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PETITIONER: RAJA JAGDAMBIKA PRATAP NARAIN SINGH

       Vs.

RESPONDENT: CENTRAL BOARD OF DIRECT TAXES & ORS.

DATE OF JUDGMENT17/07/1975

BENCH: KRISHNAIYER, V.R. BENCH: KRISHNAIYER, V.R. SARKARIA, RANJIT SINGH GUPTA, A.C.

CITATION:  1975 AIR 1816            1976 SCR  (1)  49  1975 SCC  (4) 578  CITATOR INFO :  RF         1986 SC1556  (14)  RF         1992 SC1782  (9)

ACT:      Constitution    of India-Article 226-Delay-Article 136- Interference by   Supreme  Court with exercise of discretion by High  Court-Income  Tax  Act  1922  Sec  4(3),  Sec.  30- Agricultural  Income-Appeal   to  A.A.C.Condona   of  delay- Finality of illegal assessment orders

HEADNOTE:      The appellant  an owner  of  a  mango  grove  has  been deriving income  by was  of fruits  and fallen trees. In the year 1939-40  he claimed  this  income  to  be  agricultural income and  therefore immune  to income  tax. The  Assessing Authorities negatived  the claim  of the appellant. The High Court in  the year  1963 held  the income to be agricultural income and  therefore exempt  from income tax. The State did not challenge  the decision of the High Court. The appellant did not  challenge the  orders of  the Assessing Authorities for the  subsequent years i.e. 1940 to 1962 in the hope that if ultimately  the High  Court upheld his contention for one year the  Tax Authorities  would give effect to that holding for all  the years.  The appellant thereafter approached the Central Board  of Revenue  for refund of the tax paid by the appellant in  respect of  the subsequent  years. The Central Board rejected the petition in 1968. The appellant moved the High Court  under article  226. The  High Court  refused  to interfere both  on the  ground of  delay as  well as  on the ground that the assessment orders for the relevant years had become final, the assessee not having taken advantage of his remedy provided for in the statute. The High Court. however, made an  observation that  if so advised the appellant might file appeals  under section  30 of  the Income Tax Act, 1922 and pray for condonation of delay under section 30(2) of the said Act.  On. appeal by Special leave to this Court, it was contended by the appellant.           (1)  Since various assessment orders were void the                State was  bound  to  refund  what  had  been                illegally levied.           (2)  The Central  Board should  have exercised its

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              power  to  give  appropriate  directions  for                refund.           (3)  Regardless of statutory remedies and rules of                limitation, the High l; Court had power under                Art. 226  to quash the illegal orders and  to                prevent unjust enrichment by the State.      The respondents contended:           (1)  The  appellant  is  guilty  of  laches.  High                Court has  rightly exercised  its discretion.                This Court may not interfere with it           (2)  The assessment orders have become final           (3)  The Central  Board of  Direct  Taxes  has  no                statutory duty to grant  refund even in cases                where orders  of assessment,  though illegal,                have been  allowed to become final by. wilful                default of the assessee.      Dismissing the appeal. ^      HELD: (1)  The imposition of tax on agricultural income is beyond  the  legislative  competence  of  Parliament  and altogether  outside  the  jurisdiction  of  the  Income  Tax officer. It  may well  be contended that the impost is ultra vires. its  powers, and  therefore, a  nullity. We  need not consider this  aspect especially  since  the  writ  petition itself is bad for unexplained delay. [54C-E] 50      (2) The  writ jurisdiction is not measured by statutory finality to  orders   regardless of their illegality. If the levy is  illegal the constitutional remedy goes into action. However,  Art.  226  is  not  blanket  power  regardless  of temporal  and   discretionary  restraint.   of  a  party  is inexplicably and  unduly delayed due to laches the court may ordinarily deny redress. If the High Court has exercised its discretion to  refuse the  redress, this  court declines  to disturb such  exercise unless  the ground is too untellable. The High  Court I in refusing relief on ground of laches did not exercise its discretion arbitrarily or improperly. [55B. D-E]      (3) It  is doubtful  if the  Central Board can exercise any judicial  power and direct refund. Even so, it is always open to  the state  where the  justice of  the ease warrants reconsideration of  the levy  of a tax illegally imposed, to view the  situation from  an equitable standpoint and direct refund wholly  or in  part. In  this case a liberal approach may well be justified The Appellate Authority if moved under section 30(2)  will give  due regard   to  the happenings in between exercising  its power  of condonation  of  delay  in filing appeals  and no observations made in this judgment or in the  High Court  judgment shall  be taken into account to the  prejudice   of  the  appellant  while  considering  the condonation of delay by the appropriate authority. [55G-56C]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil Appeal No. 2166 of 1970. of 1970      From the  Judgment and  Order dated  the 31st  October, 1968 of the Allahabad High Court in W.P. No. 3233 of 1968.      S.  C.  Manchanda  and  A.  G.  Ratanaparkhi,  for  the appellant.      T. A. Ramachandran, for the respondent.      The Judgment of the Court was delivered by      KRISHNA IYER, J.-The freak but few facts of this appeal appear to  highlight an  issue of  morality versus legality.

