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M/S. Jiffiri & Kareem v. Agricultural Income Tax Officer
Factual and Procedural Background
The petitioner is a firm assessed by the Agricultural Income Tax Office, Kozhikode for the assessment year 1978–79 (year ending 31.3.1978). An assessment under Section 18(3) of the Agricultural Income Tax Act was recorded by order dated 27.3.1984 (Ext. P1). Although Ext. P1 is dated 27.3.1984, the assessment order and the demand notice were served on the petitioner only on 20.7.1984. The petitioner appealed against Ext. P1 contending certain expense disallowances were improper; the Appellate Authority modified Ext. P1 by order dated 3.10.1985. A revised order by the Agricultural Income Tax Officer dated 25.1.1989 fixed total agricultural income at Rs. 2,99,876.20 (reduced from Rs. 3,52,108 fixed originally).
The petitioner preferred a revision before the Commissioner of Agricultural Income Tax, Trivandrum (Ext. P2 dated 29.11.1988), arguing inter alia that Ext. P1 was served only on 20.7.1984 though dated 27.3.1984 and therefore barred by limitation; other grounds concerning disallowance of labour charges were also raised. The Commissioner, in a common order dated 18.7.1989 for assessment years 1978–79 and 1979–80, remanded the matter to the Kozhikode office with directions to dispose according to law (Ext. P3). The petitioner sought rectification of Ext. P3 (petition dated 27.8.1989, Ext. P4) complaining specifically that no definitive finding was given on the limitation ground, and also filed a Reference Application under Section 60 (Ext. P5). The Commissioner dismissed those applications by order dated 2.12.1989 (Ext. P6).
Legal Issues Presented
- Whether the assessment order (Ext. P1) and the demand notice were barred by limitation under the statutory time-limit (five years) — specifically whether S. 35(2) of the Agricultural Income Tax Act (and related provisions) precluded the assessment because communication occurred after the five-year period ended on 31.3.1984.
- Whether an order of assessment takes effect only upon communication to the assessee (and thus whether the date of signing the order is determinative of its effectiveness).
- Whether the Commissioner was justified in remanding the matter to the assessing authority without deciding the specific limitation issue raised by the petitioner.
- Whether Section 35(2) applies to an assessment under Section 18 (reference in the order to applicability of S. 35(2) on an assessment under S. 18(4) was left open for the lower authority to decide).
Arguments of the Parties
Petitioner's Arguments
- The assessment order (Ext. P1) and the demand notice were served on the petitioner only on 20.7.1984, although the order is dated 27.3.1984; therefore the assessment was communicated after the five-year limitation period had expired (five years from the end of the relevant year expired on 31.3.1984).
- The petitioner relied on Section 35(2) of the Act (quoted in the record) which provides that no order of assessment under S. 18 or of assessment or re-assessment under S. 35(1) shall be made after the expiry of five years from the end of the year in which the agricultural income was first assessable.
- It was submitted that an assessment order becomes effective only upon communication to the assessee (a point supported by Section 30 of the Act and broader notions of procedural fairness), and because communication occurred beyond the statutory period, the assessment was barred by limitation.
- The petitioner contended that the Commissioner should have given a definitive, binding decision on this limitation ground rather than merely remitting the matter for re-examination by the lower authority.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Govt. Wood Workshop v. State of Kerala (69 STC 62) | The order of an authority is not complete or "passed" unless it is pronounced, published, or the party affected has the means of knowing it; mere making/signing and keeping it in the file is insufficient because it could be changed before being made known. To be complete and effective an order should be issued so as to be beyond the control of the authority, and this should be done within the prescribed period, though actual service may be beyond that period. | The court relied on this reasoning to emphasize that communication/issuance within the prescribed period is critical and to justify remitting the matter for the assessing authority to examine whether the order had been issued within the statutory period. |
| Malayil Mills v. State of Kerala (TRC Nos. 15 & 16/81) (decided 7.7.1982) | The case was referenced as a guiding authority in relation to the timing/issuance aspects of tax orders and for the approach to be taken in remitting matters for fact-based verification (specific principle or detailed excerpt is not quoted in the provided opinion). | The court cited this decision along with Govt. Wood Workshop as authority supporting the remittal to the lower authority and the approach to examine records to determine whether the order had been issued within the prescribed period. |
Court's Reasoning and Analysis
The court began by identifying the statutory framework: Section 35(2) provides that no order of assessment under Section 18 or of assessment/re-assessment under Section 35(1) shall be made after the expiry of five years from the end of the year in which the agricultural income was first assessable. Section 18 requires the officer to assess total agricultural income and determine the sum payable. Reading these provisions together, the court observed that Section 35 contemplates a determination of both total agricultural income and the tax to be paid.
The petitioner's central factual contention was that although Ext. P1 is dated 27.3.1984, it was not communicated to the petitioner until 20.7.1984 — after the five-year limitation period that ended on 31.3.1984 — and therefore the assessment was, in the petitioner's view, barred by limitation. The court accepted the legal proposition advanced by the petitioner that communication of an order is an essential part of making the order effective: the date of signing is not determinative and an order becomes binding only upon communication. The court referred to Section 30 of the Act as reinforcing this point and relied on the Division Bench decision in Govt. Wood Workshop v. State of Kerala for the proposition that an order must be issued in a manner that puts it beyond the control of the issuing authority within the prescribed period.
