<NAME>, J.

1. For the assessment years 1965-66, 1966-67 and 1969-70, the petitioner submitted returns of income of Rs. 31,291, 20,649 and 1,004 respectively. The pelitioner's income for those years was assessed by the Income-tax Officer at Rs. 44,040; 23,040 and 1,250 respectively. In the balance sheets submitted along with the returns amounts of Rs. 51,735; 32,705 and 16,915 were shown as received on account of charity: The Income-tax Officer did not direct the addition of the amounts received on account of charity to the income returned by the petitioner. He did not question the correctness of the figures either. While so, on 28-3-74. the Income-tax Officer issued three notices under Section 148 of the Income-tax Act, 1961, alleging that he had reasons to believe that the income chargeable to tax for the three assessment years in question had escaped assessment within the meaning of section 147 of the Income-tax Act, and. requiring the petitioner to submit returns of income within thirty days of the service of notices as he proposed to reassess the income for the said assessment years. These notices were served on the petitioner on 2-4-74. The petitioner objected to the validity of the notices and demanded the disclosure of the reasons on which the Income-tax Officer grounded his belief thai income chargeable to tax had escaped assessment. The petitioner received no reply. The petitioner, therefore, filed C.W.P. Nos. 2808, 2809 and 2810 of 1975 impugning the validity of the notices as invalid and without jurisdiction.

2. The first submission of <NAME>, learned counsel for the petitioner, was that the notices were bad as they were served beyond the period of limitation prescribed by section 149(1)(b) of the Income-tax Act. <NAME> contended that the notices fell under sec-tion 147(b) and therefore the period of limitation was only four years. In the written statements filed by the <ORG> the reasons recorded by the Income-tax Officer under section 148(2) are extracted. In regard to the assessment year 1969-70 the reasons for the other two years are identical the reasons are stated as follows:--

"During the year relevant to assessment year 1969-70 the assessee charged Rs. 16,914/- as charily along with other charges from the customers which is its income. The assessee has failed to disclose this amount in its return of income. I have reasons to believe that by reason of assessee's failure to disclose fully and truly the particulars of income to the extent of Rs. 16,914 has escaped assessment. Issue notice under section 148 read with section 147(a) for the assessment year 1969-70."

Though the statement of the reasons recorded by the Income-tax Officer refers to section 147(a) , it is clear from the allegations in the written statements that there was no failure or omission on the part of the assessee to disclose fully and kuly all the material facts necessary for his assessment for those years. In rela-tion to the assessment year 1969-70, it is said in the written statement.

"So far as the item of charity is concerned it goes on accumulating with the petitioner-company to be disbursed from lime to time in charities to be selected by. the petitioner-company itself. The customer of the company from whom the aforesaid three headed remuneration is charged has no hand in nominating the charity to which the amount paid by him on account of charity is to go. Thus it is a case of application of the petitioner's income towards charity by the petitioner-company. In the year under consideration namely 1969-70 it appears from the assessment order dated 31st January 1970 passed by <NAME> Income-tax Officer Companies <NAME> that his attention was not drawn to the question of charity at all............ The original assessment for the assessment year 1969-70 was completed on 31st January, 1970 by <NAME> Income Tax Officer. It is incorrect to say that the receipt and disbursement of the charity amount was accepted as correct by <NAME> Income-tax Officer Companies <NAME>. As already submitted above there was no mention of this item in the assessment order and apparently the attention of Ihe Income-tax Officer was not drawn to this at all."

Thus, it appears to be the case of the <ORG> that at the time of the original assessment, the Income-tax Officer did not focus his attention on or apply his mind to the question whether the receipts by way of charity were to be treated as income or not and that later on the Income-tax Officer acquired the "knowledge or instruction" that the receipts by way of charity ought to have been included in the assessable income of the assessee. In other words, something which had not presented itself to the mind of the Income-tax Officer at the time of the original assessment came to be so presented to his mind after the completion of the assessment. Thus, though the statements of the reasons recorded by the Income-tax Officer refer to Section 147(a) , the cases really fall under section 147(b) and the period of limitation is only four years.

3. Of course, as was held in <CITATION> ., 101 ITR 477: (1976 Tax LR 197) (Cal), by <NAME>,, and <NAME> 'a notice under section 147 which has been proposed under Clause (a) can be treated as one, if the material conditions are fulfilled, under Clause (b) of section 147 of the Income-tax Act of 1961'. In fact, Section 292B of the Income-tax Act, 1961, expressly provides that no return of income, assessment, notice, summons or other proceeding furnished or made or issued or taken or purported to have been furnished or made or issued or taken in pursuance of any of the provisions of the Act shall be invalid or shall be deemed to be invalid merely by reason of any mistake, defecl or omission in such return of income, assessment, notice, summons or other proceeding, if such return of income, assessment, notice, summons or other proceeding is in substance and effect in conformity with or according to the intent and purpose of the Act. Therefore, a notice under Section 148 though proposed under Section 147(b) if the conditions of Section 147(b) are otherwise substantially satisfied (sic).

4. Since Section 147(b) is the provision which is applicable to the cases, the limi-tation for the issuance of the notices in such cases is governed by Section 149(1)(b) which prescribes a period of four years from the end of the relevant assessment year. Therefore, for the assessment year 1965-66, the notice under Section 148 should have been issued on or before 31st March. 1970; for the year 1966-67, it should have been issued before 31st March, 1971, and for the assessment year 1969-70, it should have been issued before 31st March, 1974. The notices in respect of the assessment years 1965-66, and 1966-67 were clearly issued far beyond the period of limitation and they have, therefore to be quashed. C.W.P. Nos. 2808 and 2809 of 1975 are, therefore, allowed.

5. In regard (o the assessment year 1969-70, the submission of Shri <NAME> was that it was not enough that the notice was sent by the Income-tax Officer before 31-3-1974; it was necessary lhat it should have been served on the assessee before 31-3-1974. He submitted lhat the word "issued" occurring in Section 149 meant "served". In support of his submission, he relied on the. decision of <ORG> in <CITATION> , 53 ITR 100 ; (AIR 1964 SC 1742) and the decisions of the High Courls in <NAME> v. J. P. Jani. 58 ITR 559: (AIR 1966 Guj 47). <NAME> v. <NAME>, (1974) 96 ITR 141 ( <CITATION> , 101 ITR 106 : (1975 Tax LR 811) (<NAME> & <NAME>), Commissioner of Income-tax v. <NAME>, 105 ITR 479: (1977 Tax LR 68) (Andh Pra). Inasmuch as <ORG> of Gujarat, <NAME>ab and <NAME>yana and Andhra Pradesh have merely purported to follow the decision of <ORG> in <NAME> case, it is necessary to consider the facts and ratio of that case in some detail.

6. <NAME> case (AIR 1964 SC 1742), arose under the provisions of the 1922 Act and as we shall presently point uut, there is a vital difference between the provisions of the 1922 Act and the provisions of 1961 Act. For the assessment year 1947-48, the assessee in <NAME> case had filed a return of her income and the assessment was completed some time in 1948. On 2-4-1956, the Income-tax Officer served on her a notice dated 19-3-1956 under Section 34(1) of the Indian Income-tax Act, 1922. The date of the notice was within 8 years from the end of the relevant assessment year, i.e., 31-3-1948, but it was served beyond eight years from that date. Section 34(1) , as it stood at that time, provided that a notice falling under Clause (a) had to be served on the assessee within eight years of the end of <NAME> assessment year. The notice was clearly out of time as it was served beyond eight years from 31-3-1948. The situation in such cases was sought to be saved by Section 4 of the Amending Act (Act No. 1) of 1959 which provided that no notice issued under Section 34(1) (a) at any lime before the commencement of the Amending Act and no proceeding taken in consequence of such notice shall be called in question merely on the ground lhat at the time the notice was issued, the time within which such notice should have been issued had expired. The argument on behalf of the assessee in that case was that Section 4 of the Amending Act only saved a notice issued after the prescribed time but that it did not apply to a situation where the notice was issued within the prescribed time but not served within time. The meaning of ihe word "issued" in Section 4 of the Amending Act thus fell to be considered by <ORG>.

