Commissioner of Agricultural Income-tax, Kerala Vs. Amalgamated Coffee Estates Ltd. - Court Judgment

M. S. MENON J. - This is an application by the Commissioner of Agricultural Income-tax, Kerala, under section 54(1) of the Madras Plantations Agricultural Income-tax Act, 1955, questioning the correctness of the order of the Agricultural Income-tax Appellate Tribunal, Trivandrum, in Agricultural Income-tax Appeal No. 33 of 1959. The assessee is the Amalgamated Coffee Estates Limited, Sitharkunda. The assessment related to the assessment year 1955-56.

The Tribunal set aside the reassessment under section 35 of the Act on the ground that the notice issued under that section gave only a period of three days, that is, less than the minimum prescribed under section 16(2) of the Act. That fact, according to the Tribunal, made the reassessment an assessment without jurisdiction.

Section 35 reads as follows :

'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 three 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-section (2) of section 16 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 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 assessment or full assessment, as the case may be.'

And section 16(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 in any financial year, he may serve in that year a notice in the prescribed form requiring such person to furnish within such period not being less than thirty days as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice) his total agricultural income during the previous year.'

Section 35 corresponds to section 34 of the Indian Income-tax Act, 1922, and section 16(2) to section 22(2) of that Act. All the decision cited before us - except Commissioner of Agricultural Income-tax v. Sultan Ali Gharami, a case under the Bengal Agricultural Income-tax Act, 1944 - arose under sections 34 and 22(2) of the Indian Income-tax Act, 1922.

The leading case, and the foundation of the decision of the Appellate Tribunal, is the decision of Chagla C.J. Commissioner of Income-tax v. Ramsukh Motilal. The questions posed in that case were :

'(1) Whether the notice issued under section 34 dated 19th March, 1949, requiring the assessee to file a return by 25th March, 1949, is valid in law

(2) If the answer to the first question is in the negative, whether the proceedings taken in pursuance of such notice, without any objection on the part of the assessee as to invalidity of that notice and in spite of compliance as to the requirements of the notice, are void in law and the assessment made in consequence thereof is also null and void ?'

Chagla C.J. said :

'Each of the three requirements mentioned in section 22(2) is qualified by the legislative providing that the notice must give time to the assessee to comply with that requirement within a period which cannot be shorter than 30 days. The requirement is not merely to make a return or to verify or to give particulars. The requirement is in each case that the return must be made, the verification must be made, or the particulars must be given, within a period of not less than 30 days. Therefore it is clear that if a notice under section 34 embodies any of the requirements under section 22(2) it must at the same time permit the assessee to comply with that requirement within a period which is not less than 30 days. If the period is shorter than 30 days, then the requirement is not the requirement as set out in section 22(2). In this case the notice gave only six days to the assessee to make a return under section 34. Therefore the requirement was different from the requirement under section 22(2) and the notice was clearly bad. Mr. Joshi says that this is not a case where notice has not been given. A notice has been given, but the notice may not be exactly in accordance with the law. In our opinion, if a notice is not given as provided by section 34, then in the eye of the law it is no notice at all, and clearly the Income-tax Officer proceeded to assess the assessee under section 34 without complying with the condition precedent laid down in section 34 which alone could have given him jurisdiction to assess the assessee.'

And answered the first question in the negative and the second in the affirmative.

The contention of Mr. Isaac, appearing on behalf of the applicant, is somewhat different from that of Mr. Joshi before the High Court of Bombay. According to him the prescribed time-lag will apply when a return is called for; but not when as in this case, no return is demanded, and only particulars are required. We cannot find our way to accept this submission. A period of not less than thirty days appears to have been stipulated for anything and everything that the assessee may be called upon to do in accordance with section 22(2) by a notice under section 34 of the Act.

Commissioner of Income-tax v. Ramsukh Motilal is in agreement, on the point under discussion, with the decision of the Calcutta High Court in Commissioner of Agricultural Income-tax v. Sultan Ali Gharami. That decision was followed and explained by the High Court of Calcutta in R. K. Das & Co. Commissioner of Income-tax. Both Commissioner of Income-tax v. Ramsukh Motilal and R. K. Das & Co. v. Commissioner of Income-tax came up for consideration in Narayana Chetty v. Income-tax Officer, Nellore. In that case the Supreme Court said :

'The argument is that the service of the requisite notice on the assessee is a condition precedent to the validity of any reassessment made under section 34; and if a valid notice is not issued as required, proceedings taken by the Income-tax Officer in pursuance of an invalid notice and consequent orders of reassessment passed by him would be void and inoperative. In our opinion, this contention is well founded. The notice prescribed by section 34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee as required that the Income-tax Officer would be justified in taking proceedings against him. If no notice is issued or if the notice issued is shown to be invalid 'then the validity of the proceedings taken by the Income-tax Officer without a notice or in pursuance of an invalid notice would be illegal and void. That is the view taken by the Bombay and Calcutta High Courts in Commissioner of Income-tax v. Ramsukh Motilal and R. K. Das & Co. v. Commissioner of Income-tax and we think that that view is right.'

That the position is the same under the Madras Plantations Agricultural Income-tax Act, 1955, is not is dispute. And in view of the approval by the Supreme Court of the judgment of Chagla C.J. in Commissioner of Income-tax v. Ramsukh Motilal we consider it unnecessary to deal with the question any further, and we hold that the reassessment of the assessee in pursuance of the defective notice issued under section 35 of the Madras Plantations Agricultural Income-tax Act, 1955, is - in the words of the Supreme Court in the extract given above - 'illegal and void'.

The only further question that arises for consideration is whether the assessee can waive the defect and whether such a waiver exists in this case. Kanga deals with the question of waiver as follows :

'The view of the Calcutta High Court is that the requirement of a valid notice, though a condition precedent to the validity of an assessment under this section (section 34), can be waived : Commissioner of Agricultural Income-tax v. Sultan Ali Gharami. The Bombay High Court has taken the view in Commissioner of Income-tax v. Ramsukh Motilal that the requirement of a valid notice, being a condition precedent to the assumption of jurisdiction by the Income-tax Officer to assess under this section (section 34), cannot be waived. It is submitted that the Bombay view is incorrect... However, on the facts of Ramsukh Motilals case the decision of the Bombay High Court was correct, since the mere facts that the assessee had filed a return of income in pursuance of an invalid notice and had appeared before the Income-tax Officer without raising any objection to the notice could not be construed as amounting to waiver, particularly when there was no finding that the assessee had knowledge of his legal right which he was alleged to have relinquished.' (the Law and Practice of Income-tax, 4th edition, page 706).

In this case also there was a compliance with the notice by the assessee. But from that fact, and the other facts disclosed by the proceedings, we are unable to hold that the requisites necessary to spell a waiver are available. In this view it is unnecessary for us to decide whether a waiver, in a case like this, is possible or not.

In the light of what is stated above the T. R. C. has to be dismissed and we do so. The applicant will pay the costs of the respondent. Advocates fee Rs. 150.

Case dismissed.