Turning to the Commissioner's orders (Ext. P3 and Ext. P6), the court examined whether the Commissioner had decided the limitation question. The Commissioner had remanded the matter for detailed verification of records (receipts, vouchers, etc.) and had left open the applicability of Section 35(2) to an assessment under Section 18(4). The court found that the Commissioner had not given a definitive ruling on the limitation issue but had remitted the matter to the assessing authority for re-examination of the whole facts.
Given that the Commissioner remitted the matter for detailed fact-finding and verification, the court concluded that interference with the remittal was not warranted at that juncture. The court directed that the assessing authority must specifically consider and decide the precise limitation issue raised by the petitioner (i.e., whether the assessment order was communicated within the period prescribed by S. 35(2) and whether the order was in effect when served), examining the records and deciding on merits. The court made clear that the assessing authority may also consider other issues if necessary, depending on the finding on limitation.
Holding and Implications
Holding: The court confirmed the Commissioner's remittal of the matter to the assessing authority and ordered that the assessing authority determine, on the basis of records and merits, whether the assessment order under Section 35 had been passed and served within the time prescribed by Section 35(2) of the Act. The Original Petition was disposed of in that manner. The court awarded no costs.
Implications:
- The direct effect is that the matter returns to the Agricultural Income Tax Officer at Kozhikode for a definitive, record-based determination of the limitation issue (whether Ext. P1 was effectively issued/communicated within the statutory period) and for reconsideration of other factual issues as necessary.
- The petitioner remains free to press the specific ground regarding limitation (and any other appropriate grounds) before the assessing authority; the lower authority must decide that contention on the merits.
- The High Court declined to substitute its view for the fact-finding role of the assessing authority at this stage; interference with the remittal was not warranted.
- The opinion relied on existing precedents and principles regarding the effectiveness of administrative orders upon communication, but it did not purport to lay down a new legal precedent; it directed a factual and procedural deposit back to the assessing authority for a considered decision.
No costs were awarded by the court.
AR. Lakshmanan, J.:— Heard both sides.
2. Petitioner is a firm and an assessee on the file of the Agricultural Income Tax office, Kozhikode for the assessment year 1978–79 (year ending 31.3.1978). Petitioner's assessment was completed under S. 18(3) of the Agricultural Income Tax Act (for short ‘the Act’) by order dated 27.3.1984 The assessment order and the demand notice were despatched and were served on the petitioner only on 20.7.1984, that is, long thereafter. A copy of the said order is produced as Ext. P1. Petitioner preferred an appeal against Ext. P1 proceedings contending that the disallowance of certain expenses were not proper. The Appellate Authority modified Ext. P1 by his order dated 3.10.1985 Thereafter, a revised order was passed by the Agricultural Income Tax Officer on 25.1.1989 determining the total agricultural income at Rs. 2,99,876.20 as against Rs. 3,52,108/- fixed originally in Ext. P1 order. Against Ext. P1 order, petitioner preferred a revision before the Commissioner of Agricultural Income Tax, Trivandrum under Ext. P2 dated 29.11.1988 It was contended that the assessment order, Ext. P1, was served on the petitioner only on 20.7.1984, though it is dated 27.3.1984 and hence, barred by limitation. There were other contentions also regarding the disallowance of labour charges for manuring etc.
3. The Commissioner, by his proceedings dated 18.7.1989 in a common order for the assessment years 1978–79 and 1979–80, remanded the case to the Agricultural Income Tax Office, Kozhikode with a direction to dispose it according to law. A copy of the common order in Agricultural Income Tax Revision Petition Nos. 144 and 145 of 1989 is produced and marked as Ext. P3. Thereafter, the petitioner filed a petition dated 27.8.1989 for rectifying the mistakes in Ext. P3, namely that no specific finding was given regarding the ground that the assessment was barred by limitation. A copy of the said petition is produced and marked as Ext. P4. Petitioner has also filed a Reference Application under S. 60 of the Act to draw a statement of the case and refer it to the High Court, which is marked as Ext. P5. The Commissioner, by his order dated 2.12.1989, dismissed the same under Ext P6.
4. Sri. P. Balachandran, learned counsel appearing for the petitioner, submitted that the assessment order (Ext. P1) and the demand notice are barred by limitation. He invited my attention to S. 35(2) of the Act, which reads thus:
“35. Income escaping assessment:— (1) 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, 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-s. (2) of S. 17 and may proceed to assess or re-assess 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:
Provided that the tax shall be charged at the rate at which it would have been charged if such income had not escaped assessement or full assessment, as the case may be:
Provided further that the Agricultural Income Tax Officer shall not issue a notice under this sub-section unless he has recorded in his reason for doing so.
