STATE OF ASSAM & ANR. versus D. C. CHOUDHURI & ORS.

STATE OF ASSAM & ANR.

D. C. CHOUDHURI & OR<;.

August 7, 1969

[J. C. SHAH, ACTING C.J., V. RAMASWAMI AND A. N. GROVER, JJ.J

Assam A.grlcultural Income-tax A.ct (A.,..am A.ct 9 of 1939), ss. 19, 20 and 3f>-General notice under s. 19(1)-No individual notice under s. 19 (2)-No Initiation of procttdin11s undtr s. 30-Bm iudgmtnt assmm•nt umitr s. 20(4) btyond 3 years of tht financial ytar--Validi(v.

The assessee, owners of tea estate in Assam, after carrying on the business of cultivation, manufacture and sale of tea during the years 1948 to 1953 sold the tea estatc on July 9, 1953. In 1961, tbey received notice from the Agricultural Income-tax Officer to furnish returns of their agricultlfral income for the assessment years 1949-50 to I 953-54 in respect of that tea estate. They did not submit any return~. Thereafter. they received 1101icc of demand under s. 23 of the Assam Agricultural Incomc-tax Ac.1, 1939, for payment of the tax assessed on best judgment basis under s. 20( 4). The assessecs v.·cre not served with any notice under s. 19(2) which provides for notice to be SC1"Ved personally on the a~ssee, during the respective years, nor under s. 30 of the Act which deals with escaped assessment.

The purchasers of the tea ~state were served, in 1961, with assessment orders under s. 20(4) in respect of the assessment years 1951-52 to 1955-56 with notices of demand fdr payment of the tax assessed for each year. These asses.sees were also not served with any notice under s. 19(2) or s. 30. AJI the assessces challenged the assessments in writ petitions and the High Court allowed the petitions.

In appeal to this Court, it \vas contended that the assessment proceed-ings commenced \\'ith the publication of general notice under s. 19(1), that it v.·as open to the Agricultural Income-tax Officer to make hest judgment assessment under s. 20( 4) without any limitation as to time and that it v.·as not necessary to issue any individual nolice under s. 19(2) Or to initiate proceedings under s. 30.

HELO : l'\otYtilh5tanding the difference in language between s. 20( 4) of the Act and s. 23 ( 4) of the Income· tax Act the principles laid down by this Court in interpretin.s: ss. 22, 23 and 34 of the Income-1ax Act apply in the interpretation of ss. 19, 20 and 30, the corresponding sections of the Assam Agricul!ural Income-tax Act. (788 A..CJ

On those principles the nublication of the Rencral nolice in any financial year under s. 19( 1) of the A\sam Act to furnish return of one's agricul-tural income in the previous year, does not initiate nrocecdings against an asscssee unlec;s such asscsc;ce files return. If no rclurn is made pursuant to the general notice under s. 19( I) assessment could be made against an assessec under s. 19(2), serving an individual no1icc on that asse'.isee during that financial year. Once th~t financial year is over, and no return has been made in response 10 the general notice under s. 19( 1) and no individual notice has been served under s. 19(2), there would arise case o'f escaped assessment~ and, :he only way lo hring that income to lax is to iniliate proceedings by notice in accordance with s. 30 »·ithin 3 years of

the end of that financilJI year. Since no such proceedings were initiated in the present case, the usessment orders were rightly quashed. [787 E-H]

The Commissioner of Income-tax, Bombay v. Ranchhodas Karsondas,. Bombay, [1960] I S.C.R. 114, Ghanshyam Das v. Regiol'al Assistant Com-missioner of Sales-tax, Nagpur, [1964] 4 S.C.R. 436 and The State of Assam v, Deva Prasad Barua, [1969] 1 S.C.R. 698, followed.

CIVIL APPELLAtE JURISDICTION : Civil Appeals Nos. 1537 to 1545 of 1968.

Appeals from the judgment and orde~ dated April 4, 1963 of the Assam High Court in Civil Rules Nos. 233 to 236 and 238 to 242 of 1961.