<ORG> noticed that Section 4 of the Amending Act was enacted for the sole purpose of saving the validity of notices such as those issued in the case before them and that if the construction sought to be placed by the assessee was to be accepted, it would defeat the purpose of the amendment. They noticed that while Section 34(1) (a) prescribed eight years for the service of notices, there was no provision prescribing a time-limit for Ihe issuance of notices. They further noticed that according to the dictionaries and in legislative practice the expression "issued" had a narrow as well as a wide meaning and that in its wider connotation it meant "served" also. They held that the expression "issued" occurring in Section 4 of the Amending Act was used in its wider connotation and meant "served". They observed that such a construction alone would effecluate the intention of the legislature. <ORG> said :--

"The crucial word in the said section is "issued". The section says that though a notice was issued beyond the lime within which such notice should have been issued, its validity could not be questioned, if the word "issued" means "sent", we find (hat there is no provision in the Act prescribing a time-limit for sending a notice, for, under Section 34(1) (a) of the Act. a notice could be served only within 8. years from the relevant assessment year. It does not provide any period for sending of the notice. Obviously, therefore, the expression "issued" is not used in the narrow sense of "sent".

<ORG> then proceeded to observe that the expresssion "issued" occurring in Ihe proviso to Section 23(3) had previously been equated with (he expression "served" occurring in the substantive pari of Section 34(1) by judicial interpretation. They referred to the observations of <NAME> in <CITATION> , (1957-31 ITR 683 (Bom) ), in that connection. They then referred to the General Clauses Acf. the Calcutta Municipal Act and held that the expression "issued" had both a limited and a wide meaning and that it was for the <ORG> to give a proper meaning to ihe expression according to the context of the Act. They said :--

"In the legislative practice of our country the said two expressions are sometimes used to convey the same idea. In other words, the expression "issued" is used in a limited as well as in a wider sense. We must, therefore, give the expression "issued" in Section 4 of Ihe Amending Act that meaning which carries out the intention of the legislature in preference to that which defeats it. By doing so we will not be departing from the accepted meaning of the expression, but only giving it one of its meaning accept-ed. which fits into the context or selling in which it appears."

<ORG> then proceeded to give a closer look to the provisions of Section 4 of the Amending Act and finally observed:--

"Under Section 34(1) of the Act, as we have already pointed out, the time prescribed was only for service of the notice. As the notice mentioned in Section 4 of the Amending Act is linked with the time prescribed under the Act, the section becomes unworkable if the narrow meaning is given to the expression "issued". On the other hand, if we give a wider meaning to the word, the section would be consistent with the provisions of S, 34(1) of the Act. Moreover, the narrow meaning would introduce anomalies in the section: while the notice, assessment or reassessment were saved, the intermediate stage of service would ba avoided. To put it in other words, if the proceedings were only at the stage of issue of notice, the notice could not be questioned, but if it was served, it could be questioned: though it was served beyond time, if the assessment was completed, its validity could not be questioned. The result would be that the validity of an assessment proceeding would depend upon the stage at which the assessee seeks to question it. That could not have been the intention of the legislature. All these anomalies would disappear if the expression was given the wider meaning.

TO summarize: The clear intention of the legislature is to save the validity of Ihe notice as well as the assessment from an attack on the ground that the notice was given beyond the prescribed period, That intention would be effectuated if the wider meaning is given to the expression "issued". The dictionary meaning of the expression "issued" takes in the entire process of sending the notice as well as the service thereof. The said word used in Section 34(1) of the Act itself was interpreted by courts to mean "served". The limited meaning, namely, "sent" will exclude from the operation of the provision a class of cases and introduce anomalies. In the circumstances by interpretation, we accept the wider meaning the word "issued" bears. In this view, though the notices were served beyond the prescribed time, they were saved under S, 4 of Ihe Amending Act."

7. The decision of <ORG> In <NAME> case, (AIR 1964 SC 1742), therefore was that the expression "issued" had a wide as well as a narrow meaning and that in the context of Section 34 (1) which provided for service of notices within a period of eight years and in the context of the object of the Amending Act , the expression "issued" could only be given a wider meaning in Section 4 of Ihe Amending Act. <ORG> did not lay down that Ihe expression "issued"' whenever and wherever it occurred in the Income-tax Act , carried the wider meaning.

8. Now let Us examine the provisions of the Income-lax Acl, 1961, along-side the corresponding provisions of 1922 Act, Sections 147, 148 and 149 of Ihe 1961 Act which correspond to Section 34(1) of the 1922 Act provide the machinery for assessment or re-assessment if it is found by the Income-tax Officer thai income chargeable to tax has escaped assessment. The expression 'income chargeable to tax which has escaped assessment' is deemed to include income chargeable to tax which has been under-assessed, income which has been assessed at too low a rate, income which has been made subject to excessive relief under the 1961 Act or the 1922 Act and income assessed after excessive computation of loss or depreciation allowance. Section 147 (a) & (b) of 1961 Act which corresponds lo Section 34 (1) (a) and (b) of the 1922 Act prescribes the conditions to be fulfilled before assessment or re-assessment can be made. Under Section 147(a) , the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment for any assessment year by reason of the omission or failure on the part of the assessee to make a return of his income or to disclose fully and truly all material facts necessary for assessment for that year. Under Section 147 (b), the Income-tax Officer must have reason to believe, in consequence of information in his possession, that income chargeable to tax has escaped assessment.

Section 147(1) prescribes a condition precedent before any action is taken under Section 147 . It prescribes that the Income-tax Officer shall serve a notice on the assessee containing all or any of the requirements which may be included in a notice under Section 139(2) . Section 148(2) further prescribes that before the issuance of a notice under Section 148(1) , the Income-tax Officer shall record his reasons for doing so. It is important to notice at this juncture that neither Section 147 nor Section 148 prescribe any time-limit for the service of notice. This has to be contrasted with Section 34(1) which prescribed that in cases falling under Clause (a) the notice had to be served within eight years and in cases falling under Clause (b), the notice had to be served within four years of the end of the assessment year. Section 149 of the 1961 Act stipulates that no notice under Section 148 shall be issued after the expiry of eight years from the end of the assessment year in cases falling under Section 147(a) and after the expiry of four years from the end of the assessment year in cases falling under Section 147(b) . It ig to be noticed at once that while Section 148 prescribes that notice shall be served, Section 149 prescribes that a notice shall be issued. The limitation prescribed under Section 149 is for the issuance of the notice which is required to be served I under Section 148 before action is taken under Section 147 . The contrast between the provisions of Ihe 1961 Act and the 1922 Act becomes immediately patent. While section 34(1) of the Indian Income-tax Act 1922, prescribed limitation for the service of the notice on the assessee, Section 149 now prescribes limitation for the issuance of the notice.

It was because, in the scheme of the 1922 Act, limitation was prescribed for the service of the notice that <ORG> had to hold in <NAME> case, (AIR 1964 SC 1742), that the expression "issued" in Section 4 of the Amending Act meant "served". In the scheme of Ihe 1961 Act, limitation is prescribed with reference to the issuance of the notice. The scheme of the Act is that an Income-lax Officer must first have reason to be^ lieve that income chargeable to tax has escaped assessment either by reason of the omission or failure on the part of the assessee to make a return or to disclose fully and truly all material facts or in consequence of information in his possession. He is then required to record his reasons. He is then required to issue the notice prescribed by Section 148 within the period prescribed in Section 149 . This notice must be served before the Income-tax Officer can proceed to make the assessment or re-assessment under S, 147. That is the scheme of the present Ac! and there is no reason why the expression "issued" occurring in Section 149 should not be given its natural meaning instead of the strained, wider meaning "served". The departure from the old provision in Section 34 of the 1922 Act is a conscious departure and it is our duty to give full effect to it.

