M/Spyramid Saimira Theatre Limited, A Limited Company v. The Commissioner Of Income Tax-Iv

M/sPyramid Saimira Theatre Limited,A Limited Company,Represented by its Managing Director,Mr.P.S.Saminathan,No.27, G.N.Chetty Street,T.Nagar,Chennai-600 017... Petitioner in both WPsvs. 1.The Commissioner of Income Tax-IV, 121, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034. 2.The Deputy Commissioner of Income Tax Media Circle-1, 121, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034. 3.The Tax Recovery Officer-X Media Range I, 121, Mahatma Gandhi Road, Nungambakkam, Chennai-600 034... Respondents in both WPs. W.P.No.6213/2009: Petition under Article 226 of the Constitution of India,praying for the issue of a Writ of Certiorari, calling for therecords on the files of the Commissioner of Income Tax, the firstrespondent in C.No.CIT-IV/Chennai/Recovery Proceedings/2008-09dated 2.4.2009, quashing the proceedings of the first respondent inC.No.CIT-IV/Chennai/Recovery Proceedings/2008-09 dated 2.4.2009 asarbitrary and the findings arrived in violation of rules of naturaljustice and as without jurisdiction in so far as pronouncing andadjudicating on the revised returns presented under Section 139(5)of the Income Tax Act, 1961 before the second respondent. W.P.No.6214 of 2009: https://hcservices.ecourts.gov.in/hcservices/ Petition under Article 226 of the Constitution of India,praying for the issue of a Writ of Mandamus, directing the respondents to forbear from treating the petitioner-Company asAssessee in default under Section 140A(3) of the Income Tax Act,1961, or proceeding with recoveries instituted under Section 226(3)of the Income Tax Act, 1961 till adjudication is done under Section143 on the original return presented under Section 139(1) of theAct as well as the revised return presented on 6.3.2009 underSection 139(5) of the Act, while directing the withdrawal of allcoercive proceedings under Section 226(3) of the Act, till suchadjudication. For Petitioner in both WPs : Mr.C.Natarajan, Senior Counsel forMr.R.Sivaraman. For Respondents in both WPs: Mr.K.Subramaniam COMMON ORDER For the assessment year 2008-09, the petitioner, a PublicLimited Company, whose shares are quoted in the Stock Exchange,filed a return of its income on 30.9.2008, declaring a total incomeof Rs.79,07,54,470/- and disclosing a tax liability ofRs.29,54,97,940/-. Out of the disclosed liability, the petitioner-Company paid a sum of Rs.4,11,76,102/-, leaving an arrears ofRs.25,43,21,838/-. 2. However, after about 5 months of filing the originalreturn, the petitioner filed a revised return of income, on6.3.2009 under Section 139 (5) of The Income Tax Act, 1961,claiming a sum of Rs.76,94,22,500/- as "prior period losses". Asper the revised return, the total income of the petitioner for theassessment year was only Rs.2,13,31,972/- and the book profit underSection 115 JB was Rs.17,25,48,875/-. Consequently, the taxpayable, according to the petitioner, was Rs.1,95,49,789/-. Sincethe petitioner had already made payment of Rs.4,11,76,102/-, as perthe original return dated 30.9.2008, the petitioner sought a netrefund of the difference viz., Rs.2,16,26,310/-. 3. But before the petitioner filed a revised return, theAssessing Officer viz., the Deputy Commissioner of Income Tax,Media Circle-I, attached all the bank accounts of the petitionerand also issued garnishee notices to petitioner's debtors, treatingthe petitioner as an "assessee in default" in terms of Section 140A(3) of the Act. 3. But before the petitioner filed a revised return, theAssessing Officer viz., the Deputy Commissioner of Income Tax,Media Circle-I, attached all the bank accounts of the petitionerand also issued garnishee notices to petitioner's debtors, treatingthe petitioner as an "assessee in default" in terms of Section 140A(3) of the Act. 4. Aggrieved by the said action, on the part of the secondrespondent, the petitioner filed a representation before the firstrespondent on 9.3.2009, seeking his intervention as the next higherauthority and requesting him to lift the orders of attachment andwithdraw the garnishee notices. Simultaneously, the petitioner alsocame up with a writ petition in W.P.No.4045 of 2009, seeking a Writof Mandamus, to direct the first respondent to dispose of hisrepresentation. The petitioner also prayed for an interim relief,for lifting the orders of attachment. https://hcservices.ecourts.gov.in/hcservices/ 5. After notice to the Standing Counsel for the Department,the said writ petition W.P.No.4045 of 2009, was disposed of by me,to the following effect:- "11. Unfortunately, the petitioner has notchallenged, in this writ petition, the ordersof attachment issued by the Department underSection 226(3) of the Act. Therefore, I am nottesting their correctness in this writpetition, though, prima facie, it is not knownwhether the Department can order attachmentwithout an order of assessment, without anotice of demand and without complying with thepre-conditions for ordering attachment. 