revised return in the assessment proceedings.
The record of the assessment proceedings show that adjournments were
granted as and when requested by the Assessee. Apart from the fact that he
was represented in the assessment proceedings by a CA or an AR, he also
had sufficient time and opportunity to reflect on what had been stated by
him during the search proceedings. The Court accordingly rejects the plea
ITA 132/2008 Page 13 of 19
that the Assessee did not voluntarily make the statement attributed to him
in the course of search or that he was coerced during the assessment
proceedings to file the revised return.
Neither the original nor the revised return was non-est
26. The Court has examined Section 139 (1) (b), Section 139 (4) and
Section 139 (5) of the Act. As already noted the return originally filed was
found to be defective. A notice was issued under Section 139 (9) of the Act
asking the Assessee to rectify the defects. Section 139 (9) itself states that
if the defects are not rectified within the time allowed, then
notwithstanding anything contained in any other provision of this Act, the
return shall be treated as an invalid return and the provision of this Act
shall apply as if the Assessee had failed to furnish the return. The first
proviso to Section 139 (9) of the Act permits the AO to condone the delay
where the Assessee rectifies the defect even after the period stipulated
thereunder or such further period allowed by the AO as long as the
rectified return was filed before the assessment was finalised.
27. It was urged by Mr. Manjani, learned counsel for the Assessee that if
the revised rectified return was filed beyond the time allowed by the AO, it
should be treated as `non-est.' He placed reliance on the decisions in
Suram Chand Rahlan vs. CIT (1997)226 ITR 927 (Del), Hind Samachar
Ltd. vs. Union of India (2011) 330 ITR 266 (P&H), CIT v. Pawan Gupta
(2009) 318 ITR 322 (Del) and DIT v. Society for Worldwide Inter Bank
Financial, Telecommunications (2010)323 ITR 249 (Del).In support of
the proposition that the retracted statement of the Assessee could not form
the basis of an assessment, without any corroborative material, reliance
was placed on the decision in CIT vs. S. Khader Khan Son (2013) 352
ITR 480 (SC).
ITA 132/2008 Page 14 of 19
28. In the present case, filing of the return by the Assessee on 19 th January
1993 was only by way of rectification of the defects pointed out by the AO
in the notice issued under Section 139 (9) of the Act. This rectified return
was related back to the original date when the return was filed on 31st
August 1992. It cannot, therefore, be said that the original return was itself
`non-est' as contended by the Assessee. Consequently, filing of the revised
return in terms of Section 139 (5) of the Act by the Assessee prior to the
completion of the assessment on 31st March 1994 was within the time
prescribed. Notice had already been issued in the course of the assessment
proceedings to the Assessee under Section 143 (2) and Section 142 (1) of
the Act.
Non-consideration of documents
29. Mr. Manjani contended that the documents placed on record by the
Assessee before the AO and CIT (A) included copies of the contract and
receipts which purportedly substantiated the advance to Mr. Radha
Krishnan of Rs. 40 lakhs. As regards receipt of advance from the Russian
party for the export, he relied on certain copies of bank documents.
However, as noted by the ITAT these were only photocopies and not
originals.
30. A further aspect that requires to be noted is that even before the CIT
(A) the Assessee did not urge that documents produced by him were not
considered. A perusal of the order of CIT (A) dated 30th January 2004
reveals that initially the appeal, filed on 13th October 1994 against the
assessment order dated 31st March 1994 contained the following grounds:
"(1) Learned Assessing Officer has erred on facts as well as in law
in making addition of Rs. 40 lacs as unexplained income in spite
ITA 132/2008 Page 15 of 19
of the fact that this amount is the return of the amount given earlier
by the Appellant.
(2) Learned Assessing Officer has erred on facts as well as in law
in estimating the income from business at Rs. 1,00,000 against Rs.
22,400 declared by the Assessee.
(3) Learned Assessing Officer has erred on facts as well as in law
in making the addition of Rs. 40,95,120 as notional interest, which
is neither permissible under the Act nor has this income accrued or
been received by the Appellant."
31. On 7th December 1994 the following additional grounds were raised:
"(1) That the assessment order made is liable to be se t aside for a
fresh assessment as no fresh notice were issued under Section 143
(2) After filing of the revised return under Section 139 (5) which
was duly accepted and acted upon by the learned Deputy
Commission Assessment which was filed on 30th March 1994 and
the assessment order was passed on 31st March 1994.
