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T.A. George Vs. Agricultural Income-tax Officer and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKerala High Court
Decided On
Case NumberOriginal Petition No. 5847 of 1981-I
Judge
Reported in[1985]153ITR721(Ker)
ActsKerala Agricultural Income Tax Act, 1950 - Sections 17(2) and 35; Constitution of India - Articles 226 and 265; Income Tax Act, 1961 - Sections 147
AppellantT.A. George
RespondentAgricultural Income-tax Officer and anr.
Appellant Advocate G. Sivarajan, Adv.
Respondent AdvocateGovt. Pleader
Cases ReferredVishnudatta Antharjanam v. Tahsildar
Excerpt:
direct taxation - reassessment - sections 17 (2) and 35 of kerala agricultural income tax act, 1950, articles 226 and 265 of constitution of india and section 147 of income tax act, 1961 - assessee in revision challenged legality and validity of reassessment under section 35 - assessee contended that without issuing valid notice satisfying requirements under section 35 tax officer does not get any jurisdiction to reassess - requirement of valid notice under section 35 cannot be waived - petitioner had waived his right to question validity of notice as he had failed to make this plea before tax authorities - petitioner had challenged order of assessment and order passed in revision - under article 265 it is open to aggrieved party to challenge revenue recovery proceedings even if party had..........escaped assessment in any financial year or has been assessed at too low a rate, the agricultural income-tax officer may, at any time within five years of the end of that year serve on the person liable to pay the tax or in the case of a company on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 17 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 issued under that sub-section : provided that the tax shall be charged at the rate at which it would have been charged if such income had not escaped assessment or full assessment, as the case may be : provided further that the agricultural.....
Judgment:

Kader, J.

1. The scope and ambit of Section 35 of the Agricultural Income-tax Act, 1950 (Act 22 of 1950), hereinafter referred to as 'the Act', arise for determination in this O.P., filed by an agriculturist, challenging the legality and validity of a reassessment made under Section 35 read with Section 18(4) of the Act. Exhibit P-4 notice dated August 29, 1978, and Ex. P-7 proceedings of the first respondent dated February 6, 1979, reassessing the petitioner to agricultural income-tax and Ex. P-8 order of revision passed by the Deputy Commissioner (Appeals), Agricultural Income-tax and Sales Tax, the second respondent herein, confirming Ex. P-7 are assailed and sought to be quashed mainly on the grounds that the essential requirements of Section 35 of the Act have not been complied with, that Ex. P-4 is not a valid notice as contemplated by law, that without issuing a valid notice satisfying the requirements under Section 35 of the Act, the Agrl. ITO does not get any jurisdiction to reassess and that Ex. P-7 assessment order is one passed without jurisdiction.

2. The facts necessary for disposal of this O.P. lie in a short compass. The petitioner owns a cardamom estate within the jurisdiction of the first respondent. A return as contemplated under the Act was submitted by the petitioner showing his income from the cardamom estate for the years 1971-72, 1972-73, 1973-74 and 1974-75 (four years) and the same was duly scrutinised by the then Agrl. ITO, Alwaye, who assessed him to agricultural income-tax on the basis of the said return. Exhibit P-1 dated December 23, 1974, is a true copy of the order of assessment. This was challengedby the petitioner in revision before the Deputy Commissioner of Agricultural Income-tax and Sales Tax (Appeals), Ernakulam, who, after hearing the petitioner and considering the materials on record, modified Ex. P-1 order granting certain relief to the petitioner as per Ex. P-2 order. Thereafter, the Agrl. ITO passed consequential order in accordance with Ex. P-2 and that order is Ex. P-3. According to the petitioner, the assessment for the said years has, therefore, become complete and final. More than one year after, Ex. P-4 notice dated nil and received by the petitioner on August 29, 1978, was issued by another Agrl. ITO, who succeeded the previous officer, informing the petitioner that the assessment has been reopened under Section 35 of the Act for the reason stated therein. Although the petitioner challenged the assessment made in pursuance of these notices, it was without success. Thereafter, proceedings were said to have been initiated against the petitioner for recovery of the amount due under the order of assessment. It is submitted that it was under these circumstances, as he has no other remedy, that the petitioner approached this court seeking its extraordinary jurisdiction under Article 226 of the Constitution.

