TaxTMI 
TaxTMI 
TaxTMI 
1963 (4) TMI 97
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.... The two petitioners were the sole partners of the firm. The partnership firm was served with a notice under the Indian Income-tax Act by the Income-tax Officer and was assessed to income-tax for the assessment year 1951-52. Appeals were filed against the assessment order before the Appellate Assistant Commissioner of Income-tax and the Income-tax Appellate Tribunal. In appeal, the petitioners got substantial reliefs. After the sale of the Martycherra Tea Estate by the petitioners on the 9th July, 1953, they ceased to have any agricultural income. On the 25th January, 1961, petitioner No. I, Sri D. C. Chaudhuri, received a letter dated January 19, 1961, directing the two petitioners to furnish the returns of their agricultural incomes for the assessment years 1949-50 to 1953-54. On the 27th January, 1961, the petitioners received a notice of demand under section 23 of the Assam Agricultural Income-tax Act, 1939, hereinafter called the Act, directing them to pay ₹ 8,128 as agricultural income-tax within the 21st July, 1961, for the assessment year 1950-51. The assessment was made under section 20(4) of the Act. This order of assessment dated the 8th of June, 1961, under sectio....
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....letter, it was pointed out that the petitioner owned the Chandana Tea Estate, besides the Martycherra Tea Estate, and the petitioner proposed to submit returns for the years in respect of which it was liable under the Act. On the 19th October, 1959, the petitioner received a notice under section 19(2) of the Act in the prescribed form, which directed the petitioner to submit the returns of agricultural income in respect of the previous year for Martycherra Tea Estate. In response to this notice, the petitioner submitted the return for the year ending 31st December, 1958, in respect of the agricultural income from both these two tea estates. After the said return was submitted on the 18th December, 1959, the petitioner received another letter dated the 20th August, 1959, directing the petitioner to submit returns of agricultural income and copies of central assessments in respect of Chandana Tea Estate for the years 1951-52 and onward on the allegation that the petitioner had purchased the said tea estate from one late Bipin Chandra Bhattacharjya in 1949. On the same day, a notice under section 19(2) of the Act was received in respect of the Chandana Tea Estate and another notice un....
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....Act, together with a notice of demand under section 23 of the Act, for payment of ₹ 2,573.50 nP. as agricultural income-tax. This order of the 19th June, 1961, has been challenged by the petition numbered as Civil Rule No. 238. Civil Rule No. 239 of 1961 arises out of a petition by which the agricultural income-tax assessed under section 20(4) of the Act for the assessment year 1952-53 has been challenged. Civil Rule No. 240 of 1961 arises out of a petition by which the assessment order dated June 19, 1961, in respect of the assessment year 1953-54 has been challenged. Civil Rule No. 241 of 1961 relates to the assessment made on the 19th June, 1961, for the assessment year 1954-55. Civil Rule No. 242 of 1961 relates to the assessment made on the 19th June, 1961, for the assessment year 1955-56. 4. The main point urged by the petitioners in all these petitions is that unless the individual notice under section 19(2) of the Act is served on the assessee, no best judgment assessment can be made under section 20(4) except by proceedings under section 30 of the Act. No action was taken in the present case under section 30 of the Act. It is urged that an assessment can be made af....
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.... be required by the notice) his total agricultural income during the previous year: Provided that the Agricultural Income-tax Officer may in his discretion extend the date for the delivery of the return in the case of any person or class of persons; (2) In the case of any person whose total agricultural 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 financial year the Agricultural Income-tax Officer may serve in that financial year, a notice in the prescribed form upon him requiring him to furnish, within the prescribed period, a return in the prescribed form and verified in the prescribed manner setting forth his total agricultural income during the previous year. (3) If any person has not furnished a return within the time allowed by or under sub-section (1), or sub-section (2) or, having furnished a return under either of those sub-sections, discovers any omission or wrong statement therein, he may furnish a return or a revised return, as the case may be, at any time before the assessment is made and any return so made shall be deemed to be made in due time under....
