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M.R. Thammiah Vs. Agricultural Income-tax Officer, Madikeri and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKarnataka High Court
Decided On
Case NumberCivil Revision Petition Nos. 680 to 682 of 1983
Judge
Reported inILR1985KAR1305; [1984]150ITR403(KAR); [1984]150ITR403(Karn)
ActsIncome Tax Act, 1961 - Sections 2(8); Karnataka Agricultural Income Tax Act, 1957 - Sections 30 and 36
AppellantM.R. Thammiah
RespondentAgricultural Income-tax Officer, Madikeri and anr.
Appellant AdvocateThilak Hegde, Adv.
Respondent AdvocateS. Rajendra Babu, Adv.
Excerpt:
.....hindu adoption & maintenance act, 1956. - after hearing the petitioner's representative, the assessing authority recorded a best judgment assessment. 3. in the appeals before the deputy commissioner against the reassessment, the assessee complained that he was denied of the opportunity to put forward his case in the reassessment proceedings......of the huf. he issue a notice calling upon the assessee to show cause why there should not be a reassessment under s. 36 of the act in respect of the income concealed by the assessee. there was no reply to that notice and so the assessing authority confirmed the proposal. 3. in the appeals before the deputy commissioner against the reassessment, the assessee complained that he was denied of the opportunity to put forward his case in the reassessment proceedings. he also contended that there was partition in his family, but the assessing authority did not enquire into that claim. the deputy commissioner found some substance in the contentions raised by the assessee. he, however, observed that the assessee was estopped from raising the question of partition firstly, on the ground that.....
Judgment:

Jagannatha Shetty, J.

1. These three revision petitions arise out of the reassessment proceedings under s. 36 of the Karnataka Agricultural I.T. Act, 1957 (called shortly the 'Act').

2. For the assessment years 1978-79, 1979-80 and 1980-81, the petitioner returned the income as that of a HUF, but he has included only his share income from the family properties. After hearing the petitioner's representative, the assessing authority recorded a best judgment assessment. The assess did not put forward the plea that there was a partition in his family even though there was one. Subsequently, the assessing authority got the information that the amounts received from the Coffee Board in the names of the assessee's sons from the family properties were not included in the taxable income of the HUF. He issue a notice calling upon the assessee to show cause why there should not be a reassessment under s. 36 of the Act in respect of the income concealed by the assessee. There was no reply to that notice and so the assessing authority confirmed the proposal.

3. In the appeals before the Deputy Commissioner against the reassessment, the assessee complained that he was denied of the opportunity to put forward his case in the reassessment proceedings. He also contended that there was partition in his family, but the assessing authority did not enquire into that claim. The Deputy Commissioner found some substance in the contentions raised by the assessee. He, however, observed that the assessee was estopped from raising the question of partition firstly, on the ground that he had returned the income as that of a HUF and, secondly, that he did not challenge the original assessment which proceeded on the basis that the assessee and his sons were members of a HUF. He, accordingly, held that the question as to partition could not be gone into in the reassessment proceedings.

4. In the second appeals before the Tribunal, the assessee repeated the contentions and a so submitted that his sons also had filed separate returns on the basis of the partition effected in the family. The Tribunal also found that there was no claims as such under s. 30 of the Act and so rejected all the contentions. The Tribunal, however, noted that the assessee did refer to the partition in his letter dated November 265, 1978. But there could not have been any enquiry on that aspect since that letter was only a request to adjourn the case. It was, therefore, not obligatory for the assessing authority to have made any enquiry with regard to the partition referred to in the said letter. So stating, the Tribunal dismissed the appeals.

5. In view of these findings recorded by the authorities below, we must now proceed on the premise that there was no claim of partition in the original assessment proceedings. The assessee no doubt made a faint reference to the partition in his letter date November 25, 1978, but in that letter he sought an adjournment of the case. The authorities have rightly stated that the reference to the partition in that letter could not be construed as a claim of partition particularly when in the returns filed subsequently, the stand taken by the assessee was that he should be assessed in the status a of a HUF.

6. The question, however, to be considered is whether it is open to the assessee to contend in the reassessment proceedings that there was a partition in his family and, if so, whether the assessing authority is bound to make an enquiry in regard to that claim. Mr. Thilak Hegde, learned counsel for the petitioner, urged, that the view taken by the Deputy Commissioner and the Tribunal is incorrect and the assessee cannot be prevented from making a claim of partition in the reassessment proceedings even though no such claim was made in the original assessment. He also urged that assessment and reassessment do not differ either in respect of procedure or on the rights of parties, and what is true of an assessment is equally true of a reassessment. When a claim under s. 30 of the Act is made by the assessee, the assessing authority shall make an enquiry and shall record an order accepting or rejecting the claim. Mr. Rajendra Babu, the learned High Court advocate, urged that s. 30 of the Act under which, the assessing authority is required to make an enquiry as to the claim of partition refers only to the assessment under s. 19 of the Act and not to the reassessment under s. 36 of the Act and, therefore, it is impermissible for the assessee to raise the question of partition of his family properties if no such claim was put forward in the original assessment proceedings.

