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CASE NO.: Appeal (civil)  2716 of 2007

PETITIONER: Commissioner of Agricultural Income Tax

RESPONDENT: M.N. Moni

DATE OF JUDGMENT: 18/05/2007

BENCH: Dr. ARIJIT PASAYAT, P.K. BALASURRAMANYAN & D.K. JAIN

JUDGMENT: J U D G M E N T

CIVIL APPEAL NO.   2716          OF 2007 (Arising out of S.L.P. (C) No. 5859 of 2006)

Dr. ARIJIT PASAYAT, J.

1.      Leave granted.

2.      Challenge in this appeal is to the order passed by a  Division Bench of the Kerala High Court answering the  reference made to it under the Kerala Agricultural Income Tax  Act, 1952 (in short the ’Act’) in favour of the respondent  (hereinafter referred to as the "assessee").   3.      Background facts in a nutshell are as follows:

4.      For the assessment years 1982-83 and 1983-84, M/s.  E.K. Vijayan and others, Kozhikode was an assessee under the  Act. Shri M.N. Moni was the executor of the estates of the  assessee.  The assessee owned an estate, namely, "Woodland  Estate".  Assessee derived agricultural income from coffee,  pepper, arecanut, coconut, cardamom and coco.  For the  assessment years i.e. 1982-83 and 1983-84 the assessee filed  returns disclosing agricultural income of Rs.1,22,520/- and  Rs.2,88,996/- respectively.  The Assessing Officer was of the  view that the returns filed did not reflect the correct and  complete picture as the assessee had not disclosed the income  from coffee during 1982-83 season and income disclosed of  pepper was low and, in fact no income was disclosed from  orange, arecanuts, coconuts, cardamom, and coco and many  inadmissible expenses were claimed as deductions. Notices  were issued on 2.3.1987 and 17.10.1987 proposing to make  best judgment assessments. Assessee filed its reply to the  notices. After consideration of the objections filed, the  Inspecting Assistant Commissioner of Agricultural Income Tax  completed the assessments determining the income at  Rs.7,97,380/- and Rs.5,06,641/- respectively for the two  assessment years. It was noted that the E.B. 2 register in  respect of 60.79 acres of new registered area was not  produced.  The production details of the said area were also  not disclosed.  Accordingly, the income of coffee from 60.79  acres was estimated and included in the taxable income.   Appeals were preferred by the assessee before the Deputy  Commissioner (Appeals), who confirmed the findings of the  Assessing Officer on the issue relating to 60.79 acres of new  registered area and the income therefrom.  However, the

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Appellate Authority directed that the cultivation expenses were  to be allowed @ Rs.2,000/- per acre.  Assessee preferred the  Second Appeals before the Kerala Agricultural Income Tax  Appellate Tribunal, Additional Bench, Kozhikode (in short  ’Tribunal’).  The Tribunal found that the accounts produced by  the assessee were only in respect of the 218 acres of land and  the activities relating to 60.79 acres of land were not disclosed.   Accordingly, the Tribunal confirmed the estimate of income  from the aforesaid 60.79 acres of land.   

5.      An application for reference in terms of Section 60 of the  Act was filed.  It was rejected by the Tribunal.  Original  petitions were filed before the High Court which by order dated  April 1, 1996, directed the Tribunal to refer one of the  questions formulated by the assessee and to refer the question  no.1 along with the statement of facts:

6.      Accordingly, the reference was made which was disposed  of by the impugned order.

7.      The question that was referred reads as follows:

"Whether on the facts and circumstances of  the case, is the finding of the Tribunal that  income from 60.79 acres of unregistered coffee  area is not included in the accounts of the  assessee supported by any material or  evidence?"                                  8.      By the impugned order, the High Court held that the  orders of the Tribunal were not correct and the question was  to be decided in favour of the assessee.

9.      In support of the appeal, learned counsel for the  appellant submitted that the Original Authority and the  Appellate Authority considered the factual position in detail  and recorded findings of fact that in relation to 60.79 acres of  land incomes were not disclosed. The High Court without  discussing the factual position, in a summary manner, set  aside the findings recorded by the authorities.  The order of  the High Court, it was therefore submitted, cannot be  maintained.   

10.     Per contra, learned counsel for the assessee submitted  that the High Court has taken note of relevant factors and,  therefore, no interference is called for.  

11.     We find that after making a brief reference to the  controversy, the High Court disposed of the reference with the  following observations:

"The contention of the assessee was that so far  as they are concerned, they have returned the  entire agricultural income from the property.  Further, it was submitted that with regard to  coffee, they cannot sell coffee to outsider, but it  can be sold through M/s. Pierce Leslie.  In the  above view of the fact, the contention of the  assessee is that conclusion by the authorities  is not correct.  The Tribunal, after considering  the case, came into the conclusion that the  assessee had not shown the return from 60.79  acres. According to us, this view is not correct.   In so far as the coffee can be sold only through  M/S. Pierce Leslie, there is no basis for the

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Department to state that the entire income has  not been returned."          

12.     No reason which weighed with the High Court to upset  the orders of the Assessing Authority and the Appellate  Authorities is discernible. Findings of facts were recorded by  the said authorities.  In a reference there is no scope for  interference with the factual findings, unless the findings are  per se without reason or basis, perverse and/or contrary to  materials on record.  Merely because different view on facts  may be available to be drawn, that cannot be a ground to  interfere with the findings of fact recorded by the authorities.   

13.     In cases of reference, only a question of law can be  answered. Where the determination of an issue depends upon  the appreciation of evidence or materials resulting in  ascertainment of basic facts without application of law, the  issue raises a mere question of fact.  An inference from certain  facts is also a question of fact.  A conclusion based on  appreciation of facts does not give rise to any question of law.   If a finding of fact is arrived at by the Tribunal after improperly  rejecting evidence, a question of law arises.  Where the  Tribunal acts on materials partly relevant and partly  irrelevant, a question of law arises because it is impossible to  say to what extent the mind of the Tribunal was affected by  the irrelevant material used by it in arriving at the finding.         14.     A question of fact becomes a question of law if the finding  is either without any evidence or material.   

15.     In the instant case, the High Court has not even  indicated as to why it considered the conclusions of the  Assessing Authority and the Appellate Authority to be  unsustainable. It is to be noted that even after the reference is  made by the Tribunal directly or on the basis of a direction  given by the High Court, it is open to the High Court not to  answer the reference if no question of law is involved.

16.     Therefore, without expressing any opinion on the merits,  we set aside the order of the High Court and remit the matter  to it for fresh consideration. The appeal is accordingly  disposed of.  No costs.