9. We do not think that it is necessary to discuss the decisions in <NAME> v. J. P. Jani, 58 ITR 559 : (AIR 1966 Guj 47), <NAME> v. Upa-dhyaya, (1974) 96 ITR 141 ( <CITATION> , 101 ITR 106: (1975 Tax tiR 811 (Punj)) and Commissioner of Income-tax v. <NAME>, 105 ITR 479: (1977 Tax LR 68 (Andh Pra)) since the learned Judges who decided those cases merely purported to follow the decision of <ORG> in <CITATION> , (AIR 1964 SC 1742). We have given our reasons for holding that <ORG> did not decide in <NAME> case that the expression "issued" wherever and whenever it occurred should always be given the wider meaning "served". <ORG> gave the meaning "served" to the expression "issued" occurring in Section 4 of the Amending Act having regard to the context of the provision and the object of the Amending Act . We are clearly of the opinion that in the context of the provisions of the Income-tax Act , 1961, the expression "issued" occurring in Section 149 cannot be given the meaning "served". We dissent from the view-s expressed by the Gujarat and Andhra Pradesh <ORG> and we overrule the decision of the Punjab and Haryana <ORG> in <NAME> case.

10. The learned counsel for the petitioner urged that the Income-tax Officer had no reason to believe, in consequence of any information in his possession, that any income had escaped assessment. He urged that the assessee had disclosed the receipts on account of charity in the balance-sheet submitted by him along with the return. According to him, it was a case of mere change of opinion by the Income-tax Officer. On the other hand, <NAME>, learned counsel for the <ORG>, invited our attention to <NAME> case, 102 ITR 287: (1976 Tax LR 123) (SC), and urged that the information contemplated by Section 147(b) may be obtained even from the record of the original assessment, from an investigation of the material on record or the facts disclosed thereby or from other enquiry or research into facts or law and that cases where 'income liable to tax has escaped assessment due to oversight, inadvertence or mistake committed by the Income-tax Officer' may also be brought under Section 147(b) . We do not, however, propose to go into this question having regard to another formidable objection raised by <NAME> that under the amended provisions of Article 226 of the Constitution we are precluded from going into these questions if any other remedy is provided by or under any other law for the time being in force <NAME> argued that the assessee was entitled to raise the question of non-existence of reasons for belief before the assessing authority, the Appellate Assistant Commissioner and <ORG>. In the famous case of <CITATION> , 41 ITR 191: (AIR 1961 SC 372), <ORG> recognised the existence of alternative remedy under the provisions of the Indian Income-tax Act when it observed :--

"Mr. <NAME> mentioned more than once the fact that the company would have sufficient opportunity to raise this question viz. whether the Income-tax Officer had reason to believe that under-assessment had resulted from non-disclosure of material facts, before the Income-tax Officer himself in the assessment proceedings and, if unsuccessful there, before the Appellate Officer or <ORG> or in <ORG> under Section 66 (2) of the Indian Income-tax Act . The existence of such alternative remedy is not however always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting Without jurisdiction from continuing such action."

While <ORG> previously had the freedom to issue a high prerogative writ notwithstanding the existence of an alternative remedy, it is now precluded from doing so because Article 226(3) provides, "no petition for redress of any injury referred to in Sub-clause (b) or Sub-clause (c) of Clause (1) shall be entertained if any other remedy for such redress is provided for by or under any other law for the time being in force," C.W.P. 2810 of 1975 is, therefore, dismissed, but in the circumstances without costs.


JUDGMENT Sen, J.

1. This is an appeal under Section 39(1)(vi) of the Arbitration Act, 1940, preferred by M/s. Dilip Construction Co. from an order of the District Judge, <NAME> at Rajnandgaon, setting aside an award of the umpire in its favour, directing the payment of a sum of Rs. 8,65,000/- by <ORG>

2. The material facts, shortly stated, are these. By a contract dated 26th February, 1960, the appellant was employed by the respondent for winning and raising 45,00,000 Cft. of BF grade lime-stone ore from its <ORG>, and for transporting and loading the same into wagons at the railway siding of the mines. The deed of contract contained an arbitration clause, and it reads thus:

"61. If at any time any question, dispute or difference whatsoever shall arise between the Employer and the Contractor upon or in relation to or in connection with the contract either party forthwith give to the other notice in writing of the existence of such question, dispute or difference and the sama shall be referred to the arbitration of two persons, one to be nominated by the Employer and the other by the Contractor or failing agreement between these two to an <ORG> appointed by them. Such submission shall be deemed to be a submission to arbitration within the meaning of the Indian Arbitration Act , 1940 or any statutory modification thereof. The award of the Arbitrators or <ORG> shall be final and binding upon the parties upon every or any such reference, the costs of and incidental to the reference and to the award respectively shall, subject to the condition that the amount of such costs to be awarded to either party shall not, in respect of a monetary claim exceed the percentage set out below of any such award, irrespective of the actual fees, costs and expenses incurred by either party, be in the discretion of the arbitrators or umpire who shall determine the amount thereof, as between party and party and direct by whom and to whom and in what manner the same shall be borne and paid. Work under the contract shall, if reasonably possible, continue during the arbitration proceedings, and no payments due or payable by the Employer shall be withheld on account of such proceedings. Provided, that in matter of claims where the amount involved does not exceed Rs. 25,000/- the decision of the Engineer shall be final and binding on the contractor and such items shall not be open to arbitration.

Except that no issues on which the final settlement is otherwise provided for in this contract shall be referred to <ORG>."

3. The period stipulated in the contract for the completion of the work was of 12 months w.e. f. 29th December, 1959, but that period was extended from time to time upto 15th December, 1961. During the period in question, the appellant could perform the contract to the extent of 31,52,132.32 Cft. of lime stone, and received payments for the work done against running bills. Upon termination of the contract, the respondent prepared a final bill for Rupees 21,000/-. This was not accepted by the appellant and it instead submitted its own bill dated 5th May, 1965, raising a demand for payment of Rs. 16,77,197.28 P. That was followed by a letter dated 28th May, 1965, addressed by the appellant to the respondent, by which it requested a final settlement of accounts within 15 days. On 21st June, 1965, the appellant served the respondent with a lawyer's notice of submission to arbitration, stating that it had named one <NAME> to be its arbitrator and requesting the respondent to nominate its arbitrator within 10 days, failing which the arbitrator named by it was to become the sole arbitrator and was to proceed with the reference. In response to the same, the respondent sent a reply dated 2nd July, 1965 to the following effect:

"In the contract under reference between your clients and <ORG>, Bhilai Plant, no dispute as contemplated under the Arbitration agreement has arisen, which would entitle your clients to refer the matter to arbitration.

This is specifically so, in view of the fact that your client's claims are under examination by <ORG> and if in the course of finalisation of the claims any difference comes out, then only there will be any question of reference to arbitration.

It may also be mentioned that some of the claims mentioned by your client are even outside the purview of the agreement referred to by our clients.

Without prejudice to our above contentions, and reserving our right to take such action as may be deemed necessary in respect of the unmaintainability of the claims, We hereby nominate <NAME>, Sr. D. G. M., <ORG> as our arbitrator."

From the reply sent by the respondent it is quite clear that the existence of a dispute giving rise to arbitration was itself denied. However, as a matter of abundant caution, the respondent named its own arbitrator. In View of the threat in the notice sent by the appellant that in case of its failure to designate an arbitrator, the said <NAME> was to become the sole arbitrator, that was done without prejudice to the objection already raised.

4. The arbitrators named by the parties appear to have entered upon the refer-

ence despite the protest of the respondent. They could not arrive at an agreement and appointed one <NAME> to be the umpire. That is how the matter reached the umpire. By an award dated 10th April, 1967, the umpire directed the respondent to pay to the appellant a sum of Rs. 8,65,000/- in full and final settlement of its claim. On 1st May, 1967 the appellant presented an application under Section 14(2) of the Arbitration Act, for the filing of the award and to have the award made a rule of the <ORG>. The learned District Judge directed the umpire to file the award. On the award being filed, the respondent made an application under Sections 30 and 33 of the Act for setting aside the award on the grounds that, the award had ignored the terms of the contract and was as such bad on the face of it; that not being based on evidence, it was a nullity and was, therefore, liable to be set aside in its entirety.

5. The most crucial question on which the decision of the appeal must turn and which, the learned District Judge did not deem it worthy of mention, is, whether there was a submission proper of a dispute to arbitration. The question is one which touches the jurisdiction of the arbitrators and the umpire, and it has been debated before us at great length.

