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1961 DIGILAW 264 (KER)

CAIT, Kerala v. Amalgamated Coffee Estates Ltd.

1961-08-12

M.S.MENON, P.GOVINDA MENON

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Judgment :- 1. This is an application by the Commissioner of Agricultural Income-tax, Kerala, under S.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 1950. The assessee is the Amalgamated Coffee Estates Limited, Sitharkunda. The assessment related to the assessment year 1955-56. 2. The Tribunal set aside the re-assessment under S.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 S.16(2) of the Act. That fact, according to the Tribunal, made the re-assessment an assessment without jurisdiction. 3. S.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 S.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 of which it would have been charged if such income had not escaped assessment or full assessment, as the case may be". and S.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 selling forth (along with such other particulars as may be provided for in the notice) his total agricultural income during the previous year." S. 35 corresponds to S.34 of the Indian Income-tax Act, 1922, and S.16[2] to S. 22[2] of that Act. All the decisions cited before us-except [1951] 20 ITR 432, a case under the Bengal Agricultural Income-tax Act, 1944-arose under S.34 and 22(2) of the Indian Income-tax Act, 1922. 4. The leading case, and the foundation of the decision of the Appellate Tribunal, is the decision of Chagla, C.J. in [1955] 27 ITR. 54. The questions posed in that case were: "(1) Whether the notice issued under S.34 dated 19th March, 1949, requiring the assessee to file a return by the 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 the 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 S.22 [2] is qualified by the Legislature 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 S.34 embodies any of the requirements under S.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 S.22 [2]. In this case the notice gave only six days to the assessee to make a return under S.34. Therefore the requirement was different from the requirement under P. 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. Therefore the requirement was different from the requirement under P. 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 S.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 S.34 without complying with the condition precedent, laid down in S.34 which alone could have given him jurisdiction to assess the assessee." and answered the 1st question in the negative and the 2nd in the affirmative. 5. The contention of Mr. Isaac, appearing on behalf of the appellant, 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 every thing that the assessee may be called upon to do in accordance with S.22 [2] by a notice under S.34 of the Act. 6. [1955] 27 ITR 54 is in agreement, on the point under discussion, with the decision of the Calcutta High Court in [1951] 20 ITR. 432. That decision was followed and explained by the High Court of Calcutta in [1956] 30 ITR. 439. Both [1955] 27 ITR. 54 and [1956] 30 ITR. 439 came up for consideration in [1959] 35 ITR. 388. 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 re-assessment made under S.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 re-assessment passed by him would be void and inoperative. In our opinion, this contention is well founded. In our opinion, this contention is well founded. The notice prescribed by S.34 cannot be regarded as a mere procedural requirement; it is only if the said notice is served on the assessee 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-lax 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 (1955) 27 ITR 54 and (1955) 30 ITR 439 and we think that that view is right". 7. That the position is the same under the Madras Plantations Agricultural Income-tax Act, 1955, is not in dispute. And in view of the approval by the Supreme Court of the judgment of Chagla C. J. in [1955] 27 ITR. 54 we consider it unnecessary to deal with the question any further, and we hold that the re-assessment of the assessee in pursuance of the defective notice issued under S.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". 8. 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-S. 34-, can be waived ( (1951) 20 ITR. 432. The Bombay High Court has taken the view in (1955) 27 ITR. 54 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-S. 34-, cannot be waived. It is submitted that the Bombay view is incorrect." "However, on the facts of (1955) 27 ITR. 432. The Bombay High Court has taken the view in (1955) 27 ITR. 54 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-S. 34-, cannot be waived. It is submitted that the Bombay view is incorrect." "However, on the facts of (1955) 27 ITR. 54 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 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). 9. 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. 10. In the light of what is stated above the TRC. has to be dismissed and we do so. The applicant will pay the costs of the respondent, Advocates' fee Rs. 150/ Dismissed.