12. Considering the rival submissionsmade, the writ petition is disposed of,directing the second respondent to consider therepresentation of the petitioner dated 9.3.2009and pass appropriate orders within a period ofthree weeks from the date of receipt of a copyof this order. Since the second respondent hasalready taken up the representation for hearingon 24.3.2009, the second respondent shall makea fair assessment of the receivables anddepending upon his Best of Judgment, restrictthe orders of attachment to the actual amountof tax as reflected as per the original return(if permissible in law) without prejudice tothe rights of the petitioner on the revisedreturn filed by him. While doing so, therespondentsshouldalsotakenintoconsideration the fact that no order ofassessment has so far been passed leading to aCertificate under Section 222 of the Act andwhether Section 226(3) can be invoked at allwithout finalising the assessment and withoutissuing a demand. The respondents should bearin mind that they cannot put the cart beforethe horse." 6. In pursuance of the above order, the first respondentissued notices of hearing to the petitioner and heard the ManagingDirector of the petitioner-Company as well as the CharteredAccountants representing them. The first respondent also called fora report from the Assessing Officer, viz., the second respondent.Thereafter, the first respondent has proceeded to pass a verydetailed order, nay a thesis, dated 2.4.2009, ultimately rejectingthe representation of the petitioner for lifting the orders ofattachment and almost simultaneously rocking the very foundation ofthe revised return and reducing the revised return to a comatosecondition, so that the final rites could be performed by the secondrespondent in course of time. 7. Aggrieved by the said order of the first respondent datedhttps://hcservices.ecourts.gov.in/hcservices/2.4.2009, the petitioner has come up with W.P.No.6213 of 2009,seeking a Writ of Certiorari, to call for the records and to quash 7. Aggrieved by the said order of the first respondent datedhttps://hcservices.ecourts.gov.in/hcservices/2.4.2009, the petitioner has come up with W.P.No.6213 of 2009,seeking a Writ of Certiorari, to call for the records and to quash the same. The petitioner has also come up with another writpetition in W.P.No.6214 of 2009, seeking a Writ of Mandamus, toforbear the respondents from treating the petitioner as an"assessee in default" under Section 140A(3) of the Act andproceeding with the recoveries under Section 226(3) till anadjudication is done under Section 143 on the original return andthe revised return. 8. When both the writ petitions came up for admission on13.4.2009, Mr.K.Subramaniam, Standing Counsel for the Department,took notice and sought time to file counter. On 18.4.2009, therespondents filed the counter affidavit along with a typed set ofpapers. Thus, the pleadings were complete and hence by consent ofparties, the writ petitions were taken up for disposal. 9. I have heard Mr.C.Natarajan, learned Senior Counsel for thepetitioner and Mr.K.Subramaniam, learned Standing Counsel for theDepartment. 10. The fact that the petitioner filed an original return ofincome on 30.9.2008, disclosing a tax liability ofRs.29,54,97,940/- and the fact that the petitioner filed a revisedreturn on 6.3.2009, disclosing a reduced tax liability ofRs.1,95,49,789/-, are not in dispute. In the interregnum, betweenthe date of filing of the original return (30.9.2008) and the dateof filing of the revised return (6.3.2009), the petitioner appearsto have made payments to the tune of Rs.1,16,00,000/- in December2008 and January 2009. The Managing Director of the petitioner, isstated to have requested by a letter dated 10.12.2008, the facilityof making payment of the entire amount of tax by instalments,spread over a period of 4 months from December 2008 to March 2009.Though this commitment was for discharging the entire tax liabilityof Rs.27 crores, the petitioner is stated to have paid only a sumof Rs.1.16 crores in December 2008 and January 2009. Therefore thesecond respondent treated the petitioner as an assessee in defaultand attached the bank accounts and issued garnishee notices.According to the respondents, the attachment of the bank accountsyielded only a sum of Rs.7,84,134/-. 11. In compliance with the previous order of this Court, thepetitioner has submitted details of receivables to the tune ofRs.29.52 crores, with the list of 23 debtors of the petitioner-Company and documents. The respondents claim that when notices wereissued to those 23 debtors, 13 have not responded yet, one debtorconfirmed a balance, 3 debtors requested time to verify theaccounts, 5 debtors denied liability and one debtor found to be nottraceable. Therefore the first respondent has claimed in theimpugned order that it was not possible to confine the attachmentto the actual tax liability and that in the face of uncertainties,all the orders of attachment have to necessarily continue. 12. In the above background of facts, on which broadly thereis no dispute, what falls for consideration in these writpetitions, is the question as to whether the revised return effaceshttps://hcservices.ecourts.gov.in/hcservices/and substitutes the original return and whether the petitionercould be termed as an assessee in default, on the basis of the original return. 13. Section 139(1)(a) of the Act, mandates every person beinga Company, to furnish a return of income, during the previous year,in the prescribed form and verified in the prescribed manner andsetting forth such other particulars as may be prescribed, on orbefore the due date. Explanation-2 to sub section (1) of Section139, defines the "due date" to mean the 30[th] day of September of theassessment year. 12. In the above background of facts, on which broadly thereis no dispute, what falls for consideration in these writpetitions, is the question as to whether the revised return effaceshttps://hcservices.ecourts.gov.in/hcservices/and substitutes the original return and whether the petitionercould be termed as an assessee in default, on the basis of the original return. 