6. In support of his contention that the award of the umpire is a nullity, learned counsel for the respondent relied upon Clause 61 of the agreement, and contends that on a plain construction of its terms, it is clear that the pre-existence of a difference or dispute is a condition precedent to the invoking of the arbitration clause. Consequently, the jurisdiction of the arbitrators and for the matter of that of the umpire to enter upon and adjudicate on a submission depends on the factual existence of such difference or dispute. In this case, there was no such difference or dispute.

7. In an endeavour to overcome the difficulty, the learned counsel for the appellant has advanced a three-fold argument. Firstly, he urges that no such objection having been taken earlier, the objection cannot be permitted to be raised for the first time at this stage in appeal. Secondly, the submission is that the respondent, having participated in the proceedings before the arbitrators and the umpire, with a clear knowledge of the circumstances on which it might have founded an objection to their proceeding to make an award; and thereby submitted to the arbitration going on, and allowed the arbitrators and the umpire to deal with the case as it stood before them, taking its chance of the decision being more or less favourable to itself, was now precluded by conduct from raising the objection to the validity of the award. In support of the contention, reliance is placed on Halsbury's Laws of England, 3rd Edn. Vol. 2., p. 37; <NAME> v. <ORG>, 1925 AC 619; <CITATION> ., AIR 1954 Cal 245; Arbn. Juniter General Insce. <CITATION> , AIR 1956 Cal 470; <CITATION> , AIR 1960 Punj 182 and <CITATION> ., AIR 1965 Cal 42. Lastly the learned counsel urges that the respondent having failed to pay in full and settlement of the bill submitted by the appellant, there existed a dispute on the date of submission. At any event, he contends, that the respondent having joined issue on various items of claim in its counter-statement of acts filed before the arbitrators, there came into existence a difference or dispute between the parties as to the claim and, therefore, the arbitrators and the umpire had jurisdiction to deal with the matter. These contentions are wholly unfounded, and must, in our opinion, be rejected.

8. There was no jurisdiction either in the arbitrators, or the umpire to make an award in this case. The pre-existence of a difference or dispute is a condition precedent to the invoking of the arbitration clause. On a plain construction of its terms, the right to arbitration under Clause 61 of the agreement only arises, if a difference or dispute exists, at the time when a notice of submission is served by a party seeking to enforce the arbitration clause. In the present case, there was, in fact, no such difference or dispute. If there is no dispute, there can consequently be no right to demand arbitration. The <ORG> must, therefore, be satisfied that there was some real point of difference which had to be submitted to arbitration.

9. The law on the subject is lucidly stated in Russel on Arbitration, Seventeenth Edn. p. 28 :

"To constitute a submission proper, there must be a difference. If there is no difference there is nothing for an arbitrator to arbitrate about, and in the case of an agreement to refer future disputes to arbitration, the arbitrator's jurisdiction does not arise until a dispute has arisen. It might seem, therefore, that if the agreement between the parties is in effect an agreement to prevent disputes from arising and not an agreement as to how they are to be settled, then it is neither an agreement to refer to arbitration nor a submission to arbitration, and it is not within the Act"

10. The existence of a dispute is an essential condition for the jurisdiction of an arbitrator. If there is no dispute, there can be no right to demand arbitration at all. This was clearly laid down by <NAME>, J., as he then was, in <CITATION> 46 Cal 534 = (AIR 1920 Cal 143). A point as to which there is no dispute cannot be referred to arbitration. Failure to pay does not necessarily constitute a difference or dispute. A dispute implies an assertion of right by one party and repudiation thereof by another. In the instant case, there was merely an assertion of a claim made by the appellant for payment of Rupees 16,77,197.28 P., but there was no repudiation of that claim by the respondent and, therefore there could be no dispute which could be referred to arbitration. The jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of a cause of action, but upon the existence of a dispute. ( <CITATION> , 24 Cal WN 775 = (AIR 1920 Cal 808 (2)).

11. The leading case on the subject is <ORG> v. <ORG>, 1899 AC 79 (HL). In that case, Section 5 of an Act of <ORG> authorised the railway company to charge a reasonable sum, by way of addition to tonnage rate, for services rendered to a trader. The Act further provided that any differences between the parties arising under the said section was to be determined by an arbitrator to be appointed by <ORG>. The Railway company, in pursuance of the power so conferred on it, had given four days' time to traders to unload their wagons, and, after the said period was over, the traders were required to pay 6d. a day as demurrage for each wagon. The defendant took more than four days to unload his wagons. He knew of these conditions but all along had protested against the right of the company to levy the said demurrage. The railway company sued the defendant in <ORG> to recover a certain sum for such demurrage. The defence was that the suit could not go on, and that the company's claim could only be settled by an arbitrator to be appointed by <ORG>. The finding of <ORG> Judge was that no difference had arisen between the parties before the action had been commenced, either on the question as to whether the four free days were sufficient or not for unloading, or whether 6d. a day was a reasonable charge or not. The question before the <ORG> was not whether the action was to be stayed or not. The question was of wider scope, namely, whether the action was maintainable or not. In the said case, <ORG> reversed the decision of the <ORG> of Appeal. Lord <NAME>, L. C., stated:

"A condition precedent to the invocation of the arbitrator on whatever grounds is that a difference between the parties should have arisen; and I think that must mean a difference of opinion before the action is launched, either by formal plaint in <ORG> or by writ in the superior <ORG>. Any contention that the parties could, when they are sued for the price of the services, raise then for the first time, the question whether or not the charges were reasonable and that therefore they have a right to go to an arbitrator, seems to me to be absolutely untenable."

Lord <NAME> then drew an analogy from an arbitration out of Court. He said that before the arbitrator could enter upon the reference, it must be shown that a difference had arisen between the parties before the submission and, that the arbitrator would have jurisdiction only to adjudicate upon the particular difference which had arisen before the submission. If fresh differences arise after the arbitrator had entered upon the reference, the arbitrator cannot adjudicate upon them without a fresh submission. In the same case Lord <NAME> made the following observations- "One matter about which I do desire to say a word.........is this.........that this difference before action brought, and that it is too late.........afterwards to raise a difference which can be brought within the meaning of this section." The principle so formulated has been applied in India where the application was for stay or action under Section 34 of the Indian Arbitration Act. In Ladha Singh Bed! v. <NAME>, ILR (1939) 2 Cal 181 = (AIR 1940 Cal 105) <NAME>, J. dealing with this case pointed out as follows:

"The noble Lord then drew an analogy from an arbitration out of Court. He said that before the arbitrator could enter upon the reference, it must be shown that a difference had arisen between the parties before the submission and that the arbitrator would have jurisdiction only to adjudicate upon the particular difference which had arisen before the submission."

The same view has been taken by <NAME>, <NAME> and <NAME>, J. in <NAME> v. <NAME>, ILR (1950) 1 Cal 497.

12. The weight of authority is clearly in favour of the view that unless there is repudiation of a claim, there can be no dispute in respect thereof. <CITATION> , (1921) 33 Cal LJ 545 = (AIR 1921 Cal 342), the buyer wanted a variety of information from the sellers to enable him to judge whether the goods supplied were or Were not according to the contract. Amongst other things, he demanded production of shipment samples. The sellers declined to comply with the request. But there was at no stage an assertion by the buyer that the goods had not been supplied according to the contract and consequently there was not and could not be a repudiation by the sellers of any such assertion. It was held by <NAME> and <NAME>, JJ. that there was no "dispute" which could be and had been validly referred to arbitration. While repelling the contention similar to the one made before us, <NAME>, J. stated:

"It has been argued before us that this is an unduly narrow construction of the arbitration clause and that the terms 'difference' and 'defect' need not be restricted to 'difference' or 'defect' in. quantity or quality only. We are disposed to accede to this contention, but, even then, the appellant is not entitled to succeed, unless he proves that there was a dispute as to difference or a dispute as to defect. Now, a dispute implies an assertion of a right by one party and a repudiation thereof by another. In the case before us, the parties never reached that stage."