Naunit Lal and S. N. Choudhury, for the appellants (in all the appeals).

M. C. Chagla and Sukumar Ghose, for the respondents (in all the appeals) .

The Judgment of the Court was delivered by

Grover, J. These are nine connected appeals by certificate from judgment of the Higb Court of Assam & Nagaland whereby nine petitlons filed by the respondents under Art. 226 of the Constitut.ion were allowed and the assessment orders made under the provisions of the Assam Agricultural Income-tax Act, 1939, hereinafter called the 'Act', were quashed.

D. C. Chaudhuri and S. C.

The facts may be first stated. D. C. Chaudhuri and S. C. Dutt petitioners in four of the writ petitions owned the. Marty-cherra Tea Estate in the district of Cachar which they had purchased on January 1, 1948. They sold this Estate on July 9, 1953. From January 1, 1948 to July 9, 1953 they carried on the business of cultivation, manufacture and sale of black tea at the said Estate under partnership of which they were the sole partners. The partnership finn was served with notice under the Indian Income-tax Act, 1922 hereinafter called the Income-tax Act and was assessed to income-tax for the assess-ment year 1951-52. Appeals were filed against the assessment order before the Appellate Assistant Commissioner of ]in.Come-tax and the Income-tax Appellate Tribunal in which substantial reliefs were given to the assessee. After the sale of the Tea Estate these assessees ceased to have any 'agricultural income. The case of the assessees as laid in the writ petition was that on Janu-ary 25, l9fyl, letter was received by one of them from the Agri-cultural Income-tax Officer direct~g both the 'assessees to furnish returns of their agricultural income for the assessment years 1949-50 to 1953•54. Thereafter they received notice of demand under s. 23 of the Act for payment of certain amount as agricul-tural income-tax for the assessment year 1950-51. The assessment

order was stated to have been made under s. 20(4) of the Act. Similar orders were made and demands created with regard to the subsequent years, namely, 1951-52, 1952-53 and 1953-54. All these assessment orders were challenged by means of four petitions under Art. 226 of the Constitution. Apart from other points which were raised the main objection taken was that no notice under s. 30 of the Act had been served at any time in respect of the assessment covered by the impugned orders. Such notice could be served only within three years of the end of the financial year. In the absence of service of the aforesaid notice within the prescribed period the Income-tax Officer had no jurisdiction to make any assessment nor could such an assessment be made after the expiry of period of three years from the end of each financial year.The other set of petitions under Art. 226 of the Constitution wa~ filed by the company-The Eastern Tea Estate Private Ltd. This company owned two tea estates, the Chandna Tea Estate and the Mtrtycherra Tea Estate. The Chandna Tea Estate war purchased from the Indian Tea and Mill Industries Ltd. in 1950 and the Martycherra Tea Estate was purchased from M/s. D. C. Chaudhuri and S. C. Dutt on July 9, 1953. The case of the company was that no notice had been received under s. 19(2) of the Act for the a~sessment years 1951-52 to 1955-56 and therefore no returns were filed. On October 9, 1959 the com-pany received letter from the Agricultural Income-tax Officer, Shillong asking it to submit returns in respect of Martycherra Tea Estate for the assessment year 1950-51 onwards. The company addressed communication to the Agricultural Income-tax Officer on November 18, 1959 saying, inter a/ia, that 1¥J notice had been served on it under the Act previously and as it also owned the C:handna Tea Estate it proposed to submit returns for the years in respect of which it was liable under the Act. On October 19, 1959, the company received notice under s. 19 (2) of the Act directing it to submit the return in res-pect of the previous year for Martycherra Tea Estate. In response to the notice the company submitted the retuJ111 for the year ending December 31, 1958 showing the agricultural income from tea estates. number of notices were served subsequently and there was further exchange af correspondence. It was alleged in the petitions filed by the company that letter was received dated January 23, t 960 from the Agricultural Income-tax Officer in which it was stated that the company had failed to submit the returns for the years 1950-51to1958-59 and it was asked to show cause why the assessments for these years should not be completed summarily. After further exch3'nge of correspondence the com-pany received an assessment order dated June 19, 1161 in respect

