1. For the assessment year 1974-75 the assessment was completed in this case on 27-3-1975. The assessee had returned income of Rs. 3,67,187 as long-term capital gains relating to an immovable property. The ITO accepted this figure as returned and this formed part of the assessed income for the year. The assessment order and demand notice relating to the above assessment was served on the assessee on 18-8-1975 and apparently, the assessee accepted the assessment order and there was no appeal filed. On 3-10-1980 the assessee filed an appeal before the Commissioner (Appeals) with a request for condonation of the delay in filing the appeal and claiming to exclude the long-term capital gains originally included in the assessment. The request to condone the delay in filing the appeal was based, according to the assessee, on a news item in the Economic Times dated 19-3-1980 which reported a decision of the Bombay High Court decided on a writ petition in the case of Manutbhai A. Sheth v. N.D. Nirgudkar, Second ITO [1981] 128 ITR 87 that capital gains arising on the sale of agricultural land used for agricultural purposes was not liable to tax. The assessee sought to explain before the Commissioner (Appeals) that mistakenly he had returned the income at the original stage, but after the decision of the Bombay High Court which came to his notice, he knew that the above income was not liable to tax. After the news item appeared in the Economic Times, he waited to collect the actual judgment laying down the above proposition and immediately after his legal advisers looked into the matter and without any further delay filed an appeal. The Commissioner (Appeals) found that there were two periods of delay to be condoned, the one up to the publication of the judgment in the Economic Times and another thereafter. He was satisfied that for both these periods the assessee had sufficient cause for not filing the appeal on time. He, therefore, allowed the assessee's appeal condoning the delay and relying on the decision of the Bombay High Court on merits. The departmental appeal is directed against this order of the Commissioner (Appeals).
2. The learned counsel for the department has challenged the order of the Commissioner (Appeals) primarily on the three grounds, viz., condonation of delay, admission of fresh evidence by the Commissioner (Appeals) without satisfying the conditions of Rule 46A and the decision on merits as to the liability itself. Further, an additional ground is put in stating that the very appeal to the Commissioner (Appeals) was incompetent insofar as the ITO having accepted the return filed by the assessee, the assessee was in no way aggrieved so as to resort to the appeal provisions of the Income-tax Act, 1961 ('the Act').
3. On this additional ground the learned counsel for the assessee has challenged it, claiming that the ground not having been taken before the Commissioner (Appeals), it was not open to the department to take it for the first time before the Tribunal. The position of the admission of the additional ground is not only peculiar, but it is particularly singular. Here is a case where the assessee filed a return which was accepted and did not even file an appeal for as long as 5 years but comes up with an appeal which was admitted by the Commissioner (Appeals) condoing the delay, apparently raising a ground.
Delay in filing an appeal, etc., is so basic to this flow of events that we fail to see how the learned counsel for the assessee can even raise an objection about the department not having raised this ground before the Commissioner (Appeals) where he seeks admission himself. The additional ground has to be admitted.
4. The real issue before us relates to the condonation of delay in filing the appeal by the Commissioner (Appeals). That the assessee returned this income and it was assessed without demand is not disputed. The learned counsel has pointed out that when the ITO had simply accepted the return filed before him, the assessee could not have any grievance. Assuming it to be so for the argument sake, according to the learned counsel, the delay in filing the appeal was so long that it can never be condoned. The assessee, relying on a decision of the Bombay High Court in some other case, could not have taken the time in coming to know of such a judgment as time to be not accounted for limitation purposes for filing an appeal (sic). There are several decisions published from day-to-day and several judgments delivered by the High Courts and the Supreme Court and if all settled matters were to be disturbed with delivery of every such judgment, according to the learned counsel, there would be no settled law in the country at all.
Everything will be unsettled and finality would be unknown. It is also pointed out that apart from generally giving an explanation for the delay in filing of an appeal, the assessee has to explain every day of the default. This he can do neither with reference to the period up to the time the decision was noted in the Economic Times nor the period thereafter up to the date of filing the appeal. A mere general statement of the assessee that until he saw the item in the newspaper he was not aggrieved and that immediately thereafter he consulted his lawyer and filed the appeal would not be sufficient to condone the long delay in filing the appeal.
5. The learned counsel also objected to the admission by the Commissioner (Appeals) of extra evidence without resorting to the provisions of Rule 46A. Even if the Bombay High Court decision laid down that sale of agricultural land wherein agricultural operations were carried out would not result in capital gains, it was necessary for the assessee to have established, as a matter of fact, that his land was agricultural, agricultural operations were carried thereon and even under the ratio of the Bombay High Court decision, the income was exempt as agricultural income. There was no evidence, discussion or even details about these aspects, without considering which, according to the learned counsel, the Commissioner (Appeals) ought not to have accepted the assessee's case.