3. A counter-affidavit has been filed on behalf of the respondents strongly supporting the orders under attack.

4. Shri. A. Abdul Hassan, learned advocate apparing for the respondents, strongly contended that this original petition is liable to be dismissed on the short ground that there has been no satisfactory explanation for the inordinate delay in filing the same and that the petitioner has waived his right to question the validity of Ex. P-4 and the jurisdiction of the assessing authority as he has failed to raise this plea before the assessing authority.

5. Shri Sivarajan, learned advocate appearing for the petitioner, on the other hand, submitted that there is no question of waiver of jurisdiction or waiver of notice as contemplated under Section 35 of the Act, that the illegality of the assessment has been taken as a specific ground before the respondents, that the delay has been satisfactorily explained, that it was when revenue recovery proceedings were taken against the petitioner that he approached this court, that in a case where there is complete lack of jurisdiction, the question of delay is immaterial, that the reason given in Ex. P-4 is invalid and unsustainable in law, that it is not open to the succeeding officer to reopen an assessment under Section 35 for the reason given in Ex. P-4 and that change of opinion or adoption of different methods is not at all a ground falling under Section 35 of the Act.

6. The following points arise for determination in this O.P.

(i) Whether the valid requirements of Section 35 of the Act have been complied with in this case and a proper and legal notice as contemplated therein has been issued to the assessee ?

(ii) Can there be a waiver of the notice contemplated under Section 35 of the Act

(iii) On the facts and circumstances of this case, can the relief prayed for under Article 226 of the Constitution be refused to the petitioner on the ground of delay and

(iv) Is the order of reassessment sustainable in law and on facts We are concerned in this case only with Sub-section (1) of Section 35 of the Act which reads:

'35. Income escaping assessment.--(1) If for any reason the agricultural income chargeable to tax under this Act has escaped assessment in any financial year or has been assessed at too low a rate, the Agricultural Income-tax Officer may, at any time within five years of the end of that year serve on the person liable to pay the tax or in the case of a company on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under Sub-section (2) of Section 17 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 issued under that sub-section :

Provided that the tax shall be charged at the rate at which it would have been charged if such income had not escaped assessment or full assessment, as the case may be :

Provided further that the Agricultural Income-tax Officer shall not issue a notice under this sub-section unless he has recorded his reasons for doing so.'

