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Case Number
Judges
  • Ramanujam, J.
Acts
  • Agricultural Income-tax Act, 1955,
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Citation Codes
Equivalent Citations
citation codes
Case Number
Judges
  • Ramanujam, J.
Acts
  • Agricultural Income-tax Act, 1955,
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Smart Summary

Structured Summary of Court Opinion

Factual and Procedural Background

The petitioner in these consolidated writ petitions is Khader Sheriff Saheb, an assessee under the Agricultural Income-tax Act, 1955, on the file of the Agricultural Income-tax Officer, Arcot. For the assessment years 1963–64 to 1971–72, composition orders under section 65 of the Act were passed year by year in respect of part of the lands held by him, based on returns filed by him. In his composition applications for those years the petitioner stated that the exact extent of his land in Mukundarayapuram village could not be specified because survey and settlement proceedings in that village were pending, and he indicated he had no objection to revision of the assessment after completion of those settlement proceedings.

The original composition orders expressly reserved the authority's right to reopen and revise the composition once the settlement proceedings were completed and the exact extent of the petitioner's land in Mukundarayapuram village was ascertained. After the settlement proceedings were completed, the Agricultural Income-tax Officer revised the composition orders to include additional land and directed the petitioner to pay agricultural income-tax according to the revised composition. The petitioner challenged those revised orders in revision before the Commissioner for Agricultural Income-tax and failed. He then moved the court by writ petition to quash the revised composition orders for the nine assessment years 1963–64 to 1971–72. The petitioner principally relied on two grounds: (1) that the revised orders were in substance escaped assessments under section 35 and required prior notice which was not given for some years, and (2) that the extent of land attributed to him in Mukundarayapuram village was incorrectly fixed and included some land not belonging to him.

Legal Issues Presented

  1. Whether the revised orders of composition, made after completion of survey and settlement proceedings, are to be treated as assessments/reassessments under section 35 of the Agricultural Income-tax Act, 1955, thereby attracting the notice requirements of section 35 (and section 16(2)) before making such revision.
  2. Whether the statutory procedure for revision under section 35 (including service of notice containing particulars as contemplated by section 16(2)) was complied with for the assessment years in question.
  3. Whether the assessing authority correctly determined the extent of land held by the petitioner in Mukundarayapuram village, or whether lands not belonging to the petitioner were wrongly included.

Arguments of the Parties

Petitioner's Arguments

  • The petitioner contended that although composition orders were originally made under section 65, those composition orders effectively amounted to orders of assessment under section 17, and therefore any revision of the composition could only be done by invoking section 35 (procedure for escaped assessments) which mandates prior notice proposing assessment of escaped income. The petitioner alleged no such notice was given for the relevant years.
  • The petitioner also argued that the assessing authority incorrectly fixed the extent of land in Mukundarayapuram village and included some lands not belonging to him.

Respondents' Arguments (including Commissioner)

  • The respondents' counsel argued that an order of composition under section 65 is not an assessment under section 17 and therefore revised orders of composition could not be treated as orders made under section 35. Instead, the power to revise was to be traced to the reservation in the original composition orders themselves.
  • The respondents further asserted that section 35 had not been invoked in all the cases and that there was no necessity to issue the notice contemplated by section 35 for those years; they also stated that, in any event, notices as contemplated by section 35 had been given for five assessment years (1966–67 to 1970–71).
  • The Commissioner adopted the view that revision was not made under section 35 but pursuant to the reservation in the original composition orders.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court examined the legal character of the original composition orders and the legal basis for the subsequent revised composition orders. The court reasoned as follows:

