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PETITIONER: STATE OF ASSAM & ANR.

       Vs.

RESPONDENT: D.C. CHOUDHURI & ORS.

DATE OF JUDGMENT: 07/08/1969

BENCH: GROVER, A.N. BENCH: GROVER, A.N. SHAH, J.C. (CJ) RAMASWAMI, V.

CITATION:  1970 AIR 2057            1970 SCR  (1) 780  1969 SCC  (2) 508  CITATOR INFO :  MV         1975 SC2065  (20,21,74)

ACT:     Assam Agricultural Income-tax Act (Assam Act 9 of 1939), ss.  19,  20  and  30--General  notice  under  s.  19(1)--No individual   notice  under  s.  19  (2)--No  initiation   of proceedings  under s. 30--Best judgment assessment under  s. 20(4) beyond 3 years of the financial year--Validity.

HEADNOTE:     The  assessee,  owners of a tea estate in  Assam,  after carrying  on  the business of cultivation,  manufacture  and sale  of  tea  during the years 1948 to 1953  sold  the  tea estate  on  July 9, 1953.  In 1961, they received  a  notice from the Agricultural Income-tax Officer to furnish  returns of their agricultural income for the assessment years  1949- 50  to 1953-54 in respect of that tea estate.  They did  not submit any  returns.  Thereafter,  they received a notice of demand under s. 23 of’ the Assam Agricultural Incometax Act, 1939,  for  payment of the tax assessed  on  best   judgment basis  under s. 20(4).  The assessees were not  served  with any   notice  under s.19(2) which provides for a  notice  to be   served  personally   on   the  assessee,   during   the respective  years,  nor under s. 30 of the Act  which  deals with escaped assessment.     The  purchasers of the tea estate were served. in  1961, with  assessment  orders under s. 20(4) in  respect  of  the assessment  years 1951-52 to 1955-56 with notices of  demand for  payment  of  the  tax assessed  for  each  year.  These assessees  were  also not served with any  notice  under  s. 19(2)   or  s.  30.   All  the  assessees   challenged   the assessments in writ petitions and the High Court allowed the petitions.     In  appeal  to  this Court, it was  contended  that  the assessment  proceedings commenced with the publication of  a general  notice  under  s. 19(1), that it was  open  to  the Agricultural  Income-tax Officer to make  a   best  judgment assessment under s. 20(4) without any limitation as to  time and that it was not necessary to issue any individual notice under s. 19(2) or to initiate proceedings under s. 30.

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   HELD: Notwithstanding the difference in language between s.  20(4) of the Act and s. 23(4) of the Income-tax Act  the principles  laid down by this Court in interpreting ss.  22, 23 and 34 of the Income-tax Act apply in the  interpretation of  ss.  19, 20 and 30, the corresponding  sections  of  the Assam Agricultural Income-tax Act. [788 A-C]     On  those  principles  the publication  of  the  general notice in any financial year under s. 19(1) of the Assam Act to  furnish a ’return o.f one’s agricultural income  in  the previous  year,  does not initiate  proceedings  against  an assessee unless such assessee files a return.  If no  return is  made  pursuant  to the general  notice  under  s.  19(1) assessment could be made against an assessee under s. 19(2), serving an individual  notice  on that  assessee during that financial  year.  Once that financial year is over,  and  no return  has  been made in response to  the   general  notice under  s.  19(1) and no individual notice  has  been  served under  s.  19(2),  there  would  arise  a  case  of  escaped assessment; and, the only way to bring that income to tax is to initiate proceedings by a notice in accordance with s. 30 within 3 years of 781 the  end of that financial year. Since no  such  proceedings were  initiated in the present case, the assessment  orders. were rightly quashed. [787 E-H]     The  Commissioner  of Income-tax, Bombay  v.  Ranchhodas Karsondas,  Bombay,  [1960] 1 S.C.R. 114, Ghanshyam  Das  v. Regional   Assistant  Commissioner  of  Sales-tax,   Nagpur, [1964] 4 S.C.R.  436 and The State of  Assam v. Deva  Prasad Barua, [1969] 1. S.C.R. 698, followed.