6. It is also pointed out that capital gains from whatever source was assessable to income-tax, so long as there was surplus from sale of capital assets. The definition of 'agricultural income' cannot include within it the excess realised on the sale of agricultural land.
According to the learned counsel, 'income' by definition is stated to include capital gains, but the converse may not be true. When the capital asset itself was disposed of, income did not arise from that agricultural land so as to be termed agricultural income or exempted on that score.
7. The learned counsel for the assessee has pointed out that the department's grievance about the assessee being not aggrieved of the assessment order is not relevant for two reasons. In the state of his knowledge of law as it stood at the time of filing the return the assessee was not aggrieved but the moment he knew that he was being assessed on an item of income which was not taxable, he became an aggrieved person who could resort to the remedy of appeal. In fact this ground was not taken before the Commissioner (Appeals). According to the learned counsel for the assessee, the very ground taken in his appeal related to the condonation of delay and the circumstances indicated in detail about his returning capital gains as income. The ITO as the respondent in the appeal certainly knew about the position and still did not object before the Commissioner (Appeals) on this point. It is also not correct to say that the Commissioner (Appeals) did not give an opportunity to the ITO, since in any case the records must have been called for from him and he was asked to represent before the Commissioner (Appeals). Notice is always issued to the ITO by the Commissioner (Appeals). The fact that an appeal was filed on this point was known both to the department and the assessee. In this case, the decision of a subsequent binding authority indicated to the assessee that he has been overtaxed. This was a clear grievance against which he could appeal.
8. On the question of delay itself and condoning it, it is pointed out that the assessee became aggrieved only when he saw from the reported decision of the Bombay High Court that he has returned as income something which was not taxable. 18-10-1975 was the last date for filing the appeal. The decision of the Bombay High Court was referred to in the Economic Times on 19-8-1980. Immediately after knowing this, the assessee had contacted his chartered accountants and solicitors and even the papers were prepared for the counsel. On 1-10-1980 the counsels advised that the appeal be filed and within two days on 3-10-1980, after consultation with the chartered accountants and the solicitors, the appeal was filed. The assessee had acted with a maximum diligence in pursuing the appeal. The Commissioner (Appeals) had correctly condoned the delay.
9. The Commissioner (Appeals) had not admitted any extra evidence attracting the provisions of Rule 46A. From the evidence on record available at the time of appeal and the records of the case, it was clear to the Commissioner (Appeals) that the agricultural land was used for agricultural purposes. The decision in Sheth's case (supra) only required this condition to be satisfied. The departmental record showed that year after year the assessee has been returning agricultural income and claiming exemption on the same. The records also indicated that the provisions of Section 54B of the Act were applied for that very year, the ITO's order referring to the investment in a portion of the land. The learned counsel has referred to several cases of the High Courts and the Supreme Court to support his point that in circumstances such as this, the delay ought to be condoned in the interest of justice as was done by the Commissioner (Appeals).
10. On a consideration of the facts, we hold that there is no justification for condoning as inordinate a delay as in the present case and allow the departmental appeal.
11. There is no dispute about the fact that the assessee returned the income from capital gains in the return filed and accepted the assessment made by the ITO. Nearly 5 years after this the assessee saw an item in the newspaper about the decision by the Bombay High Court that capital gains arising from the sale of agricultural land are not liable to tax. It is on this that the assessee thought that he was not liable to tax and filed the appeal with a request to condone the delay.
It is a settled proposition that an appeal lies only when the appellant is aggrieved and not otherwise. When a return filed by an assessee is accepted, technically the assessee is not aggrieved and there is no justification for an appeal. The point made out is that the decision of the -Bombay High Court put the assessee in the position of an aggrieved person giving him a right of appeal. It is true that not merely an existing cause of action, but a cause of action which comes into existence also can support an appeal. But there must be indications that a real cause of action has arisen. In the first place, the assessee felt aggrieved for the first time because of the decision of the Bombay High Court on a particular point. While Article 141 of the Constitution lays down that only Supreme Court decision is the law of the land, it would be problematic whether with every decision or judgment of any of the High Courts in India, any assessee could feel that a fresh cause of action was arising and with another decision of the same or some other High Court the cause of action disappearing.
