Citation Codes

Equivalent Citations

citation codes

Case Number

Civil Rule No. 155 of 1973

Judges

Hon'ble Mr. Chief Justice M. C. Pathak
Hon'ble Mr. Justice N. Ibotombi Singh

Acts

subsection (4) of section 20 of the Assam Agricultural Income-tax Act, hereinafter referred to as the Act.
Indian Income-tax Act.6. Rule 5 of the Assam Agricultural Income-tax Rules, 1939,
Indian Income-tax Officer.7. Rule 8 of the Income-tax Rules, 1962,
section 20(4) of the Assam Agricultural Income-tax Act, 1939,
section 20 of the Assam Agricultural Income-tax Act,
ARTICLE 226 CONSTITUTION OF INDIA
provisions of clause (30) of section 10,
Agricultural Income-tax Act,
Indian Income-tax Act, 1922,
Central Income-tax Act
INDIAN INCOME TAX ACT
INCOME TAX ACT

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Smart Summary

Structured Summary of the Opinion (Pathak, C.J.)

Factual and Procedural Background

This petition under Article 226 of the Constitution of India challenges assessment orders dated 27 May 1971 passed by the Agricultural Income-tax Officer, Assam (Gauhati) under section 20(4) of the Assam Agricultural Income-tax Act, 1939, for the assessment years 1959-60, 1960-61 and 1961-62, and the demand notices and recovery proceedings initiated in consequence of those assessments.

The petitioner is the executor of the estate comprising Tonganagaon Tea Estate (district of Dibrugaih) and Bhubrighat Tea Estate (district of Cachar), estates of the late P.C. Syam. It was common ground that the petitioner is liable to pay agricultural income-tax but had not filed returns in accordance with law; consequently best-judgment assessments were made under section 20(4) of the Act.

Within one month of being informed of the assessments, the petitioner filed an application dated 18 June 1971 under section 21 of the Act seeking cancellation of those best-judgment assessments and fresh assessments. The petitioner contended that the section 21 application had not been disposed of when the rule was obtained on 10 April 1973, and counsel further submitted that the application remained undisposed at the time of the hearing.

Annexure documentation (a petition dated 4 June 1971) indicated the status of Central income-tax (referred to as "Central assessment") proceedings for the same years: for 1959-60 the assessment had been set aside by the Appellate Assistant Commissioner and remained pending; for 1960-61 it had been remanded and remained pending; for 1961-62 it had been revised by the ITO after effecting the order of the Appellate Assistant Commissioner. For 1961-62 the petitioner also stated difficulty in obtaining a copy of the Central assessment order because the file had been sent to the Tribunal.

Legal Issues Presented

Whether the best-judgment assessments dated 27 May 1971 passed under section 20(4) of the Assam Agricultural Income-tax Act, 1939, together with the consequential demand notices and recovery proceedings, should be set aside and quashed in view of the pendency/ incompleteness of corresponding Central (income-tax) assessments and the pendency of the petitioner's application under section 21 of the Act.
Whether the Agricultural Income-tax Officer should take up and dispose of the petitioner's application under section 21 of the Act (filed on 18 June 1971) and, if so, on what terms and time frame.

Arguments of the Parties

Petitioner's Arguments

The petitioner (through Mr. P. Choudhuri, learned counsel) submitted that at the time the best-judgment assessments were made under section 20(4) the corresponding Central income-tax assessments were not completed; consequently the petitioner was unable to file a complete return under the Agricultural Income-tax Act.
Because the Central assessments were incomplete and the petitioner could not obtain necessary Central assessment orders (specifically for 1961-62, the file was sent to the Tribunal), the petitioner filed an application under section 21 of the Act on 18 June 1971 for cancellation and revision of the section 20(4) assessments upon receipt of the Central assessment orders.
It was asserted that the section 21 application had not been disposed of and therefore the impugned assessments and recovery steps should not be allowed to stand without consideration of that application.

The opinion does not contain a detailed account of any substantive arguments advanced on behalf of the Agricultural Income-tax Officer or the revenue.