JUDGMENT:     CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 1537 to 1545 of 1968.     Appeals from the judgment and order dated April 4,  1963 the Assam High Court in Civil Rules Nos. 233 to 236 and  238 to 242 of 1961.     Naunit  Lal and S.N. Choudhury, for the  appellants  (in all the appeals).     M.C.  Chagla and Sukumar Ghose, for the respondents  (in all the appeals).     The Judgment of the Court was delivered by     Grover,   J.   These  are  nine  connected  appeals   by certificate  from a judgment.of the High Court of  Assam   & Naggland  whereby  nine petitions filed by  the  respondents under  Art.  226 of the Constitution were  allowed  and  the assessment  orders  made under the provisions of  the  Assam Agricultural  Income-tax Act, 1939, hereinafter  called  the ’Act’, were quashed.     The facts may be first stated.  D.C. Choudhuri and  S.C. Dutt  petitioners in ,four of the writ petitions  owned  the Martycherra Tea Estate in the district of Cachar which  they had purchased on January 1, 1948.  They sold this Estate  on July  9,  1953.  From January 1, 1948 to July 9,  1953  they carried on the business of cultivation, manufacture and sale of black tea at the said Estate under a partnership of which they  were  the  sole partners.  The  partnership  firm  was served  with a  notice under the Indian Income-tax Act, 1922 hereinafter  called  the Income-tax Act and was assessed  to income-tax  for the  assessment year 1951-52.  Appeals  were filed  against  the assessment order before  the   Appellate Assistant  Commissioner  of  Incometax  and  the  Income-tax Appellate  Tribunal in which substantial reliefs were  given

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to  the assessee.  After the sale of  the  Tea Estate  these assessees  ceased to have any agricultural income. The  case of  the assessees as laid in the writ petition was  that  on January 25, 1961, a letter was received by one of them  from the  Agricultural  Income-tax  Officer  directing  both  the ’assessees  to furnish returns of their agricultural  income for   the  assessment  years 1949-50 to 1953-54.  Thereafter they received a notice of demand under s. 23 of the Act  for payment  of a certain amount as agricultural income-tax  for the assessment year 1950-51. The assessment 782 order  was  stated to have been made under s. 20(4)  of  the Act.  Similar  orders  were made and  demands  created  with regard to the subsequent years, namely, 1951-52, 1952-53 and 1953-54.  All  these assessment orders  were  challenged  by means of four petitions under Art. 226 of the  Constitution. Apart from other points which were raised the main objection taken  was  that no notice under s. 30 of the Act  had  been served  at any time in respect of the assessment covered  by the  impugned  orders. Such a notice could  be  served  only within three years of the end of the financial year.  In the absence  of  service   of the aforesaid  notice  within  the prescribed period the Income-tax Officer had no jurisdiction to make any  assessment  nor  could  such  an assessment  be made  after the expiry of a period of three years  from  the end of each financial year.     The  other  set  of petitions. under  Art.  226  of  the Constitution  was  filed  by the  company--The  Eastern  Tea Estate Private Ltd. This company owned two tea estates,  the Chandna  Tea  Estate and the Martycherra  Tea  Estate.   The Chandna  Tea  Estate was purchased from the Indian  Tea  and Mill Industries Ltd. in 1950 and the Martycherra Tea  Estate was purchased from M/s. D.C. Choudhuri and S.C. Dutt on July 9,  1953.   The case of the company was that no  notice  had been  received under s. 19(2) of the Act for the  assessment years  1951-52  to  1955-56 and therefore  no  returns  were filed.   On  October 9, 1959 the company received  a  letter from the Agricultural Income-tax Officer, Shillong asking it to  submit returns in respect of Martycherra Tea Estate  for the   assessment   year  1950-51   onwards.    The   company addressed  a  communication to  the  Agricultural  Incometax Officer  on November 18, 1959 saying, inter alia,  that   no notice  had been served on it under the Act previously   and as  it  also owned the Chandna Tea Estate  it   proposed  to submit  returns  for the years in respect of  which  it  was liable  under  the Act.  On October 19,  1959,  the  company received  a  notice under s. 19 (2) of the Act directing  it to  submit  the return in respect of the previous  year  for Martycherra  Tea  Estate.  In response  to  the  notice  the company  submitted the return for the year  ending  December 31, 1958 showing the agricultural income  from  tea estates. A  number of notices were served subsequently and there  was further  exchange of correspondence.  It was alleged in  the petitions  filed by the company that a letter  was  received dated  January  23, 1960 from the   Agricultural  Income-tax Officer  in which it was stated that the company had  failed to  submit the returns for the years 1950-51 to 1958-59  and it  was  asked to show cause why the assessments  for  these years  should  not be completed  summarily.   After  further exchange   of   correspondence  the  company   received   an assessment order dated June 19, 1961 in respect 783 of the assessment year 1951-52 which was made under s. 20(4) of the Act together with a notice of demand for payment of a certain   amount   of  agricultural   income-tax.    Similar

