S.K. Chander, Accountant Member - (1.)IN the captioned appeals by the revenue and cross-objections by the assessee, we have before us very interesting legal issues. IN order to appreciate why these legal issues arose and why the parties have their respective grievances, it is very essential to have a very accurate factual background of the case which, as culled out from the record and the papers filed before us, is as under.
(2.)The assessment years involved in these appeals are 1979-80, 1980-81 and 1982-83. The assessee is a corporation in which the Government of Punjab is substantially interested. Its business consists of manufacture and sale of 'Malathion Technical'. The assessee maintains books of accounts on mercantile system of accounting. Its previous year ends on 30th September. Thus, for the assessment years under appeals, the previous years ended respectively on 30th September, 1978, 30th September, 1979 and 30th September, 1981. In accordance with the provisions of law, the return of income from the assessee was due on or before 30th of June of the relevant assessment year. The assessee filed the return of income signed by its Secretary, Shri R. Narayanan, on 28-6-1979 for the assessment year 1979-80. In this return, the assessee, inter alia, claimed loss of Rs. 5,03,470 and also made a claim for carry forward of Rs. 26,09,436 as investment allowance etc. On the basis of this return, the Income-tax Officer started the assessment proceedings on 3-9-1979. These proceedings continued and culminated in an assessment order made Under Section 144 of the Act on 29-3-1982. On receipt of this order made ex parte Under Section 144 by the assessing authority, the assessee made an application Under Section 146 of the Act on 7-4-1982. On the basis of this application, the assessing authority cancelled the ex parte order, mentioned supra, by order dated 19-4-1982.
Thereafter, on 20/23-1-1985, the assessee received a letter bearing No. 965 on the subject of return for the assessment year 1979-80 filed on 28-6-1979. In this letter, the Inspecting Assistant Commissioner of Income-tax(Asst.) Chandigarh, projected to the assessee that the above return, "is signed and verified by Secretary, who is not a competent authority in view of the provisions of Section 140(c) and as such this return is not a valid return". The attention of the assessee was also invited to a judgment of the Hon'ble Punjab & Haryana High Court in the case of CIT v. Dr. Krishan Lal Goyal [1984] 148 ITR 283, wherein, it was pointed out to the assessee by the Inspecting Assistant Commissioner of Income-tax (Asst.), it had been held that a return in order to be valid must comply with the conditions prescribed in Section 139/140 of the Income-tax Act, 1961 and Rule 12(1) of the Income-tax Rules, 1962. It was thus projected to the assessee that the above return made on 28-6-79 was, "invalid and the subsequent assessment framed Under Section 144 on the basis of such an invalid return is also invalid".

(3.)ON 19-9-1984, i.e. before the letter No. 965 dated 22/23-1-1985 was received by the assessee, the assessee had filed another return which was signed by the Director and it is common ground that but for the fact that in place of the Secretary of the company signing the verification of the return filed on 28-6-1979, the return filed on 19-9-1984 had been signed by the Director, otherwise the two returns were identical in their contents and claims. Therefore, when the assessee received the letter No. 965, mentioned supra, it sent a reply to the Inspecting Assistant Commissioner of Income-tax(Asst.) on 30-1-1985. In this reply, appearing at pages 5 to 13 of the paper book filed by the assessee, it was pointed out that on receipt of the return on 28-6-79, the Income-tax Officer had started the process of assessment and after due process of law completed the assessment on 29-3-1982. This letter also projects that last hearing on the basis of that return was given to the assessee on 29-3-1982 itself. There is also averment in this letter that, "at that hearing, the Inspecting Assistant Commissioner of Income-tax(Asst.) informed the company that in the absence of certain details asked for by him and not supplied by the assessee, it was not possible for him to complete the assessment. Further, he stated that he was not in a position to give any further time as the assessment was getting time-barred on 31st March, 1982". The letter points out that in so completing the assessment, the Inspecting Assistant Commissioner of Income-tax(Assessment) ignored the losses claimed and the carry forward of investment allowance by taking the income as 'nil'. Thereafter, there is narration of the historical development as to how application Under Section 146 was filed and the assessment was cancelled. This letter also projects that the order Under Section 146 of the Act was made on 19-4-82, i.e. during the financial year 1982-83, and, therefore, in accordance with the provisions of law, the de novo assessment had to be made on or before 31-3-1985. It is only towards the close of this period that the assessee was informed that the best judgment assessment made Under Section 144 on the basis of the return dated 28-6-1979 and cancelled by an order Under Section 146 on 19-9-1982 was invalid.