Table of Precedents Cited

No precedents were cited in the provided opinion.

Court's Reasoning and Analysis

The court examined the statutory and regulatory framework governing agricultural income from tea and the interaction with Central income-tax computation:

The court quoted the definition of "agricultural income" in section 2 of the Assam Act and the second proviso to section 8 which provides that agricultural income from cultivation and manufacture of tea shall be deemed to be that portion of income which is agricultural income within the meaning of the Indian Income-tax Act and is to be ascertained by computing income for Indian income-tax purposes with certain deductions.
The court referred to Rule 5 of the Assam Agricultural Income-tax Rules, 1939, which contemplates that the portion of net income worked out under the Indian Income-tax Act and left unassessed as agricultural shall ordinarily be accepted by the Assam Agricultural Income-tax Officer; the rule permits the Assam officer to obtain further details but contains protections against requiring production of account books already examined by the Indian Income-tax Officer without proper sanction.
The court noted Rule 8 of the Income-tax Rules, 1962, which provides that income from manufacture of tea is to be computed as if income were derived from business and that forty per cent of such income shall be deemed income liable to tax. From the statutory and rule provisions and Article 366(1) (which defines "agricultural income" as that defined for Indian income-tax enactments), the court concluded that 60% of the tax determined under the Income-tax Act is to be treated as agricultural income-tax (i.e., the allocation between taxable and agricultural portions was reflected by the rules).
The court accepted the petitioner's factual contention that the Central assessments had not been completed at the time of the agricultural best-judgment assessments and that complete returns under the Assam Act could not be filed without copies of the Central assessment orders; the court referred to Annexure 9 which detailed the pending or remanded status of Central proceedings for the relevant years and to the difficulty in obtaining the Central order for 1961-62 because the file was with the Tribunal.
Balancing the interests of revenue and assessee, the court concluded that in the circumstances the Agricultural Income-tax authority should take up and dispose of the petitioner's application under section 21 so that the agricultural income-tax could be computed in accordance with law having regard to Central assessments.
Accordingly, the court directed the petitioner to supply copies of the Central income-tax assessment orders within six weeks and directed the Agricultural Income-tax Officer to dispose of the section 21 application within one month of receipt of those copies.
As immediate procedural relief, the court set aside the impugned assessment orders, quashed the demand notices and recovery proceedings, and ordered release of the attachment. The court also imposed a conditional limitation: if the Central assessment orders had already been finalised and the assessee did not file copies within the time allowed, then the impugned assessments, demand notices and recovery proceedings would stand valid.

The court concluded by disposing of the rule and ordering no costs. A second judge (N. Ibotombi Singh, J.) concurred.

Holding and Implications

Core Ruling: The court set aside the impugned assessment orders passed under section 20(4) of the Assam Agricultural Income-tax Act (dated 27 May 1971), quashed the demand notices and recovery proceedings initiated pursuant to those assessments, and ordered the release of the attachment. The court directed the petitioner to supply copies of the Central income-tax assessment orders within six weeks and directed the Agricultural Income-tax Officer to dispose of the petitioner's section 21 application within one month of receipt of those copies. The rule was disposed of and there was no order as to costs.

Implications and consequences:

Direct effect on the parties: The immediate assessments, demands and recovery actions under the Assam Act for the three assessment years in question are quashed and the attachment released, pending disposal of the section 21 application upon receipt of Central assessment orders.
Conditional provision: If the Central income-tax assessment orders were already finalised and the petitioner fails to file copies within the time prescribed by the court, the previously set-aside assessment orders, demand notices and recovery proceedings will remain valid.
No broad precedent announced: The opinion applies statutory and rule provisions to the facts and directs administrative steps for computing agricultural income following Central assessments; the judgment does not state that it establishes a novel legal principle beyond its application to the facts of this case.

Disposition: The rule is disposed of. No order as to costs. (N. Ibotombi Singh, J. concurred.)

