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P. Vittal Pai and ors. Vs. Agricultural Income-tax Officer, Puttur - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberWrit Petitions Nos. 2803 to 2805 and 2808 to 2810 of 1973
Judge
Reported inILR1975KAR1175; [1976]104ITR794(KAR); [1976]104ITR794(Karn); 1975(1)KarLJ492
ActsKarnataka Agricultural Income Tax Act, 1957 - Sections 36
AppellantP. Vittal Pai and ors.
RespondentAgricultural Income-tax Officer, Puttur
Appellant AdvocateU.L. Narayana Rao, Adv.
Respondent AdvocateH.N. Narayan, Adv.
Excerpt:
.....third proviso to section 36. 8. for immediate reference, the above provision is set out below :36. income escaping assessment -if for any reason any agricultural income chargeable to tax under this act has escaped assessment in any financial year or has been assessed at too low rate, the agricultural income-tax officer may, in cases falling under sub-section (3) of section 40, at any time within five years and in any other case at any time within three years of the end of that year serve on the person liable to pay the tax or in case of a company on the principle officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 18 and may proceed to assess or reassess such income and the provisions of this act shall, so..........by the appellate commissioner. modifications or setting aside of assessment made on a firm, joint hindu family, association of persons, for a particular year may effect the assessment for the said year on a partner or partners of the firm, member or members of hindu undivided family or the individual, as the case may be. in such cases though the latter are not eo nomine parties to the appeal, their assessments depend upon the assessments on the former. the said instances are only illustrative. it is not necessary to pursue the matte further. we would, therefore, hold that the expression 'any person' in the setting in which it appears with the assessments of the year under appeal.' 12. the above view has been reiterated by the supreme court in commissioner of income-tax v. onkarmal.....
Judgment:

Jagannatha Shetty, J.

1. These petitions under article 226 raise a common question of law relating to the scope of the third proviso to section 36 of the Karnataka Agricultural Income-tax Act, 1957 (hereinafter referred to as 'the Act').

2. The facts giving rise to these petitions are these :

Prior to 1958, certain areca garden was jointly held by one P. C. Pai and his three brothers. On January 10, 1958, there was a division in his family. For the assessment years 1965-66 and 1966-67, P. C. Pai filed returns furnishing agricultural income to the extent of his share in that areca garden. The Agricultural Income-tax Officer, Puttur, respondent herein, called upon P. C. Pai to submit the particulars of his income and expenditure by issuing notice in form No. 5. In response to the said notice, P. C. Pai produced before the respondent a copy of the registered partition deed dated January 10, 1958, and three term lease deeds in respect of the areca garden from which he derived income. He contended that he was divided member of the family separately enjoying his share in the areca garden. On perusal of the documents produced by P. C. Pai, the respondent came to the conclusion that there was only a partial partition, and the family continued to hold the areca garden as a joint family property. On the basis P. C. Pai was assessed in the status of Hindu undivided family for the years 1965-66 and 1966-67.

3. Challenging the validity of the said assessment orders, P. C. Pai moved this court in Writ Petitions Nos. 1769 and 1770 of 1967 (P. Cheradappa Pai v. Agricultural Income-tax Officer, Puttur). The court allowed those petitions after holding that the respondent was clearly in error in treating P. C. Pai as karta of the Hindu undivided family and he and his brothers should have been assessed as tenants-in-common. In the concluding portion of the order, this court observed as follows :

'The petition succeeds on the second ground urged by the petitioner, viz., that the respondent is in error in assessing the petitioner in the status of a Hindu undivided family. That being a clear error apparent on the face of the record, we quash the impugned orders of assessment made by the respondent. The respondent is at liberty to assess the petitioner and his brothers for the relevant assessment years in accordance with law and in the light of this judgment. No costs.'

4. The petitioner referred to above is P. C. Pai. He is not before me. The petitioners before me are his three younger brothers who were not to nomine parties to the previous proceedings.