7. The officer will have the power to assess or reassess under Section 35(1) of the Act if income has escaped assessment or has been assessed at too low a rate. Two conditions have to be satisfied before an Agrl. ITO proceeds to assess or reassess income chargeable to tax under the Act. The first condition is that before issuing a notice under this sub-section, the officer must record his reasons for doing so. The second and the most important condition is serving of a notice containing all or any of the requirements of a notice under Section 17(2) of the Act. Under Sub-section (2) of Section 17 of the Act, if, in the opinion of the Agrl. ITO, the total agricultural income of a person is of such amount as to render such person liable to payment of agricultural income-tax for any financial year, the Agrl. ITO has to serve in that year, a notice in the prescribed form requiring such person to furnish within such period not being less than thirty days as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total agricultural income during the previous year and expenditure incurred by him out of that income. It is clear from Section 35 of the Act that before proceeding to assess or reassess under that Section, a notice containing all or any of the requirements of a notice under Sub-section (2) of Section 17 of the Act has to be served on the assessee. Such a notice is a condition precedent to the assumption of jurisdiction and validity of the assessment or reassessment. The requirements as enjoined in Sub-section (2) of Section 17 are absent in Ex. P-4. Under this notice, the petitioner has been required to deliver to the Agrl. ITO not later than twenty days, a return in the attached form of the petitioner's total agricultural income assessable for the years 1972-73 to 1974-75; while under Sub-section (2) of Section 17, a period of not being less than thirty days has to be given to submit the returns. This apart, it may be noted that it was on the ground of escaped assessment and not on the ground that the petitioner has been assessed at too low a rate, that Ext. P-4 notice was issued. Clause (a) in Ex. P-4 gives the reason and that is 'escaped assessment due to omission in taking progressive yield'. This is the only reason given and the same has been specifically asserted in Ex. P-4. The next question is whether for the reason stated in Ex. P-4, the previous assessment made on the agricultural income of the petitioner for the relevant period can be reopened and reassessed under Section 35 of the Act. The counsel appearing for the respondents strongly contended that the words used in Section 35 are 'any reason' and, therefore, if it found that income has escaped, that alone is sufficient to invoke the powers under Section 35 of the Act. The respondents have no case that it was because the petitioner has been assessed by the previous officer at too low a rate that the assessment was reopened under Section 35 of the Act. There is no case for the respondents that in the return submitted by the petitioner for the relevant period before the previous Agrl. ITO, he did not show the actual income or total income or omitted any items of income. All the available materials were placed before the then Agrl. ITO who duly considered the same and, thereafter, assessed the petitioner as per Ex. P-1 order, which the revisional authority interfered with and remanded for passing orders in accordance with the revisional order. An assessing authority may by oversight or due to pressure of work or lack of proper care, omit to take note of certain items of income or wrongly construe the status of the assessee. As a result of all these, there can be escapement of assessment. Where an officer has duly considered all the materials before him and bona fide came to the conclusion adopting a particular mode where there are different modes indicated and concluded the assessment, and, thereafter, another officer succeeding him discovers that the mode adopted by his predecessor in the matter of assessment was wrong and as a result, the previous assessment had resulted in a lesser income, it cannot be said that it is a case of escaped assessment as contemplated under Section 35 of the Act. A mere change of opinion on thepart of a successor officer in regard to the mode of assessment will not be sufficient to invoke Section 35 of the Act. It is not open to an Agrl. ITO who makes reassessment to substitute his own opinion regarding the method of computing the income for that of the officer who made the original assessment, more so when the method adopted at the time of original assessment was not vitiated by any error of law. The Agrl. ITO ordering reassessment is not an appellate authority; he should not, therefore, act as a court of appeal over the officer who made the original assessment. This view finds strong support in the decision of a Division Bench of this court in Ramaraj v. Commr. of Agrl. IT : [1981]131ITR429(Ker) . That was also a case under Section 35 of the Act. The assessment for the earlier year, namely, 1970-71, was reopened under Section 35 of the Act and the assessee was reassessed. This was challenged before the AAC by the assessee but without success and again the matter was taken up before the Tribunal and the Tribunal also agreed with the AAC on the question as to the legality of the proceedings taken under Section 35 of the Act. Ultimately, the matter came up before a Division Bench on a reference made under Section 60(1) of the Act. The Division Bench consisting of Balakrishna Eradi C.J., as he then was, and Bhaskaran J. held that the findings of the predecessor-Agrl. ITO might be right or might be wholly wrong, but they were findings arrived at by him on the basis of the opinion formed by him after a consideration of the relevant materials. What happened in that case was that the successor Agrl, ITO, while effecting the assessment for the year 1971-72, re-examined the said matter and came to a totally different conclusion. Referring to the different conclusion, the Division Bench observed that it was a mere change of opinion on the part of the successor-officer in respect of a question on which a finding had been entered by his predecessor on the same materials and that it is now well established that such mere change of opinion on the part of either the same officer or his successor in regard to any relevant matter concerning the tax liability of the assessee will not justify resort being taken to the power conferred by Section 35 of the Act and that the legality of the action taken by the ITO has to be judged with reference to the grounds on which he proceeded to act under Section 35 of the Act.