13. Section 139(1)(a) of the Act, mandates every person beinga Company, to furnish a return of income, during the previous year,in the prescribed form and verified in the prescribed manner andsetting forth such other particulars as may be prescribed, on orbefore the due date. Explanation-2 to sub section (1) of Section139, defines the "due date" to mean the 30[th] day of September of theassessment year. 14. Sub section (5) of Section 139, entitles an assessee tofile a revised return and it reads as follows:-"If any person, having furnished a returnunder sub section (1), or in pursuance of anotice issued under sub section (1) of Section142, discovers any omission or any wrongstatement therein, he may furnish a revisedreturn at any time before the expiry of one yearfrom the end of the relevant assessment year orbefore the completion of the assessment,whichever is earlier." 15. Admittedly, the assessment is not yet completed and theperiod of one year from the end of the relevant assessment year hadalso not expired, on 6.3.2009, the date on which, the petitionerfiled a revised return. In other words, the revised return wasfiled by the petitioner well within the time prescribed by subsection (5). 16. In such circumstances, what is the sanctity of the revisedreturn has now become the subject matter of controversy. Accordingto the learned Senior Counsel for the petitioner, the revisedreturn substitutes, effaces, supersedes and obliterates theoriginal return. In support of this contention, the learned SeniorCounsel for the petitioner relied upon certain decisions, which Ishall refer to at present. 17. Following one of the earliest decisions of the AllahabadHigh Court in Amjad Ali Nazir Ali vs. CIT {1977 (110) ITR 419},asubsequent Bench of the Allahabad High Court held in Niranjan LalRam Chandra vs. Commissioner of Income Tax {134 ITR 352}, that oncea revised return is filed under Section 139(5), the original returnis supplanted. On the basis of the said logic, the Allahabad HighCourt went to the extent of holding that there was no bar forfiling a second revised return, in view of the fact that the firstrevised return filed under Section 139(5) actually becomes theoriginal return under Section 139(1). 18. In Commissioner of Income Tax vs. Mangalore Chemicals andFertilizers Ltd {191 ITR 156}, a Division Bench of the KarnatakaHigh Court held that once the original return is withdrawn or issubstituted, by filing a valid revised return, the naturalconsequence is that the earlier return would be effaced orhttps://hcservices.ecourts.gov.in/hcservices/obliterated for all purposes under the Act. 19. In Chief Commissioner of Income Tax vs. Machine ToolCorporation of India Ltd {201 ITR 101}, another Division Bench ofthe Karnataka High Court, quoted with approval, the decision of theGujarat High Court in CIT vs. Arun Textile {192 ITR 700}, to theeffect that once a revised return is filed under Section 139(5),the original return is substituted by the revised return and thattherefore it is not open to the Income Tax Officer to advert to theoriginal return or the statement filed along with it. 20. In response to the above decisions relied upon by thelearned Senior Counsel for the petitioner, the learned StandingCounsel for the Department, relied upon the following decisions:- (i) Deepnarain Nagu vs. Commissioner of Income Tax {157 ITR 37}. (ii) Commissioner of Income Tax vs. Girishchandraharidas {196 ITR 833}. (iii) Sunanda Ram Deka vs. Commissioner of Income Tax {210 ITR 988}. 20. In response to the above decisions relied upon by thelearned Senior Counsel for the petitioner, the learned StandingCounsel for the Department, relied upon the following decisions:- (i) Deepnarain Nagu vs. Commissioner of Income Tax {157 ITR 37}. (ii) Commissioner of Income Tax vs. Girishchandraharidas {196 ITR 833}. (iii) Sunanda Ram Deka vs. Commissioner of Income Tax {210 ITR 988}. 21. In Deepnarain Nagu's case, the original return was filedalong with a statement of accounts and a balance sheet, showingthat the assessee was following mercantile system of accounts.Subsequently, a revised return was filed along with a statement ofaccounts claiming that they were maintained on cash basis. TheAssessing Officer, the Appellate Assistant Commissioner and theIncome Tax Appellate Tribunal, rejected the revised return and atthe instance of the assessee, a reference was made to a Bench ofthe Madhya Pradesh High Court, which held as follows:-"This provision clearly enacts that where aperson who has filed a return under sub-section(1) or sub-section (2) discovers any omission orwrong statement made in the return filed, it isonly in those circumstances that he is permittedto file a revised return. Apparently, it is notthe case of the assessee that he has omitted tomention something or that he has made any wrongstatement. Therefore, as held by the Tribunal, theassessee could not be permitted to rewrite theaccount books when in fact during the accountingyear they were maintained on a particular systemof accounts. In this view of the matter, it isapparent that the Tribunal was right in holdingthat the return filed under Section 139(5) was nota valid return." 