<CITATION> , AIR 1931 Bom 164 the plaintiff was the sub-partner of the defendant in a certain business. The deed of sub-partnership incor-ported all the articles, covenants, conditions and obligations contained in the principal partnership agreement between the defendant and his partner which were not inconsistent With the terms of the agreement. There was a clause in the deed of principal partnership which provided, inter alia, that any dispute or difference arising between partners with regard to the construction of any of the articles contained in the agreement or to any divisions of goods or things, related to the said Partnership or the affairs thereof, shall be referred to arbitration in the manner therein mentioned. The plaintiff called upon the defendant to make up the accounts and to pay him the amount found due at the foot thereof. The defendant did not pay and the plaintiff filed a suit praying that the defendant may be ordered to render a true and complete account of the profits earned by the partnership business and of the amount due to the plaintiff, and to pay the same to him. The defendant thereupon took out a summons for an order to stay further proceedings to enable the parties to refer to arbitration. It was held by <ORG>, that as there was no dispute between the parties but mere failure to pay, the suit was maintainable and could not be stayed. The principles deducible from these authorities are-

(i) The existence of a difference or dispute is an essential condition for the arbitrator's jurisdiction to act under an arbitration clause in an agreement;

(ii) The jurisdiction of an arbitrator depends not upon the existence of a claim or the accrual of a cause of action, but upon the existence of a dispute. A dispute implies an assertion of a right by one party and repudiation thereof by another;

(iii) A failure to pay is not a difference, and the mere fact that a party could not or would not pay does not in itself amount to a dispute unless the party who chooses not to pay raises a point of controversy regarding, for instance, the basis of payment or the time or manner of payment.

13. There is no merit in the contention of learned counsel for the appellant that the respondent not having taken any objection as to the jurisdiction of the arbitrators or the umpire to enter upon the reference earlier, it cannot now be permitted to raise such an objection at this stage. Throughout, the respondent has taken the stand that there was no difference or dispute existing at the time of reference and, therefore, the arbitration clause could not be invoked. In the first place, such an objection was expressly taken not only at the initial stage as soon as the lawyer's notice was served, but also thereafter before the arbitrators and in the <ORG> below. In its reply dated 2nd July, 1965, the respondent had clearly stated that "no dispute as contemplated in the arbitration agreement has arisen" as would entitle the appellant to refer the matter to arbitration. The respondent further stated that in view of the fact that the appellant's claim was "under examination by <ORG>", and if in the course of finalization of the claim "any difference comes out" then only there will be any question of reference to arbitration. Thereafter, in para 18 of the counter-statement of facts filed before the arbitrators, the respondent reiterated that the the reference to arbitration was premature. Once again, in, the <ORG> below, the respondent while applying under Section 30 of the Arbitration Act for setting aside the award, had specifically alleged in para 5 of the application that "there was no dispute or difference as contemplated by Clause 61 of the agreement" and that it had only nominated an arbitrator without prejudice to this contention, and in para 41 thereof stated that the arbitrators and the umpire had "acted without jurisdiction." In the face of such clear and explicit assertions by the respondent, at all relevant stages, we fail to appreciate how it can be urged that no such objection was taken earlier and, therefore, the objection cannot be raised at this stage.

14. It is well established by authority that once the parties appearing before the arbitrators object to the jurisdiction, they do not waive their rights by proceeding with the case before the arbitrators and defending themselves as best as they may. The law is succinctly stated in Russel on Arbitration, 17th Edn. p. 174 thus :

"In cases where an arbitrator enters into the consideration of matters which are not referred to him, or which he has no jurisdiction to try, 'the question is not one of waiver or estoppel, but of authority' and a party continuing to attend the reference after objection taken and protest made does not give the arbitrator authority to make an award."

"If a party to a reference objects that the arbitrators are entering upon the consideration of a matter not referred to them and protests against it, and the arbitrators nevertheless go into the question and receive evidence on it, and the party, still under protest, continues to attend before the arbitrators and cross-examines the witnesses on the point objected to, he does not thereby waive his objection, nor is he estopped from saying that the arbitrators have exceeded their authority by awarding on the matter."

"Continuing to take part in the proceedings after protest made does not amount to be a consent."

In particular, we would refer to the remarks of Lord <NAME>, L. C., in <NAME> v. <NAME>, (1880) 6 QBD 63 where he said:

"In arbitrations, where a protest is made against jurisdiction, the party protesting is not bound to retire; he may go through the whole case, subject to the protest he has made."

See also <NAME> v. <NAME>, (1864) 34 LJQB 8. The principles enunciated in these cases have throughout been followed in India. <CITATION> , AIR 1927 Bom 553; <CITATION> , AIR 1931 Bom 81; <CITATION> ., AIR 1931 Bom 343 and <NAME> v. <NAME>, (1961) 31 LJ Ch 420. Thus, the appearance of the respondent after objection taken and protest made did not give the arbitrators or the umpire authority to make an award, nor estopped it from urging that the umpire has exceeded his authority. In such a case, no question of estoppel, acquiescence or waiver, arises.

15. Learned counsel for the appellant relied upon the following passage in Halsbury's Laws of England, 3rd Edn. Vol. 2, p. 37:

"84. Party protesting that arbitrator is exceeding his authority.

A party who protests that the arbitrator is acting either without authority or beyond the scope of the agreement of reference, but nevertheless attends the reference, does not thereby waive his protest." but we fail to understand how that passage supports him,

16. The decisions relied upon by learned counsel for the appellant are distinguishable on facts. They rest on the principle of estoppel, waiver or acquiescence. They rest on the principle that if a party allowed an arbitrator to proceed without objecting to his jurisdiction or competence, he would not be subsequently heard to say that the award should be set aside, on the ground that the arbitrator was not competent to decide the dispute in question. Though the learned counsel has not referred to the leading cases on the subject, we may advert to them. That principle was enunciated by <ORG> in <NAME> v. Mt. Bibi Bechunnissa, (1876) 3 Ind App 209 p. 220 in the following words :

".........that the appellant, having a clear knowledge of the circumstances on which he might have founded an objection to the arbitrators proceedings to make their award, did submit to the arbitration going on, that he allowed the arbitrators to deal with the case as it stood before them, taking his chance of the decision being more or less favourable to himself; and that it is too late for him, after the award has been made, and on the application to file the award, to insist on his objection to the filing of the award."

Likewise, <ORG> in <NAME> and Co. v. <NAME>, AIR 1920 PC 123 was faced with the question as to the defective appointment of a sole arbitrator. Their Lordships were of the opinion that though the defect, i. e., the absence of notice under Section 9(b) , would have been fatal to the authority of the person appointed as sole arbitrator but for the fact that any objection on this head was waived by the party concerned, he having rested his case as to the validity of any arbitration in the place in which it was held, he could not be permitted to rely on a defect in procedure which could have been remedied at once if he had raised the point.

17. We shall now deal with the decisions relied upon. In (1925) AC 619 <ORG> held that the claimant having allowed the point of insurable interest to be raised before the arbitrator without objection, it was not open to him to call in question the authority of the arbitrator to entertain it. In AIR 1956 Cal 470 (supra), the submission to arbitration was by a party under a statutory disability, and in spite of the disability, it had participated in the arbitration without protest and fully availed of the arbitration proceedings and then when it saw that the award had gone against it, it came forward to challenge the whole of the arbitration proceedings as without jurisdiction on the ground of a known disability of a party. That was also a case where a party having knowledge of its disability had withheld that fact and was thereby precluded by conduct from challenging the validity of the award. In AIR 1965 Cal 42 (supra), there was failure to object to the jurisdiction of the arbitrators and the umpire as to investigate a part of the claim, i. e., with respect to the hiring charges, at any stage of the proceedings, and it was held that such failure acts as an estoppel. In AIR 1960 Punj 182 (supra), there was a valid submission, and no objection was taken to the Superintending Engineer, for the time being, adjudicating upon the dispute. The party willingly and without protest took part in the proceedings before the arbitrator, and thereby took its chance of the decision going in his favour. In those circumstances, it was held that there was implied variance of the agreement to refer to a named arbitrator, by conduct, and that it was under the varied agreement that the arbitrator acted. There was, accordingly, no defect in the award.