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....t receive the notice issued under sub-section (2) of section 19 or sub-section (2) of section 20 or that he had not a reasonable opportunity to comply or was prevented by sufficient cause from complying with the terms of the last mentioned notices, the Agricultural Income-tax Officer shall cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of section 20." Section 30 reads as follows: "If for any reason any agricultural income chargeable to agricultural income-tax has escaped assessment for any financial year, or has been assessed at too low a rate or has been the subject of undue relief under this Act, the Agricultural Income-tax Officer may, at any time within three years of the end of that financial year, serve on the person liable to pay agricultural income-tax on such agricultural income 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-section (2) of section 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 a notic....
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.... may be that in pursuance of a general notice under section 19(1) the assessee may file a return and if once the return has been filed, even though in pursuance of a general notice, the proceedings for assessment commence, and it does not terminate unless the assessment is completed. This reasoning will not apply to a case where no return has been filed in pursuance of a general notice. Merely by issuing a general notice under section 19(1), no assessment proceedings can commence against an individual. The question thus of completing the assessment will not arise in cases where no return has been filed and proceedings for assessment have not commenced. Under section 20, clause (4), it is urged that power is given to the assessing authority to make a best judgment assessment. This is a penal provision, which can only be invoked if the assessee does not file a return on a notice being issued under section 19(2). The question of making a penal assessment will not arise in a case where it is not obligatory for an assessee to file a return. It is urged that if section 20(4) is interpreted as suggested by the Advocate-General in his reply, the effect will be that the assessing authority ....
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....icer to act if any agricultural income has escaped assessment for any reason. The Agricultural Income-tax Officer has to serve on the person liable to pay agricultural income-tax, a notice containing all or any of the requirements, which may be included in a notice under sub-section (2) of section 19, and such a notice will be deemed to be a notice under that sub-section and thereupon, he may proceed to assess or reassess such income. This notice has to be given within three years of the end of the financial year for which the agricultural income has escaped assessment. The condition precedent for exercising power under section 30 to assess or reassess an assessee is the issue of a notice under section 19(2) within three years of the end of the financial year. If on the issue of a general notice under section 19(1), the Agricultural Income-tax Officer can make a best judgment assessment under section 20(4) at any time on failure of the assessee to submit a return as required under section 19(1), the Agricultural Income-tax Officer need not proceed under section 30 of the Act. Section 20(4) and section 30 should be read together. Reading these two sections together, it will be clear....
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....b-section. The provisions of section 20(4) are attracted in cases of assessment under section 30 by virtue of this provision and not on their own force. 8. At this stage, it maybe convenient to refer to the authorities cited "at the Bar. The authorities mostly deal with the Indian Income-tax Act. Under section 22(1) of the Indian Income-tax Act, 1922, a general notice is issued before the 1st day of May in each year requiring every person whose total income during the previous year exceeded the maximum amount which is not chargeable to income-tax to furnish a return of his total income within a specified period. Under sub-section (2) of section 22, an individual notice may be served on a person, who is liable to pay income-tax in the opinion of the Income-tax Officer. Section 23 deals with the assessment and under section 23(4), if any person fails to make the return required by any notice given under sub-section (2) of section 22 and has not made a return or a revised return under sub-section (3) of the same section, or fails to comply with all the terms of a notice issued under sub-section (4) of the same section or, having made a return, fails to comply with all the terms ....
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....t. What the Agricultural Income-tax Officer does under section 20(4) is to quantify the amount of tax and thus the authorities under the Indian Income-tax Act are of no assistance. 10. The Advocate-General, however, strongly relied upon the case of Rajendranath Mukherjee v. Commissioner of Income-tax [1934] 2 ITR 71 (PC). This case arose out of proceedings under the Indian Income-tax Act. Section 34 of the Indian Income-tax Act, as it stood at that time, was as follows: "If for any reason income, profits or gains chargeable to income-tax has escaped assessment in any year, or has been assessed at too low a rate, the Income-tax Officer may, at any time within one year of the end of that year, serve on the person liable to pay tax on such income, profits or gains, 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-section (2) of section 22 and may proceed to assess or reassess such income, profits or gains, 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 : . . ." 11. The facts o....