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But closer  scrutiny whittles down this conflict and induces us to  dismiss the  appeal, subject  to certain observations warranted by  the circumstances  of the case. We may proceed straight to  a miniaturised  statement of  the circumstances giving rise to the controversy before us.      The appellant  has been  the owner  of a mango grove of long ago  from which  he has  been deriving income by way of fruits and fallen trees. Way back in 1939-40 he claimed this income to  be agricultural  and therefore  immune to Central income-tax.  His  plea  was  over-ruled  by  the  Income-tax officer, but  adverse orders  notwithstanding, the  assessee reached the  High Court  undaunted by  the disappointment he met with  as he  steered through  the  statutory  spiral  of authorities. Unfortunately,  on account of the zigzag course of this  litigation which  had its deck-by-deck slow motion, more than  two decades  passed before  the High  Court could pronounce at  long last in favour 5 of the appellant holding that the  income in  dispute was  agricultural t  income and therefore could not be taxed.      The State  did not carry the case further to this Court and thus  the decision  of the Allahabad High Court rendered on March  21, 1963 became final. As a proposition of law, on the facts  of the  case the  ruling was  that such income as arose from  mango fruits  and fallen  trees was agricultural income and therefore outside the pale of the 51 Income-tax Act  (vide s.4(3) of the Income-tax Act). We have no reason  to disagree with this view and proceed to dispose of this  writ appeal  which has  come to  us by  certificate under Art. 133(1)(a) of the Constitution on the footing that for all  the assessment years with which we are concerned as will be  explained presently-what  has been  taxed and is in dispute is agricultural income.      Some more  facts are  necessary to  bring out  the real grievance of  the appellant.  We have already mentioned that although the  first  assessment related to the year 1939-40, the final pronouncement by the High Court came only in 1963. During this  protracted pendency,  years rolled  on. and, at the base,  the  tax  officer  was  busy  ritually  repeating annually, by  his orders,  the tax  impost on similar income accruing year  after year  treating it  as  non-agricultural income. In  deed, the  assessee had been assessed to tax for 21 years  on this assumption but he filed appeals only for 8 years, and  even that  only  upto  the  Appellate  Assistant Commissioner’s level  where he left it off apparently in the hope that if ultimately the High Court upheld his contention for one  year, the tax authorities would give effect to that holding for  all the  years-not a  fantastic  assumption  if Government were a virtuous litigant.  .      At this  stage we may state that for the years 1940-41, 1941-42, 1947-48,  1949-50, 1950-51  and 1958-59  to 1961-62 appeals had  been preferred  most of  which  were  dismissed although in  one year  or so  the appellate  authority  gave relief accepting  the plea of agricultural income. So far as the Income-tax  officer was  concerned, he uniformly adopted the hostile  line of treating the income as non agricultural and, except  for the  years referred  to above, the assessee did not  think it  necessary-was it  wise or  otherwise  the sequel proves to challenge these assessment orders. But when the High Court held in his favour in 1963 for the assessment year 1939-40, he applied for refund to the Central Board of‘ Direct Taxes  of the  tax paid by him for the other years on the glib  ground that,  limitation apart,  the income having been found  by the  High Court to be agricultural, had to be excluded  from  the  tax.  The  Central  Board  of  Revenue,