18. We are here not concerned with any procedural irregularities, but initial lack of jurisdiction. <CITATION> ., AIR 1962 SC 1810, <ORG> has observed:

"But what confers jurisdiction on the arbitrators to hear and decide a dispute is an arbitration agreement as defined in Section 2(a) of the Arbitration Act, and where there is no such agreement, there is an initial want of jurisdiction which cannot be cured by acquiescence. It may also be mentioned that the decision in (1860) 30 LJ Bcy 10 has been understood as an authority for the position that when one of the parties to the submission is under a disability that will not be a ground on which the other party can dispute the award if he was aware of it. Vide Russel on Arbitration, 16th Edition, 320"

When the respondent was not willing to join in the submission, the remedy of the appellant lay by way of an application under Section 20 of the Arbitration Act. We are fortified in that view by the decision of <ORG> in <CITATION> , AIR 1955 SC 468. While dealing with the question, their Lordships of <ORG> observed:

"A reference requires the assent of 'both' sides. If one side is not prepared to submit a given matter to arbitration when there is an agreement between them that it should be referred, then recourse must be had to the <ORG>, under Section 20 of the Act and the recalcitrant party can then be compelled to submit the matter under Sub-section (4).

In the absence of either, agreement by 'both' sides about the terms of reference, or an order of the <ORG> under Section 20(4) , compelling a reference, the arbitrator is not vested with the necessary exclusive jurisdiction."

19. It is now well settled that an inherent lack of jurisdiction or want of jurisdiction renders the ultimate decision a nullity so that it can be challenged at any subsequent stage and even in collateral proceedings. Such a defect cannot be cured even by waiver or acquiescence of the party entitled to raise the objection. ( <CITATION> , AIR 1954 SC 340). By now the expression "jurisdiction" has acquired a much wider meaning. However, the expression "jurisdiction" even in its original sense when it was limited, included within its ambit the stage of commencement of a proceeding. We are concerned in this case with jurisdiction at the commencement of the proceeding and, therefore, even in the original sense of the term, when it was so limited, such a defect of jurisdiction was a nullity. This theory has now been modified by enlarging the scope of the expression "jurisdiction" so as to include in its ambit even those defects which may crop up later during the course of the proceeding. This modified meaning enlarging the scope of the expression "jurisdiction" is dealt with in <NAME> v. <ORG>, (1969) 1 All ER 208 by <ORG>, and the same has been followed with approval by their Lordships of <ORG> in <CITATION> ,  = (AIR 1971 SC 1558).

20. In the state of law as it is, there can be no manner of doubt that the defect of jurisdiction with which we are concerned in the present case, is such that in case it exists, the ultimate award would be a nullity and, that being so, such an objection can be validly raised for the first time even at this stage. For these reasons, we are of the view that the objection taken on behalf of the appellant to the tenability of this argument has no force.

21. Having regard to the view that we have taken on the question of jurisdiction, there is no need for us to go into other questions. We are satisfied that the umpire had no jurisdiction to deal with the matter and, therefore, the award was rightly set aside.

22. The result, therefore, is that the appeal fails and is dismissed with costs. The order of the learned District Judge setting aside the award of the <ORG> is affirmed, though of a different ground. Counsel's fee as per schedule or a certificate, whichever is less.


<NAME>, Judicial Member

1. This appeal is directed against the order of the Commissioner (Appeals) dated 7-10-1982 passed in Appeal No. 18/111. D/CIT. II of 1982-83. The assessment year involved in this appeal is 1978-79.

2. According to the facts arising in this case, the firm filed the original return for the assessment year 1978-79 on 31-3-1979, admitting a net income of Rs. 4,16,289 from its business in purchase and sale of yarn, fibre, etc. Subsequently, on 1-11-1980, the firm filed a revised return showing an income of Rs. 2,46,450. The difference between the income disclosed in the original return and the one returned in the revised return is on account of the claim made under the head bad debts. The <ORG> forwarded the draft order of assessment to the assessee on 29-10-1981, which was served on the assessee on the same date. On 8-12-1981, the <ORG> forwarded the draft assessment order under Section 144B of the Income-tax Act, 1961 ('the Act'), along with the objections of the assessee-firm to the <ORG> for further action. The <ORG> gave instructions by his order under Section 144B on 21-4-1982. The same day, the <ORG> completed the assessment. According to the Commissioner (Appeals), the <ORG> completed the assessment within 180 days from 29-10-1981 and, therefore, it is within the time limit.

3. Before us, the learned Counsel appearing for the assessee submitted that the order of the assessment dated 21-4-1982 is without jurisdiction inasmuch as it is barred by time and, hence, according to the assessee, the assessment is ab initio void. The crux of the submission made by the learned Counsel was that the original return, which was filed on 31-3-1979, was filed neither under Section 139(1) nor under Section 139(2) of the Act, being beyond the time limits prescribed by the aforesaid sections. The return was one filed under Section 139(4) . Therefore, the revised return filed on 1-8-1980 is non est in law, because a revised return under Section 139(5) can be filed only to rectify mistakes, etc., in a return filed under Section 139(1) or Section 139(2) . If that is so, according to him, the assessment completed on 21-4-1982 is barred by time since, for the assessment year 1978-79, two years' period ended on 31-3-1981.

4. The learned counsel appearing for the assessee, in support of his argument, relied upon the decision of <ORG> in the case of <CITATION>  136 ITR 559, wherein <ORG> was of the view that:

Different time limits for completion of assessments have been provided in respect of cases where a return has been filed under Sub-section (4) or a revised return has been filed under Sub-section (5). Sub-section (5) does not provide for any separate category of return. It only gives a right to an assessee to revise a return already tiled under Sub-section (1) or Sub-section (2). When a revised return is filed the original return stands supplanted or withdrawn. If the original return is under Sub-section (1), and a revised return is filed, then the revised return would be a return under Sub-section (1) and so will be the position if the original return was under Sub-section (2). Therefore, a return under Sub-section (4) stands in a category different from that provided in Sub-section (1) or Sub-section (2) and such a return cannot be revised under Sub-section (5). The revised return, being an invalid return, cannot extend the period of limitation for completing the assessment.

5. Yet another decision, relied upon by the learned Counsel for the assessee, was that in <CITATION> [l978] 113 ITR 830 (All.) (FB). This judgment was then followed in Dr. <NAME>'s case (supra). In Metal India Products case (supra), the Full Bench of the Allahabad High Court was of the view that where the assessee filed his return within the time prescribed by Section 139(1) and where no notice was issued by the ITO to the assessee under Section 139(2) , even if the assessee filed its return under Section 139(4) , within four years from the end of the assessment year and before the assessment order was passed, the assessee is liable to pay penalty under Section 271(1)(a) of the Act, for not having filed the return within the time prescribed in Section 139(1) or the time given under Section 139(2) . For the purposes of penalty, the filing of the return within the time prescribed by Sub-section (4) cannot be treated as a return filed within the time prescribed by Sub-section (1).

6. Reliance was also placed on the decision in <CITATION>  129 ITR 379 (Delhi). This judgment was also followed by <ORG> in Dr. <NAME>'s case (supra). In <NAME> case (supra), <ORG> was of the view that subsection (5) of section 139 applies only in a case where a person, having furnished a return under Sub-section (1) or Sub-section (2), discovered any omission or wrong statement therein. The sub-section does not refer to Sub-section (4) and, therefore, does not entitle an assessee to rectify or revise a return filed under Section 139(4) . Accordingly, <ORG> held that the return filed on 30-3-1965, being one under Section 139(4) , a revised return could not be filed under Section 139(5) and the return filed on 28-3-1966 was invalid in law.