  1. The court accepted that the petitioner had, in his applications and in the original composition orders, indicated acceptance of inclusion of the Mukundarayapuram lands after settlement proceedings. However, it held that even absent such statements or reservations, where income has escaped assessment for any reason (for example, omission of lands), the original order can be revised under section 35 of the Act. The court emphasised that the income escapes assessment if some lands belonging to the assessee were omitted at the time of original composition.
  2. The court rejected the respondents' contention that revised composition orders should be treated as original assessment orders (and the notion that piecemeal assessments for different portions of income are permissible). It reasoned the Act contemplates one order of assessment in relation to one individual and does not contemplate multiple assessment orders in piecemeal fashion for the same person. Thus, where it is found that income escaped assessment in the original assessment, the correct statutory route to revise that assessment is by invoking section 35 (and section 36), i.e., by treating the revision as an assessment/reassessment of escaped income.
  3. Having concluded that the revised orders of composition were, in law, orders made under section 35, the court turned to compliance with the procedural prerequisites of section 35. Section 35 requires, as a pre-condition, service on the assessee of a notice containing particulars as contemplated in section 16(2) before the authority proceeds to assess or reassess escaped income.
  4. The factual record showed that a combined notice for the five years 1966–67 to 1970–71 had been served on the petitioner (acknowledgment appears on the file and a statement by the petitioner appears in the revisional proceedings). Consequently, the court accepted that notices as contemplated by section 35 had been served for those five years.
  5. The record contained no such notices for the four assessment years 1963–64, 1964–65, 1965–66 and 1971–72; the respondents' counter-affidavit did not assert service for those years either. Because the revised composition orders for those four years were in substance orders under section 35, and because the mandatory notice procedure of section 35 (and section 16(2) particulars) had not been followed, the revised orders for those years could not be upheld.
  6. As to the second ground (incorrect fixation of extent of land), the court noted that for the five years where notices had been given the petitioner had opportunities to object but had not substantiated his claims with concrete material before the Commissioner or before the court; therefore the court could not entertain the factual challenge absent evidentiary material. However, because the revised orders for the four years were quashed for procedural lapse, the petitioner would have the opportunity to substantiate his claim about actual extent of land when proper notice is given and revision is undertaken afresh.

Holding and Implications

The court held that the revised orders of composition were properly regarded as assessments/reassessments under section 35 of the Agricultural Income-tax Act, 1955, and that the statutory notice procedure under section 35 (with particulars as contemplated by section 16(2)) must be followed prior to such revision. Because that procedure was not followed for certain years, those revised orders were quashed.

Direct consequences and specific disposals recorded in the opinion:

  • The revised composition orders for assessment years 1963–64, 1964–65, 1965–66 and 1971–72 were quashed because no notice under section 35 had been given for those years. The assessing officer was granted liberty to proceed with revision under section 35 after giving due notice and a reasonable opportunity to the petitioner to contest the proposed revision.
  • The revised composition orders for the five assessment years 1966–67 to 1970–71 were treated as having been preceded by proper notices and the petitions challenging those revised orders were dismissed for those years; the court noted the petitioner had not substantiated his factual claim as to extent of land with concrete materials during available opportunities.
  • Disposition of writ petitions as expressly recorded in the opinion: Writ Petitions Nos. 1569, 1571, 1573, 1592 and 1593 of 1973 were dismissed; Writ Petitions Nos. 1570, 1572, 1590 and 1591 were allowed.
  • There will be no order as to costs in all the writ petitions.

The opinion does not set out any separate precedential holdings beyond applying the statutory scheme (sections 16(2), 35 and 65) to the facts: the court applied the existing statutory framework to determine that revision for escaped income requires compliance with the pre-conditions of section 35. The summary above states the direct effect on the parties as ordered by the court.

Show full summary ...

    N. Khader Sheriff Saheb v. Commissioner Of Agricultural Income-Tax And Another

    Ramanujam, J.:— The petitioner, who is the same in all the writ petitions, is one Khader Sheriff Saheb. He was an assessee under the Agricultural Income-tax Act, 1955, on the file of the Agricultural Income-tax Officer, Arcot. Orders of composition had been passed year after year under section 65 of the Act in respect of part of the lands held by him on the basis of the return filed by him. It has been mentioned in the composition application filed by the petitioner for all the years 1963–64 to 1971–72, that the exact extent of the land held by him in Mukundarayapuram village could not be given in his return as the settlement proceedings are pending in respect thereof, and that he had no objection for revision of the assessment after the completion of the said settlement proceedings and after the exact extent of, land belonging to the petitioner is clearly ascertained. Based on the said statement of the petitioner in his composition applications, composition orders had been passed by the Agricultural Income-tax Officer reserving his right to reopen and revise the same as and when the extent of land held by the petitioner in Mukundarayapuram village is ascertained on completion of the settlement proceedings.