(3) That no reasonable opportunity was given as the assessment
was completed in a hurry on the next date of filing the revised
return, particularly when after filing of revised return the
assessment was not getting barred on 31st March 1994 and could
have been completed within one year thereof that is 31 st March
1995.
(4) That amount of Rs. 12,91,42,946 was a receipt which is
claimed as non-taxable being advance which could not partake the
character of income and that there has been no evidence that the
same stands remitted to fall in the net of taxable income.
(5) Without prejudice it is submitted that the amount received from
Russia was a windfall without there being any source and is casual
receipt not liable to be taxed under the Income Tax Act."
32. There was no occasion, therefore, for the CIT (A) to consider the plea
that the statement attributed to the Assessee, as recorded by the AO in the
ITA 132/2008 Page 16 of 19
assessment order, was not in fact made by the Assessee or that documents
tendered by the Assessee were not considered by the AO. On the contrary,
the order of the CIT (A) showed that in the course of appellate proceeding,
a remand report was sought from the AO on the additional grounds urged
by the Assessee. The remand report of the AO has been set out in para 7.2
of the CIT (A) order. The AO has subsequently denied the contention of
the Assessee that no reasonable opportunity was given to the Assessee or
that the assessment was completed in a hurry.
Was notice under Section 143 (2) required?
33. Mr. Manjani urged that it was incumbent on the AO to issue a fresh
notice under Section 143 (2) before finalising the assessment made
pursuant to the revised return filed by the Assessee and that the failure to
do so invalidated the assessment made.
34. It has been pointed out by Mr. Shivpuri, learned counsel for the
Revenue, that there is a division of opinion of the High Courts on the issue
whether the filing of a revised return obliterates the original return, or
whether the revised return only rectifies the deficiency in the original
return, but did not obliterate it. The Gauhati High Court in Sunanda Rak
Deka v. CIT (1994) 210 ITR 988 (Gau) and the Calcutta High Court in
CIT v. India's Hobby Centre (P) Ltd (1995) 78 Taxman 377 (Cal) have
held that the revised return substitutes the original return. On the other
hand, the decisions in Deepnarain Nagu & Co. v. CIT (1986) 157 ITR 37
(MP), CIT v. Girish Chandraharidas (1992) 196 ITR 833 (Ker) and
Pyramid Saimira Theatre Limited v. CIT (2009) 316 ITR 75 (Mad)
emphasise that a revised return can be filed only if an "omission or wrong
statement in the original return" is discovered by the Assessee.
ITA 132/2008 Page 17 of 19
35. There is merit in the contention that the revised return should relate
back to the return originally filed, minus the omissions and wrong
statements. Even if the revised return replaces the original return, the
assessment proceedings leading up to the revised return do not get
obliterated. The decisions in CIT v. Chitranjali (1986) 159 ITR 801 (Cal),
F.C. Agarwal v. CIT (1976) 102 ITR 408 (Gau.) and Sivagaminatha
Moopanar & Sons v. CIT (1964) 52 ITR 591 (Mad) appear to support this
proposition. As rightly pointed out by Mr. Shivpuri, it could never have
been intended by the legislature that the filing of the revised would wipe
out the proceedings that have taken place till then. This would include the
documents gathered or filed, and statements made, during the course of the
assessment proceedings and the hearings conducted till then. The filing of
the revised return was during the continuation of the assessment
proceedings that began with filing of the return. The assessment
proceedings continued till the finalisation of the assessment pursuant to
filing of the revised return.
36. The Court is, therefore, inclined to accept the plea that with a number
of hearings having taken place pursuant to the filing of the original return,
as a result of which the Assessee volunteered to file a revised return, and
with the revised return having been filed just before the deadline for
conclusion of the assessment proceedings, there was no need for the AO to
issue another notice to the Assessee under Section 143 (2) of the Act prior
to finalising the assessment. The assessment proceedings, for all practical
purposes, stood concluded by the time of filing of the revised return.
Conclusion
37. For the above reasons, the Court answers Question No. 1 in the
affirmative and holds that the revised return filed on 31st March 1994 was a
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valid return. In that view of the matter, Question No. 2 does not arise.
Question No. 3 it is answered in the affirmative i.e. in favour of the
Revenue and against the Assessee. The ITAT did not commit any error in
relying on the statement made by the Assessee under Section 132 (4) of the
Act.
38. The appeal is, accordingly, dismissed but in the circumstances, with no
order as to costs.
S. MURALIDHAR, J.
VIBHU BAKHRU, J.
NOVEMBER 23, 2015
Rk
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