7. On the other hand, the learned departmental representative pointed out that the assessee can file any number of returns under Section 139(4) . Therefore, according to him, the second return filed on 1-11-1980 is not invalid in law, and if that is so, according to him, the assessment order passed on 21-4-1982 is not barred by limitation. He relied upon a judgment of <ORG> in <CITATION>  137 ITR 722, wherein <ORG> was of the view that:

The Income-tax Act contemplates the filing by the assessee of a correct and complete return. The law gives him a right to substitute and bring on record a correct and complete return if he discovers any omission or wrong statement in the return originally filed by him. The law cannot content plate the making of an assessment on the basis of a return which even the assessee claims contains wrong statements. When an assessee files a revised return, he, in fact, admits that the original return filed by him was not correct or complete and substitutes the same by a revised return which, according to him, is correct and complete. The effective return for the purposes of assessment is thus the return which is ultimately filed by an assessee on the basis of which he wants his income to be assessed. Sub-section (5) is a part of Section 139 . The statute itself provides for the filing of a revised return. Section 143 does not specifically deal with the return filed either under Sub-section (1) or Sub-section (2) or Sub-section (4) of Section 139 . It deals generally with the return filed under Section 139 . It is true that Sub-section (5) specifically mentions Sub-section (1) or Sub-section (2) but does not mention the case of a return filed under Sub-section (4) of Section 132 . However, the true purport of a return filed under Sub-section (5) is that it substitutes the original return filed and Sub-section (4) specifically gives the assessee a right to file a return at any time before the assessment. Hence, where a voluntary return has been filed under Section 139(4) , a revised return can be filed in respect of it.

While coming to the aforesaid conclusion, <ORG> dissented from the view taken by <ORG> in <NAME> case (supra).

8. Yet another decision, relied upon by the learned departmental representative, was that of Mst. <CITATION>  129 ITR 560, wherein <ORG> was of the view that if an assessee, after having filed a return under Section 139(4) , files another revised return subsequently, it is to be assumed that he has given a go-by to the return filed previously and that so far as he is concerned, the return filed subsequently is the correct and proper return. Where the ITO allows the revised return to be filed and proceeds to assess thereunder without any objection from the assessee, it would not be open to the assessee to contend later that the return filed subsequently was invalid. Therefore, <ORG> held that the subsequent return filed by the assessee was a valid return under Section 139(4) and the assessment made thereunder was within the time prescribed under Section 153 of the Act.

9. Again, the learned departmental representative attempted to support his view by placing reliance on the judgment of <ORG> in <CITATION> .) Ltd.  77 ITR 518. In that case, <ORG> held by the majority judgment that Section 24(2) of the Indian Income-tax Act, 1922 ('the 1922 Act'), conferred benefit to the assessee, whereby losses incurred in a particular year could be set off and carried forward to a subsequent assessment year. There was no provision in Section 22 of the 1922 Act, under which losses had to be determined for the purpose of Section 24(2) . Section 22(2A) simply laid down that in order to obtain the benefit of Section 24(2) , the assessee must submit his return showing loss within the time specified by Section 22(1) . That provision, according to <ORG>, had to be read with Section 22(3) . It was held that a return showing a loss submitted at any time before the assessment was made was valid, as it could be contended that Section 22(3) was merely a proviso to Section 22(1) .

10. Therefore, it was submitted that inasmuch as the assessee itself filed two returns, the <ORG> was made to proceed on the second return wherein bad debt deduction was claimed. It was further submitted that the approach of any judicial authority must be to vest jurisdiction in the <ORG> and not to divest the jurisdiction which was already vested. On the other hand, the learned Counsel appearing for the asses see, relying upon the decision of <ORG> in <CITATION> .  88 ITR 192 contended that when there are two views possible on the same point, that which is in favour of the assessee should be followed.

11. We have heard the rival submissions. The original return was filed on 31-3-1979 and, subsequently, a revised return was filed on 1-11-1980. On 29-10-1981, draft assessment order was framed and on 21-4-1982, final order of assessment was passed. Section 139 particularly enables the filing of returns under Sub-section (1) suo moto within the statutory period provided under Sub-section (2), in response to a notice specifically issued as also under Sub-section (4), voluntarily. The issue before us is whether a return filed under Sub-section (4) could be considered to be a return filed under subsection (1) or Sub-section (2) of Section 139 , because only if the return filed under Sub-section (4) is so construed, the assessee would be entitled to file a revised return under Sub-section (5). The learned Counsel for the assessee had submitted that if two views are possible, as in the present case, then the view in favour of the assessee should be taken. This is not an instance where one of the two views will always be favourable to all the assessees. In <ORG> view, if an assessee makes a return even beyond the time limit allowed under Section 139(1) , or Section 139(2) , and discovers a mistake therein, he should always file a revised return. This view enables an assessee to set right any mistake even in returns, which were originally filed belated. In <ORG> view, such action is not possible. Merely because in the present case, if following <ORG> view, the revised return is held to be non est, limitation would have set in, it does not follow that this is the view which has to be construed as favourable to the assessees in general. The rule of interpretation canvassed for by the learned Counsel, therefore, does not help us in deciding the present case. We have to decide the case in the light of the judgments of the various <ORG> relied on by the parties. We have already set out the reasoning of <ORG> in the case of <NAME> (supra), which we repeat as under:

...Sub-section (5) is a part of Section 139 . The statute itself provides for the filing of a revised return. Section 143 does not specifically deal with the return filed either under Sub-section (1) or Sub-section (2) or subsection (4) of Section 139 . It deals generally with the return filed under Section 139 . It is true that Sub-section (5) specifically mentions subsection (1) or Sub-section (2) but does not mention the case of a return filed under Sub-section (4) of Section 139 . However, the, true purport of a return filed under Sub-section (5) is that it substitutes the original return filed and Sub-section (4) specifically gives the assessee a right to file a return at any time before the assessment. Hence, where a voluntary return has been filed under Section 139(4) , a revised return can be filed in respect of it.

<ORG> has given reasons why even where a voluntary return has been filed under Section 139(4) , a revised return could yet be filed to set right mistakes. In the present case, the assessee had filed a return showing an income of as much as Rs. 4,16,000 but, later in the return filed on 1-11-1980, the income shown was only Rs. 2,46,000. The difference of Rs. 1,70,000 was an amount claimed as bad debts. In the view of <ORG>, such action was clearly permissible. We have carefully considered the views expressed by the Delhi and the Allahabad <ORG>, but we would respectfully follow the reasoning of <ORG> and hold that merely because the first return filed on 31-3-1979 showing an income of Rs. 4,16,289 for the assessment year 1978-79 was a return under Section 139(4) , the assessee was not prevented from filing the revised return showing an income of Rs. 2,46,450 on 1-11-1980. That being so, the return filed on 1-11-1980 is not non est in law and the assessment as made is within the period of limitation. On this ground, the assessee, therefore, does not succeed.

12. Insofar as merit is concerned, the learned Counsel for the assessee reiterated the same arguments as were advanced before the authorities below. In fact, the <ORG> has disallowed a sum of Rs. 1,69,840, being bad debts claimed in the business in purchase and sale of yarn. He observed that the amounts varying between Rs. 100 and Rs. 10,000 were being written off without any action being taken for recovery of the debts. Before the <ORG>, it was submitted that the firm incurred heavy losses and the business had come to an end. According to the assessee, the amounts written off represented interest charged but not accepted by the debtors and in some cases, they represented the difference in rates. It was further submitted that the firm did not have funds even to file a suit against these parties. However, the <ORG> refused to accept the contention put forward by the assessee.

13. In the original return filed by the assessee, there was no claim for deduction of bad debts. The original return declared an income of Rs. 4,16,289 and the <ORG> had initiated penalty proceedings for nonpayment of tax under Section 140A of the Act and levied a penalty of Rs. 50,000 by his order dated 20-9-1980. Subsequent to this, the firm filed a revised return claiming bad debts of Rs. 1,13, 274 in the accounts for the period 1-10-1976 to 30-6-1977 and Rs. 56,567 in the accounts for the earlier period 1-7-1976 to 30-9-1976. The details of bad debts were furnished before the <ORG>. It was represented before him that most of the amounts were less than Rs. 1,000 and in all those cases, either the party was disputing the charging of interest or was not traceable. The remarks made by the <ORG> on some of the items are as under:

Amount Name and address Remarks Rs. 10,900 <ORG>, Paid bank commission for Chirala hundi drawn on him for party not in existence. 6,969 <NAME>, Guravapalam 3,380 <NAME>, Chinna- Disputed amount. <NAME>, Narsannapet 18,385 <NAME>, <NAME>, Disputed amount. Narsannapet 18,932 <NAME> Rate difference debited not <ORG>, Secunderabad agreeing to pay. 10,840 <NAME>, Bangalore Your rate differences paid. 3,445 <ORG> Waived interest. Ltd., Cheekur 5,623 <NAME> Expired. 4,543 <NAME>, Nerada Expired. 3,591 <NAME>, Nerada Not available in his village do not know whereabouts. 9,715 The Andhra Co-operative Difference in accounts. Spg. <NAME>, Guntakal 5,000 <NAME>, Secunderabad Paid advance. Party not available.