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P.K Syam v. State Of Assam And Others

Pathak, C.J:— By this application under article 226 of the Constitution of India the petitioner has challenged the orders of assessment dated May 27, 1971, passed by the Agricultural Income-tax Officer, Assam, Gauhati, under section 20(4) of the Assam Agricultural Income-tax Act, 1939, for the assessment years 1959-60, 1960-61 and 1961-62, and the demand notices issued and the recovery proceedings started in pursuance thereof.

2. The petitioner is the executor of the estate comprising Tonganagaon Tea Estate in the district of Dibrugaih and Bhubrighat Tea Estate in the district of Cachar left by late P.C Syam. It is common case that the petitioner is liable to pay agricultural income-tax in accordance with law. The petitioner did not file return in accordance with law, and, accordingly, the taxing authority had no other alternative but to pass best judgment assessment as provided under subsection (4) of section 20 of the Assam Agricultural Income-tax Act, hereinafter referred to as “the Act”. After the assessments were made and the petitioner came to know about them, he filed an application under section 21 of the Act for all the three assessment years for cancellation of the assessments and for fresh assessments as stated in the application. This application under section 21 of the Act is dated June 18, 1971, that is within one month, as laid down in section 21 itself. The petitioner now contends that that application under section 21 had not been disposed of when the rule was obtained on April 10, 1973.

3. It is submitted by the learned counsel for the petitioner that the application under section 21 of the Act has not been disposed of even today.

4. It would be convenient to quote the relevant sections of the Act. Section 2 of the Act defines “agricultural income” as follows:

“2. In this Act, unless there is anything repugnant in the subject or context—

(a) ‘agricultural income’ means—

(1) any rent or revenue derived from land which is used for agricultural purposes, and is either assessed to land revenue in Assam or subject to a local rate assessed and collected by officers of the Government as such.

(2) any income derived from such land by—

(i) agriculture, or

(ii) the performance by a cultivator or receiver of rent-in-kind of any process ordinarily employed by a cultivator or receiver of rent-in-kind to render the produce raised or received by him fit to be taken to market, or

(iii) the sale by a cultivator or receiver of rent-in-kind of the produce raised or received by him, in respect of which no process has been performed other than a process of the nature described in sub-clause (ii);

Explanation—Agricultural income derived from such land by the cultivation of tea means that portion of the income derived from the cultivation, manufacture and sale of tea as is defined to be agricultural income for the purposes of the enactments relating to the Indian income-tax.

(b) ‘agricultural income-tax means the tax payable under this Act.”

5. The second proviso to section 8 of the Act reads as follows:

“Provided further that in cases of agricultural income from cultivation and manufacture of tea the agricultural income for the puposes of this Act shall be deemed to be that portion of the income from cultivation, manufacture and sale which is agricultural income within the meaning of the Indian Income-tax Act, and shall be ascertained by computing the income from cultivation, manufacture and sale of tea as computed for Indian income-tax from which shall be deducted any allowances by this Act authorised in so far as the same shall not have been allowed in the computation for the Indian Income-tax Act.”

6. Rule 5 of the Assam Agricultural Income-tax Rules, 1939, read as follows:

“5. In respect of agricultural income from tea grown and manufactured by the seller in the Province of Assam, the portion of net income worked out under the Indian Income-tax Act, and left unassessed as being agricultural shall be assessed under this Act after allowing such deductions under the Act and the rules made thereunder so far as they have not been allowed under the Indian Income-tax Act, in computing the net income from the entire operation:

Provided that the computation made by the Indian Income-tax Officer shall ordinarily be accepted by the Assam Agricultural Income-tax Officer who may, for his satisfaction under section 20 of the Assam Agricultural Income-tax Act, obtain further details from the assessee or from the Indian Income-tax Officer, but shall not without the previous sanction of the Deputy Commissioner of Taxes or when there is no Deputy Commissioner of Taxes the Assistant Commissioner of Taxes empowered by the Commissioner of Taxes in this behalf require under the proviso to section 49 the production of account books already examined by the Indian Income-tax Officer for determining the agricultural income from tea grown and manufactured in Assam or refuse to accept the computation of the Indian Income-tax Officer.”

7. Rule 8 of the Income-tax Rules, 1962, reads as followss

“8. Income from the manufacture of tea.—(1) 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.