7. We do not think that the contention of Mr. Rajendra Babu could be accepted. In A.N. Lakshman Shenoy v. ITO : [1958]34ITR275(SC) the Supreme Court while examining the scope of the word 'assessment' in the context of the Finance Act (XXV of 1950) and the Indian I.T. Act (XI of 1922) observed (headnote) :

8. 'Reassessment' will, without doubt, come within the expression 'levy, assessment and collection of income-tax' occurring in section 13(1) of the Finance Act. The local laws in Part B States are, therefore, saved by force of section 13(1) of the Finance Act for the purpose of making reassessments in respect of any period for which they have been kept alive.

9. The three expressions 'levy', 'assessment' and 'collection' are of the widest significance and embrace in their broad sweep all such proceedings for raising money by the exercise of the power of taxation'.

10. In the scheme of the Karnataka Agrl. I.T. Act, we do not think that a narrow meaning could be assigned to the expression 'assessment' so as to exclude 'reassessment'. In legal parlance, the expression 'assessment' has the widest significance and covers all such proceedings for raising money by the exercise of the power of taxation. It is in consonance with this conception that the I.T. Act, 1961, defines under s. 2(8) assessment to include reassessment. Even if there is no such inclusive definitions under the Act, the court shall presume that the legislature has used the expression 'assessment' in the sense in which it is judicially understood.

11. Apart from that, when a reassessment is made under s. 36 of the Act, the original assessment is completely reopened and in its place a fresh assessment is made. While a fresh assessment is made, the assessing authority does not merely assess him on the escaped income but assess him on his total estimated income. Therefore, it would be unreasonable to say that assessment does not include reassessment under the Act.

12. In V. Jaganmohan Rao v. CIT & EPT : [1970]75ITR373(SC) the Supreme Court, while examining the scope of s. 34 of the Indian I.T. Act, 1922 observed (page 380) :

'Once proceedings under section 34 are taken to be validly initiated with regard to two-thirds share of the income, the jurisdiction of the Income-tax Officer cannot be confined only to that portion of the income. Section 34 in terms states that once the Income-tax Officer decides to reopen the assessment, he could do so within the period prescribed by serving on the person liable to pay tax, a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or reassess such income, profits or gains. It is therefore, manifest that once an assessment is reopened by issuing a notice under sub-section (2) of section 22, the previous under-assessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under section 34(1)(b) the Income-tax Officer had not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year'.

13. In CST v. H. M. Esufali H. M. Abdulali : [1973]90ITR271(SC) , the Supreme Court, while dealing with the scope of the relevant provisions of the Madhya Pradesh General Sales Tax Act, 1958 observed (at page 280 of 90 ITR) :

'What is true of the assessment must also be true of reassessment because reassessment is nothing but a fresh assessment. When reassessment is made under section 19, the former assessment is completely reopened and in its place fresh assessment is made. While reassessing a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover'.

14. In Deputy Commissioner of Commercial Taxes v. H. R. Sri Ramulu (1977) 39 STC 177, the Supreme Court observed (at page 180);

'The reason for that is that once an assessment is reopened, the initial order for assessment ceases to be operative. The effect of reopening the assessment is to vacate or set aside the initial order for assessment and to substitute in its place the order made on reassessment. The initial order for reassessment cannot be said to survive, even partially, although the justification for reassessment arises because of turnover escaping assessment in a limited field or only with respect to a part of the matter covered by the initial assessment order. The result of reopening the assessment is that a fresh order for reassessment would have to be made including for those matters in respect of which there is no allegation of the turnover escaping assessment.'

15. The assessing authority before making a reassessment has to call upon the assessee to show cause and produce books of accounts and other documents or any other evidence which the assessee may wish to produce in support of his objection. When such a notice is received the assessee has a right to prefer his objections and produce his evidence as he may think necessary. The assessing authority may make a reassessment if necessary only after considering the objections raised by the assessee and after examining the evidence. If, in the course of the proceedings, the assessee contended that there was partition of his family properties, the assessee authority cannot refuse to consider that question solely on the ground that the question was not raised in the original assessment proceedings. The assessee has got a right to raise all the legitimate contentions in the reassessment proceedings which he could have raised in the original assessment proceedings. He cannot be estopped from raising such contentions.

16. The question of estoppel operating against the assessee, if we may say so is foreign to reassessment proceedings.

17. In the result, these revision petitions are allowed, the orders impugned are set aside and the matter stands remitted to the assessing authority for redoing the reassessment after affording an opportunity of being heard to the assessee and in the light of the observations made.

18. The parties shall appear before the assessing authority on September 17, 1984 to receive further notice.


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