5. Pursuant to the direction issued by this court in Writ Petitions Nos. 1769 and 1770 of 1967 (P. Cheradppa Pai v. Agricultural Income-tax Officer, Puttur), the respondent issued notice under section 19(3) read with section 3 of the Act calling upon the petitioners to show cause why final assessment orders for the years 1965-66 and 1966-67 should not be made against them by apportioning the income of the areca garden to each of the brothers as tenant-in-common. The notice was issued on July 16, 1973. The petitioners filed objections, contending, inter alia, that the proceedings, against them were barred by limitation under section 36 of the Act. Repelling that contention, the respondent passed assessment orders, which are challenged in these petitions.

6. The respondent has held that previous assessment proceedings taken against P. C. Pai should be held to be binding on his three brothers, even though they were not parties to the said proceedings. He has further held that P. C. Pai is a main tenant-in common who was and is liable to pay the tax assessed on each of his brothers.

7. Before me the contention regarding the limitation was repeated on behalf of the petitioners by placing reliance on section 36 of the Act. For the respondent, it was urged that the assessment orders were valid and saved by the third proviso to section 36.

8. For immediate reference, the above provision is set out below :

'36. Income escaping assessment - If for any reason any agricultural income chargeable to tax under this Act has escaped assessment in any financial year or has been assessed at too low rate, the Agricultural Income-tax Officer may, in cases falling under sub-section (3) of section 40, at any time within five years and in any other case at any time within three years of the end of that year serve on the person liable to pay the tax or in case of a company on the principle officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 18 and may proceed to assess or reassess such income and the provisions of this Act shall, so far as may be,apply accordingly as if the notice were a notice under that sub-section :.......

Provided further that in computing the period of limitation for assessment or reassessment under this section, the time during which the assessment has been deferred on account of any stay order granted by any court or other authority in any case or by reason of the fact that an appeal or other proceeding is pending before High Court or the Supreme Court, shall be excluded :

Provided also that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to an assessment or reassessment made on the assessee or any person in consequence of, or to give effect to, any finding, direction or order made under section 32, 33, 34, 35, or 55 or any judgment, or order made by the Supreme Court, the High Court or any other court'.

9. For the assessment years 1965-66 and 1966-67, the respondent initiated proceedings against the petitioners by issuing notice on July 16, 1973. It was clearly beyond five years as provided by section 36. But the third proviso therein lifts this ban under certain circumstances. It states that the period within which any action to be taken for assessment or reassessment shall not apply to an assessment or reassessment made on the assessee or any person in consequence of, or to give effect to, any finding, direction or order made under section 32, 33, 34, 35 or 55 or any judgment or order made by the Supreme Court or High Court or any other court. The proviso deals with an assessee, and any other person against whom the assessment or reassessment could be made for giving effect to any court. The assessment on P. C. Pai was certainly to give effect to the order of this court and, therefore, saved by the third proviso. But the petitioners were neither assessees nor parties in the previous proceedings. The impugned assessment orders, therefore, cannot bind any one of them unless he falls within the meaning of the words 'any person' occurring in the third proviso. It is, therefore, necessary to examine the scope and meaning of the said words. These words are not new to the taxation law. They were found in section 34(3) of the Indian Income-tax Act, 1922, which was the subject of judicial pronouncements. Before referring to the decisions it is better to set out sections 34(3) :

'(3) No order of assessment or reassessment, other than an order of assessment under section 23 to which clause (c) of sub-section (1) of section 28 applies or an order of assessment or reassessment in cases falling within clause (a) of sub-section (1) or sub-section (1A) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable....

Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to give any finding or direction contained in an order under section 31, section 33, section 33A, section 33B, section 66 or section 66A.'

10. The above proviso to section 34(3) of the Indian Income-tax Act, 1922, is analogous to the third proviso to section 36 of the Act.