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....en filed and what the Income-tax Officer had done in that case was that he completed the assessment and not assessed an "escaped income". The following two passages will make this point abundantly clear. At page 76 of the report, their Lordships observed [1934] 2 I.T.R. 71 (P.C.) : "It may be that in the two cases to which the section (section 34) applies if no notice is served within the year following the tax year, no subsequent assessment or reassessment can be made of the income which has escaped assessment or been assessed too low, but that is not to say that in no other case can an assessment be made after the expiry of the tax year." At another place in the same page, their Lordships, after quoting the observation of Rankin C.J., stated: "It may be that if no notice calling for a return under section 22 is issued within the tax year then section 34 provides the only means available to the Crown of remedying the omission, but that is a different matter." As the return had been filed in that case and Burn and Co. had been assessed on the basis of that return, their Lordships held that it was not a case of escaped assessment. 13. In Chatiura....
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....e on the ground that his income had escaped assessment. This was also a case where a return had been filed. It was pointed out in this case that notice under section 34 was only necessary if at the end of the assessment year, no return had been made by the assessee and the income-tax authorities wished to proceed under section 22(2) by serving a notice individually. In that case, it may be said that as the assessment year had come to an end and as no return had been furnished, and as the income-tax authorities wished to proceed under section 22(2), they could not do so under section 34. 14. In In re P.S. Rama Iyer A.I.R. 1958 Mad. 40 it has been held by the Madras High Court that a voluntary return filed in response to a public notice under section 22(1) and which is not preceded by notice under section 22(2), is a "return" even though the quantum of the income disclosed in the return is less than the taxable limit. On the submission of such a return, the Income-tax Officer is entitled to proceed with the assessment applying the other provisions of the enactment including that for ignoring the return and estimating the income. Dealing with the case of Commissioner of Agr....
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....nter-affidavit, it is stated that the petitioners refused to accept service of the notices under section 19(2) or section 30 of the Act. Thereafter, it is stated that even if no notice was served under section 19(2) or section 30 of the Act, as the petitioners failed to submit their returns in spite of the issue of the notice under section 19(1), they were liable to be assessed to agricultural income-tax under section 20(4) of the Act. In reply to the counter-affidavit, it was stated in paragraph 5 that no such notices were ever served on the petitioners. In paragraph 5, it is further stated that after the receipt of the order dated July 26, 1961, the petitioners applied for certified copies of the various notices and reminders alleged to have been issued in respect of the assessment year and supplied the necessary folios and court fees, but no such copies were supplied to them. In paragraph 6 of the rejoinder-affidavit, it is denied that the petitioner No. 2 ever refused to accept service of notice under section 19(2) or section 30 of the Act. The petitioners made a supplementary application supported by an affidavit praying for permission to argue some additional grounds. An affi....
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....ection 19(2) were issued, there was an obligation on the part of the assessee to file his return, and on his failure to do so, the provisions of section 20(4) were attracted. By the letter dated the 19th January, 1961, the petitioners were called upon to submit their returns for the assessment periods 1949-50 to 1953-54, by the 18th February, 1961, failing which best judgment assessment was to be made. This notice was in pursuance of the proviso to section 20(4) of the Act and not under section 19(2) or under section 30 of the Act. 19. It is also contended in this connection that under section 2oA(i) of the Act, where agricultural income is received or deemed to be received by a firm or association of individuals and the business of such firm or association is discontinued in any year, an assessment may be made in that year on the basis of the agricultural income received or deemed to be received during the period between the end of the previous year and the date of such discontinuance in addition to the assessment, if any, made on the basis of the agricultural income received or deemed to be received in the previous year. Every person who was a partner of such firm or a member of....
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....Act was issued within the financial year. The point was also raised by the petitioners that there was no proof of the fact that the notice under section 19(1) was duly published. In the absence of any clear allegation in the petition, it will be presumed that the official act was done in the normal course and properly. There is thus no force in the contention that no proper notice was published in the Gazette under section 19(1) of the Act. 21. The last point contended in these rules is that the Explanation to section 2 of the Act only provides that 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 denned to be agricultural income for the purposes of the enactments relating to Indian income-tax. The Indian Income-tax Act does not define "agricultural income" for the purposes of the Indian Income-tax Act and in the absence of any such definition, the Explanation will not be attracted. The proviso to section 8 of the Act lays down that in cases of agricultural income from cultivation and manufacture of tea, the agricultural income, for the purposes of this Ac....
