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M. Chettyappan and ors. Vs. Commissioner of Agricultural Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtChennai High Court
Decided On
Case NumberWrit Petition Nos. 1448 to 1450 of 1974
Judge
Reported in[1977]110ITR684(Mad)
ActsKerala Agricultural Income Tax Act, 1950 - Sections 10(1) and 34
AppellantM. Chettyappan and ors.
RespondentCommissioner of Agricultural Income-tax
Appellant AdvocateS.V. Subramaniam and ;K.J. Chandran, Advs.
Respondent AdvocateP. Venkataraman, Additional Government Pleader
Cases ReferredState of Madras v. Cannon Dunkerley and Co. Ltd.
Excerpt:
.....the learned counsel for the petitioner is, therefore, well-founded in his submissions. the income-tax officer is entitled under section 23(1) to make an assessment on the basis of the return if he is satisfied, without requiring the presence of the assessee or the production of evidence in support of the return, that the return is correct and complete. if, prima facie, satisfied about the maintainability of such a claim the appellate assistant commissioner may remand the matter to the income-tax officer for consideration of the new claim for deduction. the appellate assistant commissioner may, if satisfied, remand the case to the income-tax officer to consider the claim made by the assessee and allow the same if allowable. the only effect of such absence of materials may be that the..........of revenue. at that stage, the assessee who had acquiesced in the original assessment sought to claim exemption that certain portion of the assessment related to works contracts and, therefore, the same was not taxable. in rejecting that contention, their lordships of the supreme court held at page 521 thus :' with regard to the second question relating to the refusal by the deputy commissioner to exercise his revisional power in favour of the appellants, we are of the view that the order does not suffer from any infirmity. it is true that money paid under a mistake of law common both to the assessee and the taxing authority can be got refunded [see the decision of this court in state of kerala v. aluminium industries ltd. [1965] 16 stc 689 (sc). but, in the instant case, the.....
Judgment:

Mohan, J.

1. In all these writ petitions, a common question arises for myconsideration, viz., whether the Commissioner of Agricultural Income-taxhas jurisdiction to grant relief in respect of an item which is exempt fromtaxation even though that exemption was not claimed before the originalauthority.

2. The petitioner in W.P. No. 1448 of 1974 is an assessee on the file of the Agricultural Income-tax Officer, Nagercoil, who filed the returns for the assessment year 1971-72, showing a net income of Rs. 85,261. The Agricultural Income-tax Officer accepted the net income return submitted by the petitioner and levied a tax of Rs. 30,581.60. Thereafter, he discovered that the life insurance premia paid by him amounting to Rs. 11,629.69 was exempt and, therefore, preferred a revision claiming exemption. The only ground on which the Commissioner of Agricultural Income-tax disallowed the claim was that in the return filed he had not made a claim towards rebate for life insurance premia paid by him during the relevant accounting year. It is to quash this order that this writ petition has been preferred.

3. The learned counsel for the writ petitioner draws my attention to Section 34 of the Kerala Agricultural Income-tax Act, 1950, and states that the power of revision of the Commissioner is wide in its amplitude and he has also power to make such enquiry. He is further enabled to pass such orders thereon as he thinks fit subject to the provisions of the Kerala Agricultural Income-tax Act, 1950. Under the provisions of the Act, viz., Section 10(1)(e) any sum paid towards the insurance premium is exempt. Having regard to these provisions, the rejection of the revisional authority to grant exemption is incorrect since it is a jurisdictional issue. In support of this submission, the learned counsel for the petitioner relies on Pandit Sheo Nath Prasad Sharma v. Commissioner of Income-tax : [1967]66ITR647(All) , Union Coal Co. Ltd, v. Commissioner of Income-tax : [1968]70ITR45(Cal) , Commissioner of Income-tax v. Gurjargravures Put. Ltd. : [1972]84ITR723(Orissa) and Giridharlal Parasmal v. State of Mysore [1967] 20 STC 64 (Mys).