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assessment   orders were passed under s. 20(4)  and  demands created in respect of the assessment years 1952-53, 1953-54, 1954-55  and 1955-56. All these assessments were  challenged by   means  of  five  petitions  under  Art.  226   of   the Constitution.  The main point raised in all these  petitions was that unless individual notices under s. 19(2) of the Act had been served no assessment could be  made under s.  20(4) except by way of proceedings under s. 30 of the Act.     In  the  returns which were filed  by  the  Agricultural Incometax  Officer  to all the petitions filed in  the  High Court  it  was maintained that the assessees had refused  to accept the service of the notices under ss. 19(2) and 30  of the  Act.  The notice under s. 19(1) had been  published  in the  Assam  Gazette and the assessees were bound to  make  a return pursuant  to  that notice.  It was denied that  there was  any necessity of serving notices under ss. 19(2) or  30 of the Act and that the assessments which had been made were barred by limitation.     A  division bench of the  Assam & Nagaland  High   Court consisting of Mehrotra, C.J. and S.K. Dutta, J. allowed  all the petitions but delivered separate judgments.  The learned Chief  Justice  held  that where no return  had  been  filed pursuant   to  a  general  notice  under   s.   19(1)    the Agricultural  Income-tax Officer was bound to proceed  under s.  30 and issue a notice under s. 19(2) of the  Act  within the prescribed period, namely, three years of the end of the financial  year.  He further held that there was no  service of  notice on the respondent in respect  of  the  assessment years in question either under s. 19(2) or s. 30 of the Act. S.K. Dutta, J., came to the same conclusion  as  the learned Chief  Justice but he relied on a judgment of  the  Calcutta High Court in Commissioner  of  Agricultural  Income-tax  v. Sultan Ali Gharami(1) in which a dissent had been  expressed from  the  Bombay  judgment in   Harakchand  Makanji  &  Co. v.Commissioner   of  Income-tax,  Bombay  City(2)   on   the question as to when proceedings relating to assessment could be  regarded as having commenced.  According to the  learned judge  if no return is made in response to a  public  notice under s. 19(1) of the Act and no individual notice is served under s. 19(2) there would be no pending proceedings and  it would be a case of escaped assessment.  But this would be so only after the expiry of the financial year.  In other words after  the  publication of the notice under s.  19(1)  there would  be  no  escapement  of income till  the  end  of  the financial  year.   Once the financial year is  over  and  no return has been made in response to a notice under (1) 20 I.T.R. 432.       (2) 16 I.T.R. 119. L15 Sup. CI/69--6 784 s.  19(1) and no individual notice has been served under  s. 19(2)  a case would arise of "escaped assessment   for   the financial year."     The relevant provisions in Chapter IV of the Act may now be  noticed.  Sections 19 and 20 contain provisions  similar to  ss. 22 and 23 of the Income-tax Act.  Under s. 19(1)  of the  Act  the  Agricultural Income-tax  Officer  before  the specified date shall give notice by publication in the press or  otherwise  requiring  every  person  whose  agricultural income exceeds the limits of taxable income prescribed in s. 6 to furnish within such period not being less than 30  days as may be specified a return in the prescribed form  setting forth  his  agricultural income during  the  previous  year. Sub-section  (2) provides that 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

