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High Court of Karnataka
VINEET SARAN & S. SUJATHA, JJ.
K. Nagesh - Appellant
Versus
The Assistant Commissioner of Income Tax - Respondent
Income Tax Appeal No. 683 of 2009
Decided On : 20-04-2015
Income Tax - Assessment Year 1992-93 - Income Tax Act, 1961, Section 143(1), Section 139(5), Section 143(2), Section 148, Section 144, Section 147 - The case involves the validity of a revised return filed by the appellant assessee, the assessment order passed, and the subsequent appeals and orders. The court considered the validity of the revised return, the authority of the Assessing Officer to process an invalid return, and the entitlement of the assessee to a refund of the tax paid on the invalid return. The court analyzed the provisions of Section 240 of the Act, the definition of 'return' under Section 139, and relevant case laws to determine the entitlement of the assessee to a refund of the tax paid on the invalid return.
Fact of the Case:
The appellant assessee filed a return for the assessment year 1992-93, declaring total income as Rs.57,810/-. Subsequently, a revised return was filed declaring additional income, which was later held to be invalid. The assessment order, appeals, and subsequent orders led to the question of whether the appellant was entitled to a refund of the tax paid on the invalid return.
Finding of the Court:
The court found that the revised return filed by the assessee was invalid and non est in the eye of law. The court held that the tax paid on the invalid return should be refunded to the assessee, as it was not supported by law and amounted to tax collected without authority of law, violating Article 265 of the Constitution.
Issues: The issues involved the validity of the revised return, the authority of the Assessing Officer to process an invalid return, and the entitlement of the assessee to a refund of the tax paid on the invalid return.
Ratio Decidendi: The court interpreted the provisions of Section 240 of the Act, the definition of 'return' under Section 139, and relevant case laws to determine that the tax paid on the invalid return should be refunded to the assessee, as it was not supported by law and amounted to tax collected without authority of law, violating Article 265 of the Constitution.
Final Decision: The substantial questions of law were answered in favor of the assessee, and the judgment passed by the Tribunal was set aside. The appeal was allowed, and the court held that the tax paid on the invalid return should be refunded to the assessee.
1. This case has a chequered history and relates to the assessment year 1992-93. The facts relevant for the purpose of the case are that for the aforesaid assessment year the appellant assessee filed his return on 31.8.1992 declaring his total income as Rs.57,810/-. The admitted tax liability was Rs.9,216/- plus interest of Rs.302/-. As such, the total tax paid was Rs.9,518/-. The return filed by the assessee was processed under S.143(1) of the Income Tax Act, 1961 (the ‘Act’ for short) and the income as disclosed was accepted. Then on 30.12.1993, the appellant filed another return of income declaring an additional income of Rs.2,50,000/- under the Immunity Scheme and Rs.75,000/- as premium paid for the above amount i.e., an additional amount of Rs.3,25,000/-. Thus, in the revised return, the appellant disclosed a total income of Rs.3,82,810/- i.e., Rs.3,25,000/-, plus Rs.57,810/- as disclosed in the original return dated 31.8.1992. The assessee-appellant paid tax of Rs.2,53,761/- on the said return. It may be relevant to mention that the assessee had declared this additional income only after the Department had detected the bogus transaction. On 10.2.1995, the assessment order was passed whereby after calculating the total tax to be paid as Rs.2,75,043/-, the balance amount payable was found to be Rs.20,704/- as the assessee had deposited Rs.9,518/- as tax with the return filed on 31.8.1992 and a further amount of Rs.2,53,761/- with the revised return filed on 30.12.1993. Challenging the said order dated 10.2.1995, the assessee filed an appeal before the CIT (A) which was allowed by order dated 3.12.2001, after holding that the return filed on 30.12.1993 could not be treated as a revised return under S.139(5) of the Act as the revised return under S.139(5) is based on the discovery by the Income Tax Department. It was further held that since the revised return was invalid under S.139(5) of the Act, notice under S.143(2) issued by the Assessing Officer was time barred, accordingly the impugned assessment order dated 10.2.1995 was annulled. However, the CIT(A) directed the Assessing Officer to issue notice under S.148 of the Act to tax the escaped income.
2. In the meantime, the Assessing Officer passed an order dated 22.2.2002 stating it to be an order giving effect to the order passed by the CIT (A). In the said order, the revised income was taken as Rs.3,82,810/- although the same was nullified by the CIT(A) and the amount of Rs.4,880/- was found to be refunded. The said amount was refunded to the assessee by another order dated 22.2.2002. The Deputy Commissioner, by order dated 20.6.2002, rectified the mistake under S.154 r/w S.240 (b) of the Act and determined that the amount refundable to the assessee as Rs.96,385/- out of which, Rs.4,880/- had been refunded and the balance amount of Rs.91,505,/- remained to be refunded. In the meantime, the assessee challenged the order dated 22.2.2002 before the CIT (A) who, by his order dated 2.9.2002, allowed the appeal and directed the Assessing Officer to reduce the total income to nil. A further direction was issued for refund of the excess tax paid over and above the tax payable on the returned income.
3. Then, in compliance of the order dated 3.12.2001 passed by the CIT(A), a notice under S.148 of the Act was issued to the assessee on 19.3.2002 which culminated in an assessment order dated 4.2.2003 passed under S.144 r/w S.147 of the Act. Challenging the said order, assessee filed an appeal before the CIT (A) who, by order dated 21.10.2003, allowed the appeal. During this period, on 7.7.2003 another order was passed by the Assistant Commissioner under S.154 of the Act wherein it was determined that an excess amount of tax i.e., Rs.96,385/- was refunded to the assessee and the same would now be payable by him to the Department.
4. Challenging the order of the CIT (A) dated 3.12.2001, appellant filed an appeal before the Tribunal for quashing the direction issued for issuance
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