The learned Commissioner (Appeals) pointed out that apart from the verbal observations of the assessee-firm, there is no other evidence to indicate that the debts had become bad. He has also pointed out that large amounts running to Rs. 80,000 and odd were written off without any effort being made for recovery. However, under these circumstances, he considered that amounts of less than Rs, 1,000 should be treated as bad and benefit should be given to the assessee on these amounts. The disallowance was restricted to amounts in excess of Rs. 1,000. Accordingly, he gave relief of Rs. 22,128 and confirmed the balance.

14. However, on a scrutiny of the items, as set out by the <ORG>, we found that two of the parties appear to have expired. They are V. Laxmaiah, Ramanpet and <NAME>, Nerada. In the circumstances under which the assessee was placed, we consider that these two items of debt have become irrecoverable looking to the amounts involved as taking legal action may not prove commensurate with expenses. Therefore, these two items of amounts can be considered as bad debts. Apart from what has been stated before the authorities below, the assessee has not produced any evidence before us afresh to consider the case of bad debts as argued by the learned Counsel appearing for the firm. Under such circumstances, apart from the two items of debts which we consider as having become irrecoverable, we are unable to interfere with the other items of bad debts as claimed by the assessee. Accordingly, to that extent, we allow the appeal in part.


JUDGMENT <NAME>, J.

1. These petitions raise a common question and may conveniently be decided by a common judgment.

2. The petitioners are public limited companies and manufacture sugar through vacuum pan process. <ORG> and <ORG> manufacture alcohol also in the distilleries ituate within the premises of the sugar mills. <ORG> manufacture sugar in Mawana Sugar Works, Mawana and Daurala Sugar Works, Daurala in the district of Meerut. <ORG> also has a distillery for manufacturing alcohol from molasses. Molasses produced at the Mawana and Daurala Sugar Factories is transferred to the distillery situate in the premises of the Daurala Sugar Works, in the petition filed by <ORG> it is not asserted that the petitioner manufactures alcohol also. In the process of manufacture of sugar molasses is produced as a bye-product which forms the basic material from which alcohol js manufactured. The molasses produced by the sugar mills is consumed in their distilleries. The State of Uttar Pradesh has passed an Act known as U.P. Sheera Niyantran Adhiniyam, 1964. Under the aforesaid Act the Excise Commissioner, U.P. is the Controller of Molasses, who exercises full power over the production, sale, preservation and price of molasses. On 1st March, 1975 <ORG> for the first time imposed excise duty on the manufacture and production of molasses under Item No. 68 of the Schedule to the Central Excises and Salt Act . On 30th April, 1975, however, <ORG> issued Notification No. 118/75-CE whereby it exempted molasses from payment of excise duty manufactured in a factory and intended for use in the factory in which it is manufactured or in any other factory of the same manufacturer. By Finance Act , 1980 the <ORG> introduced Tariff Item No. 15CC in the First Schedule to the Central Excises and Salt Act and imposed an excise duty at the rate of Rs. 30/- per metric ton. On 19th June, 1980 <ORG> issued Notification No. 86/80-CE exempting molasses from payment of excise duty which was not produced in the manufacture of sugar by the vacuum pan process.

3. The grievance of the petitioners is that they have been directed by the respondents to pay excise duty at the rate of Rs. 30/- per metric tonne plus special excise duty amounting to five per cent of the basic excise duty under Notification No. 86/80-CE dated 19th June, 1980 on the stock of molasses that the petitioners had in their factories on the date Item No. 15CC was introduced in the First Schedule to the Central Excises and Salt Act . The petitioners objected to this demand but without any success. They have prayed for quashing the demands raised by the respondents. <ORG>, which has paid the duty demand by the respondents, has prayed for refund of the excise duty paid by it. Certain other prayers have been made in these petitions but since no argument was addressed in support thereof, they need not be set out here.

4. It was urged that since excise duty is essentially a tax on production and manufacture of excisable goods, no duty could be levied in respect of goods manufactured and produced during the period when excise duty was not leviable. According to the petitioners molasses produced prior to the date when Item No. 15CC was introduced in the Schedule to the Central Excises and Salt Act was exempt from excise duty under the notification dated 30th April, 1975. The demands made by the respondents are illegal. We find no merit in the contention. It is true that an excise duty by its very nature is on the production or manufacture of goods but as pointed out by <ORG>,in <CITATION> (A.I.R. 1977 S.C. 1459) the excise duty can be levied at a convenient stage so long as the character of the impost, i.e., it is a duty on the manufacture or production, is not lost. The method of collection does not affect the essence of the duty, but only relates to the machinery of collection for administrative convenience. Laws are to be found which impose a duty on excise at stages subsequent to the manufacture or production.

5. Rule 9 of the Central Excise rules provides that no excisable goods shall be removed from any place where they are produced, cured or manufactured or any premises appurtenant thereto, which may be specified by the Collector in this behalf, whether for consumption, export, or manufactures or any other commodity in or outside such place, until the excise duty leviable thereon has been paid at such place and in such manner as is prescribed in the rules or as the Collector may require. Rule 9-A provides that the rate of duty and tariff valuation, if any, applicable to any excisable goods shall be the rate and valuation in force (i) in the case of goods cleared from the premises of a curer on payment of duty on the date on which the duty assessed ; and (ii) in the case of goods cleared from a factory or a warehouse, subject to certain other rules, which are not relevant for our purpose, on the date of the actual removal of such goods from such factory or warehouse. Rule 49 also makes it clear that excise duty is chargeable on removal of the goods from the factory premises or from an approved place of storage. It clearly provides that payment of duty shall not be required in respect of excisable goods made in a factory until they are about to be issued out of the place or premises specified under Rule 9 or are about to be removed from a store-room or other place of storage approved by the Collector under Rule 47. These rules leave no room for doubt that excise duty is leviable not with reference to the date of manufacture of the excisable goods but at the time and at the rate on the date of removal of goods from the place of manufacture or from the approved place of storage. Thus the duty is linked in point of a time to the date of removal and not to the date of manufacture. The fact that in the present cases molasses was produced prior to 18th June, 1980 would not affect the liability of the petitioners for excise duty on the stock of molasses available with the petitioners when excise duty was levied on the molasses under the Finance Act , 1980.

6. It was urged that molasses manufactured by the petitioners was exempt from excise duty under the Notification dated 30th April, 1975 and since that notification has not been withdrawn, the petitioners were entitled to claim exemption from excise duty. The argument is untenable. By the aforesaid notification <ORG> exempted goods falling under Item No. 68 of the First Schedule to the Central Excises and Salt Act in certain circumstances. At that stage molasses was not listed as a separate item in the Schedule but was treated to fall under residuary Tariff Item No. 68 of the Schedule. When the Finance Act , 1980 brought molasses under a specific item (No. 15-CC) it ceased to fall under the residuary Tariff Item No. 68 with the result that the notification dated 30th April, 1975 ceased to apply to molasses. No advantage can, therefore, be taken of the exemption granted under the aforesaid notification which has ceased to cover molasses now.

7. <NAME> appearing for <ORG> contended that since molasses in question was produced at the time when it was exempt from excise duty and the Finance Act of 1980, under which molasses was introduced as a specific item in the Schedule, did not give retrospective operation, this stock could not be subjected to excise duty. Learned counsel, however, could not point out any provision in the Act or the Rules that excise duty was leviable with reference to the date of production. As pointed out earlier, although excise duty is on the production or manufacture of goods, it can be imposed at a stage subsequent to the manufacture or production as held in <CITATION> (A.I.R. 1976 S.C. 182). This dictum has been approved in the case of <ORG> (supra).

8. In the result the petitioners are not entitled to any relief. The petitions are accordingly dismissed with costs.