(2) No order of assessment under S. 18 or of assessment or re-assessment under sub-s. (1) of this Section shall be made after the expiry of five years from the end of the year in which the agricultural income was first assessable:
XXXXXXXXX”
5. The above Section provides that no order of assessment under S. 18 or of assessment or re-assessment under sub-s. (1) of this Section shall be made after the expiry of five years from the end of the year in which the agricultural income was first assessable. Under S. 18 of the Act, the Officer shall assess the total agricultural income of the assessee and determine the sum payable by him on the basis of such return. A combined reading of the two Sections lead to the conclusion that what is contemplated under S. 35 of the Act is a determination of both the total agricultural income as well as the tax to be paid. It is submitted that Ext. P1 order and the demand notice were served on the petitioner only on 20.7.1984, long after the period prescribed by the Statute. Ext. P1 order is dated 27.3.1984 According to the petitioner, it was not despatched along with the demand notice before the expiration of the period prescribed under the Act. In the instant case, the assessment year in question was 1978–79. Five years from the end of the year in which the agricultural income was first assessable ended on 31.3.1984 The assessment order is dated 27.3.1984 and the demand notice was served on 20.7.1984 It is contended by learned counsel for the petitioner that the order of assessment became alive only when the notice of demand was served and that was beyond the period of five years and, therefore, the assessment was barred by limitation. As rightly pointed out by learned counsel for the petitioner, the communication of an order is an essential part of making such an order. According to the petitioner, Ext. P1 was communicated to him only on 20.7.1984 and hence, beyond the period of limitation and, therefore, the Commissioner was not justified in merely noting the above argument without giving a binding decision in Exts. P3 and P6 orders. It is submitted that the Commissioner should have considered the above argument which goes to the root of the matter and should have given a proper finding before directing the lower authority to consider other points.
6. A perusal of the order of the Commissioner under Ext. P3 would show that the Commissioner has not decided the issues raised by the petitioner and has left open all the issues to be agitated afresh before the assessing authority. The Commissioner, in his order dated 2.12.1989 (Ext. P6) which was filed as a rectification application under S. 36 of the Act as well as the reference application under S. 60 of the Act against the revision order Nos. 144 and 145 of 1989 which were filed against the assessment orders for the years 1978–79 and 1979–80, has extracted the grounds raised in the two revisions filed by the petitioner. The question of limitation has been raised as ground No. 7 for the assessment year 1979–80. It is stated in ground No. 7 that the assessment is barred by limitation. The Commissioner has also extracted other grounds raised by the petitioner in the revisions. The Commissioner was of the view that since the petitioner has raised many grounds which actually necessitated a detailed verification of the basic records, receipts, vouchers etc. at the lower level, has remanded the matter to the lower authority. The applicability of S. 35(2) on an assessment under S. 18(4) was also left open to be decided by the lower authority. Since the Commissioner has remitted the entire matter for a re-examination of the whole facts, I am of the view that an interference with such an order is not warranted at this stage. As pointed out by the Commissioner, the petitioner is also free to raise any other new grounds along with the grounds raised earlier. I make it clear that the assessing authority shall decide the specific ground raised by the petitioner with regard to the limitation issue. It is the petitioner's case that the assessment order was communicated to him only on 20.7.1984, that is, beyond the period of five years as provided under S. 33(2) of the Act. The assessing authority shall consider this specific issue with reference to the records and decide the same in merits.
7. As rightly pointed out by learned counsel for the petitioner, an order of assessment comes into force only when it is communicated. This is not only by reason of S. 30 of the Act, but also for more fundamental reasons that a party against whom an order is made must be put on that order. The date of making or signing the order is not determinative of its effect The order, at that stage, is only unilateral in a sense and not irrevocable and it become bilateral or binding only on communication. In this case, the date of communication of order of assessment is in dispute. As already noticed, according to the petitioner, it is beyond the period of limitation. A Division Bench of this Court comprised of Paripoornan and Viswanatha Iyer, JJ. in an identical matter in Govt. Wood Workshop v. State Of Kerala (69 STC 62) held thus:
“The order of any authority cannot be said to be passed unless it is in some way pronounced or published or the party affected has the means of knowing it. It is not enough if the order is made, signed, and kept in the file, because such order may be liable to change at the hands of the authority who may modify it or even destroy it, before it is made known, based on subsequent information, thinking or change of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein. This should be done within the prescribed period, though the actual service of the order may be beyond that period.”
8. The Division Bench, in the above case, has also remitted the matter to the Tribunal for an examination of the records to ascertain whether the order of the Deputy Commissioner in that case had been issued from his office within the period of four years prescribed under S. 35(2) of the Act. The Tribunal was directed to adjudicate the matter in the light of the observations contained in that judgment and the judgment in the case of Malayil Mills v. State of Kerala (TRC Nos. 15 and 16/81) decided by this Court on 7.7.1982 I, therefore, do not feel justified in interfering with the order of the Commissioner in remitting back the matter to the assessing authority. I confirm the remittal order to the lower authority for consideration of the question whether the assessment order under S. 35 has been passed and served within the time prescribed in S. 35(2) of the Act and to pass a considered order in the light of the issues and contentions raised by the petitioner in this Original Petition. The lower authority may consider other issues, if necessary, and that would be depending upon the finding to be rendered on the question of limitation.
9. The Original Petition is ordered accordingly. No costs.
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