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Omprakash Agarwalla Vs. Agricultural Income-tax Officer and ors. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberMatter No. 1 of 1970
Judge
Reported in[1972]84ITR340(Cal)
ActsBengal Agricultural Income Tax Act, 1944 - Section 8 and 8(2); ;Income Tax Rules, 1962 - Rule 8; ;Income Tax Act, 1961
AppellantOmprakash Agarwalla
RespondentAgricultural Income-tax Officer and ors.
Appellant AdvocateS. Ghosh, Adv.
Respondent AdvocateP.K. Sengupta and ;S. Dutt, Advs.
Cases ReferredAmerican Direct Tea Trading Co. Ltd. v. Commissioner of Agricultural Income
Excerpt:
- .....growing and manufacturing tea without the assessment of such assessee being completed under the indian income-tax act have been raised in this application. it appears that the bagdogra tea estate was owned and managed by a partnership firm of which maidhandus agarwalla and certain other persons were the partners. it is alleged in the petition that sometime in september, 1965, the other partners of the firm retired after transferring the said bagdogra tea estate to maidhandas agarwalla who has since been managing the said estate on behalf of the hindu undivided family of which he was the karta. notices for filing returns of agricultural income of the said bagdogra tea estate for the assessment years 1959-60 to 1964-65 dated the 2nd june, 1965, were issued and the said returns were duly.....
Judgment:

K.L. Roy, J.

1. Some very difficult and intricate questions as to the competence of the Agricultural Income-tax Officer to make an assessment on an assessee deriving income from growing and manufacturing tea without the assessment of such assessee being completed under the Indian Income-tax Act have been raised in this application. It appears that the Bagdogra Tea Estate was owned and managed by a partnership firm of which Maidhandus Agarwalla and certain other persons were the partners. It is alleged in the petition that sometime in September, 1965, the other partners of the firm retired after transferring the said Bagdogra Tea Estate to Maidhandas Agarwalla who has since been managing the said estate on behalf of the Hindu undivided family of which he was the karta. Notices for filing returns of agricultural income of the said Bagdogra Tea Estate for the assessment years 1959-60 to 1964-65 dated the 2nd June, 1965, were issued and the said returns were duly filed. Notices under Section 24(4) of the Bengal Agricultural Income-tax Act (hereinafter referred to as ' the Act ') for these various years were served on the said estate calling upon it to produce, inter alia, its books of accounts and other records and the certified copy of the assessment order for the corresponding year under the Indian Income-tax Act. The said notice also informed the assessee that failure to comply with any of the terms of the notice would render him liable to prosecution under Section 53(1) of the Act and to summary assessment under Section 25(5). It is alleged in the petition that the said Maidhandas Agarwalla contended before the Agricultural Income-tax Officer, being the respondent No. 1 herein, that as the assessments under the Central Income-tax Act for any of the aforesaid assessment years had not been completed, it was not possible to furnish certified copies of the said assessment orders. It is further alleged in the petition that in spite thereof the respondent No. 1 proposed to proceed with the assessment of the Bagdogra Tea Estate to agricultural income-tax for the aforesaid years ex parte if there was failure to comply with the aforesaid notices. Several applications under Article 226 were tiled in this court either by the said Maidhandas Agarwalla or after his death by the present petitioner and rules obtained in respect of the assessment years 1960-61, 1961-62 and 1962-63 together with interim orders restraining the respondent No. 1 from taking any steps in pursuance of the said notice under Section 24(4) until the disposal of the rules. Such a rule in respect of the assessment year 1960-61 was obtained on the 20th February, 1967, that, for the year 1961-62 on the 19th December, 1967, and the rule for 1962-63 was obtained on the 19th November, 1968. This rule in respect of the assessment year 1963-64 was issued by me on 2nd January, 1970, on the same terms as the previous rules, with an interim order restraining the respondent No. 1 from taking any steps in respect of the notice under Section 24(4) as in the earlier rules. The said Maidhandas Agarwalla died on the 8th May, 1968, and the present application has been made and the rule obtained by his son, Om Prakash Agarwalla., claiming to be the karta of the joint Hindu family carrying on business under the name and style of Bagdogra Tea Estate. In the petition it has been claimed that in spite of representations being made to the respondent No. 1 by the authorized representative of the tea estate that no certified copy of the order of assessment under the Income-tax Act could be produced as no order of assessment for the relevant year had yet been passed, the respondent No. 1 wanted to make an ex parte assessment though it was not possible for the petitioner to produce any such certified copy before him. It is further submitted that as the petitioner maintains all up to date books of accounts and other particulars for the purpose of assessment of the agricultural income of the said tea estate end is willing to be assessed on the basis of such books of accounts, the respondent No. 1 was illegally insisting on the production of the certified copy of a non-existent order of assessment under the Indian Income-tax Act. It is further submitted in the petition that under the relevant provisions of both the Indian Income-tax Act and this Act the the total income of an assessee which grows and manufactures tea has to be determined by the Income-tax Officer making the assessment under the Indian Income-tax Act and thereafter allocated as to 60 per cent. As agricultural income and 40 per cent. as the income chargeable under the Indian Income-tax Act. Unless such an assessment has been made it is not possible to compute the agricultural income of an assessee growing and manufacturing tea and no assessment to agricultural income-tax can be made until and unless the assessment for the corresponding year has been completed under the Indian Income-tax Act.

