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State of Uttar Pradesh Vs. Raja Yadvendra Dutt Dube - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtSupreme Court of India
Decided On
Judge
Reported inAIR1965SC727; [1966]60ITR221(SC); [1966]3SCR161
ActsUttar Pradesh Agricultural Income-tax Act, 1948 - Sections 2(6), 3, 14, 14(1), 14(2), 15(1), 15(3), 16(3), 16(4), 21, 22, 24, 24(4), 25 and 44
AppellantState of Uttar Pradesh
RespondentRaja Yadvendra Dutt Dube
Excerpt:
.....- collector to give fresh notice before starting assessment proceeding under direction given by board - collector cannot rely on notice under section 25 - respondent escapes liability to pay lawfully due tax even then no justification for commencement of fresh proceeding for assessment contrary to provisions of statute - held, no fresh proceedings for assessment can be started. - - in the view of the commissioner, assessment made by thesub-divisional officer was without jurisdiction, and the order of reassessmentby the collector 'being in review and substitution of the order ofassessment',want of jurisdiction in the order of assessment attached tothe order of re-assessment as well. (2) or refused to state the case onsuch application, if the high court is not satisfied about the..........by order dated march 5,1952, set aside the orders of the collector and also of the sub-divisionalofficer and directed that the assessment be reopened by the collector and freshassessment of the income for 1355 fasli be made after giving notice to therespondent. in the view of the commissioner, assessment made by thesub-divisional officer was without jurisdiction, and the order of reassessmentby the collector 'being in review and substitution of the order ofassessment', want of jurisdiction in the order of assessment attached tothe order of re-assessment as well. the respondent then moved the board of revisionagainst the order of the commissioner. the board agreed with the commissioner,that the assessment order made by the sub-divisional officer was 'illegaland invalid', but.....
Judgment:

Shah, J.

1. By order, dated May 14, 1949 the Sub-Divisional Officer, Jaunpur,assessed Raja Yadvendra Dutt Dube - hereinafter called 'the respondent' - unders. 16(3) of the U.P. Agricultural Income-tax Act, 1948 to pay agriculturalincome-tax for the account period 1355 Fasli (July 1, 1947 to June 30, 1948) ona net income of Rs. 72,769/15/2. Being of the view that a part of the income ofthe respondent had escaped assessment, the Collector of Jaunpur by order, datedJune 9, 1950, recomputed tax under s. 25 read with s. 16(4) of the Act for thesaid account period on a total net income of Rs. 80,859/13/6. In appeal by therespondent the Agricultural Income-tax Commissioner by order dated March 5,1952, set aside the orders of the Collector and also of the Sub-DivisionalOfficer and directed that the assessment be reopened by the Collector and freshassessment of the income for 1355 Fasli be made after giving notice to therespondent. In the view of the Commissioner, assessment made by theSub-Divisional Officer was without jurisdiction, and the order of reassessmentby the Collector 'being in review and substitution of the order ofassessment', want of jurisdiction in the order of assessment attached tothe order of re-assessment as well. The respondent then moved the Board of Revisionagainst the order of the Commissioner. The Board agreed with the Commissioner,that the assessment order made by the Sub-Divisional Officer was 'illegaland invalid', but in the view of the Board the Commissioner exceeded hisauthority in setting aside the order of the Sub-Divisional Officer, which wasnot challenged in appeal before him. However, the Board observed, theillegality and invalidity of the order of assessment having come to theirnotice, they would take up the matter suo motu in exercise of their revisionaljurisdiction and declare the order passed by the Sub-Divisional Officer asillegal and set it aside. Accordingly, in setting aside the order of theCommissioner, they also set aside the order of assessment made by theSub-Divisional Officer, and directed that 'Fresh assessment will be madeaccording to law.' The Board then referred under s. 24(4) of the Act thefollowing question of law to the High Court of Allahabad for opinion :

'Whether on the facts and having regard to theprovisions of section 25 of the Act, the Board could on the 15th October, 1952,direct a fresh assessment to be made ?'

