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Mrs. R.H. Dave Vs. Commissioner of Income-tax - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberIncome-tax Reference No. 305 of 1979
Judge
Reported in[1983]140ITR1035(Cal)
ActsIncome Tax Act, 1961 - Sections 153(3) and 251(1)
AppellantMrs. R.H. Dave
RespondentCommissioner of Income-tax
Appellant AdvocateDilip Dhar, Adv.
Respondent AdvocateM.L. Bhattacharjee, Adv.
Excerpt:
- .....officer was at liberty to consider the assessment of the income in the correct assessment year in view of explanation (i) to section 153(3) of the act. we, therefore, decline to accede to the request of the assessee to delete the direction given by the appellate assistant commissioner and we confirm the order of the appellate assistant commissioner.'5. in the background of the facts so found, the tribunal has referred the question, as indicated above. the power of the aac in disposing of the appeal relevant for our present purpose is in clause (a) of sub-section (1) to section 251 of the act, which provides as follows :'(a) in an appeal against the order of assessment, he may confirm, reduce, enhance or annul the assessment or he may set aside the assessment and refer the case.....
Judgment:

Sabyasachi Mukharji, J.

1. This reference relates to the assessment year 1971-72. Under Section 256(1) of the I.T. Act, the Tribunal has referred to this court the following question:

'Whether, on the facts and in the circumstances of the case, the Tribunal having held that the Appellate Assistant Commissioner had no juridiction to direct the Income-tax Officer to bring the amount to tax in an assessment year not involved in the appeal before him, was justified in law in refusing to delete such direction given by the Appellate Assistant Commissioner ?'

2. It appears that the assessee is an individual. The assessee had taken on lease a plot of land at Worli, Bombay ; the said plot of land was acquired by the Government on 12th May, 1961, and the assessee received a sum of Rs. 2,55,645 as compensation. The ITO brought this amount to tax in the assessment year 1971-72 as the income received under the head'Other sources' in the previous year relevant to this assessment year. The assessee had appealed to the AAC and had contended that this amount was not taxable as it was a windfall and, alternatively, it was not taxable in the assessment year in question. The AAC accepted both the contentions of the assessee and he was of the view that the amount received was the price of the leasehold right which was extinguished and, therefore, should not be taxed as income. He was also of the view that as capital gains it was to be taxed in the assessment year 1962-63, relevant to the previous year in which the transfer took place and, therefore, could not be assessed in the present assessment year. We may incidentally point out that we are not concerned here with the controversy whether there could be a transfer of the property before the receipt of the compensation under the Land Acquisition Act, or whether the possession of the property was taken before the receipt of compensation. The AAC was of the view that, as capital gains, the amount was to be taxed in the year 1962-63, relevant to the previous year in which the transfer took place and could not, therefore, be assessed in the present assessment year and he, therefore, deleted the addition in this assessment year 'but directed the ITO to bring it to tax in the correct assessment year'.

3. The Revenue appealed to the Tribunal and it was contended that the amount received by the assessee was really a business receipt, considered as the sale of a commercial asset. It was argued that the amount was correctly brought to tax in the year in which it was received in view of a certain decision; it was submitted that the order of the ITO should be restored.

4. We find that the assessee had filed a cross-objection against the direction given to the ITO to bring the amount to tax in the correct assessment year. It was submitted that the AAC had no jurisdiction to decide that point and he should have confined himself to the finding that this amount was not taxable in this assessment year. It was submitted that the amount was actually compensation for immovable property and that being a capital asset, there was no question of treating this amount as business income. It was also submitted that according to the provisions of the Act, capital gains should be taxed only in the assessment year relevant to the previous year in which the transfer took place and, therefore, the assessment was rightly cancelled by the AAC. The Tribunal, after considering the rival submissions, expressed the view that the order of the AAC was substantially correct and should be confirmed. . The Tribunal thereafter observed as follows :

''The assessee was having certain leasehold rights in the lands and those rights having been acquired by the Government under the LandAcquisition Act, on 12th May, 1961, the assessee received the compensation of Rs. 2,55,645 by an award dated 13th February, 1970. The contention of the Revenue that this amount is business income has no basis.There is no material to show that the land was a commercial asset of the assessee or that it was transferred in the course of her business. The decision of the Patna High Court in the case of Rai Bahadur H. P. Banerji : [1951]19ITR596(Patna) , is also not on all fours as that case was concerned withcompensation for the use of the land and not for acquiring the leasehold rights. It is, therefore, clear that in the present case it was only a capital gain arising from the transfer and should be assessed to income-tax. According to Section 2(47), 'transfer' includes the compulsory acquisition of a capitalasset and according to Section 45 any profits and gains arising from the transfer of a capital asset effected in the previous year in which the transfer took place. In the present case that transfer has taken place in May, 1961, when the acquisition was made and, therefore, there was no transfer in the previous year relevant to the assessment year 1971-72 with which we are now concerned. The Revenue relied on the decision of the Andhra Pradesh High Court in the case of Khan Bahadur Ahmed Alladin & Sons v. CIT : [1969]74ITR651(AP) , to argue that the right to receive compensation was an inchoate right which could materialise only when the award is made. That case, however, was concerned with additional compensation accruing, by reason of enhancement, to the assessee and there is no reference to the provision of Section 45 which, as we have seen, requires the capital gains to beassessed only in the assessment year relevant to the previous year in which the transfer took place. We are, therefore, of the opinion that the decision of the AAC to exclude this amount from the assessment of this assessment year 1971-72 was quite correct. However, he had no jurisdiction to direct the ITO to bring the amount to tax in the correct assessment year (sic)before him and not otherwise (See the decision of the Supreme Court in the case ITO v. Murlidhar Bhagwan Das : [1964]52ITR335(SC) and in the case of Sivalingam Chettiar v. CIT : [1967]66ITR586(SC) . At the same time evenwithout such a direction the Income-tax Officer was at liberty to consider the assessment of the income in the correct assessment year in view of Explanation (i) to section 153(3) of the Act. We, therefore, decline to accede to the request of the assessee to delete the direction given by the Appellate Assistant Commissioner and we confirm the order of the Appellate Assistant Commissioner.'

