JUDGMENT S.N. Sahay, J.
1. Since a common question of law has been raised in both the writ petitions, they are being disposed of by a common judgment.
2. In Writ Petition No. 3094(MB) of 1991, it will appear from a perusal of the impugned order contained in armexure-5 to the writ petition that the petitioner-company filed a return of income for the assessment year 1990-91 declaring a loss of Rs. 49,64,09,180. The petitioner had filed a tentative profit and loss account along with the return and the tax audit report. The Assessing Officer took the view that the return was defective, inasmuch as no compliance was made with the provisions contained in Clauses (bb) and (d)(i) of the Explanation to Sub-section (9) of Section 139 of the Income-tax Act, 1961. The Assessing Officer was of the opinion that, since the petitioner had filed only a tentative profit and loss account and the audit report filed by the petitioner was also based on the same, it cannot be said that the petitioner has submitted the audit report as required by Section 44AB in respect of the profit and loss account of the petitioner-company. It appears that an opportunity was given by the Assessing Officer to the petitioner-company to remove the defects which were not removed to the satisfaction of the Assessing Officer. Therefore, the Assessing Officer passed the impugned order to the effect that, as the assessee has failed to remove the defects, the alleged return filed on December 31, 1990, would be treated as an invalid return and non est and it would be deemed that the assessee had not filed any return for the assessment year 1990-91.
3. In Writ Petition No. 1356(MB) of 1992, the impugned order dated August 22, 1991, passed by the Assessing Officer contained in annexure-6 to the writ petition shows that the assessee, U. P. State Sugar Corporation Ltd., filed its return of income on December 20, 1990, declaring a loss of Rs. 1,59,89,95,087. The return was accompanied by an audit report in Form No. 3CA and provisional profit and loss account in annexure-D signed by the Chairman only and unsigned in annexures-E to H 1(i) to 1(iii). No balance-sheet had been filed with the return. The defects were intimated to the assessee. The petitioner was requested to remove the defects by a certain date. The petitioner submitted a reply and, after consideration of the same, it was held by the Assessing Officer that, though the assessee-company has furnished an audit report in Form No. 3CA on the basis of the provisional profit and loss account, it has failed to fulfil the complete requirements of Section 139(9)(e) of the Income-tax Act, 1961.
"Accordingly, it was held by the Assessing Officer that the report was invalid and non est, under Section 139(9) of the said Act and the provisions of the Act are to be applied as if the assessee has failed to furnish a return".
4. Learned counsel for the petitioners in both the cases has urged that it is not required by Sub-clause (i) of Clause (d) of the Explanation, to subsection (9) of Section 139 of the said Act that the assessee shall file an audited profit and loss account. The contention is that the petitioners are Government companies, incorporated under the Companies Act and their accounts are to be audited by an auditor appointed by the Central Government under Section 619 of the Companies Act. It is stated that no auditor had been appointed by the Central Government and the return for the assessment year in question was to be filed within time by the petitioner and so it was not possible for the petitioners to file an audited profit and loss account either under the above-mentioned provision or under Section 44AB. The petitioner has asserted that it cannot be required by law to perform an impossible act and since the statutory audit had not been completed, no audited return could be filed by the petitioner in any case. It has been explained that, in order to satisfy the requirements of the above-mentioned provisions, the petitioners engaged the services of chartered accountants and, after getting the balance-sheet audited by the private auditor, submitted the audit report as indicated above. Under these circumstances, the audit report and the profit and loss account submitted by the petitioners should have been, it is so contended, accepted by the Assessing Officer and the income-tax returns filed by the petitioner should have been held to be not defective.
5. In the second place, it has been argued by learned counsel for the petitioners that, in any case, the assessment proceedings should have been completed by the Assessing Officer in accordance with law on the basis that the petitioners have failed to file any income-tax returns. According to learned counsel, the assessment should have been made under Sections 142 and 144 after giving due opportunity of hearing to the petitioners. The Assessing Officer has not completed assessment proceedings as required by law and has left the matter after passing the impugned orders and, therefore, it is submitted that the Assessing Officer should be directed to complete the assessment proceedings. In this connection, it has also been pointed out that the Government auditor was subsequently appointed in both the cases and he has, after auditing the profit and loss account of the petitioners, submitted an audit report which is now available.
6. Learned counsel for the respondents has contended that the Assessing Officer was perfectly justified in holding that the income-tax returns filed by the petitioners in both the cases were defective and all the documents required by law were not submitted by them along with the return and, therefore, the impugned orders are perfectly legal and valid. He has also submitted that the provisions of Sections 142 and 144 cannot be invoked, but rather it is only under Section 148 of the Act that the assessment can be made on the basis that, in fact, the income of the petitioner has escaped assessment. He has submitted that, since the returns have become invalid, a notice will have to be issued to the petitioners for making the escaped assessment as required under Section 148.
7. We find in both the cases on the basis of the facts stated in the writ petitions and in the counter-affidavits and the rejoinder affidavits and the impugned orders that the income-tax returns filed by the petitioners were defective. It may be that the petitioners had utilised the services of chartered accountants privately for getting their accounts audited, but the fact remains that, even according to them, the profit and loss accounts submitted for the petitioners were provisional in nature. The auditors did not state that the profit and loss accounts of the petitioners were final and, on that basis, the audit reports were prepared by them. Therefore, it cannot be said that the view taken by the Assessing Officer in either case was unjustified that the petitioners did not comply with the provisions of Section 139 of the Act and the returns filed by them were defective. In view of this conclusion, no interference can be made with the impugned orders. But learned counsel for the petitioners is right when he contends that, after holding that the income-tax returns were defective, the Assessing Officer should have proceeded to complete the assessment proceedings in accordance with law. He should have proceeded under Sections 142 and 144 of the Act and should have made assessments accordingly. We do not agree with learned counsel for the respondent that it is a case of escaped assessment and the proceedings should have been completed in accordance with law under Section 148 of the Act. However, whether assessment proceedings are to be completed under Section 142 or Section 144 or Section 148, an opportunity of hearing will have to be given to the petitioners before making assessment and, in any case, the assessment cannot be completed without considering the cause shown by the petitioners and the materials furnished by the petitioners before the Assessing Officers in support of their contentions. Our conclusion is that the assessment proceedings should be completed in accordance with law now as indicated above. As the audit reports prepared by the Government auditors are also available now as indicated by learned counsel for the petitioners, the Assessing Officers shall also take the same into consideration.
8. Both the writ petitions are accordingly allowed and directions in terms referred to above are hereby issued to the respondents who shall complete the assessment proceedings in accordance with law as early as possible.
9. Costs easy.