2. The High Court, recorded an answer in the negative. The State of UttarPradesh has appealed to this Court.

3. The relevant provisions of the Act are briefly these : 'Assessingauthority' under the Act means a person authorised by the State Governmentto assess agricultural income-tax : s. 2(6). By s. 3 charge of agriculturalincome-tax and super-tax at the rate or rates specified in the Schedule on the totalagricultural income of the previous year of every person is imposed. Section 14sets up Assessing authorities and prescribes their powers. It provides :

'(1) For the purposes ofthis Act, every Collector, and Assistant Collector in charge of a sub-divisionshall be the assessing authority and shall exercise and perform within hisrevenue jurisdiction such powers and duties as may be prescribed, provided thatthe State Government may appoint any officer as an assessing authority for sucharea as may be prescribed.

(2) In particular and withoutprejudice to the generality of the provisions of sub-section (1), the followingauthorities shall be the assessing authorities in the case mentioned againsteach namely :

(a) Assistant Collector Incharge.. Where the gross agricultural of sub-division. income does not exceed Rs. 1lakh. (b) Collector. .. In all cases. (c) Officer appointed under .. In suchcases as may be proviso to sub-section (1). prescribed.'

4. Section 15, in so far as it is material, provides :

'(1) The Collector shall . .. give notice, by the publication in the Official Gazette and in such othermanner as may be prescribed, requiring every person, . . . . whose totalagricultural income during the previous year exceeded the maximum amount whichis not chargeable to agricultural income-tax to furnish to such assessingauthority and within such period, not being less than thirty days, as may bespecified in the notice, a return in the prescribed form and verified in theprescribed manner, setting forth . . . his total agricultural income during theprevious year :

(2) . . . . .

(3) In the case of any personwhose total agricultural income is, in the opinion of the assessing authority,such amount as to render such person liable to payment of agriculturalincome-tax in any year, he may serve in that year a notice in the prescribedform requiring such person to furnish within such period, not being less thanthirty days as may be specified in the notice, a return in the prescribed formand verified in the prescribed manner setting forth . . . . . his totalagricultural income during the previous year :'

5. Section 16 sets out the procedure of assessment by the assessingauthority, and against the order of assessment by the assessing authority, anappeal lies under s. 21 to the Commissioner. By s. 22 power is conferred uponthe Board of Revision either on their own motion or on an application to callfor the record of any proceeding under the Act pending before or decided by anyauthority subordinate to the Board, and after such inquiry as they deemnecessary, may pass such orders as they think fit. Section 24 provides forreference of questions of law to the High Court for opinion. Sub-section (2),insofar as it is material, provides :

'Within sixty days of the communication of an orderunder section 21 or section 22 the assessee may, by application . . . apply tothe Board to refer to the High Court any question of law arising out of suchorder or decision, and the Board shall, within sixty days of the receipt ofsuch application, draw up a statement of the case, and refer it, with theiropinion to the High Court :'

6. Under sub-s. (4) of s. 24 the High Court is authorised, where the Boardhas rejected the application under sub-s. (2) or refused to state the case onsuch application, if the High Court is not satisfied about the correctness ofthe decision of the Board, to require the Board to State the case and refer itto the High Court. Section 25 authorises the assessing authority to assess orreassess income which has escaped assessment in any year or has been assessedat too low a rate, after serving a notice on the person liable to payagricultural income-tax within one year of the end of the year in which theincome has escaped assessment. Section 44 confers power upon the StateGovernment to make rules for carrying out the purposes of the Act.

7. Under the scheme of the Act, the Collector of the District is theassessing authority generally in respect of the entire District over which hehas revenue jurisdiction, and he is invested with the power to issue a generalnotice calling upon every person whose income is chargeable to tax, to make areturn of his income. The Assistant Collector (who is also called theSub-Divisional Officer) in charge of a sub-division is invested with power asthe assessing authority within his revenue jurisdiction, where the grossagricultural income of an assessee does not exceed Rs. 1 lakh. Power of theassessing authority under s. 15(3) to issue a special notice calling for areturn may be exercised within the year of assessment, and not thereafter.Power to re-assess under s. 25 is also restricted and the assessing authoritymay not issue a notice of 'escaped assessment' after one year fromthe end of the year of assessment.