8. In CIT v. Simon Carves Ltd. : [1976]105ITR212(SC) , while considering an income escaping assessment under Section 147(b) of the I.T. Act, 1961, the Supreme Court observed that discretion was vested in the ITO under r. 33 for the purpose of making his choice of the methods and there was nothing to show that the discretion was not exercised by him in a proper or judicious manner ; and that from the mere fact that the method selected by the officer was such as resulted in lower tax liability of the assessee compared to the liability which would have resulted from the adoption of another method, it would not follow that the discretion was not exercisedin a proper and judicious manner. It was also observed in that case that the order made by the ITO at the time of the original assessment was a legally correct order and was not vitiated by any error and that the absence of an error justified the inference that it was not a case of income escaping assessment. An ITO ordering reassessment cannot substitute his own opinion regarding the method of computing the income for that of the ITO who made the original assessment, especially when the method of computation adopted at the time of the original assessment was permissible in law. The fact that the adoption of a different method of computation would have resulted in a higher yield of tax would not in such a case justify the reopening of the assessment. It was also stated in the same decision that the taxing authorities exercise quasi-judicial powers and in doing so they must act in a fair and not a partisan manner and that although it is part of their duty to ensure that no tax which is legitimately due from an assessee should remain unrecovered, they must also at the same time not act in a manner as might indicate that the scales are weighed against the assessee.

9. It may be noted that Section 34 of the Indian I.T. Act, 1922, as it originally stood, and the provisions in Section 35 of the Act are identical and the provisions in Section 35 of the Act and Section 147(b) of the I.T. Act, 1961, are also almost identical. The provisions in Section 19 of the General Sales Tax Act, 1963, and the provisions in Section 35 of the Act are also more or less similar. As regards the case on hand, the respondents have no case that the Agrl. ITO who passed Ex. P-1 order did not act in a legal, proper or judicious manner or that he was actuated by any oblique motive. The only fault attributed to him is that he failed to adopt the progressive yield method in assessing the total income of the petitioner. This cannot be treated as a ground coming in or recognised under Section 35 of the Act. Exhibit P-9 guidelines issued by the Board of Revenue (Taxes), Trivandrum, in the matter of agricultural income from cardamom plantations is produced before this court. This deals with the progressive yield method and the genuineness and the correctness of this have not been disputed. But this relates to 1980-81 assessment and 1979-80 accounting year. Whatever that might be, the counsel for the petitioner submitted that this was produced only for showing that different methods are adopted for assessing the agricultural income from cardamom plantations and the progressive yield method is only one of those methods. There is no dispute that agricultural income from cardamom plantations can be assessed on the basis of the return submitted by the assessee, provided the concerned officer is satisfied that the return contained a true and correct statement of facts relating to the income. As pointed out by the Supreme Court, merely because the previous officer selected one of the methods permissible in law which resultedin lower tax liability of the assesses, it cannot be said that the officer did not exercise his discretion in a proper and judicious manner and that the assessment made by him was illegal or vitiated by any error. It is clear from the facts and materials available on record that different conclusions arrived at by the successor-officer was merely a change of opinion and that the valid requirements of Section 35 of the Act have not been satisfied for reopening the assessment made as per Ex. P-1.

10. It is now well settled that a valid notice under Section 35 of the Act is a condition precedent to the assumption of jurisdiction by the tax officer to reopen the assessment under Section 35 of the Act. It has been held by a Division Bench of the Bombay High Court in CIT v. Ramsukh Motilal : [1955]27ITR54(Bom) , that if a notice under Section 34 of the Indian I.T. Act, 1922, embodies any of the requirements under Section 22(2), it must at the same time permit the assessee to comply with that requirement within a period which is not less than 30 days. If, therefore, a notice under Section 34 gave only six days to the assessee to make a return under that section, the notice is clearly illegal and such illegality cannot be waived by the assessee. It was also observed that although Section 22(2) is a procedural section and the failure to give notice or a defect in a notice is a procedural defect, in the case of Section 34, it is not a procedural defect but is a failure to comply with a condition precedent to the assumption of jurisdiction. This decision of the Bombay High Court has been approved by the Supreme Court in Narayana Chetty v. ITO : [1959]35ITR388(SC) . Gajendragadkar J., as he then was, delivering the judgment for the Bench, observed as follows (headnote):