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however. declined to oblige him and when on May 11, 1968 his petition was  rejected, the  assessee moved  the High  Court under Art. 226 seeking many reliefs including a direction to the Central  Board to  issue ’necessary  instructions to the Income-tax officer,  Faizabad,.. for  the purpose of passing final assessment  orders for the assessment years 1940-41 to 1961-62 and  for another  writ ’quashing  the order   of the Central Board  of Direct  Taxes dated  11th May 1968 wherein the Board declined to interfere in the matter in dispute’. A Division Bench  of that Court dismissed the writ petition on two grounds: (a) that the assessment orders for the relevant years  had  become  final  the  assessee  not  having  taken advantage of  his remedy  provided for  in the  statute; (b) that several  years had  lapsed between  the  last  impugned order which  related to the  assessment year 1961-62 and the writ petition  which was  filed in  September 1968. However, the Court  made an  observation  that  if  so  advised,  the petitioner may  file appeals  under  s.  30  of  the  Indian Income-tax Act, 1922 and pray for condonation of delay under s. 30(2) of the said Act. Surely discomfited. 52 the assessee  has come  up to this Court hopefully and urged that the various assessment orders were void, that the State was bound to refund what had been illegally levied, that the Central Board should have exercised its power to give proper directions for refund and that in and case justice should be done to the party who should not be penalised for not having filed appeals  and second appeals and references to the High Court year  after year-a  repeat performance which would add to the totality of avoidable litigation since the High Court was seized of the identical point between the same parties.      At the  first flush  it may  seem that  the  assessee’s agricultural income  having been  taxed illegally,  a refund was obligatory  and the  fanatical insistence  on the  legal ’pound of flesh’ based on limitation and finality was not to be expected  from a  party like the State. Indeed, one might go to the extent of quoting the cynical words of the ancient legal wit:  "Law and  equity are  two things  which God hath joined, but  which Man  has put asunder". We have to examine the merits of the case in the light of the facts we have set out above  and of  the principles  settled by  this Court in regard to  the exercise of the writ jurisdiction of the High Court.      Shri Manchanda,  alive to  the spinal  weakness of  his case in law  in that his client had, by option for inaction, permitted the impugned order to become final and listless by lapse  of   limitation  period,   played     upon   judicial sensitivity to  justice,  equity  and  good  conscience.  He argued that  regardless of  statutory remedies  and rules of limitation, the   High  Court   had power  under Art  226 to quash orders  loudly illegal,  deprivatory of  property  and promoting unjust enrichment by the State. He also urged that the assessment  orders were  void and the routine challenges through prescribed  channels could  be bypassed  and frontal attack made under Art. 226 in such extraordinary situations. Sri Ramachandran,  appearing for  the Revenue,  scouted  the supplicant plea for equity as unavailable in a court of law. He also insisted that the orders of assessment having become conclusive could  not be  invaded by the back-door, that the orders were  not nullities  but good until set aside through the regular  statutory processes and that the alleged jab on the face  of justice  is imaginary, the party himself having been guilty  of gross  laches. We  will examine these pleas, not in  the general terms set out but within the confines of the particular facts of the present case.