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such person liable to payment of agricultural income tax for any  financial year, he may serve in that financial  year  a notice requiring him to furnish within the prescribed period a  return.   Sub-section (3) enables a person  who  has  not furnished a return within the time allowed by or under  sub- s. (1) or sub-s. (2) to furnish a return or a revised return at any time before the assessment is made. Thus sub-ss. (1), (2)  and  (3)  of s. 19 of the Act are  identical  with  and correspond  to  sub-ss.  (1), (2) and (3) of s.  22  of  the Income tax Act.     Under  s. 20 of the Act if the  Agricultural  Income-tax Officer  is  satisfied  that a return made under  s.  19  is correct  and  complete he has to assess  total  agricultural income  of the assessee ’according to it.  If he has  reason to believe that such a return is incorrect or incomplete  he has to serve a notice requiring the person who has made  the return  to  produce  any evidence on which he  may  rely  in support  of the return.  After hearing such evidence as  the person making the return may produce and such other evidence as  the officer may require on specified points the  assess- ment  order   is to be made.  These are the  provisions   of sub-ss.  (1), (2) and (3).  Sub-s. (4) is in  the  following terms :--                   "If  the principal officer of any  company               or  other person fails to make a return  under               sub-section  (1  )  or,  sub-section  (2)   of               section  19,   as the case  may be  or  having               made the return, fails to comply with all  the               terms  of the notice issued under  sub-section               (2)  of  this  section,  or  to  produce   any               evidence   required  under sub-section (3)  of               this   section,  the  Agricultural   Incometax               Officer shall make the assessment to the  best               of  his  judgment,   and  determine  the   sum               payable  by the assessee on the basis of  such               assessment               Provided......................." 785 Turning  to s. 23 of the Income-tax Act,  sub-sections  (1), (2) and (3) thereof correspond to sub-sections (1), (2)  and (3) of s. 20 of the Act.  Sub-section (4) of s. 23 reads :--                    "if  any person fails to make the  return               required by any notice given under sub-section               (2)  of  section 22 and has not made a  return               or a revised return under sub-section (3)   of               the  same section or fails to comply with  all               the   terms   of  a   notice   issued    under               subsection (4) of the same section or,  having               made  a return, fails to comply with  all  the               terms  of  a  notice issued under  sub-section               (2)  of  this section, the  Incometax  Officer               shall  make the assessment to the best of  his               judgment  and determine the  sum  payable   by               the  assessee on the basis of such  assessment               and   in   the case of a firm  may  refuse  to               register it or may cancel its registration  if               it is already registered".               Provided  .............." Section  30  of the Act which corresponds to s.  34  of  the Incometax  Act which deals with income  escaping  assessment may now be reproduced :--                      "If  for  any reason  any  agricultural               income  chargeable to agricultural  income-tax               has escaped assessment for any financial year,               or  has been assessed at too/ow a rate or  has

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             been  the subject of undue relief  under  this               Act, the Agricultural Income-tax Officer  may,               at  any time within three years of the end  of               that  financial  year,  serve  on  the  person               liable to pay agricultural income-tax on  such               agricultural  income  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 19, 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  ...............  ,, The principal contention raised on behalf of the   appellant is  that for an assessment to be made under s. 20(4) of  the Act it is not necessary that proceedings should  have   been taken  under  s.  30.  The argument   is   that   assessment proceedings  commence  with  the publication  of  a  general notice  under  s. 19(1) and it is open to  the  Agricultural Income-tax Officer  to  make 786 the  best  judgment assessment under s.  20(4)  without  any limitation  as  to time.  It is not necessary to  issue  any individual notice under s. 19(2) or to initiate  proceedings under  s. 30 in such a situation.  Reliance has been  placed on   the   observations   in Harakchand Makanji  &  Co.   v. Commissioner  of  Income-tax,  Bombay City(1)  that  once  a public  notice  is given under sub-s. (1) of s.  22  of  the Income-tax  Act, which is similar  in  terms to s. 19(1)  of the  Act, the assessment proceedings  should  be  deemed  to have commenced and there is no obligation on the  Income-tax Officer to serve an ’assessee individually as well.  But  in the  same  case it was said that "a notice under  s.  34  is only  necessary  if at the  end of the assessment  year   no return   has  made  ’by  the  assessee  and  the  Income-tax authorities  wish  to proceed under s. 22(2)  by  serving  a notice  individually.   It  may then be  said  that  as  the assessment year had come to an end and as no return had been furnished  and  as the authorities wished to  proceed  under section  22(2) they should not do so without a notice  under section 34".     The  above  view  was approved by  this  Court  in   The Commissioner   of   Income-tax,  Bombay    v.    Ranchhoddas Karsondas,  Bombay(2),  but  the  portion  which  has   been extracted   does  not support the contention which has  been pressed  on  behalf of the appellant.  Indeed  it  has  been relied upon more firmly by the counsel for the  respondents. If this view is  accepted  to  be correct it follows that  a notice under s. 30 of the Act, in the present case, would be necessary if at the end of the assessment year no return has been  made  by  the assessee and  the  authorities  wish  to proceed  under  s.  19(2).  The  case  would   be   entirely different  where he himself chooses voluntarily to.  make  a return.  This he can do after the publication of  a  general notice under s. 19(1) of the Act.  If the return is filed no question  arises  of any income having  escaped  assessment. The  return under the provisions of s. 19(3) of the Act  can be  furnished  at any time before the  assessment  is  made. This  is what this Court held in The State of Assam Anr.  v. Deva Prasad Barua & Anr.(3).     The  position is altogether different if no return   has been  made  by the assessee and where income  has  not  been assessed  at  all  because for one reason or  the  other  no

