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Executive Officer, Nameli Sri Alavandar Naicker Charities v/s Commissioner of Agricultural Income Tax and Another

    WP No. 14289 and 14290 of 1988, WMP No. 21397 and 21398 of 1988
    Decided On, 18 October 1997
    At, High Court of Judicature at Madras
    By, THE HONOURABLE MR. JUSTICE RENGASAMY
   


Judgment Text
RENGASAMY, J.


These two writ petitions under article 226 of the Constitution of India are filed for certiorarified mandamus to quash the common order of the Commissioner of Agricultural Income-tax, Chepauk, Madras, levying the agricultural income-tax for the assessment years 1975-76 and 1976-77 The facts are as follows:


The petitioner, which is a public charity is having the agricultural income and, therefore, it filed the returns for the assessment years 1975-76 and 1976-77 stating that no tax was leviable and the Agricultural Income-tax Officer also had accepted those returns. However, the second respondent/Agricultural Income-tax Officer having found that the above assessment was not according to law, reassessed under section 35 of the Tamil Nadu Agricultural Income-tax Act, 1955 (hereinafter referred to as the "Act"), and levied tax of Rs. 2, 058.25 and Rs. 1, 561.40, respectively, for the assessment years 1975-76 and 1976-77. The petitioner aggrieved by this order, filed an appeal before the Assistant Commissioner of Agricultural Income-tax, Villupuram, in A. P. Nos. 6 and 7 of 1985 and the Assistant Commissioner of Agricultural Income-tax set aside that order and remanded the matter with direction that notice under section 16(2) of the Act had to be issued before reassessment under section 35 of the Act. So the second respondent thereafter initiated fresh proceedings and a revised assessment was passed on November 19, 1985 under section 35 of the Act for the abovesaid two assessment years. However, he has confirmed the tax that was arrived at before the order of remand. The petitioner thereafter filed appeal before the Assistant Commissioner of Agricultural Income-tax, but on the direction of the Assistant Commissioner of Agricultural Income-tax, he filed revision before the Commissioner of Agricultural Income-tax under section 34 of the Act. The Commissioner of Agricultural Income-tax, Madras, has simply accepted the order of assessment made by the second respondent. Therefore, the petitioner has filed these writs invoking article 226 of the Constitution of India, alleging that the order of assessment is illegal as the mandatory provisions of the Act were not complied with while reassessment was made under section 35 of the ActLearned counsel appearing for the petitioner, Mr. R. Gangadharan, has submitted two arguments against this reassessment and they are, (1) the notice under section 35 of the Act is beyond the prescribed period of limitation, namely, five years, and (2) non-speaking of the order quantifying the tax payable by the petitioner. In other words, the respondents in the reassessment order have not specifically mentioned the tax levied for the net income of the petitioner, but have simply confirmed the assessment which was non est on the date of their orders.


With regard to the second contention, no doubt, the initial reassessment dated May 22, 1985, levying the tax of Rs. 2, 058.25 and Rs. 1, 561.40, respectively, for the assessment years 1975-76 and 1976-77 was set aside by the Assistant Commissioner of Agricultural Income-tax in A. P. Nos. 6 and 7 of 1985. Therefore, that order was not in existence when the respondents herein passed a revised reassessment after the remand order. However, the second respondent in his order dated November 19, 1985, has passed the order confirming the orders already passed by him on May 22, 1985, and this order was confirmed by the Commissioner of Agricultural Income-tax by his order dated June 13, 1988. Learned counsel for the petitioner submitted that when the order of the second respondent dated May 22, 1985, itself was not available on September 17, 1985, there was no question of confirming that order which was non-est and, therefore, when the second respondent had levied the fresh assessment under section 35 of the Act, he has not quantified the agricultural income-tax and therefore, the order has no substance.