    3. It appears that Mukundarayapuram village was an imam estate and the survey and settlement proceedings were pending in relation to the lands in that village when the orders of composition were passed. Subsequently after the completion of the survey and settlement proceedings in relation to the lands in that village, the orders of composition have been revised by the Agricultural Income-tax Officer based on the reservation made by him in the original orders of composition and the petitioner has been directed to pay agricultural income-tax as per the revised orders of composition. The petitioner has challenged these revised orders of composition, in revision, before the Commissioner for Agricultural Income-tax, but without success. The petitioner has, therefore, approached this court to quash the revised orders of composition passed by the Agricultural Income-tax Officer for the nine assessment years, i.e, from 1963–64 to 1971–72, as confirmed in revision by the Commissioner. The petitioner has challenged the revised orders of composition mainly on two grounds.

    4. One is that they have been passed under section 35 of the Act as an escaped assessment without complying with the statutory requirement of giving a prior notice to the petitioner. According to the petitioner though an order of composition has been made under section 65 of the Act, it virtually amounts to an order of assessment under section 17 of the Act and, therefore, any revision of the composition order can only be done by invoking section 35 of the Act which provides for the manner of assessing an escaped income, and no notice proposing assessment of escaped income as contemplated under section 35 of the Act has been given to him for any of the years in this case. As against this contention, the learned counsel for the respondents contends that an order of composition cannot be taken as an order of assessment under section 17 of the Act, that, therefore, revised orders of composition cannot be treated as orders passed under section 35 of the Act and that the original orders of composition having made a reservation of the right of the Agricultural Income-tax Officer to include the extent of the lands held by the petitioner in Mukundarayapuram village, after the settlement of that village is completed, the power of the Agricultural Income-tax Officer to revise the order has to be traced only to the original composition order and not to section 35 of the Act. This is in fact the view taken by the Commissioner while disposing of the revision petitions. The question is whether the submission of the learned counsel for the respondents as well as the view taken by the Commissioner can be accepted as correct.

    5. It is true that in all the composition applications filed by the petitioner, he has clearly stated that he has no objection for the inclusion of his lands for the purpose of determining his ultimate tax liability and that in the original orders of composition, reservation has been made to the effect that as and when the settlement is completed as regards the lands in Mukunda-rayapuram village, separate action will be taken for including those lands in the petitioner's holding for the purpose of determining the tax. But it cannot be disputed that even without any such statement by the petitioner in his return or the reservation by the Agricultural Income-tax Officer in the order of composition, the original order of composition can be revised under section 35 of the Act, if the income has escaped assessment for any reason. The income will escape assessment if some of the lands held by the petitioner had been omitted to be assessed. Notwithstanding the original orders of composition, the assessing authority will be entitled to proceed to revise the assessment by invoking section 35 of the Act if it is found that certain lands belonging to the petitioner have not been included in his aggregate holding for any reason. Here the reason why the lands at Mukundarayapuram village was not included in the holding of the petitioner at the time when the original order of composition was made was that the settlement proceedings were not complete and it is not known clearly as to what is the actual extent held by the petitioner in that village. Therefore, the consent given by the petitioner in his application for composition or the reservation made in the original orders of composition by the officer is not quite material for determining the jurisdiction of the Agricultural Income-tax Officer to revise the assessment. I am not inclined to agree with the learned counsel for the respondents that the revised orders of composition should be treated as the original orders of assessment, for the Act contemplates only one order of assessment in relation to one individual and does not contemplate piecemeal orders of assessment at various stages in respect of the same individual. There cannot be an assessment in relation to a portion of the income of the petitioner and further assessment in relation to the same person in respect of his some other income. The Act in no way contemplates the passing of two assessment orders in relation to the same person. Therefore, once an assessment is made against the person, that assessment could be revised only by invoking section 35 if it is found that the income has escaped assessment for any reason in the original assessment and under section 36. Therefore, revised orders of composition passed by the Agricultural Income-tax Officer in these cases can only be treated as orders passed under section 35 of the Act.