4. The learned counsel appearing for the department would contend that the original authority accepted the return filed by the petitioner and assessed the tax on that return where the exemption was not claimed, there was no duty on the part of the assessing authority to allow it. Therefore, before the revisional authority it cannot be contended that such an order suffered from any infirmity and it required revision. In support of this submission, reliance is placed on Bombay Ammonia Pvt. Ltd. v. State of Tamil Nadu : [1976]3SCR856 .

5. Having regard to this relative context, let me refer to the relevant section. Section 34 of the Kerala Agricultural Income-tax Act, 1950, reads as follows :

'34. Revision.--(1) The Commissioner may, of his own motion or on application by an assessee, call for the record of any proceeding under this Act which has been taken by any authority subordinate to him and may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such orders thereof as he thinks fit :

Provided that he shall not pass any order prejudicial to an assessee without hearing him or giving him a reasonable opportunity of being heard :

Provided further that an order passed declining to interfere shall not be deemed to be an order prejudicial to the assessee.

(2) Any order passed under Sub-section (1) shall be final subject to any reference that may be made to the High Court under Section 60. '

A reading of the above section would clearly bring out the following important features :

(1) The revisional powers of the Commissioner can be exercised suo motu or at the instance of an assessee ;

(2) when such a revision is filed, the revisional authority has power to make such enquiry or cause such enquiry to be made ; and

(3) he may pass such orders as he thinks fit, however, subject to the provisions of the Act.

6. One such provision, which is relevant for our purpose, is Section 10(1)(e), which reads as follows :

' 10. (1)(e) any sum paid by such person-

(i) to effect an insurance on the life of such person or on the life of a wife or husband of such person or in respect of a contract for deferred annuity on the life of such person or on the life of a wife or husband of such person ;

(ii) where the assessee is a Hindu undivided family or Aliyasanthana family or branch or Marumakkathayam tarwad, to effect an insurance on the life of any member of such family or tarwad :

Provided that the aggregate of any sums exempted under this section shall not exceed one-sixth of the total agricultural income of the assessee or six thousand rupees, whichever is less :

Provided further that nothing contained in this section shall be deemed to entitle a person who is assessed to income-tax under the Indian Income-tax Act, 1922, to claim any deduction in respect of any sum referred to in this section if it was exempted under Section 15 of the said Act. '

7. Section 10 is one in which the exemption from assessment of agricultural income is catalogued. Therefore, the power of assessment is only subject to this provision. That being so, the amount paid towards the insurance premium will automatically stand exempted. However, in this case, unfortunately such an exemption had not been claimed and it was claimed for the first time in the revision. Nevertheless, can the revisional authority refuse, as he has done, on the single ground that such an exemption was not claimed before the original authority I will have to answer this question in favour of the assessee, saying that he cannot refuse. The proper manner in which the question has to be approached is, not as the department contends, that the original order does not suffer from any infirmity. On the contrary, should not the revisional authority have considered this question of exemption irrespective of the fact whether it, was raised before the original authority or not If a particular item is exempt, it is not taxable. He has no jurisdiction to assess. Having regard to this jurisdictional issue, I should consider the revisional authority had failed to exercise his jurisdiction vested in him. It matters little whether it was raised before the original authority or not. He should have considered the question of exemption and should have passed such orders as he thought fit. It is well-known that when this phraseology is used, the revisional power is very wide in its amplitude. Having regard to such a power, this question ought to have been considered. The learned counsel for the petitioner is, therefore, well-founded in his submissions. The authorities cited by him also support his stand. There is a case in which under more or less similar circumstances it was held in Pandit Sheo Nath Prasad Sharma v. Commissioner of Income-tax : [1967]66ITR647(All) thus :