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    We must  pause to  state one  important aspect  of  the assessment orders  since  that  oxygenates  Sri  Manchanda’s submission on  equity. The  Income-tax officer, aware of the pendency  in   the  High   Court  of  the  precise  question confronting him  about the  agricultural  character  of  the income, had  in some  years (e.g.  1952-53) recited  in  his order under s. 23(3) of the Act, words which kindled hope in the assessee somewhat in the following terms:      "Income from  Mango gul  Mahuwa and  Kathal  have  been      excluded  from   the  total   income  and   treated  as      agricultural 11  income by the learned Appellate Asstt.      Commissioner of  In come  Tax Banaras in this very case      but this very point is 53      already under  consideration before  the  Hon’ble  High      Court of Judicature at Allahabad. However with respects      to the  learned A.A.C.  and pending the decision of the      Hon’ble High Court on this point the sum of Rs. 7,960/-      is being added back  " But the  palliative is absent in the orders relating to many other years and, above all, the orders are all made under s. 23(3), which  means  final  assessments-neither  provisional assessments   being   under   s.   23(3)   nor   conditional assessments, such  orders being unknown to the scheme of the Act.      The points in controversy may be briefly formulated:           (1)  Are the  orders of assessment, which have not                been   assailed, amenable  to challenge under                Art. 226  of the  Constitution,  or  is  such                jurisdiction inhibited  because  the  regular                statutory remedies have not been pursued ?           (2)  Is the  appellant guilty of laches to such an                extent that the extra-ordinary remedy in writ                jurisdiction ‘l)  should not  be exercised in                his favour?           (3)  Are the orders of assessments nullities since                they are taxes levied on agricultural income,                and if so, is the appellant entitled to claim                a refund ?           (4)  Is the  Central Board of Direct Taxes charged                with any statutory duty to grant refunds even                in cases   where orders of assessment, though                illegal, have been allowed to become final by                the wilful default of the assessee ?           (5)  If justice is on the side of the assessee but                law against  him, can  he seek redressal in a                Court on that footing ? We may  deal with  these points  more or  less as  a package submission but  not in  the order  in which  they have  been itemised.      Counsel has  placed considerable  stress  on  the  last point which  we deal  with first.  It is true that two stark facts generate  some considerations  of conscience in favour of the assessee. The High Court having declared this kind of income  which   was  taxed   by  the   income  tax  officer, ’agricultural income’,  it is  not liable  to tax  under the Income-tax  Act   (s.  4(8)).   In  any   case,  after   the Constitution of India came into force, the Union List in the Seventh Schedule  expressly excluded  agricultural income as forbidden zone  for the  Centre, so  much so  it would be an unconstitutional levy  if a  taxing authority imposed tax on agricultural income  purporting to  act under the Income-tax Act.  It  may,  therefore,  well  be  argued  that  all  the assessments, notwithstanding  that no  appeals  were  filed, were void  being beyond  the jurisdiction  of the officer to

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tax. There  is a  basic difference  between the  decision in Comm. of I.T. v. Tribune  Trust, 54 Lahore (1)  cited by  Sri Ramachandran and the present case. There, one  of the exemptions statutorily provided in favour of income  derived from property held under trust wholly for religious or  charitable purposes,  fell for  consideration. The Judicial Committee held that such assessments, regularly made, which  failed to  give the exemption claimed, were not nullities:      "The assessments  were duly made, as they were bound to      be made,  by  the  Income-tax  officer  in  the  proper      exercise of  his duty.  .. It  does not appear to their      Lordships that they were a ’nullity’ in any other sense      than that  if they had been challenged in due time they      might have been set aside." True, mere  exemptions from  taxation  of  income  otherwise competently taxable  fell wholly  within the jurisdiction of the  officer  for  determination.  There  is  a  fundamental difference where  the claim  is that  agricultural income is beyond the legislative competence of Parliament to enact and altogether  outside  the  jurisdiction  of  the  Income  tax officer. It  may well  be contended that the impost is ultra vires his  powers and therefore a nullity. Merely because an order has  been passed  by the  officer  and  has  not  been appealed against,  it does  not become  legal and  final  if otherwise it  is void;  for instance, if there is a flagrant violation of natural justice, the order by a Tribunal may be a nullity.  However, we need not explore this penumbral area because we  are satisfied,  for reasons to be set out below, that the writ petition itself is misconceived and is bad for unexplained delay.  Even so we may state that the levies for the various  years would have undoubtedly been set aside and refund ordered if only the assessee had been diligent enough to make  annual appeals to higher authorities. In that sense there is  some justice on his side. What is more, in some of the orders,  as earlier  indicated, the  Income-tax  officer himself has stated that he is making the assessments finally but he  takes note of the pendency of the identical question before the  High Court.  He has  vaguely  quickened  wishful thinking in the assessee that in the event of his winning in the High  Court he may somehow get a refund. We have set out what Mr. Manchanda has pressed before us as the ’justice’ of his case.  Assuming for  a moment  that ’justice’  is on his side, law  is against  him because the assessment orders are now unassailable  except perhaps  under Art.  226 or Art. 32 with which  we will  deal separately.  Can a court over-ride law to effectuate what it conceives to be justice ?      Any  legal   system,  especially   one  evolving  in  a developing country,  may permit  judges to  play a  creative role and  innovate to  ensure justice without doing violence to the  norms set  by legislation.  But to  invoke  judicial activism to set at nought legislative judgment is subversive of   the    constitutional    harmony    and    comity    of instrumentalities. So  viewed, the  appeal of Sri Manchanda, for relief  in the name of justice must fail. If the statute speaks on  the subject  the judge has to be silent and stop. In a  contest between  morality and  legality. the court, in clear cases has no option. Here, both sides agree that 55 the assessments  are final, that limitation has long ago run out, that  the Central  Board has no judicial power to upset what has  been decided  by lesser  tribunals.  Not  being  a fringe area  for judicial  activism to  play the  submission must suffer rejection.