of the assessmqnt year 1951-52 which was made under s. 20(4) ?f '.he Act together with notice of demand for payment of certam amount of agricultural income-tax. Similar assessment orders were passed under s. 20(4) and demands created in respect of the assessment years 1952-53, 1953-54, 1954-55 and 1955-56. All these assessments were challenged by means of five petitions under Art. 226 of the Constitution. The main point raised in all these petitions was that unless individual notices under s. 19(2) of the Act had been served no assessment could be made under s. 20(4) except by way of proceedings under s. 30 of the Act.In the returns which were filed by the Agricultural Income· tax Officer to all the petitions filed in the High Court it was maintained that the assessees had refused to accept the service of the notices under ss. 19(2) and 30 of the Act. The notice under s. 19(1) had been published in the Assam Gazette and the assessees were bound to make return pursuant to that notice. It was denied that there was any necessity of serving notices under ss. 19(2) or 30 of the Act and that the assessments which had been made were barred by limitation. division bench of the Assam & Nagaland High Court consisting of Mehrotra, C.J. and S. K. Dutta, J. allowed all the petitions but delivered separate judgments. The learned Chief Justice held that where no return had been filed pursuant to general notice under s. 19(1) the Agricultural Income-ta'.I: Officer was bound to proceed under s. 30 and issue notice under s. 19(2) of the Act within the prescribed period, namely, three years of the end of the financial year. He further held that there was no service of notice on the respondent in respect of the assessment years in question either under s. 19(2) or s. 30 of the Act. S. K. Dutta, J., came to the same conclusion as :he learned Chief Justice but he relied on judgment of the Calcutta High Court in Commissioner of Agricultural Income-tax v. Sultan Ali Gharami(') in which dissent had been expressed from the Bompay judgment in Harakchand Makanji & Co. v. Commissioner of Income-tax, Bo1r.bay City(') ori the question as to when proceedings relating to assessment could be regarded as having commenced. According to the learned judge if no return is made in response to public notice under s. 19(1) of the Act and no individual notice is served under s. 19(2) there would be no pending proceedings and it would be case of escaped assessment. But this would be so only after the expiry of the financial year. In other words after the publication of the notice under s. 19(1) there would be no escapement of income till the end of the financial year. Once the financial year is over and no return has been made in response to notice under

(2) 161.T.R. 119.

s. 19(1) and no individual notice has been served under s. 19(2) case would arise of "escaped assessment for the financial year".

The relevant provisions in Chapter IV of the Act may now be noticed. Sections 19 and 20 contain provisions similar to ss. 22 and 23 of the Income-tax Act. Under s. 19(1) of the Act the Agricultural Income-tax. Officer before the specified date shall give notice by publication in the press or otherwise requiring every person whose agricultural income exceeds the limits of tax-able income prescribed in s. 6 to furnish within such period not being Jess than 30 <lays as may be specified return in the pres· cribed form setting forth his agricultural i,ncome during the pre-vious year. Sub-section ( 2) provides that in the case of any person whose total agricullural income is, in the opinion of the Agricultural Income tax Officer, of such amount as to render such person liable to payment of agricultural income tax for any fi;nan-cial year, he may serve in that financial year notice requiring him to furnish within the prescribed period return. Sub-section (3) enables person who has not furnished return within the time allowed by or under sub-s. ( 1) or sub-s. (2) to furnish return or revised' return at any time before the assessment is made. Thus sub-ss. (1), (2) and (3) of s. 19 of the Act are identical with and correspond to sul>-ss. (1), (2) and (3) of s. 22 of the Income tax Act.Under s. 20 of the Act if the Agricultural Income-tax Officer is satisfied that return made under s. 19 is correct and complete he has to assess total agricultural income of the assessee accordi.ng to it. If he has reason to believe that such return is incorrect or incomplete he has to serve notice requiring the person who has made the return to produce any evidence on which he may rely in support of the return. After nearing such evidence as the person making the return may produce and such other evi-dence as the officer may require on specified points the assess· ment order is to be made. These are the provisions of sub-ss. (I), (2) and (3). Sub-s. ( 4) is in the following terms :-

