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The Salar Jung Sugar Mills Ltd. v. The State Of Mysore & Others
Factual and Procedural Background
The petitioner, an assessee under the Mysore Agricultural Income-tax Act, 1957, challenged a provisional assessment made for the assessment year 1969-1970 and the subsequent recovery proceedings. The petitioner filed a return on 30th May 1969 declaring a net profit of Rs. 2,61,585, claiming certain deductions. The Agricultural Income-tax Officer (4th Respondent) issued a notice proposing to disallow Rs. 1,99,017 of these deductions and to make a provisional assessment on an income of Rs. 4,60,602. Despite the petitioner’s objections, the provisional assessment order was passed on 21st February 1970, assessing a tax of Rs. 1,25,606. A notice of demand was issued prematurely on 11th February 1970. The petitioner did not pay the demanded tax, leading to a penalty and recovery proceedings initiated by the 5th Respondent. The petitioner then sought relief under Article 226 of the Constitution of India.
Legal Issues Presented
- Whether the assessing authority under sub-section (1) of Section 20 of the Mysore Agricultural Income-tax Act, 1957, has jurisdiction to make a provisional assessment order on income not admitted by the assessee.
Arguments of the Parties
Petitioner's Arguments
- The provisional assessment order made under Section 20(1) of the Act is illegal because the assessing authority lacks jurisdiction to make a provisional assessment on income not admitted by the assessee.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Jaipur Udyog Limited v. Commissioner of Income-tax | The scope of Section 141 of the Income-tax Act, 1961, regarding provisional assessment only on admitted income by the assessee. | The Court held that Section 20(1) of the Mysore Agricultural Income-tax Act is similar in scope to Section 141 of the Central Income-tax Act. Hence, the assessing authority can only make provisional assessments on income admitted by the assessee, not on disputed or unadmitted income. |
Court's Reasoning and Analysis
The Court examined Section 20(1) of the Mysore Agricultural Income-tax Act, 1957, which empowers the Agricultural Income-tax Officer to make a provisional assessment based on the return filed by the assessee and accompanying documents. The Court noted that this provision is in pari materia with Section 141 of the Income-tax Act, 1961. Citing the Supreme Court decision in Jaipur Udyog Limited, the Court emphasized that the provisional assessment power is limited to taxing income admitted by the assessee and does not authorize enquiry into disputed income or deductions. Since the assessing authority made the provisional assessment on income not admitted by the petitioner, it exceeded its jurisdiction. Consequently, the provisional assessment order, the demand notice, and recovery proceedings were found to be illegal and were quashed.
Holding and Implications
The provisional assessment order, the demand based thereon, and the recovery proceedings are quashed.
The petitioner is entitled to costs of the writ petition, including an advocate's fee of Rs. 100. This decision directly affects the parties by setting aside the impugned orders but does not establish any new precedent beyond affirming the limits of provisional assessment under the relevant statutory provisions.
Govinda Bhat, J.:— The petitioner who is an assessee under the Mysore Agricultural Income-tax Act, 1957 (hereinafter called the ‘Act’), has challenged the provisional assessment made for the assessment year 1969-1970 and the proceedings taken for recovery of the tax so assessed. For the assessment year 1969-1970, the petitioner filed a return on 30th May 1969 showing a net profit of Rs. 2,61,585. In arriving at the net profits, the petitioner had claimed certain deductions. The Agricultural Income-tax Officer, Bellary (Respondent 4) issued a notice on 22-11-1969 stating that he proposed to disallow a sum of Rs. 1,99,017 claimed as deduction by the petitioner and to make a provisional assessment on the income of Rs. 4,60,602. Over-ruling the objections raised by the petitioner to the said proposal the 4th Respondent made a provisional assessment order on 21-2-1970 assessing a tax of Rs. 1,25,606. The notice of demand which ought to have followed the provisional assessment was, in fact, issued on 11-2-1970 in advance of the provisional assessment order. Since the petitioner did not pay the tax so demanded, a penalty of Rs. 15,700-75 was levied and proceedings were initiated by the 5th Respondent for the recovery of the provisional tax and penalty. Thereupon the petitioner approached this Court for relief under Article 226 of the Constitution of India.
2. The contention of Sri Venugopalachary, the learned counsel for the petitioner is that the provisional assessment order made by the 4th Respondent under sub-sec. (1) of S. 20 of the Act is illegal as the assessing authority has no jurisdiction to make a provisional assessment order on an income not admitted by the assessee.
3. The contention of the learned counsel, in our opinion, is well founded. Sub-sec. (1) of S. 20 which empowers the assessing authority to make a provisional assessment order reads thus:
“20(1).—The Agricultural Income-tax Officer may, at any time after the receipt of a return made under S. 18, proceed to make in a summary manner, a provisional assessment of the tax payable by the assessee, on the basis of his return and the accounts and documents, if any, accompanying it, after giving due effect to (i) the allowance referred to in paragraph (2) of the proviso to clause (c) of S. 5, and (ii) any loss carried forward under S. 15.”
4. The above provision is in pari materia with S. 141 of the Income-tax Act, 1961 (Central Act 43 of 1961). In Jaipur Udyog Limited v. Commissioner of Income-tax(1) the Supreme Court had occasion to pronounce on the ambit of the power of the Income-tax Officer under S. 141 of the Central Income-tax Act. It has been laid down in the said decision that ‘the scheme of S. 141 is to call upon the assessee to pay tax provisionally at the appropriate rate on what he admits as his taxable income, subject to the benefit of the allowances under sub-sec. (2) and that the section does not permit an enquiry to be made whether the total income returned by the assessee exceeds the amount admitted by him, nor whether the allowances or deductions claimed are admissible. The scheme of S. 20(1) of the Act being similar to S. 141 of the Income-tax Act, 1961, the assessing authority has power only to call upon an assessee to pay tax provisionally on what he admits as his taxable income. The 4th Respondent in making the provisional assessment order has exceeded his jurisdiction in calling upon the petitioner to pay tax on income not admitted. Therefore the impugned provisional assessment order, the demand based thereon and the recovery proceedings are liable to be set aside and accordingly they are quashed.
5. The petitioner is entitled to the costs of this writ petition. Advocate's fee Rs. 100.
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