22. In Girishchandraharidas case, the members of a Hinduundivided family, running a business, divided the assets and filedreturns of income, disclosing proportionate share of rental incomearising out of the leases granted of their properties. But since norent was received during the previous year, the assessees filedrevised returns showing nil income. The Income Tax Officer rejectedthe revised returns, but the Tribunal allowed their appeals. On areference to the High Court, a Division Bench of the Kerala Highhttps://hcservices.ecourts.gov.in/hcservices/Court held that since the assessees had maintained the accounts onmercantile basis, they were bound to file the returns on accrual basis. Therefore the rejection by the Income Tax Officer, of therevised return filed on "receipt" basis, was upheld by the KeralaHigh Court and the decision of the Income Tax Appellate Tribunalwas set aside. 23. In Sunanda Ram Deka case, the assessee filed a return ofincome on 3.4.1982. A revised return was filed on 7.11.1983. TheIncome Tax Officer held a hearing and thereafter sent a draftassessment order under Section 144B on 19.3.1984. Thereafter theassessee filed another revised return on 31.3.1984. The revisedreturn dated 31.3.1984 was rejected upto the Tribunal and areference was made to the Gauhati High Court. The High Court heldas follows:- "We are of the opinion that the filing ofthe revised return after discovery of theomission or wrong statement is not by itselfsufficient to bring the revised return within theambit of sub-section (5) of Section 139 of theAct. In our opinion, the further requirement isthat this omission or wrong statement in theoriginal return must be due to a bona fideinadvertence or mistake on the part of theassessee." "We are of the opinion that the filing ofthe revised return after discovery of theomission or wrong statement is not by itselfsufficient to bring the revised return within theambit of sub-section (5) of Section 139 of theAct. In our opinion, the further requirement isthat this omission or wrong statement in theoriginal return must be due to a bona fideinadvertence or mistake on the part of theassessee." 24. Thus I find that the proposition of law advanced by thelearned Senior Counsel for the petitioner is supported by twodecisions of the Allahabad High Court {in Amjad Ali's case andNiranjan Lal's case} and two decisions of the Karnataka High Court{in Mangalore Chemicals case and Machine Tool Corporation's case}.On the other hand, the proposition advanced by the Standing Counselfor the Department is supported by the decisions of the MadhyaPradesh High Court, Kerala High Court and Gauhati High Court. 25. But there is a fundamental distinction between thedecisions cited on behalf of the petitioner and those cited onbehalf of the Department. The decisions cited on behalf of thepetitioner, are on first principles relating to "merger" or"substitution". They are recognised in common law and alsorecognised by Section 139(5) of The Income Tax Act, 1961. But therecognition afforded to this principle, is circumscribed by twolimitations viz., (i) that it should be done within the time limitprescribed and (ii) that the purpose of such substitution should beto set right any omission or wrong statement contained in theoriginal return. 26. In contrast to the decisions cited on behalf of thepetitioner, the decisions cited by the learned Standing Counsel forthe Department, have arisen out of the rejection of the revisedreturns by the Assessing Officers, in exercise of the powersconferred upon them. There is no quarrel with the proposition thatan Assessing Officer has the right to accept or reject the revisedreturn, exactly as he has the power to accept or reject theoriginal return. In the decisions relied upon by the learnedStanding Counsel for the Department, the Assessing Officershttps://hcservices.ecourts.gov.in/hcservices/concerned rejected the revised returns and after a sojourn throughthe Appellate Authority and the Tribunal, the questions of law reached the High Court on references. Therefore the citationsrelied upon by the Standing Counsel for the Department, provide noanswer to the question now raised. 27. In the case on hand, the Assessing Officer viz., thesecond respondent has not yet completed the assessment and rejectedthe revised return. If he had done so, the decisions relied upon bythe Standing Counsel for the Department, would squarely apply. Evenas per the order impugned in the writ petition as well as thecontentions raised in the counter affidavit, the second respondenthas only prima facie found the revised return "unacceptable". Thisprima facie finding cannot be placed on the same pedestal as anorder of assessment, rejecting the revised return. It is needlessto point out that what is prima facie acceptable or unacceptable,may ultimately turn out to be unacceptable or acceptable, as thecase may be. 27. In the case on hand, the Assessing Officer viz., thesecond respondent has not yet completed the assessment and rejectedthe revised return. If he had done so, the decisions relied upon bythe Standing Counsel for the Department, would squarely apply. Evenas per the order impugned in the writ petition as well as thecontentions raised in the counter affidavit, the second respondenthas only prima facie found the revised return "unacceptable". Thisprima facie finding cannot be placed on the same pedestal as anorder of assessment, rejecting the revised return. It is needlessto point out that what is prima facie acceptable or unacceptable,may ultimately turn out to be unacceptable or acceptable, as thecase may be. 28. Section 139(5) does not appear to treat a revised returnas a petition for an amendment. A petition for amendment, unlessordered as prayed for, cannot implement the new pleadingssubstituted in the place of the original pleadings. Section 139(5)does not appear to prescribe an intermediary step or provide for aninterlocutory order, accepting or rejecting the revised return andthereafter proceeding with the assessment. It is only in the orderof assessment that the Assessing Officer is competent to accept orreject the revised return. The consideration of the revised returnis part of a composite exercise of an assessment and I doubt verymuch whether the Assessing Officer can proceed stage by stage orpiecemeal. 