11. While dealing with the scope of the proviso to section 34(3) of the Income-tax Act in Income-tax Officer, A-ward, Sitapur v. Murlidhar Bhagwan Das, the Supreme Court observed :

'The words 'any person', it is said, conclude the matter in favour of the department. The expression 'any person' in its widest connotation may take in any person, whether connected or not with assessee, whose income for any year has escaped assessment; but his construction cannot be accepted, for the said expression is necessarily circumscribed by the scope of the subject-matter of the appeal or revision, as the case may be. That is to say, that person must be one who would be liable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. If so construed, we must turn to section 31 to ascertain who is that person other than the appealing assessee who can be liable to be assessed for the income of the said assessment year. A combined reading of section 30(1) and section 31(3) of the Act indicates the orders passed by the Appellate Commissioner. Modifications or setting aside of assessment made on a firm, joint Hindu family, association of persons, for a particular year may effect the assessment for the said year on a partner or partners of the firm, member or members of Hindu undivided family or the individual, as the case may be. In such cases though the latter are not eo nomine parties to the appeal, their assessments depend upon the assessments on the former. The said instances are only illustrative. It is not necessary to pursue the matte further. We would, therefore, hold that the expression 'any person' in the setting in which it appears with the assessments of the year under appeal.'

12. The above view has been reiterated by the Supreme Court in Commissioner of Income-tax v. Onkarmal Meghraj. At page 239 of the report, it was observed :

'The words 'any person' in the second proviso to section 34(3) have been interpreted by this court in Income-tax Officer v. Murlidhar Bhagwan Das. As any person intimately connected like members of a Hindu undivided family, partners of a firm or individuals forming an association of individuals because in such cases though they are not eo nomine parties they could be deemed to be represented by the Hindu undivided family, partnership or association before the relevant income-tax authority. Such is not the case with regard to these individuals because no Hindu undivided family was before the concerned income-tax authority-indeed there was no Hindu undivided family-and therefore they would not be bound by those orders. In the case of individuals who were actually before the Appellate Assistant Commissioner and the Tribunal the orders would bind those three individuals. In their cases, therefore, the second proviso can be rightly applied.'

13. It is clear from the above decisions that the words 'any person' do not include all other persons unconnected with the previous proceedings. It takes within its fold those persons who might be affected by orders passed by the courts or the authorities constituted under the Act. They may be partners of a firm, members of Hindu undivided family, or individuals forming an association of persons because in such cases though they are not eo nomine parties they shall be deemed to be represented by the Hindu undivided family, patnership or association. But the tenants-in-common do not fall within any of those categories. A tenant-in-common is as to his own share, in the position of the owner of an entire seperate estate. On his death his estate would devolve on his heirs. Therefore, the order of assessment against one tenant-in-common is not binding on others unless they also had notice of that assessment proceedings.

14. Quite apart from that, in the instant case, petitioners were not connected with the previous assessment proceedings. P. C. Pai was then assessed in the status of Hindu undivided family which he could not represent. He did not and infact could not represent these petitioners in the previous proceedings. The petitioners had no notice of that proceeding. Therefore, if the respondent is to proceed against the petitioners on the ground that there was an escaped assessment for the years 1965-66 and 1966-67, he ought to take proceedings within the time limit allowed by section 36 of the Act, and the third proviso therein is not attracted to extend the period of limitation.

15. It must be stated that this court has no jurisdiction to extend the period of limitation prescribed under the said section nor the operative portion of the direction issued by this court in Writ Petitions Nos. 1769 and 1770 of 1967 (P. Cheradappa Pai v. Agricultural Income-tax officer) could be construed in that manner. All that this court observed was that the respondent would be at liberty to assess the petitioner and his brothers for the relevant assessment years in accordance with law. If the proceedings against the petitioners were barred by time, the respondent cannot take advantage of the direction issued by this court.

16. On behalf of the respondent, a feeble attempt was made to sustain the impugned assessment orders by relying on the second proviso to section 36.

17. The second proviso reads :

'Provided further that in computing the period of limitation for assessment or reassessment under this section, the time during which the assessment has been deferred on account of any stay order granted by any court or other authority in any case or by reason of the fact that an appeal or other proceeding is pending before the High Court or the Supreme Court, shall be excluded.'

18. The above proviso is clearly not applicable to the facts of the present case as this court has never stayed any proceedings as against the petitioners. It may at best applicable to the case of P. C. Pai who has not come before this court.

19. In the result, rules issued in these petitions are made absolute and a writ of certiorari shall issue quashing the impugned assessments. The petitioners are entitled to their costs. Advocate's fee Rs. 100 one set.


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