2. In the affidavit-in-opposition it is not denied that the notice under Section 24(4) did require the petitioner and/or his predecessor-in-interest to produce certified copies of the assessment orders under the Indian Income-tax Act for the relevant years as such certified copies were required under the provisions of the Act for completing the assessment to agricultural income-tax. It is further pointed out that under the provisions of the Act the assessment to agricultural income-tax for the year 1963-64 would be barred on the 31st March, 1970 and the respondent No. 1 was anxious to complete the assessment before such assessment became barred. It is further stated that the assessment to agricultural income-tax of the Bagdogra Tea Estate for the year 1963-64 was completed by respondent No. 1 on 23rd December, 1969. Apparently, the assessment was made as a best judgment assessment.

3. At the hearing of this rule it was not disputed by the learned counsel for the petitioners that in respect of all the aforesaid years, rules had been obtained from this court by the said Maidhandas Agarwalla against the Income-tax Officer making the assessments to the Central income-tax and interim orders were obtained permitting the said Income-tax Officer to complete the assessments but not to communicate the orders to the assessee or make any demand in respect thereof. Accordingly, no assessment orders had been served on the petitioner and no certified copies thereof could be obtained by him. Mr. Sen Gupta, the learned counsel for the respondents, has pointed out that the Agricultural Income-tax Officer also could not get copies of the aforesaid assessment orders from the Central Income-tax Officer because of the aforesaid restrictions placed upon him by this court. Mr. Sen Gupta submitted that when the present rule was obtained from me on the 2nd January, 1970, the stay orders against the Central Income-tax Officer were already in operation but this very material fact was not mentioned in the petition or brought to the notice of the court when obtaining the rule and the interim order restraining the respondent No. 1 from giving any effect to the notice under Section 24(1). The result has been that the assessment for the year under consideration was going to be barred. Mr. Sen Gupta submits that on the ground of such suppression of material facts alone the rule should be discharged and the application should be thrown out.

4. A strange state of affairs has been brought into existence by the petitioner and his predecessor-in-interest by obtaining rules from this court both in respect of the assessments under the Indian Income-tax Act and the assessments under the Agricultural Income-tax Act, for the assessment years 1959-60 to 1964-65 with the result that no assessment could be made under either of the two Acts in respect of these years, and it is debatable whether such assessments could legally be made in future as the assessments for some of the years seem to be barred under the provisions of the respective statutes unless such an assessment had been completed under the directions of this court.

5. One other fact should be mentioned before I discuss the legal points involved in this application. Though a complaint is made in the petition that in spite of representations on behalf of the petitioner and/or his predecessor-in-interest that it was not possible to produce a certified copy of the assessment order under the Indian Income-tax Act as no assessment under that Act had been completed or had been made, Mr. Sen Gupta points out that though the impugned notice was issued on the 15th December, 1969, and admittedly received by the petitioner on the 17th December, 1969, no letter or application from the petitioner to the respondent No. 1 has been disclosed or annexed to the petition recording the fact that no such assessment had taken place and that it was not possible for the petitioner to produce the certified copy of the relevant assessment order. On the other hand, an application dated the 23rd December, 1969, from the tea estate to respondent No. 1 has been annexed to the petition showing that the petitioner was asking for time to produce its books of account as such books had been seized by the Income-tax Officer, Siliguri, and that the accountant of the estate was seriously ill. In this petition no time has been asked for on the ground that it was not possible to obtain a certified copy of the assessment order under the Indian Income-tax Act.