    6. On this basis, we have to deal with the petitioner's objection that the revised orders of composition are bad for the reason that prior notice proposing revision as contemplated under section 35 of the Act had not been issued. The petitioner has made this complaint even before the Commissioner at the stage of revision and also in the affidavit filed in support of the writ petition. In the counter-affidavit filed by the respondents, it has been stated that section 35 of the Act had not been invoked in all these cases and, therefore, there is no necessity to issue the notice proposing revision as contemplated under section 35 of the Act and that, in any event, notice as contemplated under section 35 of the Act had been in fact given in respect of five assessment years 1966–67 to 1970–71. In the reply affidavit filed by the petitioner, the petitioner has denied the service of any notice on him under section 35 of the Act for any of the years. But the assessment file produced before the court would show that a combined notice for the five years, 1966–67 to 1970–71, has in fact been served on the petitioner. The acknowledgment signed by the deponent of the reply affidavit is found therein. It also contains a statement given by the petitioner before the assessing authority in the proceedings for revision of assessment under section 35 of the Act. Therefore, it has to be taken that there was service of notice as contemplated under section 35 of the Act in respect of five assessment years 1966–67 to 1970–71. The file does not contain any such notice for the four assessment years 1963–64 to 1965–66 and 1971–72. Even the counter-affidavit does not proceed on the basis that any such notice was given in respect of these four assessment years. It only proceeds on the basis that no such notice is necessary since the revised orders of composition are not made under section 35 of the Act. It can, therefore, be safely taken that in fact there was no notice as contemplated under section 35 of the Act in respect of the assessment years 1963–64, 1964–65, 1965–66 and 1971–72.

    7. Now that it has been held that all the revised orders of composition had been made only under section 35 of the Act, the procedure contemplated therein should strictly be followed. Section 35 makes it a pre-condition that a notice containing all the particulars as contemplated in section 16(2) of the Act should be served on the assessee before the authority proceeds to assess or reassess the escaped income, under section 35 of the Act. Since this statutory procedure has not been followed in respect of the assessment years 1963–64, 1964–65, 1965–66 and 1971–72, the revised orders of composition cannot be upheld. The revised orders in respect of these years have, therefore, to be quashed. The assessing officer is, however, given liberty to proceed with the revision of the assessment under section 35 of the Act, after giving due notice to the petitioner and after giving him a reasonable opportunity to put forward his case against the proposed revision of the original orders of composition.

    8. The second ground of attack made by the petitioner against the revised orders of composition is that the extent held by him in Mukundarayapuram village has not been correctly fixed by the assessing authority and that some of the lands not belonging to him had also been included in his holding. For the five assessment years 1966–67 to 1970–71, the petitioner was given notice prior to the passing of the revised orders of composition and he had an opportunity to put forward his case. Though the petitioner was served with notice he had not availed of that opportunity to file his objections. Further, in the revisional proceedings before the Commissioner of Agricultural Income-tax, he had a further opportunity to establish his case that the larger extent of land had been included in his holding. In the revisional orders passed by the Commissioner, it has been mentioned that the petitioner did not substantiate his claim by producing any concrete materials. Even before this court, no material has been referred to by the petitioner to show as to what is the actual extent of land held by him in that village. It is not, therefore, possible to go into that question. However, now that for the assessment years 1963–64, 1964–65 and 1965–66 and 1971–72, the assessing authority has been directed to proceed with the revision of assessment after giving due opportunity to the petitioner, the petitioner can substantiate his claim as to the actual extent of land in Mukundarayapuram village. In this view the Writ Petitions Nos. 1569, 1571, 1573, 1592 and 1593 of 1973 are dismissed. W.P Nos. 1570, 1572, 1590 and 1591 are allowed. There will, however, be no orders as to costs in all these writ petitions.

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    N. Khader Sheriff Saheb v. Commissioner Of Agricultural Income-Tax And Another
    (Jun 16, 1977)