8. It is necessary to remember that these proceedings come before us in appealagainst the order passed by the High Court on a reference made under s. 24.Jurisdiction of the High Court under s. 24 is advisory : the High Court mustanswer the question referred to it and cannot travel outside the terms of thereference. This caution is necessary because learned counsel appearing for theparties have sought to canvass many questions which were never raised beforethe Board and even before the High Court. The question whether the order passedby the Board setting aside the orders of assessment of the Sub-DivisionalOfficer and of the Collector and even of the Commissioner is justifiable in lawis not referred to us. We are only concerned to deal with the limited questionwhether the Board had authority on the view expressed by it to make the orderdirecting re-assessment, and that question must be decided in the light of theprovisions of s. 15(3) and s. 25 of the Act.

9. It may be assumed that a notice under s. 15(1) was issued by theCollector (though there is no reference to such a notice in the record)requiring every person whose income exceeds the maximum amount exempt from taxto submit a return in the Form No. 1(a) prescribed by the Rules. It is commonground however that the respondent filed the return in pursuance of a noticeunder s. 15(3), and that the Sub-Divisional Officer found in the course of theassessment proceeding that the gross agricultural income of the respondentexceeded Rs. 1 lakh. The order of assessment passed by the Sub-DivisionalOfficer was set aside by the Board because the Sub-Divisional Officer had nojurisdiction to assess to tax income of a person whose gross agriculturalincome exceeded Rs. 1 lakh, and the Board agreed with the Commissioner that theorder of the Collector being in 'review or substitution' of the orderof the Sub-Divisional Officer was also liable to be set aside.

10. Counsel for the State raised three contentions in support of the pleathat the Board had power to direct the Collector to make a fresh assessment :

(1) The Sub-Divisional Officerwas invested with authority to issue a notice under s. 15(3) calling for areturn, and since this notice was not set aside by the Commissioner or by theBoard of Revision, in making the order of assessment pursuant to the order ofthe Board, the Collector will not be transgressing any statutory restrictionsimposed by s. 15(3) or s. 25 of the Act.

(2) Without a fresh notice unders. 15(3), the Collector has the power, by virtue of the notice under s. 15(1),to assess the income of the respondent on the return made pursuant to thenotice issued by the Sub-Divisional Officer.

(3) Since notice under s. 25 ofthe Act for reassessment of the escaped income was issued within the periodprescribed by s. 25(3), and the notice was otherwise valid, assessmentproceedings directed by the Board may be founded by the Collector on thenotice.

11. In proceedings for assessment the Sub-Divisional Officer found that thetotal gross income of the respondent exceeded Rs. 1 lakh, and under s. 14(2)the Collector alone was the assessing authority in respect of the income of therespondent. The contention raised by counsel for the State that by theexpression 'without prejudice to the generality of the provisions ofsub-section (1)' in sub s. (2) of s. 14 power is intended to be conferredupon the Assistant Collector in charge of a sub-division to assess income of anassessee whose gross agricultural income exceeds Rs. 1 lakh, cannot beaccepted. The first sub-section of s. 14 declares the Collector and theAssistant Collector in charge of a sub-division as assessing authorities withinthe limits of their respective revenue jurisdictions. By sub-s. (2) it isdirected that the authorities mentioned in sub-s. (2) shall be the assessingauthorities in the cases 'mentioned against each'. Reading sub-ss.(1) and (2) together there can be no doubt that the Collector is the assessingauthority within his revenue jurisdiction with unlimited jurisdiction, and theAssistant Collector in charge of a sub-division is the assessing authoritywithin his revenue jurisdiction with power only in cases in which the grossagricultural income of the assessee does not exceed Rs. 1 lakh.