"If the principal officer of any company or other person fails to make return under sul>-section ( 1) or, sul>-section (2) of section 19, as the case may be or having made the return, fails to comply with all the terms of the notice issued under sul>-section (2) of this section, or to produce any evidence required under sub-section (3) of this section, the Agricultural Income. tax Officer shall make the assessment to the best of his judgment, and determine the sum payable by the asscssee on the basis of such assessment : Provided .............•.... "

Turning to s. 23 of the Income-tax Act, sub-sections (1), (2) and (3) thereof correspond to sub-sections (1), (2) and (3) of s. 20 of the Act Sub-section ( 4) ol s. 23 reads :-

''If any p«son fails to make the return required by any notice given under sub-section (2) of section 22 and has not made return or revised return under sub-section (3) of the same section or fails to com-ply with au the terms of notice issued under sub-section ( 4) of the same section or, having made re-turn, fails to comply with all the terms of notice issued '.!!Ider sub-section (2) of this section, the Income-tax Officer shall make the assessment to tho best of his judgment lll!d determine the sum payable by the assessee on the basis of such assessment and in the case of firm may refuse to register . it or may cancel its registration if it is already registered".

Provided ...•........... "

Section 30 of the Act which ·corresponds to s. 34 of the Income-tax Act which deals .with income escaping assessment may now be reproduced :-.

"H for any reason any agricultural income charge-able to agricu!~ income-tax has escaped assessment f<ir any fin3j0Cial year, or has been assessed at too low rate or has ~ the subject of undue relief under this Act, the ~gricu!tural Income-tax Officer may, at any time withi!1 three years of thel end of that finan-cial year, serve on the person liable to pay agricultural income-tax on such agricultural income or, in the case of company on the principal officer thereof, notice cqntaining all or any of the requirements which may be included in notice under sub-section (2) oi sec-ti on 19, 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 notice issued under that sub-section :

Provfded ............... "

The principal contention raised on behalf of the appellant is that for an assessment to be made under s. 20(4) of the Act it is not necessary that proceedings should have been taken under s. 30. The argument is that assessment proceedings commence with the publication of general notice under s. 19(1) and it is open to the Agricultural Income-tax Officer to make

the best judgment assessment under s. 20( 4) without any limita-tion as to time. It is not necessary to issue any individual notice under s. 19(2) or to initiate proceedings under s. 30 in such situation. Reliance has been placed on the observations in Harakchand Makanji & Co. v. Commissioner of lncome·tax, Bombay City(') that once public notice is given under sub-s. (1) of s. 22 of the Income-tax Act, which is similar in terms to s. 19(1) of the Act, the assessment proceedings should be deemed to have commenced and there is no obligation on the Income-tax Officer to serve an assesooe individually as well. But in the same case it was said that "a notice under s. 34 is only pecessary if at the end of the assessment year no return has made by the assessee and the Income-tax authorities wish to pro-ceed under s. 22(2) by serving notice individually. It may then be said that as the assessment year had c:ome to an end and as no return had been furnished and as the authorities wish-ed to proceed under section 22(2) they should not do so without notice unde~ section 34".

The above view was approved by this Court in The Com-missioner of Income-tax, Bombay v. Ranchhoddas Karsondas, Bombay ( '), but the portior which has been extracted does not support the contention which has been pressed on behalf of the appellant. Indeed it has been relied upon more firmly by the cou,nscl for the respondents. Ii this view is accepted to be correct it follows that notice under s. 30 of the Act, in the present case, would be necessary if at the end of the assessment year no return has been made by the assessee and the authorities wish to proceed under s. 19(2). The case would be entirely different where he himself chooses voluntarily to make return. This he can do after the publication of general notice under s. 19(1) of the Act. If the return i5 filed no question arises of any income having escaped assessment. The retnrn under the provisions of s. 19(3) of the A~ can be furnished at any time before the assessment is made. This is what this Court held in The State of Assam & Anr. v. Deva Prasad Barua & Anr.(').