'The notice prescribed by Section 34 of the Income-tax Act for the purpose of initiating reassessment proceedings is not a mere procedural requirement; the service of the prescribed notice on the assessee is a condition precedent to the validity of any reassessment made under Section 34. If no notice is issued or if the notice issued is shown to be invalid then the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void.'

11. A Division Bench of this court in Suseela Sadanandan v. Addl. ITO : [1963]47ITR318(Ker) held that if a proper notice under Section 34 of the I.T. Act complying with the provisions of law is not duly served, the proceedings taken for reassessment and recovery of tax under Section 34 of the Act would be invalid. The counsel appearing for the petitioner pointed out that although this decision of the Division Bench was challenged before the Supreme Court, the above dictum was not interfered with, as could be seen from First Addl. ITO v. Suseela, Sadanandan : [1965]57ITR168(SC) .

12. There can be no doubt, in the light of the principles stated in the above decisions, that the requirements of a valid notice as contemplated under Section 35 of the Act cannot be waived. The decisions of the Supreme Court and this court, referred to above, constitute a complete answer to the contention of the counsel for the respondents that the petitioner has waived his right to question the validity of the notice, as he has failed to take this plea before the tax authorities.

13. The counsel for the respondents cited a decision of a learned single judge of this court in Ahammed Kutty Haji & Bros. v. Agrl. ITO : [1979]117ITR209(Ker) . The provisions in Sections 35 and 17(2) of the Act came up for consideration in this case before the learned judge. This decision was cited by the counsel in support of his contention that an assessment can be reopened under Section 35 of the Act on the basis of information received subsequently. The learned judge, on the facts of that particular case, held that Section 35 was applicable in that case and the plea that the notice was bad in law for want of particulars as required under Section 17(2) was rejected on the ground that such a plea was taken for the first time before the High Court. The decisions relied on by the learned judge in that case are distinguishable on facts. In Ahammed Kutty Haji & Bros. case : [1979]117ITR209(Ker) , the decision of the Supreme Court in Narayana Chetty's case : [1959]35ITR388(SC) , was neither cited nor brought to the notice of my learned brother. It is now fairly clear that a mere change of opinion on the part of either the same officer or his successor in regard to any relevant matter concerning the tax liability of the assessee will not justify resort being taken to the power conferred by Section 35 of the Act.

14. The counsel appearing for the respondents very strongly contended that the inordinate delay of 17 months, in this case, has not been satisfactorily explained and, therefore, it has to be treated as laches on the part of the petitioner and on that short ground, relief should be refused in writ jurisdiction and the petition dismissed. The counsel cited a number of decisions in support of this contention, prominant of which are Joseph v. State of Kerala [1982] KLT 61, Aflatoon v. Lt. Governor, AIR 1974 SC 2077, Indrapuri Griha Nirman Sahakari Samiti v. State of Rajasthan, : [1975]2SCR68 , Jayaraman v. Kerala State Electricity Board [1975] ILR 1 Ker 703 and Ashok Kumar Mishra v. Collector, Raipur, : [1980]1SCR491 . Every decision in a case has to be considered and applied in the light of the particular facts and circumstances of that case. No decision can be an authority on facts and no hard and fast rule can be laid down that a delay of a particular period is fatal to an application under Article 226 of the Constitution. There is no period of limitation prescribed for invoking the jurisdiction of this court under Article 226 of the Constitution. Butall the same the persons interested and seeking relief must act within a reasonable time or period. In case where the order or decision under attack affects the very jurisdiction or is found to be one without jurisdiction or passed in excess of jurisdiction, the delay in filing the application is of no serious consequence. The delay in a particular case has to be decided on the facts and circumstances of the case. The power to grant relief under Article 226 of the Constitution is a discretionary power.