' It seems to me, however, that the order of the Commissioner rejecting the previous applications, on the mere ground that the petitioner had shown the income in his return, is erroneous. The Commissioner was bound to apply his rnind to the question whether the petitioner was taxable on that income. The Income-tax Officer is entitled under Section 23(1) to make an assessment on the basis of the return if he is satisfied, without requiring the presence of the assessee or the production of evidence in support of the return, that the return is correct and complete. But it may be that the assessee may have committed a mistake in treating a certain receipt as taxable. The mere circumstance that he has shown that receipt as income in his return does not make him liable to tax thereon. An assessee is liable to tax only upon such receipt as can be included in his total income and is assessable under the Income-tax Act. The law empowers the Income-tax Officer to assess the income of an assessee and determine the tax payable thereon. In doing so, he may proceed on the basis that, where an assessee discloses that a certain sum of money has been received by him, the fact of that receipt may be accepted without anything more as constituting an admission on the part of the assessee. That would be an admission as to a state of fact. But whether the receipt can be considered as taxable income is quite another matter, and consideration of that question leads into the realm of law. If the Income-tax Officer assesses an assessee upon a receipt which is not taxable in law, it is always open to the assessee to take the case in appeal or in revision thereafter. It is then for the Appellate Assistant Commissioner or the Commissioner of Income-tax, as the case may be, to examine the matter and determine whether, although the money has been received by the assessee, it is taxable in law. The assessee is then within his rights in requiring the appellate or the revisional authority to examine the validity of the assessment to tax of a receipt which, though admitted by him, is not taxable in law. '

8. Again, in Union Coal Co. Ltd v. Commissioner of Income-tax : [1968]70ITR45(Cal) , dealing with the appellate powers, it was held as follows :

' Nothing debars an assessee from making a new claim for deduction before the Appellate Assistant Commissioner. Nothing prevents the Appellate Assistant Commissioner, prima facie, to examine the force of such a claim. If, prima facie, satisfied about the maintainability of such a claim the Appellate Assistant Commissioner may remand the matter to the Income-tax Officer for consideration of the new claim for deduction. The right of appeal, conferred by Section 30 of the Act, includes right of appeal against the assessment of income. In the instant case, the income was assessed without deduction of a claim made for the first time by the assessee before the Appellate Assistant Commissioner. The assessee was at liberty to challenge the assessment in appeal and argue that the assessment should be reduced by allowing a claim for deduction, as we have already observed. The Appellate Assistant Commissioner may, if satisfied, remand the case to the Income-tax Officer to consider the claim made by the assessee and allow the same if allowable. The absence of materials in the assessment order will not affect the right of the assessee to appeal before the Appellate Assistant Commissioner. The only effect of such absence of materials may be that the appeal may fail not because the right of appeal was absent but because materials for allowing the appeal were not available and good reasons for remand were not made out. The Tribunal was, therefore, in error in holding that the assessee had no right of appeal before the Appellate Assistant Commissioner. '

9. In Commissioner of Income-tax v. Gurjargravures Pvt. Ltd. : [1972]84ITR723(Orissa) , wherein the claim for exemption was not raised before the Income-tax Officer, a question arose whether it could be raised before the Appellate Assistant Commissioner. The learned judges of the Gujarat High Court (P. N. Bhagwati C.J. and B. J. Divan J.) held thus :

' Where an assessee claimed exemption under Section 84 of a portion of the profits brought to tax by the Income-tax Officer for the first time in an appeal to the Appellate Assistant Commissioner :

Held, that, as the Income-tax Officer had subjected to tax the portion of profit which was claimed to be exempt under Section 84, it was open to the Appellate Assistant Commissioner to consider whether the assessment of this portion was right or wrong and hence he could examine the claimunder Section 84. '

10. In Giridharlal Parasmal v. State of Mysore [1967] 20 STC 64 (Mys) in the return of the assessee, exempted turnover was included by mistake and it was assessed. The question was whether that mistake could be corrected at the appellate stage. It was held therein as follows :