The position is altogether different if no re.:um has been made by the assessee and where income has not been assessed at all because for one reason or the other no assessment proceedings were initiated. That would be case of "escaped assessment" within s. 20 of the Act. The matter was examined at length by this Court in Ghansyam Das v. Regional Assistant Commis-sioner of Sales Tax, Nagpur(') with reference to the provisions of the Central Provinces & Berar Sales Tax Act, 1947. The

1947. The

(I) 16 1.T.R. 119.

(2) [1960: I S.C.R.114. (4) [1964] 4 S.C.R. 436.

(3) 1969] I S.C.R. 698.

following principles were laid down in that case which are note-worthy:-

( 1) In the case of registered dealer the proceed-ings before the Commissioner started factually when return was made or when notice was issi:ed to him ei~ei; under s. 10(3) (under which tl!e Colll!lllSs1oner has to issue notice if n? return is submitted) or under s. 11 ( 4) (which provides for the best judgment assess-me1;1t) ?f the Sales Tax Act. The statutory obligation to file return did not initiate the proceedfugs. (2) Once ; statutory return ; statutory return was filed pursuant to

(2) Once ; statutory return ; statutory return was filed pursuant to noti~e .under s. 10(3) or s. 11 of the Sales Tax Act the -proceedings did not come to an end until the final assessment was made.

(3) The ~xptession "escaped assessment" in s. llA of the •Sales Tax Act included that of turnover whi¢h had not been assessed at all because for one reason or the other no assessment proceed-ings were initiated and no assessment was made in respect thereof.

Keeping in view the above principles it must be held that in the absence of return having been filed by the assessees in the present case pursuant to general notice under s. 19(1) of the Act assessment could be made only after due notice s. 19(2) or by initiating proceedings under s. 30 of the Act. Section 19(2) requires that an individual notice is to be served in the financial year. If no notice is served under that section proceedings under s. 30 can be initiated by notice in accord-F ance with that section within three years of the end of that finan-cial year. In this connection it may also be remembered that s. 43(2)(a) of the Act confers valuable right on the assessee in the matter of choosing the forum for the assessment. Accord-ing to that provision an assessee may on receipt of the first notice served on him under s. 19(2) apply to the Agricultural Income-tax Officer by whom such notice is served, to be assessed at the usual place of residence or at the place where the accounts relating to his agricultural income are kept. The Agricultural· Income-tax Officer can then make an order that the assessee shall be .assessed at the place specified in the application or he has to refer · the matter to the Assistant Commissioner of Agri-H cutural Income-tax whose decision shall be final. No such right is conferred on the assessee wifilreference to publication of general notice under s. 19(1). It shows, therefore, that the pro-ceedings for assessment under the Act can be initiated only by

notice u,nder s. 19(2) or by having resort to the provisions of s. 30 of the Act

Counsel for the appellant has sought to make distinction between the decision given under the provisions of the Income-tax Act by pointing out that under s. 20(4) of the Act best judgment assessment can be made on the failure to make return under sub-section (1) or sub-section (2) of s. 19 whereas under s. 23 ( 4) of the Income-tax Act such an assessment can be made only where any person fails to make the return required by any notice given under sub-section (2) of s. ;i2 which is equivalent to s. 19(2) of the Act. This distinction is hardly material when the principles which have been laid down by this Court are kqit in view. In support of his contention counsel for the appellant 1111 Ille> called attention to decision of the Privy Council in Gokuldas Ratanji Mandavia v. Commissioner of Income-ta:c([1]) i,ti which the provisions of the East African l.ucome-tax (Manage-ment) Act, 1952 came up for consideration. Those provisions are altogether different and the decision rested on the wording of s. 71 of that enactment. It cannot, therefore, be of. any assistance in the present case.

For the reasons given above the appeals fail and they are dismissed with costs. One hearing fee.

Appeals dismissed.