6. As under the Constitution, Parliament is not competent to levy tax on agricultural income, both the Indian Income-tax Act and the State Agricultural Income-tax Act provide for exclusion of such income from assessment under the Central Act and for its assessment under the relevant State Act. The definition of agricultural income under the Indian Income-tax Act is the same as that under this Act. Section 3 of the Act, which is the charging section, provides that agricultural income-tax shall be charged for each financial year in accordance with and subject to the provisions of this Act at the rate or rates specified in the Schedule on the total agricultural income of the previous year of every individual, Hindu undivided family, company, firm or other association of persons, etc. Sections 5, 6 and 7 lay down the procedure for computing the agricultural income to be charged under Section 3. Section 8 deals with the computation of tax on mixed incomes, i.e., income derived from operations partly agricultural and partly non-agricultural. Section 8(1) enacts that in the case of such mixed income which is chargeable partly under this Act and partly under the Indian Income-tax Act, the Agricultural Income-tax Officer shall determine the agricultural income on certain basis as laid down in that sub-section. Sub-section (2) of that section deals exclusively with income derived from tea and is in the following terms :

'Notwithstanding anything contained in this Act, in the case of tea grown in West Bengal and sold by the grower himself or his agent after manufacture, the agricultural income derived therefrom shall, as long as for the purposes of assessment to income-tax under the Indian Income-tax Act, 1922, the income derived therefrom is computed under that Act in such manner as to include agricultural income, be deemed to be that portion of such income as so computed on which income-tax is not payable under that Act, and agricultural income-tax at the rates specified in the Schedule shall be payable on the whole of such agricultural income as so computed.'

7. It would be clear from this sub-section that in the case of income derived from tea the total income is to be determined in the assessment under the Central Income-tax Act and thereafter it is apportioned, as to the agricultural income and the business income, and only that part which is apportioned as agricultural income is to be taken for the purposes of assessment to agricultural income-tax under the Act. Sub-section (3) of that section provides that for the purpose of assessment under that section or any rule made thereunder a certified copy of the order of an assessment under the Indian Income-tax Act or a certified copy of an order of any appellate or revising authority or of the High Court or of the Supreme Court altering or amending such order of assessment under the provisions of that Act shall be conclusive evidence of the contents of such order. Section 24 deals with the notices requiring the assessee either to file returns or to produce books and documents in support of such returns. Under Sub-section (4) of that section the Agricultural Income-tax Officer may serve on any person who has made a return a notice requiring him on a date to be therein specified to produce or cause to be produced such accounts or documents as the Agricultural Income-tax Officer may require, provided that the Agricultural Income-tax Officer may on reasonable grounds and on application being made to him in this, behalf allow such accounts or documents to be produced on a date later than that specified in the notice. Section 25(5) empowers the Agricultural Income-tax Officer to make the assessment to the best of his judgment, if any person fails to comply with all the terms of a notice issued under Section 24(4) or fails to produce before the Agricultural Income-tax Officer any order under the Indian Income-tax Act, 1922, or a certified copy thereof which may be necessary for the purpose of enabling any assessment to be made under Section 8. The mode of assessment of income derived from the growing and manufacturing of tea is provided for in rule 8 of the rules framed under the Income-tax Act, 1961, corresponding to Rule 24 of the Rules under the repealed Act of 1922. The said rule prescribes that income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business and forty per cent. of such income shall be deemed to be income liable to tax. It is, therefore, clear that on allocation being made under this rule sixty per cent. of the income computed would be regarded as agricultural income and this is the amount which is to be taken for assessment to agricultural income-tax under Section 8(2) of the Act. Mr. Ghose, the learned counsel for the assessee, drew my attention to the decision of the Supreme Court in Anglo-American Direct Tea Trading Co. Ltd. v. Commissioner of Agricultural Income-tax, : [1968]69ITR667(SC) . There one of the contentions raised was whether the Agricultural Income-tax Officer could make the assessment under the Kerala Agricultural Income-tax Act without accepting the assessment already made by the Central income-tax authorities under Rule 8 of the Income-tax Rules. The Supreme Court said that it thought that he was bound to accept the determination by the Central Income-tax Officer. Income from sale of tea grown and manufactured by the seller was derived partly from business and partly from agriculture. This income had to be computed as if it were income from business under the Central Income-tax Act and Rules. Forty per cent. of the income so computed was deemed to be income derived from business and assessable to non-agricultural income-tax. The following observations are instructive :