15. In Suniti Devi Jaipuria v. ITO : [1971]79ITR391(Cal) , the question whether delay was a sufficient ground for refusing relief by issue of a writ came up for consideration. It was held in that case that if there was a patent lack of jurisdiction, normally the court would interfere and would not stay its hands merely on the ground of delay on the part of the petitioner to come to the court. Where writs of certiorari or prohibition are concerned, a challenge to the exercise of a jurisdiction not vested or against action in excess of such jurisdiction or for error apparent on the record are always amenable to the writ jurisdiction of the High Courts and in such cases consideration of delay will not at all be material.

16. In Madhavlal Sindhoo v. Idurkar : [1956]30ITR332(Bom) , Desai J., as he then was, observed (p. 337):

'Where, however, there is patent lack of jurisdiction and the court is immediately satisfied that the inferior court or authority has exceeded its jurisdiction, the court will very readily interpose. The discretion to grant or refuse to grant the writ is of course there. But since discretion contemplates an exercise of arbitrium and not arbitrariness, the writ must go though not of right nor of course yet almost as a matter of course unless an irresistible case for withholding the writ is made out.'

17. In Estate and Trust Agencies v. Singapore Improvement Trust, , it was observed (headnote):

'A proceeding is none the less a judicial proceeding subject to prohibition or certiorari because it is subject to confirmation or approval by some other authority. An application for prohibition or certiorari is never too late as long as there is something left for it to operate upon.'

18. The decisions in Navasakti Publishing Co. v. Presiding Officer [1976] Lab IC 1032 and Orient Paper Mills v. Union of India, : AIR1979Cal114 , are almost to the same effect. It follows from the above decisions that the delay in presenting a petition under Article 226 of the Constitution would not bar the petitioner from obtaining the relief by way of prohibition or certiorari against orders passed without jurisdiction or in excess of jurisdiction or erroneous exercise of jurisdiction.

19. It is true that there is a delay of 17 months in filing this application but it cannot be said that this delay has not been satisfactorily explained.

20. The counsel for the respondents also argued that the contention of the petitioner that it was when revenue recovery proceedings were initiated against him that he approached this court cannot be countenanced or accepted as, without challenging the order of assessment, he cannot challenge the revenue recovery proceedings. In this petition, the petitioner has challenged the order of assessment and the order passed in revision. Under Article 265 of the Constitution, it is open to an aggrieved party to challenge the revenue recovery proceedings even if the party has failed to challenge the order of assessment. Therefore, even in cases where the assessee has challenged the order of assessment by availing all the remedies under the Act, he is entitled to challenge the revenue recovery proceedings on the ground that the collection of the tax should be only in accordance with law or by authority of law. This court in Vishnudatta Antharjanam v. Tahsildar [1981] KLT 727 has held that the notice insisted by Section 6A is not a mere procedural formality. The service of the notice within the time given in the section is a condition precedent for the validity of an assessment on a plantation escaping assessment. Similarly, if the notice does not give the assessee the minimum time insisted in Section 4(3), the notice is clearly illegal and that will also be a failure to comply with a condition precedent for the exercise of jurisdiction under Section 6A. It was also held that collection of tax assessed under orders which are illegal and void can be challenged even if the assessment orders are not challenged in appeal or revision in view of Article 265 of the Constitution. In this case, the learned judge has relied on the decisions in Narayana Chetty v. ITO : [1959]35ITR388(SC) and CIT v. Ramsukh Motilal : [1955]27ITR54(Bom) . It may be noted that the provisions in Section 6A of the Plantation Tax Act, 1960 (Kerala), and the provisions in Section 35 of the Act are almost identical.

21. For the foregoing reasons, this O.P. is allowed and Exs. P-4, P-7 and P-8 are hereby quashed.


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