(2) In computing such income an allowance shall be made in respect of the cost of planting bushes in replacement of bushes that have died or become permanently useless in an area already planted, if such area has not previously been abandoned, and for the purpose of determining such cost, no deduction shall be made in respect of the amount of any subsidy which, under the provisions of clause (30) of section 10, is not includible in the total income.”

8. Article 366(1) of the Constitution of India is in the following terms:

“366. In this Constitution, unless the context otherwise requires, the following expressions have the meanings hereby respectively assigned to them, that is to say—

(1) ‘agricultural income’ means agricultural income as defined for the purposes of the enactments relating to Indian income-tax.”

9. Thus, it is found that 60 per cent, of the tax determined under the Income-tax Act is to be treated as agricultural income-tax from which allowable deductions are to be made.

10. In the form of the return to be submitted under the Agricultural Income-tax Act, column 3 of Schedule C is as follows:

“Portion of net total income worked out for assessment under the Indian Income-tax Act, 1922, but left unassessed as being agricultural. “Mr. P. Choudhuri, the learned counsel for the petitioner, submits that when the assessments were made for the three assessment years under section 20(4) of the Act, the assessment under the Central Income-tax Act was not completed and, therefore, the assessee was not in a position to file a complete return as required under the law. That being the position, the assessee filed an application under section 21 of the Act for cancellation and revision of the assessments made under section 20(4) of the Act on receipt and consideration of the copies of the Central assessment orders.

11. Annexure 9 to the petition is a petition dated June 4, 1971, wherein it has been stated as follows:

“Assessment year 1959-60—The assessment has been set aside by the AAC and the assessment is still pending.

Assessment year 1960-61—Remanded by the AAC and is still pending.

Assessment year 1961-62—Since revised by the ITo after giving effect to the order of the Appellate Assistant Commissioner.”

12. It is submitted by the learned counsel for the petitioner that regarding the Central assessment for the assessment year 1961-62, the petitioner could not obtain copy of the assessment order as the file was sent to the Tribunal by the authority concerned. Under these circumstances the petitioner was not able to file the return and, therefore, the petitioner filed the application under section 21 of the Act for appropriate reliefs.

13. The relevant assessment years are 1959-60, 1960-61 and 1961-62 and it may quite reasonably be concluded that the Central assessments have by now been finalised and there may not be any difficulty for the agricultural income-tax authority to compute the agricultural income-tax in accordance with law if the application under section 21 of the Act is taken up and disposed of.

14. In view of the facts and circumstances of the case and the difficulties in obtaining the copies of the Central assessment orders which were not finalised and in view of the fact that complete return cannot be filed without obtaining copy of the Central assessment order, in the best interests of the revenue as well as that of the assessee, the authority concerned should take up the application dated June 18, 1971, under section 21 of the Act and pass appropriate orders in respect of the three assessment years under the law.

15. We direct that the petitioner shall submit copies of the Central income-tax assessment orders within six weeks from the date of this order before the Agricultural Income-tax Officer who will dispose of the application under section 21 of the Act in accordance with law within a month from the date of receipt of the copies of the Central income-tax assessment orders. In the result, the impugned assessment orders are set aside, the demand notices issued and the recovery proceedings started in pursuance thereof are quashed and the attachment is also released. Both the petitioner and the Agricultural Income-tax Officer are directed to comply with the directions given hereinabove promptly and timely we would also like to make it clear that if the Central income-tax assessment orders have already been finalised and if the assessee does not file the copies of the Central Income-tax assessment orders for the three assessment years in question within the time allowed hereinabove before the Agricultural Income-tax Officer, then the impugned assessment orders passed under section 20(4) of the Act and the demand notices issued and the recovery proceedings started in pursuance thereof will stand valid.

16. The rule is accordingly disposed of. There will be no order as to costs.

N. Ibotombi Singh, J.:— I agree.

P.K Syam v. State Of Assam And Others

Structured Summary of the Opinion (Pathak, C.J.)

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Petitioner's Arguments

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

P.K Syam v. State Of Assam And Others

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