' There is no provision in the Kerala Act authorising the Agricultural Income-tax Officer to disregard the computation of the tea income made by the income-tax authorities acting under the Central Income-tax Acts. The Agricultural Income-tax Officer in making an assessment of agricultural income is bound to accept the computation of the tea income already made by the Central income-tax authorities and to assess only sixty per cent. of the income so computed less allowable deductions as agricultural income taxable under the Kerala Act.'

8. After considering the provisions, inter alia, of Sections 8(2), 24(1) proviso, 24(2) proviso, 23(4) and 25(5) of the Bengal Agricultural Income-tax Act, 1944, and Rules 7 and 8 made thereunder, the Supreme Court declined to express any opinion on the construction of these Acts and Rules, and merely contented itself by saying that the Kerala Agricultural Income-tax Act did not confer upon the Agricultural Income-tax Officer power to disregard the assessment on the tea income already made by the Central income-tax authorities. The Supreme Court, however, was not unaware of the difficulties which might arise in making an assessment of agricultural income on the basis of the assessment cf the tea income made by the Central income-tax authorities as it points out that the previous year under the Central Act may be different from the previous year under the State Agricultural Income-tax Act, but observed that in spite of these and other difficulties they were unable to hold that the Agricultural Income-tax Officer could ignore the assessment of the tea income already made by the Central income-tax authorities. As to the question whether the Agricultural Income-tax Officer could on his own make an assessment of the agricultural income in respect of tea grown it was left open as it did not arise for decision in that case.

9. The relevant provisions of the present Act seem to me to be in pari materia with the relevant provisions of the Kerala Act considered by the Supreme Court in the above case and in my opinion it cannot be said that the Agricultural Income-tax Officer making an assessment of the income of a tea estate could ignore the assessment made under the Central Income-tax Act and make an assessment on his own.

10. But the difficulty that has arisen in this case and which was envisaged by the Supreme Court in the case discussed above but which the Supreme Court declined to resolve, is that when the corresponding assessment under the Central Act could not be completed, can the assessment to agricultural income be allowed to be barred in the absence of such assessment The provisions of the Act as discussed above appear to provide that unless the Central assessment is made and the total income is allocated in that assessment order, no assessment could be made of the agricultural income derived from tea. This again is a difficult question which it is not necessary for me to decide in view of the course I am adopting in the present application.

11. If the fact that the inability of the petitioner to produce the certified copies of the income-tax assessments made under the Central Act was caused by the petitioner's own action in obtaining prohibitory orders from this court prohibiting the Income-tax Officer from communicating the assessment orders to the petitioner, was brought to my notice when I issued the rule in January, 1970, I would certainly have refused to grant any stay prohibiting the Agricultural Income-tax Officer from completing the assessment before it became barred. The learned counsel for the petitioner informs me that when issuing the rule I noticed that the assessment was going to be barred and accordingly gave liberty to the respondent to come and apply for vacating the interim order. In view of the fact that it has been stated in the affidavit-in-opposition that the assessment for the relevant year has been completed within time before the rule was issued, without going into the question of the legality of such assessment it would be enough for me to discharge the rule and vacate the interim order and leave the parties to proceed to enforce their rights under the law. The petition is wholly unmeritorious and in my opinion a rule has been obtained from this court by suppression of very material facts and the only course left open for me is to discharge the rule and vacate the interim order. There will be no order as to costs of this application.


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