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    The surviving  issue of some moment is whether the writ jurisdiction is  muzzled by  statutory  finality  to  orders regardless of their illegality. We think not. If the levy is illegal, the  constitutional remedy  goes into  action.  The Privy Council  ruling does  not contradict  this rule of law because for  one thing there the case was income taxable but for   a statutory exemption; here the income is agricultural and beyond the orbit of the Income-tax Act. For another, the Judicial Committee  was not  considering the  sweep  of  the constitutional remedy  de hors  statutory  changes  but  was construing  the plea of ’nullity’ with reference to an order Passed, erroneously  may  be  but  within  jurisdiction  and impugned before the statutory tribunals.      Even so,  the journey  of the  appellant is  beset with insurmountable hurdles.  Art. 226  is not  a blanket  power, regardless of  temporal and  discretionary restraints.  If a party is  inexplicably insouciant  and unduly belated due to laches, the  court may  ordinarily deny  redress. And if the High Court  has exercised  its discretion  to  refuse,  this Court declines to disturb such exercise unless the ground is too untenable.  To awaken  this Court’s  special power gross injustice  and   grievous  departure  from  well-established criteria in  this jurisdiction,  have to be made out. In the present case,  long years  have elapsed  not only  after the impugned orders but even after the High Court held the taxed income agricultural.  The reason  for the inaction is stated to be  an illusory  expectation of  suo moto modification of assessment orders  on representation  by the party. The High Court   has    examined   and   dismissed   the   plea   and consequentially refused  relief. We  do not think that in so refusing relief on ground of laches the High Court exercised its discretion  arbitrarily or  improperly.  And  the  sorry story must thus close.      When at the end of the legal tether, the appellant made a  plaintive   plea  for   considerateness  based   on  good conscience. No  doubt, we feel this is a case where, had the party not  been optimistically  asleep  but  had  diligently appealed, the  tax could  not have  been  recovered  by  the State. We  equally  see  some  compassionate  merit  in  his complaint  that   a  few   of  the  assessment  orders  made misleading reference to the pendency of the High Court being seised of the identical legal issue. But it is no good alibi in expiation of the sin of gross delay in coming to the High Court. It  is doubtful if the Central Board can exercise any judicial power  and direct  refund. Nor is there a statutory duty cast on it to consider applications for refund and so a writ of mandamus could not issue from the Court. Even so, it is always  open to  the State, where the justice of the case warrants reconsideration  of the  levy of  a  tax  illegally imposed to  view the situation from an equitable  standpoint and direct  refund wholly  or in  part. This perhaps is case where a  liberal approach  may well  be justified. The Court has, however,  jurisdiction only  when there  is a statutory duty. There being 56 none, the  issuance of  a writ hardly arises. We endorse the observations of  the High.  Court that,  despite  inordinate delay, the  appellate authority,  if moved  under s.  30(2), will give  due regard  to  the  happenings  in  between,  in exercising its  power of  condonation  of  delay  in  filing appeals. We  also make  it clear that no observation made in this judgment  with regard  to delay  on  the  part  of  the assessee in  moving the  High Court  under Art. 226 shall be taken into  account to  the prejudice  of the assessee while considering the  condonation of  the delay  on his  part  in

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preferring the  appeal/appeals, if any, filed by him to the. appropriate authority under the Act.      The appeal  fails and  is dismissed.  The circumstances are such  that the parties may appropriately be, directed to bear their respective costs. We direct accordingly. P.H.P.                                     Appeal dismissed. 57