5. In the background of the facts so found, the Tribunal has referred the question, as indicated above. The power of the AAC in disposing of the appeal relevant for our present purpose is in Clause (a) of Sub-section (1) to Section 251 of the Act, which provides as follows :

'(a) in an appeal against the order of assessment, he may confirm, reduce, enhance or annul the assessment or he may set aside the assessment and refer the case back to the Income-tax Officer for making a fresh assessment in accordance with the directions given by the Appellate Assistant Commissioner and after making such further inquiry as may be necessary and the Income-tax Officer shall thereupon proceed to make such fresh assessment and determine, where necessary, the amount of tax payable on the basis of such fresh assessment.'

6. Here, we are not concerned with Clauses (b) and (c) to Sub-section (1) of Section 251. The Tribunal, as we have mentioned before, came to a categorical finding that the AAC had no jurisdiction to direct the ITO to bring the amount to tax in the correct assessment year, for, he could only decide the matter relating to the assessment year before him and not otherwise. This view of the Tribunal is corroborated by several decisions of the Supreme Court We may refer to the latest decision of the Supreme Court in the case of Rajinder Nath v. CIT : [1979]120ITR14(SC) , where the Supreme Court categorically observed that the expressions 'finding' and 'direction', in Section 153(3) were limited in meaning. The Supreme Court observed that a finding given in an appeal, revision or reference, arising out of assessment must be a finding necessary for the disposal of the particular case, that is to say, in respect of the assessee and in relation to the particular assessment year; to be a necessary finding, the Supreme Court observed, that it must be directly involved in the disposal of the case ; it was possible in certain cases that in order to render a finding in respect of A, a finding in respect of B might be called for; for instance where the facts showed that the income could belong to either A or B and to none else, a finding that it belonged to B or did not belong to B, would be determinative of the issue as to whether it could be taxed as A's income ; a finding respecting B was initially involved as a step in the process of reaching the ultimate finding respecting A; if, however, the finding as to A's liability could be directly arrived at without necessitating a finding in respect of B, then a finding made in respect of B was an incidental finding only and it was not a finding necessary for the disposal of the case pertaining to A.

7. Here, we have noticed the language of Clause (a) of Sub-section (1) of Section 251, which empowers the AAC to set aside the assessment and refer the case back to the ITO for making a fresh assessment in accordance with the direction given by the AAC. This power must be limited to the assessment year in question.

8. In view of the categorical ratio of the Supreme Court in the aforesaid decision, in our opinion, the Tribunal having already held that the AAC had no jurisdiction to direct the ITO to bring the amount to tax in the correct assessment year, the Tribunal was in error in declining to deletethe direction, because the ITO, according to the Tribunal, had the same power under Section 153(3) of the Act. Whether the AAC has the power under that section is another matter but if the authority holds that the AAC had no jurisdiction to come to a finding that the income could be taxed in a particular year, then whether that amount could be brought to tax by resort to some other provisions, irrespective of the finding of the AAC is, in our opinion, irrelevant.

9. In that view of the matter, we are of the opinion, that the Tribunal was in error in coming to the finding, as we have mentioned, and to decline to delete the direction contained in the AAC's order.

10. Our attention was drawn by the learned advocate for the Revenue to Expln. 2 to Sub-section (3) of Section 153. We may incidentally point out that that Explanation was introduced with effect from 6th October, 1964, by the Direct Taxes (Amendment) Act, 1964, and the judgment of the Supreme Court in the above-mentioned case came on 13th August, 1979. Indeed, though the Supreme Court was not concerned with the Explanation, the Supreme Court noted that though it was concerned with the assessment years 1955-56 and 1956-57, there was no change in the expression used in Sub-section (3) of Section 153, namely, 'finding' and 'direction' and in spite of the same, the Supreme Court made the aforesaid observations.

11. In that view of the matter, in our opinion, the contention of the assessee must succeed in view of the aforesaid decision of the Supreme Court.

12. Our attention was drawn on behalf of the Revenue to the Bench decision of the Andhra Pradesh High Court in the case of B. A. R. Abdul Rahman Saheb v. ITO : [1975]100ITR541(AP) , and reliance was placed on the observations at p. 546 of the report. Whether any appropriate step is to be taken under Section 153 or Section 147 or Section 148 or not, is not the issue before us. We are concerned with the question whether by the expression 'finding or direction', as these have been construed by the Supreme Court, after holding that the AAC had no jurisdiction, could the Tribunal still decline to delete the direction given by the AAC ?

13. Our attention was also drawn to another decision of the Andhra Pradesh High Court in the case of P. J. Udani v. CIT : [1967]63ITR766(AP) . But in view of the view the Supreme Court has taken, it is not necessary for us to discuss the said decision in detail.

14. In the aforesaid view of the matter, the question must be answered in the negative and in favour of the assessee.

15. In the facts and circumstances of the case, parties will pay and beartheir own costs.

C.K. Banerji, J.

16. I agree.


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