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....cants may be liable to pay double tax. To avoid this conflict between the two authorities, the Legislature has provided under section 8 of the Act that the portion of the income from cultivation, manufacture and sale, which is regarded under the Indian Income-tax Act as the agricultural income, will be liable to tax under the Act and the portion which is not considered to be agricultural income under the Indian Income-tax Act, will be taxable under the Income-tax Act. There is no force in this contention that the Explanation attached to section 2 of the Act has not been complied with. 22. Another point urged was that the proviso to section 20(4) of the Act is not mandatory. The Advocate-General however contended that even if it was considered to be mandatory, in the present case, the proviso was complied with. The proviso clearly lays down that before making such assessment, the Agricultural Income-tax Officer may allow the assessee such further time as he thinks fit to make the return or comply with the terms of the notice or to produce the evidence. If section 20(4) is interpreted to mean that no best judgment assessment can be made in cases where no return has been filed in com....
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....uring the previous year. 25. If a person does not furnish any return in answer to the public notification under sub-section (1) or the individual notification under subsection (2) of section 19 the Agricultural Income-tax Officer may make an assessment to the best of his judgment under sub-section (4) of section 20 of the Act. A proviso to this sub-section is as follows : "Provided that before making such assessment the Agricultural Income-tax Officer may allow the assessee such further time as he thinks fit to make the return or comply with the terms of the notice or to produce the evidence." In the cases before us the petitioners were assessed for various years under section 20(4) of the Act. There is nothing to show that any individual notice under sub-section (2) of section 19 was served on any of the petitioners. In every case steps under section 20(4) were taken long after the assessment year (i.e., financial year) concerned was over. It is an admitted fact that no return was furnished by any of the petitioners for any of the years in question. 26. The learned Advocate-General submits that the assessment proceedings commence with the public notice under section....
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....rrect. There is a conflict of judicial opinion on this point. The Bombay and Madras High Courts have held that assessment proceedings commence with the public notice. The Calcutta High Court has held a contrary view. 30. In Commissioner of Agricultural Income-tax v. Sultan Ali Gharami [1951] 20 I.T.R. 432 it has been held by the Calcutta High Court that no assessment proceeding commences by a mere notice under section 24(1) of the Bengal Agricultural Income-tax Act, 1944 (corresponding to section 19(1) of the Assam Agricultural Income-tax Act). In this connection the following observation was made by Chakravartti J. (as he then was): "It therefore appears that so far as section 24(1) is concerned no assessment proceeding is started by the mere notice under the section and that a proceeding commences only when a return under the section is filed if any such return is filed at all. If no such return is filed an assessment proceeding commences only when a notice under section 24(2) is served. In so far as it was held in C. V. Govindarajulu Iyer v. Commissioner of Income-tax [1948] 16 I.T.R. 391 and Harakchand Makanji v. Commissioner of Income-tax [1948] 16 I.T.R. 119, with ref....
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.... himself chose to make a return, no question arose of assessment escaping. From this view, it is quite clear that assessment proceedings cannot start with the public notice. Had it done so, there could not be any question of assessment escaping even when an assessee chose not to make any return. 34. So, if no return is made in response to the public notice under section 19(1) of the Act and no individual notice is served under section 19(2) of the Act, there is no pending proceeding and there will be escaped assessment in such circumstances. But this escaped assessment "for any financial year" within the meaning of section 30 of the Act will be there only when the financial year is over. So from the publication of the notice under section 19(1) till the end of the financial year, there will be no escaped assessment for the financial year even if no return is filed and no individual notice is served. Once the financial year is over and no return is made or no individual notice has been served there is "escaped assessment for the financial year". Section 30 of the Act will then be attracted. If no return is filed in response to the public notice and no individual....