What we want to emphasise is while the decision of the High Court settles the law for the particular state it is not always that all the High Courts decide the same matter in the same manner. Another High Court might give a different decision on the matter. A decision of a High Court on law cannot, therefore, even pursuing the logic of the assessee's argument, make him aggrieved. Basically, therefore, and apart from the question of the assessee having been assessed on a returned income, we cannot accept the position in fact or in law that the assessee is aggrieved in this particular case. Perhaps it might have been a different position if the assessee has acted on a decision of the Supreme Court so that at least a pendulum-like arising and extinction of grievances with the decision of every High Court may not arise. The Commissioner (Appeals)'s order could be set aside on this one point alone.
12. We also do not see how in the present case this enormous delay could be condoned. The twin arguments of the learned counsel for the assessee are that justice requires appellate interference and decisions of the Courts support his case. On the first point, as far as the point at issue has not been finally settled by the Supreme Court, we cannot say that what is non-taxable in the hands of the assessee has been taxed at all. In our opinion, on the second point the decided cases do not support the assessee.
13. Reference was made to the decision of the Bombay High Court in the case of Shrimant Govindrao Narayanrao Ghorpade v. CIT [1963] 48 ITR 54.
This was a case where an appeal was filed by the assessee, a short time after he attained majority on the ground that his guardian had not presented an appeal within time and raising this as a ground for condonation of delay in filing the appeal. Their Lordships of the Bombay High Court came to the conclusion that the decision reached by the Tribunal was not founded on any material on record. They observed : The order of the Tribunal in this respect appears to be founded merely on surmises. The applicant has stated certain facts on oath.
Those facts have not been controverted by any counter-affidavit by the department. In these circumstances it can hardly be said that the aforesaid conclusion reached by the Tribunal is founded on any material on the record . . . . (P- 67) This decision cannot be said to be one directing condonation of a delay in any specific circumstances. Only the Tribunal's acting on surmises resulted in a decision in favour of the assessee.
14. Reference was made to the decision of the Supreme Court in the case of Kamala Mills Ltd. v. State of Bombay [1965] 57 ITR 643. In that case the company which manufactured and sold textile cloth was registered as a dealer under the Bombay Sales Tax Act, 1946 ('Sales Tax Act').
Between 26-1-1950 and 31-3-1951, it sold goods inside and outside Bombay. All these sales were included in the turnover and sales tax was also levied in respect of the outside sales. After the decision of the Supreme Court in Bengal Immunity Co. Ltd. v. State of Bihar [1955] 2 SCR 603, the company instituted a suit on the original side of the Bombay High Court to recover the sales tax paid on outside sales on the ground that it was illegally levied and that the illegality was discovered after the decision of the Supreme Court. It was also claimed that Section 20 of the Sales Tax Act did not bar the institution of the suit. Their Lordships of the Supreme Court held that Section 20 was an absolute bar against the institution of a suit and that the appellant could have either appealed or applied for revision and prayed for condonation of delay on the ground that the mistake which was responsible for the illegal recovery was when the Supreme Court pronounced its judgment and that such a plea would have been competent under Section 22B of the Sales Tax Act. Section 22B gave power to the prescribed authority to extend the period of limitation if it is satisfied that the party applying for such extension had sufficient cause for not preferring the appeal or making the application within such period. Section 23 A of the Sales Tax Act provided for rectification of the mistake. The facts of the case indicate that this was a clear case of a mistaken payment, the Supreme Court having given its opinion on the legal position. The Supreme Court also found that the time limit for making a rectification was not passed. The Supreme Court also found that it was open to the appellant to move to the High Court under Article 226 of the Constitution. It was under such circumstances that the decision on the suit filed on the original side was given. We are not sure that this case helps the assessee.J.B. Advani & Co. (P.) Ltd. v. R.D. Shah, CIT [1969] 72 ITR 395, the Supreme Court laid down that the explanation of delay for the entire period was necessary.
16. In the case of Parshuram Pottery Works Co. Ltd. v. D.R. Trivedi, WTO [1975] 100 ITR 651 (Guj.), a certain amount was disallowed as not constituting deductible liability for wealth-tax purposes.
Subsequently, the assessee came to know from the decision given by the Tribunal that such amounts were deductible. The assessee's application to the ITO for rectifying an alleged mistake and revision petition to the Commissioner having been unsuccessful, a writ was filed before the Gujarat High Court. Their Lordships held that this was a fit case for the exercise of the discretion of the Court in favour of the petitioners even though they had not preferred appeals against the orders of the assessment. It was urged on behalf of the revenue in that case that a discretion was not exercised in favour of the petitioner since he had not adopted the statutory remedy of an appeal challenging the orders of the assessment and so the orders had become final. The decision of their Lordships went on the ground that a patent error was apparent from the record. Action in that case was, however, within the period of limitation. This decision does not directly help the assessee's case.