29. It is in the light of the above fundamental principlesthat the question whether the petitioner is an assessee in default,on the basis of its original return, though not on the basis of therevised return, has to be analysed. 30. Section 140-A(1) of the Income Tax Act, 1961, mandatesthat where any tax is payable on the basis of any return requiredto be furnished under the relevant provisions, the assessee shallbe liable to pay such tax together with interest for any delay infurnishing the return, after taking into account the amount of taxalready paid under any provision. The point of time at which suchtax shall be paid is also indicated in the same provision. Subsection (1) of Section 140-A reads as follows:- "Where any tax is payable on the basis ofany return required to be furnished underSection 115-WD or Section 115-WH or Section 139or Section 142 or Section 148 or Section 153-Aor as the case may be Section 158-BC, aftertaking into account the amount of tax, if any,already paid under any provision of this Act,the assessee shall be liable to pay such taxtogether with interest payable under anyprovision of this Act for any delay infurnishing the return or any default or delay inhttps://hcservices.ecourts.gov.in/hcservices/payment of advance tax, before furnishing thereturn and the return shall be accompanied by proof of payment of such tax and interest." 31. Thus sub section (1) fixes the date of furnishing of thereturn as the outer limit of time for making payment of tax. Ifpayment is not made on or before the date of furnishing of thereturn, the assessee is considered to be in default, by a deemingfiction created under sub section (3) which reads as follows:-"If any assessee fails to pay the whole orany part of such tax or interest or both inaccordance with the provisions of sub section(1), he shall, without prejudice to any otherconsequences which he may incur, be deemed tobe an assessee in default in respect of the taxor interest or both remaining unpaid and allthe provisions of this Act shall applyaccordingly." 32. Therefore, it is mandatory for an assessee to make paymentof the tax or interest or both, in accordance with sub section (1),if he is not to be treated as an assessee in default under subsection (3). In other words, the tax or interest or both should bepaid "before furnishing the return" and the proof of payment shouldactually accompany the return. If not, he is treated as an assesseein default. 32. Therefore, it is mandatory for an assessee to make paymentof the tax or interest or both, in accordance with sub section (1),if he is not to be treated as an assessee in default under subsection (3). In other words, the tax or interest or both should bepaid "before furnishing the return" and the proof of payment shouldactually accompany the return. If not, he is treated as an assesseein default. 33. Section 4(1) makes income tax chargeable at the ratespecified in accordance with the Finance Act and sub section (2) ofSection 4 makes it obligatory to deduct income tax either at sourceor paid in advance, in respect of income chargeable under subsection (1). In Commissioner of Income Tax vs. Shelly Products andAnother {2003 (5) SCC 461}, it was held as follows:- "Section 4 of the Act creates the chargeand provides inter alia for payment of tax inadvance or deduction of tax at source. The Actprovides for the manner in which advance tax isto be paid and penalises any assessee who makesa default or delays payment thereof. Similarlythe deduction of tax at source is also providedfor in the Act and failure to comply with theprovisions attracts the penal provisionsagainst the person responsible for making thepayment. It is, therefore, quite apparent thatthe Act itself provides for payment of tax inthis manner by the assessee. The Act alsoenjoins upon the assessee the duty to file areturn of income disclosing his true income. Onthe basis of the income so disclosed, theassessee is required to make a self-assessmentand to compute the tax payable on such incomeand to pay the same in the manner provided bythe Act. Thus the filing of return and thepayment of tax thereon computed at theprescribed rates amounts to an admission of taxhttps://hcservices.ecourts.gov.in/hcservices/liability which the assessee admits to haveincurred in accordance with the provisions of the Finance Act and the Income Tax Act. Boththe quantum of tax payable and its mode ofrecovery are authorized by law. The liabilityto pay income tax chargeable under Section 4(1)of the Act thus, does not depend on theassessment being made. As soon as the FinanceAct prescribes the rate or rates for anyassessment year, the liability to pay the taxarises. The assessee is himself required tocompute his total income and pay the income taxthereon which involves a process of self-assessment." 