Learned counsel for the petitioner would rely upon a decision in CIT v. Smt. Krishwanti Punjabi wherein the Calcutta High Court has held that an assessment must be determined by not only the total income, but also, the tax payable and there must be an actual determination of the tax payable within the time stipulated under section 153 of the Income-tax Act, 1961. It is true that the second respondent in his order dated November 19, 1985, has not specifically mentioned the quantum of tax on the net income. But, he has simply mentioned that he confirmed the order already passed by him on May 22, 1985, and this order of the Agricultural Income-tax Officer has been confirmed by the Commissioner of Agricultural Income-tax by his order dated June 13, 1988. The assessee must understand the quantum of the tax levied by the authority so that a tax assessed must be paid by him. So, for the easy understanding by the assessee, the tax assessed must be made clear in the assessment. In this case, even though the tax arrived at by the authority, namely, the second respondent, had not been mentioned specifically in his order after the enquiry, he would observe that the tax arrived at by him, by his previous order dated May 22, 1985, is correct and, therefore, the same is the tax payable by the petitioner/assessee under the reassessment made by him. The petitioner is fully conscious of the fact that under the order dated May 22, 1985, they have been directed to pay Rs. 2, 058.25 and Rs. 1, 561.40 for the assessment years 1975-76 and 1976-77. It is not difficult for them to understand what was the tax levied by the order of the second respondent on May 22, 1985. Therefore, when they are able to understand the quantum of tax levied by the second respondent by his previous order dated May 22, 1985, it cannot be contended that the second respondent by his fresh order has not quantified the tax levied on them. Therefore, the argument that the order has not quantified the tax, is not an acceptable argument, and this technical objection raised by learned counsel for the petitioner will not affect the order of the assessmentThen coming to the first contention, namely, the limitation, learned counsel for the petitioner would rely upon section 35 of the Act for reassessment and section 35 reads as follows:


"If for any reason agricultural income chargeable to tax under this Act has escaped assessment in any financial year or has been assessed at too low a rate (or has been underassessed) 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 16 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."


So, the argument, of learned counsel for the petitioner is that for the reassessment under section 35 of the Act, a notice has to be issued under section 16(2) of the Act within five years from the end of that relevant assessment year, but, in this case, the notice under section 16(2) of the Act was issued only in the year 1985 beyond the period of five years as the assessment years were 1975-76 and 1976-77, and in view of this defect the order of reassessment in the year 1985 is illegal.


Learned counsel, Mr. Gangadharan, relied upon a decision of the apex court in Y. Narayana Chetti v. ITO wherein the Supreme Court, would observe that when the requisite notice on the assessee is a condition precedent to the validity of any reassessment made under section 34 of the Indian Income-tax Act, 1922, and if a valid notice is not issued as required, proceedings taken by the Income-tax Officer in pursuance of an invalid notice and consequent orders of reassessment passed by him would be void and inoperative. According to learned counsel, the sections referred to above in the Income-tax Act are pari materia to the Agricultural Income-tax Act and when the valid notice that is required for reassessment was not complied with, the reassessment is illegalIt is not in dispute that the notice under section 16(2) of the Act was issued only in the year 1985 after the order of remand passed by the Assistant Commissioner of Agricultural Income-tax. As a matter of fact, in Appeals Nos. 6 and 7 of 1985 before the Assistant Commissioner of Agricultural Income-tax, Villupuram, he set aside the order of the second respondent only on the ground that notice was not issued under section 16(2) of the Act before reassessment was made under section 35 of the Act. Therefore, learned counsel for the petitioner would contend that as the notice for reassessment under section 35 of the Act calling upon the petitioner to file the return under section 16(2) of the Act was issued only in the year 1985, i.e., beyond the period of five years contemplated under section 35 of the Act, and, therefore, reassessment order is illegal.


But learned counsel appearing for the respondents, Mr. Raviraja Pandian, Special Government Pleader (Tax), would contend that notice under section 16(2) of the Act is required only when the particulars are required for the purpose of assessment, that in this case, the gross income of the petitioner has been already furnished in the original assessment itself in the year 1976-77 and no further particulars are required for the purpose of reassessment, but as certain inadmissible allowances had been claimed by the petitioner and were initially accepted by the Income-tax Department, later it was found to be incorrect, that the reassessment was only in respect of inadmissible allowances, and, therefore, there is no need for notice under section 16(2) of the Act.