12. There is in the Act no procedure prescribed about ascertainment of thegross agricultural income of an assessee which is determinative of thejurisdiction of the Sub-Divisional Officer, but as in other taxing statuteswhere the taxing authority is constituted a tribunal of exclusive jurisdictionthe authority has the power, subject to rectification by a superior Court, todecide facts on the proof of which his jurisdiction depends. The Sub-DivisionalOfficer had therefore power to decide whether the gross agricultural income ofthe respondent did or did not exceed Rs. 1 lakh. The notice under s. 15(3) was issuedto the respondent by the Sub-Divisional Officer, presumably on the assumptionthat the gross agricultural income of the respondent did not exceed Rs. 1 lakh,but when the Sub-Divisional Officer found on scrutiny of the return that thegross agricultural income of the respondent exceeded Rs. 1 lakh, he could notexercise the powers of the assessing authority. There is no provision in theAct or the Rules for transfer of proceeding from the Sub-Divisional Officer tothe Collector, when the Sub-Divisional Officer in dealing with a return findsthat he has no jurisdiction. When he arrived at the conclusion that the grossincome of the respondent exceeded Rs. 1 lakh, the proceeding initiated by theSub-Divisional Officer including the issue of notice must, unless theconclusion is set aside by a superior authority, be held unauthorised, for thepower to issue a notice under s. 15(3) is only conferred upon the assessingauthority, and the assessing authority within the meaning of s. 2(6) is aperson authorised to assess agricultural income-tax. The Sub-Divisional Officerhad no power to assess agricultural income of the respondent, because his grossincome exceeded Rs. 1 lakh, and he had on that account no power to issue thenotice.

13. It is true that the Board of Revision did not expressly set aside thenotice issued by the Sub-Divisional Officer under s. 15(3), but the Boardagreed with the Commissioner that the Original order of assessment passed bythe Sub-Divisional Officer 'was absolutely without jurisdiction', anddirected that the entire case be reopened by the Collector and fresh assessmentof the income for Fasli year 1355 be made by the Collector after giving noticeto the respondent. The Board thereafter passed the same order which the Commissionerclaimed without authority to make. It must, therefore, be held that the noticeissued by the Sub-Divisional Officer was not only unauthorised, but was alsoquashed by the Board.

14. The second contention that when notice under s. 15(1) is issued, theCollector may without a notice under s. 15(3) commence fresh assessmentproceeding on the return made to the Sub-Divisional Officer has no substance.This question does not appear to have been raised or argued at any stage beforethe Board. Again, if the proceedings for assessment were commenced on a returnmade pursuant to an invalid notice, and the proceeding for assessment were setaside on the ground of want of jurisdiction of the authority making theassessment, the entire proceeding must be deemed to be vacated, and relyingupon the return made to the authority who had assessed the income, anotherauthority cannot proceed to assess the income of the assessee. Mere issue of anotice under s. 15(1) cannot come to the aid of the Collector in commencingfresh assessment proceeding many years after the date on which that notice wasissued, on a return which was not made to him. When after a general notice aspecial notice was issued unauthorisedly and proceedings were taken pursuant tothat special notice, the general notice cannot be relied upon to start freshproceeding for assessment on the assumption that the return must be deemed tobe made to him pursuant to the general notice. The Collector must, beforeproceeding to assess, issue under section 15(3) a notice when no return wasfiled pursuant to the notice under section 15(1), and a notice under section15(3) cannot issue after expire of the year of assessment to which the noticerelates.

15. The third contention also has no substance. The Collector issued anotice under s. 25 for re-assessing income which had escaped assessment andassessed the income of the respondent, but the proceeding of the Collector wasset aside as unauthorised, and the Collector was directed to start a freshproceeding for assessment. The notice issued by the Collector must also bedeemed to be quashed. The Collector has, therefore, under the direction givenby the Board, to issue a fresh notice before a proceeding for assessment may bestarted, and the earlier notice issued under s. 25 cannot be relied upon by theCollector.

16. The High Court was therefore right in the answer which it recorded. Itis somewhat unfortunate that on account of the diverse orders passed by theauthorities from time to time without a correct appreciation of the scheme ofthe Act, the respondent escapes liability to pay tax which was lawfully due byhim, but that cannot justify the commencement of a fresh proceeding forassessment contrary to the provisions of the statute.

17. This appeal fails and is dismissed. There will, however, be no order asto costs in this Court and in the High Court.

18. Appeal dismissed.


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