17. In the case of Saurashtra Cement & Chemical Industries Ltd. v. CIT [1978] 115 ITR 27 (Guj.), the Commissioner was directed to proceed on the footing that there was sufficient cause requiring condonation of delay on the ground that : ... the Commissioner recognised that it would have been a sufficient cause if the petitioner-company had approached the Commissioner immediately after the order of the ITO with reference to assessment year 1966-67, but declined to condone the delay just because the petitioner-company took the matter in appeal first before the Appellate Assistant Commissioner and thereafter before the Appellate Tribunal. . . . (p. 28) 18. Kammchand Premchand (P.) Ltd. v. CIT[1975] 101 ITR 46 (Guj.) also refers to a case where the petitioner could have applied for rectification of the orders of the assessment within the prescribed period of limitation. Here also action was taken pursuant to a Supreme Court's decision.
19. An analysis of the cases cited before us clearly indicates that the provision where rectification or an alleged grievance on account of a decision accepted was possible only where such rectification could be done within the period of time. A final legal pronouncement of the Supreme Court alone has been regarded as justifying interference by the appellate or revisionary authorities. The decisions are given on the peculiar facts of the cases and cannot be regarded as laying down a general position, helping the assessee's case.
20. Apart from the above, even if the High Court's decision could be regarded as giving rise to a grievance and a cause of action. It is doubtful whether the delay in filing an appeal could be condoned for that reason. Periods of limitation are provided not to unsettle many settled matters giving rise to complicated problems of right, interest and financial and other liability. If every case where a decision has been arrived at not merely in the near past but several years earlier, is unsettled on the basis of decisions not merely by a High Court but even by the Supreme Court, one can imagine the multiplicity of proceedings fruitful and otherwise which could plague the Tribunal as well as the Courts including the Supreme Court. Periods of limitation as well as the practice of filing an individual appeal in each case have been fixed only with this end in view. Otherwise it would be quite sufficient for an assessee, every time he receives an order from the ITO to lie low and file an application for rectification or revision or appeal when a decision of the Tribunal, the High Court or the Supreme Court comes up at any time in the future. Periods of limitation provided for appeals as well as rectification would also be meaningless if this was possible. A mistake apparent from record would remain a mistake even after the years, but the Statute provides for rectification only within a statutory limitation period. A grievance in an assessment or other order also continues to remain a grievance but still it can be pursued only during the period of limitation provided for an appeal, revision, etc. From a general view of judicial procedure and also the particular practice in tax laws of filing an appeal, etc., in each individual case and for each individual assessment year, it would certainly appear that there could be no grievance arising to a person with every judgment, or order passed by the High Court or the Supreme Court in another person's case and an appeal condoning the delay in filing following it.
21. Another aspect of the matter is that an appeal not having been filed on time and the point not being even agitated for the first time before the ITO, the decision of the Supreme Court in the case of Addl.
CIT v. Gurjargravures (P.) Ltd. [1978] 111 ITR 1 would apply. Here is a case where the question was not considered at all by the ITO. The facts as to the nature of the agricultural land, the agricultural operations carried thereon, the relation between the land and the income through capital gains, etc., are not available. Enquiry into all these facts requires to be made before entertaining the assessee's claim. It has been pointed out on be half of the assessee that he has been returning agricultural income from year to year and that the provisions of Section 54B were also considered by the ITO. From what source the agricultural income was derived and the identity or relation between the land sold, purchased, etc., have not been enquired into by the ITO.In fact there is nothing on record to show that the lands giving rise to capital gains were also the lands which produced the agricultural income returned for some of the years. The decision of the Supreme Court in the case of Gurjargravures (supra) read with the clarification given in the decision of the Andhra Pradesh High Court in the case of CIT v. Gangappa Cables Ltd. [1979] 116 ITR 778 does not help the assessee.
22. We find also substance in the argument of the learned counsel for the department that sufficient material was not available to the Commissioner (Appeals) to come to the decision that the lands in the present case which yielded the capital gains were agricultural lands which were cultivated from year to year. In fact there was no material for the Commissioner (Appeals) to come to the conclusion that the criteria laid down in the Bombay High Court decision were satisfied in the present case. The Commissioner (Appeals) has not admitted any fresh evidence in this regard. The reference of the learned counsel for the department to Rule 46A may not, therefore, be relevant, but we have certainly to hold that the Commissioner (Appeals) had no materials to hold that the lands in the present case satisfied the conditions referred to in the Bombay High Court decision 23. We, therefore, hold that the Commissioner (Appeals) erred in condoning the delay in the present case and admitting the appeal and also deciding it on merits in the assessee's favour. His order is cancelled.
24. In view of our finding it is not necessary to go into the question of applicability, on merits of the Bombay High Court decision itself, in the present case.