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assessment proceedings were initiated.  That would be a case of  "escaped  assessment"  -within s. 30 of  the  Act.   The matter was examined at length by this Court in Ghansyam  Das v.  Regional Assistant Commissioner of Sales Tax,  Nagpur(4) with reference to the provisions . of the Central  Provinces & Berar Sales Tax Act,  1947.  The (1) 16 I.T.R. 119.       (2) [1960] 1 S.C.R. 1l4. (3) [1969] 1 S.C.R. 698. (4) [1964] 4 S.C.R. 436. 787 following  principles were laid down in that case which  are noteworthy :--               (1)  In  the case of a registered  dealer  the               proceedings  before the  Commissioner  started               factually  when  a return was made or  when  a               notice  was  issued to him either   under   s.               10(3)   (under which the Commissioner  has  to               issue   a  notice         if  no   return   is               submitted) or  under  s. 11(4)(which  provides               for  the  best judgment   assessment)  of  the               Sales Tax  Act.  The  statutory obligation  to               file   a   return   did   not   initiate   the               proceedings.               (2) Once a statutory return was filed pursuant               to  a  notice under s. 10(3) or s. 11  of  the               Sales Tax Act the proceedings did not come  to               an  end until the final assessment was made.               (3)  The expression "escaped assessment"in  s.               11A  of the Sales Tax Act included that  of  a               turnover  which had not been assessed  at  all               because  for  one  reason  or  the  other   no               assessment  proceedings were initiated and  no               assessment was made in respect thereof.     Keeping  in view the above principles  it must  be  held that  in the absence of a return having  been filed  by  the assessees  in the present case pursuant to a general  notice under  s.  29(1) of the Act assessment could be  made   only after   due   notice s. 19(2) or by  initiating  proceedings under  s.  30 of  the  Act. Section 19(2) requires  that  an individual notice is to be served in the financial year.  If no notice is served under that section proceedings under  s. 30  can  be initiated by a notice in  accordance  with  that section  within  three years of the end  of  that  financial year.  In this connection it may also be remembered that  s. 43(2)(a)  of  the  Act  confers a  valuable   right  on  the assessee  in  the  matter  of choosing  the  forum  for  the assessment.  According to that provision an assessee may  on receipt  of  the  first notice served on him under s.  19(2) apply  to the Agricultural Income-tax Officer by  whom  such notice  is  served,  to be assessed at the  usual  place  of residence or at the place where the accounts relating to his agricultural income are kept.  The  Agricultural  Income-tax Officer can then make an order that  the  assessee shall  be assessed at the place specified in the application or he has to  refer  the  matter  to  the  Assistant  Commissioner  of Agricultural  Income-tax whose decision shall be final.   No such  right is conferred on the assessee with  reference  to publication of a general notice under s. 19 (1 ).  It shows, therefore that the proceedings for assessment under the  Act can be initiated only by 788 notice trader s. 19(2) or by having resort to the provisions of s. 30 of the Act.     Counsel   for  the  appellant  has  sought  to  make   a distinction between the decision given under the  provisions of the Incometax Act by pointing out that under s. 20(4)  of

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the   Act   best  judgment assessment can  be  made  on  the failure  to  make  a return under sub-section  (1)  or  sub- section (2) of s. 19 whereas under s. 23 (4) of the  Income- tax Act such an assessment can be made only where any person fails to make the return required by any notice given  under sub-section (2) of s. 22 which is equivalent to s. 19(2)  of the  Act.   This  distinction is hardly  material  when  the principles which have been laid down by this Court are  kept in  view.   In  support of his contention  counsel  for  the appellant  has  also called attention to a decision  of  the Privy  Council in Gokuldas Ratanti Mandavia v.  Commissioner of Income-tax(1) in which the provisions of the East African Income-tax (Management) Act, 1952 came up for consideration. Those  provisions are altogether different and the  decision rested  on  the  wording of s. 71  of  that  enactment.   It cannot,  therefore,  be  of  any assistance in  the  present case.     For  the reasons given above the appeals fail  and  they are dismissed with costs.  One hearing fee. V.P.S.                   Appeals dismissed. (1) 38 I.T.R. 224 (P.C.) 789