34. Therefore, the law as declared by the Apex Court, on aninterpretation of Section 4 of the Act, together with the otherprovisions, appears to be that "the liability to pay income taxchargeable under Section 4(1) of the Act does not depend on theassessment being made". Hence in the case on hand, the moment aself-assessment is made and a return filed by the petitioner, underSection 139(1) on 30.9.2008, the provisions of Section 140-A(1) andconsequently Section 140-A(3) came into operation, automatically.Therefore, there is no doubt about the fact that on and from30.9.2008, upto 6.3.2009 {the date of filing of the revisedreturn}, the petitioner was an assessee in default in terms ofSection 140-A(3). It was during this period that the secondrespondent issued orders of attachment and garnishee notices. Thisis perhaps why, the petitioner did not come up with a challenge tothe orders of attachment and garnishee notices, even at the firstinstance. The petitioner chose to file a revised return on 6.3.2009and then made a representation to the first respondent on 9.3.2009for lifting the attachment and thereafter came up with the firstwrit petition, seeking a mere Mandamus, to direct the firstrespondent to pass orders on their representation. Therefore, theaction of the second respondent in treating the petitioner as anassessee in default, from 30.9.2008 till 6.3.2009, cannot be saidto be illegal. 35. But what the second respondent has done after the revisedreturn was filed and what he is obliged to do about the attachment,after the revised return was filed, is what is intriguing. If arevised return filed under Section 139(5) actually becomes theoriginal return under Section 139(1) on the basis of the "Doctrineof Substitution", the petitioner ceased to be an assessee indefault in terms of Section 140-A(3). If he is not an assessee indefault, the consequences prescribed in the later part of Section140-A(3) that "all the provisions of this Act shall applyaccordingly", may not come to life. If it will not come to life, itis very doubtful whether the second respondent can straight awayinvoke Section 226. 36. Section 220 of the Act, stipulates "when tax is payableand when an assessee is deemed in default". It reads as follows:-"220. When tax payable and when assesseehttps://hcservices.ecourts.gov.in/hcservices/deemed in default – (1) Any amount, otherwise thanby way of advance tax, specified as payable in a notice of demand under Section 156 shall be paidwithin thirty days of the service of the notice atthe place and to the person mentioned in thenotice: Provided that, where the Assessing Officerhas any reason to believe that it will bedetrimental to revenue if the full period ofthirty days aforesaid is allowed, he may, with theprevious approval of the Joint Commissioner,direct that the sum specified in the notice ofdemand shall be paid within such period being aperiod less than the period of thirty daysaforesaid, as may be specified by him in thenotice of demand. (2) If the amount specified in any notice ofdemand under Section 156 is not paid within theperiod limited under sub-section (1), the assesseeshall be liable to pay simple interest at one percent for every month or part of a month comprisedin the period commencing from the day immediatelyfollowing the end of the period mentioned in sub-section (1) and ending with the day on which theamount is paid.Provided that, where as a result of an orderunder Section 154, or Section 155, or Section 250,or Section 254, or Section 260, or Section 262, orSection 264, or an order of the SettlementCommission under sub-section (4) of Section 245-Dthe amount on which interest was payable underthis Section had been reduced the interest shallbe reduced accordingly and the excess interestpaid, if any, shall be refunded: Provided further that in respect of anyperiod commencing on or before the 31[st] day ofMarch, 1989 ending after that date, such interestshall, in respect of so much of such period asfalls after that date, be calculated at the rateof one and one-half per cent for every month orpart of a month. (2-A) Notwithstanding anything contained insub-section (2) the Chief Commissioner orCommissioner may reduce or waive the amount ofinterest paid or payable by an assessee under thesaid sub-section if he is satisfied that - (i) payment of such amount has caused orwould cause genuine hardship to the assessee; (ii) default in the payment of the amount onwhich interest has been paid or was payable underthe said sub-section was due to circumstancesbeyond the control of the assessee; and (iii) the assessee has cooperated in anyinquiry relating to the assessment or anyproceeding for the recovery of any amount due fromhim. https://hcservices.ecourts.gov.in/hcservices/ (3) Without prejudice to the provisions contained in sub-section (2), on an applicationmade by the assessee before the expiry of the duedate under sub-section (1), the Assessing Officermay extend the time for payment or allow paymentby instalments, subject to such conditions as hemay think fit to impose in the circumstances ofthe case. (ii) default in the payment of the amount onwhich interest has been paid or was payable underthe said sub-section was due to circumstancesbeyond the control of the assessee; and (iii) the assessee has cooperated in anyinquiry relating to the assessment or anyproceeding for the recovery of any amount due fromhim. https://hcservices.ecourts.gov.in/hcservices/ (3) Without prejudice to the provisions contained in sub-section (2), on an applicationmade by the assessee before the expiry of the duedate under sub-section (1), the Assessing Officermay extend the time for payment or allow paymentby instalments, subject to such conditions as hemay think fit to impose in the circumstances ofthe case. (4) If the amount is not paid within the timelimited under sub-section (1) or extended undersub-section (3), as the case may be, at the placeand to the person mentioned in the said notice theassessee shall be deemed to be in default. (5) If, in a case where payment byinstalments is allowed under sub-section (3), theassessee commits default in paying any one of theinstalments within the time fixed under that sub-section, the assessee shall be deemed to be indefault as to the whole of the amount thenoutstanding, and the other instalment orinstalments shall be deemed to have been due onthe same date as the instalment actually indefault.(6) Where an assessee has presented an appealunder Section 246 or Section 246-A the AssessingOfficer may, in his discretion and subject to suchconditions as he may think fit to impose in thecircumstances of the case, treat the assessee asnot being in default in respect of the amount indispute in the appeal, even though the time forpayment has expired, as long as such appealremains undisposed of.(7) Where an assessee has been assessed inrespect of income arising outside India in acountry the laws of which prohibit or restrict theremittance of money to India, the AssessingOfficer shall not treat the assessee as in defaultin respect of that part of the tax which is due inrespect of that amount of his income which, byreason of such prohibition or restriction, cannotbe brought into India, and shall continue to treatthe assessee as not in default in respect of suchpart of the tax until the prohibition orrestriction is removed." 37. A reading of Section 220 shows that it provides a lot ofopportunities for the assessee to make payment of the tax. Subsection (1) gives an assessee 30 days time to make payment of theamount mentioned in the notice of demand issued under Section 156.The proviso enables the Assessing Officer to provide a lesser timethan 30 days. But sub section (3) enables the Assessing Officereven to enlarge the time or to allow payment by instalments. Theimmediate consequence of non-payment within the time prescribedunder sub section (1), is the charging of simple interest, but subhttps://hcservices.ecourts.gov.in/hcservices/section (2-A) empowers the Chief Commissioner or Commissioner toreduce or waive the interest. It is only after the failure of the assessee to make payment within the time limit prescribed under subsection (1) or the extended time limit prescribed under sub section(3) that he becomes an assessee in default under sub section (4) ofSection 220. Under sub section (5), an assessee becomes an assesseein default, upon his failure to pay the instalments allowed undersub section (3). The Assessing Officer is also vested with thepower under sub section (6) to treat the assessee as not being indefault, upon such conditions as he may impose, if an appeal underSection 246 is pending. assessee to make payment within the time limit prescribed under subsection (1) or the extended time limit prescribed under sub section(3) that he becomes an assessee in default under sub section (4) ofSection 220. Under sub section (5), an assessee becomes an assesseein default, upon his failure to pay the instalments allowed undersub section (3). The Assessing Officer is also vested with thepower under sub section (6) to treat the assessee as not being indefault, upon such conditions as he may impose, if an appeal underSection 246 is pending. 38. Section 222 prescribes (i) attachment and sale of theassessee's movable property (ii) attachment and sale of theassessee's immovable property (iii) arrest of the assessee and hisdetention in prison and (iv) appointment of Receiver, as some ofthe modes of recovery of the amount due from an assessee in defaultor an assessee deemed to be in default. But these powers areexerciseable under Section 222, by a Tax Recovery Officer, afterdrawing up a Certificate of Recovery. Section 225 empowers the TaxRecovery Officer also to grant time for payment of tax and even tostay the proceedings for recovery until the expiry of the time sogranted. 39. But where no Certificate has been drawn up under Section222, the Assessing Officer himself may recover the tax by any ofthe modes prescribed under Section 226. Sub section (3) of Section226 empowers both the Assessing Officer as well as the Tax RecoveryOfficer to issue garnishee notices. Clause (v) of sub section (3)of Section 226 makes it clear that once a notice is issued to agarnishee, any claim upon the property held by the garnisheearising after the date of the garnishee notice shall be void.Clause (vii) empowers the Assessing Officer and the Tax RecoveryOfficer to amend or revoke any notice. 40. Thus the Act gives lot of scope for the assessees to makepayment, (i) before the date of filing of the return under Section140-A, (ii) within the time prescribed in the notice of demandunder Section 156, (iii) within the time prescribed under Section220(1), (iv) within the extended time prescribed under Section 220(3), (v) within the time for payment by instalments allowed underSection 220(3), (vi) within the time granted by the Tax RecoveryOfficer under Section 225(1) and (vii) within the time prescribedin Rule 3 of Schedule-II. 41. Therefore the scheme of the Act as seen from the variousprovisions quoted above, appears to be to give a long rope to anassessee to make payment, before attachment or garnishee orders.Such rope may even be around his neck, so as to safeguard theinterests of revenue, but shall not be tight enough to strangulatehim. It is in the context of such leverage granted to the assesseesthat the action of the respondents 1 and 2 may now have to betested. 