Learned counsel for the respondents, Mr. Raviraja Pandian, refers to a Bench decision of this court in State of Tamil Nadu v. N. Muthalagirisami, arising under the Agricultural Income-tax Act, wherein, this court has observed that the basis for a notice under section 16(2) of the Act is for filing a return with regard to the real income of the assessee and in such cases, section 35 of the Act enables the Agricultural Income-tax Officer to issue a notice under section 16(2) calling upon the assessee to file a return. According to learned counsel for the respondents, in this case, the gross income furnished by the petitioner in the original returns submitted in the assessment years has been accepted by the second respondent, and, therefore, there is no necessity to call upon the petitioner under section 16(2) of the Act to file a return as to the income and when such necessity does not arise, there is no question of issuing notice under section 16(2) of the Act, even though reassessment was made under section 35 of the Act. Learned counsel for the respondents would further submit that before reassessment by the order of the second respondent dated May 22, 1985, a notice under section 35 of the Act was issued to the petitioner on October 27, 1977, asking the petitioner to show-cause notice within 15 days to pay the assessment mentioned therein, and as this notice has been issued under section 35 of the Act, it is the compliance under section 35 of the Act for the notice contemplated under section 35 of the Act and as this notice was issued within five years from the assessment year, it cannot be contended that the notice has not been issued within five years. It is true that when the second respondent wanted to reopen the assessment for the purpose of reassessment in the year 1985, he issued the notice under section 35 of the Act on October 27, 1977. It reads to be a show-cause notice directing the petitioner to pay the assessment within a period of fifteen days as worked out in that notice, But the petitioner was not asked to file the return as contemplated under section 16(2) of the Act. Section 16(2) of the Act reads that when in the opinion of the Agricultural Income-tax Officer, a person is liable to payment of agricultural income-tax, he may serve 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. So section 16(2) of the Act requires the Agricultural Income-tax Officer to issue a notice in the prescribed form and call upon the assessee to furnish the particulars within a period not less than thirty days to submit his return in the prescribed form with regard to the total agricultural income during the previous year. In the notice sent by the second respondent on October 27, 1977, he has not asked the petitioner to submit the return in the prescribed form furnishing the particulars with regard to the total agricultural income. Further, thirty days time has also not been given and fifteen days has been given under the notice for payment of the tax mentioned therein. Therefore, it was argued for the petitioner that this statutory notice contemplated under section 16(2) of the Act was not issued before reassessment under section 35 of the Act, which will invalidate the proceedings for the reassessment. As mentioned above, learned counsel for the respondent, Mr. Raviraja Pandian, would contend that in view of the fact that there is no dispute with regard to the gross income furnished by the petitioner in the original return, there is no necessity for issuing notice under section 16(2). It is not the gross income alone that has to be taken into consideration for the assessment. The tax is assessed on the basis of the net income furnished by the assessee. In this case, the net income provided in the original assessment was not taxable, and, therefore, no tax was levied. However, when the second respondent had reopened the assessment, he found that the net income furnished by the petitioner was incorrect and, therefore, the notice for reassessment under section 35 of the Act was issued on October 27, 1977. The notice dated October 27, 1977, under section 35 of the Act was found inadequate as found by the Assistant Commissioner of Agricultural Income-tax, for the reason that it did not precede with the notice under section 16(2) of the Act. Even though it is argued for the respondents that this order of the Assistant Commissioner of Agricultural Income-tax is incorrect, as read above, section 35 of the Act specifically reads that a notice has to be issued within five years requiring the assessee under sub-section (2) of section 16 of the Act to provide the requirements of that section. It is true that the gross income furnished in the original assessment has been accepted by the second respondent. But, the gross income alone is not the basis for the assessment and it is the net income. Therefore, unless the assessee furnishes the correct net income, the assessment cannot be properly done. The Form No. I under section 16(2) of the Act is the prescribed form for giving all particulars required for the assessment and, therefore, when the authority concerned reopens the assessment once made and wants to reassess, they have to call upon the assessee to furnish all the particulars including the net income for the proper assessment. There is dispute with regard to net income furnished by the petitioner in the o

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riginal assessment. It is because of that, the assessment had to be reopened for the purpose of reassessment in the year 1985. Hence when the second respondent issued a notice under section 35 of the Act he ought to have called upon the petitioner to furnish the particulars as required under section 16(2) of the Act in the prescribed form with regard to the income for the purpose of assessment. As this provision was not complied with, the Assistant Commissioner of Agricultural Income-tax also had set aside this order of reassessment and the matter was remanded for fresh reassessment. It cannot be stated that this order passed by the Assistant Commissioner of Agricultural Income-tax is illegal. A reading of section 35 of the Act also makes it clear that a notice under section 16(2) of the Act is mandatory, for reassessment under section 35 of the Act. But, this notice under section 16(2) of the Act was made only in the year 1985, i.e., beyond the period of limitation prescribed under section 35 of the Act. Therefore, learned counsel for the petitioner is perfectly right in contending that as the notice was not issued within the period of five years, the proceedings for reassessment beyond the period fixed under the Act is illegal and, therefore, the order of reassessment made by the respondent has to be quashed. I fully agree with the contention raised by learned counsel for the petitioner on this point of limitation. Therefore, necessarily, orders have to be quashedIn the result, the common order passed by the first respondent in R.P. Nos. 70 and 71 of 1986 dated June 13, 1988, is quashed. The writ petitions are allowed. There will be no order as to costs. Consequently, W.M.P. Nos. 21397 and 21398 of 1988 are closed.
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