' The duty of the assessing officers is not merely to impose tax that is lawfully exigible but also to give to the assessees the benefit of any reduction or exemption that may become due to them upon facts actually found to be true by the assessing authorities, whether or not the assessees, out of ignorance or by mistake, make a claim thereto. When the mistake is obvious and the matter is taken up on appeal, it is the duty of the appellate authorities to correct the mistake. '

11. The principles adumbrated in all these decisions will squarely apply to this case.

12. Reliance placed by the department on Bombay Ammonia Pvt. Ltd. v. State of Tamil Nadu : [1976]3SCR856 is ill founded. That was a case in which the suo motu powers were sought to be exercised by the Board of Revenue. At that stage, the assessee who had acquiesced in the original assessment sought to claim exemption that certain portion of the assessment related to works contracts and, therefore, the same was not taxable. In rejecting that contention, their Lordships of the Supreme Court held at page 521 thus :

' With regard to the second question relating to the refusal by the Deputy Commissioner to exercise his revisional power in favour of the appellants, we are of the view that the order does not suffer from any infirmity. It is true that money paid under a mistake of law common both to the assessee and the taxing authority can be got refunded [see the decision of this court in State of Kerala v. Aluminium Industries Ltd. [1965] 16 STC 689 (SC). But, in the instant case, the appellants themselves submitted a return showing taxable turnover of Rs. 6,41,031.77, At no stage of the assessment proceedings before the assessing authority did they bring it to his notice that a substantial portion of the turnover related to works contracts and was as such exempt from liability to tax. The appellants not having raised the question by claiming the exemption, the assessing authority had no occasion to consider it. It cannot, therefore, be said that the order- of assessment suffered from any illegality. It is also significant that the appellants acquiesced in the order of assessment passed by the assessing authority and did not prefer any appeal against it nor did they take any other step to have it modified. Even; in the objections filed by them to the show-cause notice issued by the Deputy Commissioner in regard to the levy of penalty, they made a half-hearted attempt to claim exemption. It will be relevant in this connection to advert to the prayer made by them which is couched in the following terms :

' In the circumstances we request you that the Deputy Commissioner may either totally drop the proposal to levy penalty or in the alternative totally cure the illegality of the assessment and render justice. '

13. The plea put forth by the appellants that they did not claim exemption under the mistaken impression that the transaction amounted to sale of goods cannot also be countenanced in view of the fact that so far back as in 1954 it was held by the Madras High Court in Cannon Dunkerley and Co, Ltd. v. State of Madras [1954] 5 STC 216 (Mad) that works contracts did not involve any element of sale of materials and the levy of sales tax thereon was unlawful. This ruling was affirmed by this court in State of Madras v. Cannon Dunkerley and Co. Ltd. : [1959]1SCR379 . We are, therefore, of the view that the Deputy Commissioner rightly refused to exercise his revisional jurisdiction in favour of the appellants and the High Court was right in reversing the order of the Appellate Tribunal in so far as it related to the appellants' claim to the aforesaid exemption. ' What has to be noted in this case is that not only the assessee had acquiesced in the order of assessment but he did not take any steps to have that portion of the order revised or modified. But the case on hand is entirely different.

14. In view of the above, I hold that the impugned order is liable to be quashed and is hereby quashed and the matter will stand remitted to the revisional authority for reassessment in the light of the observations made above. The petitioner will be entitled to his costs. Counsel's fee Rs. 150.

15. In W.Ps. Nos. 1449 of 1974 and 1450 of 1974, the facts are identical as those of W.P. No. 1448 of 1974, excepting that they relate to a different assessee, the assessment year being the same, viz., 1971-72. Applying my judgment in W.P. No. 1448 of 1974, these writ petitions will stand allowed and the matter will stand remitted to the revisional authority for reassessment in the light of the observations made in W.P. No, 1448 of 1974. However, there will be no order as to costs.


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