42. The orders of attachment and garnishee notices in thepresent case, issued on the basis of the admitted liability as perhttps://hcservices.ecourts.gov.in/hcservices/the original return filed on 30.9.2008, may have been validlyissued, before the date of filing of the revised return, on 6.3.2009, treating the petitioner as an assessee in default byvirtue of Section 140-A(3). But after the revised return was filed,the admitted tax liability was different from what it was under theoriginal return. 42. The orders of attachment and garnishee notices in thepresent case, issued on the basis of the admitted liability as perhttps://hcservices.ecourts.gov.in/hcservices/the original return filed on 30.9.2008, may have been validlyissued, before the date of filing of the revised return, on 6.3.2009, treating the petitioner as an assessee in default byvirtue of Section 140-A(3). But after the revised return was filed,the admitted tax liability was different from what it was under theoriginal return. 43. The respondents have now taken a stand, in the impugnedorder and the counter affidavit, that the revised return is notworth the piece of paper on which it is written. In the revisedreturn, the petitioner has chosen to switch over to a differentsystem of accounting, which is not acceptable to the respondents,even at the threshold. Therefore according to the respondents, therevised return is not a valid return under Section 139(5).Moreover, it is the contention of the respondents that a revisedreturn is permissible only to correct an omission or a wrongstatement and not to change the system of accounting. Therefore ineffect, the respondents 1 and 2 have taken a position, that therevised return is not valid in law. 44. Having taken such a position, the second respondent couldhave passed an order rejecting the revised return on the shortground that it does not satisfy the requirements of Section 139(5)and proceeding further with the assessment on the basis of theoriginal return. But the second respondent could not even do this,on account of the fact that the functions performed by him arequasi judicial in nature and that such rejection in limine, withoutscrutiny, will not be permissible. It is in this background of thereluctance on the part of the second respondent to accept therevised return as well as to reject it outright that the impugnedorder justifying the continuance of the attachment and thegarnishee notices, raises eyebrows. 45. Even the normal facilities available to an assessee (underSections 156, 220, 222 and 226), like the grant of time to makepayment, enlargement of time to make payment, stay of proceedingsetc., have not been extended to the petitioner. These facilitiesare denied to the petitioner only on account of factors such as,the admitted tax liability as per the original return, the failureof the petitioner to make payment of the admitted liability forabout 5 months, the filing of a revised return thereafter and thedebtors denying their liability to make any payment. This in myconsidered view, is not justified. 46. If the assessment had been completed even on best ofjudgment basis, the Assessing Officer would have raised a demand interms of Section 156 and followed the provisions of Sections 220,222 and 226. A person who suppressed taxable income andconsequently suffered a best of judgment assessment, would havebeen placed on a better footing than the petitioner who filed areturn admitting liability to a particular extent and laterattempted to file a revised return. Therefore I am of theconsidered view that the petitioner could be granted some reprieve,even while protecting the interests of revenue. https://hcservices.ecourts.gov.in/hcservices/47. Mr.C.Natarajan, learned Senior Counsel for the petitionersubmitted that all the bank accounts of the petitioner are nowsubmitted that all the bank accounts of the petitioner are now https://hcservices.ecourts.gov.in/hcservices/47. Mr.C.Natarajan, learned Senior Counsel for the petitionersubmitted that all the bank accounts of the petitioner are nowsubmitted that all the bank accounts of the petitioner are now frozen and all persons to whom advances have been paid for thepurpose of performance of certain contractual obligations, havebeen issued with garnishee notices. Those persons have denied anyliability to pay to the petitioner, on account of the fact that theamounts paid to them were not like loans or advances repayable incash. They have paid in consideration of the performance of certainpersonal obligations, which could be translated in terms of moneyby the petitioner, at the time of performance. The learned SeniorCounsel submitted that all the operations of the petitioner havecome to a standstill, in view of the freezing of the bank accounts.Even the day-to-day administration of the Company is todayimpossible since the banks could not release the overdraft facilitymade available to the petitioner, on account of the orders ofattachment. 48. In support of his contention that an overdraft facilitycannot be the subject matter of a garnishee notic