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PETITIONER: STATE OF UTTAR PRADESH

       Vs.

RESPONDENT: RAJA YADVENDRA DUTT DUBE

DATE OF JUDGMENT: 17/12/1965

BENCH: SHAH, J.C. BENCH: SHAH, J.C. SUBBARAO, K. SIKRI, S.M.

CITATION:  1966 AIR  727            1966 SCR  (3) 161  CITATOR INFO :  R          1973 SC2384  (4)

ACT: U.P.  Agricultural  Income-tax Act, 1948, ss. 14(1)  &  (2), 15(3), 25--Jurisdiction to assess when gross income  exceeds Rs.   1  lakh-Revision  Board whether  competent  to  direct Collector to make an assessment after period under s. 25 has expired-Whether  Collector can make assessment on  basis  of return filed before Sub-Divisional Officer on notice  issued by  latter under s. 15(3)-whether assessment can be made  on such return on the basis of notice issued under s. 14(1).

HEADNOTE: The  respondent-assessee had a gross agricultural income  of more than Rs. 1 lakh in 1355 Fasli (July 1, 1947 to June 30, 1948).   In  response to a notice issued  by  the  Assistant Collector under s. 15(3) of the U.P. Agricultural Income-tax Act,  1948, the assessee filled a return of his  income  and the said officer made an assessment though under s. 14(2) of the  Act  Jurisdiction  to assess in cases  when  the  gross income  exceeded Rs. 1 lakh lay within the Collector.   The, Collector  thereafter made a reassessment under s.  25  read with  s.  16(4) within the period of  limitation  prescribed under the former section i.e. "within one year of the end of the  year in which the income had escaped  assessment".   In appeal   by  the  respondent  the  Agricultural   Income-tax Commissioner set aside the orders of the Collector and  also of  the  Assistant Collector and directed the  Collector  to make  a  fresh assessment after giving notice  to  the  res- pondent.   The Board of Revision held that the  Commissioner had rightly decided that the orders in question were invalid but that the Commissioner was not empowered to set aside the order  of the Assistant Collector which was  not  challenged before him.  However the Board suo motu set aside the  order of  the Assistant Collector and directed that  fresh  assess ment  be  made  "according  to  law".   The  High  Court  in reference  under  s. 24(4) held that having  regard  to  the limitation  provided  in s. 25 the Board could not  in  1952 direct  the  Collector to make a fresh  assessment  for  the period in question.  The State of Uttar Pradesh appealed  to this Court.

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It  was  contended  on behalf of the  State  that:  (1)  The Assistant Collector could make assessment even in cases when the  gross income exceeded Rs. 1 lakh. (2) The notice  under s.  15(3) issued by the Assistant Collector not having  been set aside by the higher authorities, the Collector could, as directed   by   the  Board,  make  an   assessment   without transgressing  any  restrictions in s. 15(3) or s.  25.  (3) without a fresh notice under s. 15(3) the Collector had  the power by virtue of the notice under s. 15(1), to assess  the income of the respondent on the return made pursuant to  the notice  issued by the Assistant Collector. (4) Since  notice under 9. 25 for reassessment of the escaped income had  been issued  by the Collector within the period prescribed by  s. 25(3)  and  the  notice  was  otherwise  valid,   assessment proceedings  directed by the Board could be founded  by  the Collector on that notice. HELD : (i) Reading sub-s. (1) & (2) together there can be no doubt  that the Collector is the assessing authority  within his revenue jurisdiction with unlimited jurisdiction and the Assistant  Collector  in  charge of a  sub-division  is  the assessing  authority within his revenue  jurisdiction  with power  only in cases in which the gross agricultural  income of the assessee 162 does not exceed Rs.  1 lakh.  The Assistant Collector is not entitled  to make assessment in such a case relying  on  the generality of the provisions of s. 14(1). [167 F-G] (ii) When the Assistant Collector arrived at the  conclusion that the gross income of the respondent exceeded Rs. 1  lakh the proceedings initiated by him including the issue of  the notice  must,  unless  that conclusion is  set  aside  by  a superior  authority,  be treated as  unauthorised,  for  the power  to  issue a notice under s. 15(3) is  only  conferred upon  the  assessing authority and the  assessing  authority within  the  meaning  of S. 2(6) s a  person  authorised  to assess  agricultural income-tax.  There is no  provision  in the  Act or the Rules for transfer of proceedings  from  the Assistant  Collector  to the Collector  when  the  Assistant Collector  in  dealing with a return finds that  he  has  no jurisdiction.   The  Collector therefore could  not  in  the present case make reassessment on the basis of    the return filed under s. 15(3).  In fact having regard to the terms of the  order passed by the Board it was clear that the  notice under s.   15(3) issued by the Assistant Collector had  been quashed by the Board. [168 B-F] (iii)     If  the proceedings for assessment were  commenced on  a  ’return made pursuant to an invalid notice,  and  the proceedings  for assessment were set aside on the ground  of want of jurisdiction of the authority making the  assessment the  entire  proceeding  must be deemed to  be  vacated  and relying  upon  the  return made to  the  authority  who  had assessed  the  income another authority  cannot  proceed  to assess  the income of the assessee.  Mere issue of a  notice under s. 15(1) could not come to the aid of the Collector in commencing fresh assessment proceedings many years after the date  on which that notice was issued on a return which  was not made; to him. [168 H-169 B] (iv) The  notice  under s. 25 issued by the  Collector  must also  be  deemed  to have been quashed by  the  Board.   The Collector  had therefore, under the direction given  by  !he Board,  to  issue  a fresh notice before  a  proceeding  for assessment could be started and a fresh assessment could not be based on the earlier notice. [169 E]

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JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 123 of 1965. Appeal  by special leave from the judgment and order,  dated November  28,  1963 of the Allahabad High  Court  in  A.I.T. Reference No. 16 of 1960. S.   T. Desai and O. P. Rana, for the appellant. A.   V.  Viswanatha Sastri, M. V. Goswami and B.  C.  Misra, for the respondent. The Judgment of the Court was delivered by Shah,  J.  By order, dated May 14, 1949  the  Sub-Divisional Officer,   Jaunpur,  assessed  Raja  Yadvendra   Dutt   Dube hereinafter called ’the respondent’-under S. 16(3) of the U. P.  Agricultural  Income-tax Act, 1948 to  pay  agricultural income-tax  for the account period 1355 Fasli (July 1,  1947 to June 30, 1948) on a net income of Rs. 72,769/15/2.  Being of the view that a part 163 of the income of the respondent had escaped assessment,  the Collector   of  Jaunpur  by  order,  dated  June  9,   1950, recomputed tax under S. 25 read with s. 16(4) of the Act for the  said  account  period  on a total  net  income  of  Rs. 80,859/13/6.   In appeal by the respondent the  Agricultural Income-tax  Commissioner by order dated March 5,  1952,  set aside  the  orders  of the Collector and also  of  the  Sub- Divisional  Officer  and  directed that  the  assessment  be reopened by the Collector and fresh assessment of the income for   1355  Fasli  be  made  after  giving  notice  to   the respondent.   In  the view of the  Commissioner,  assessment made by the Sub-Divisional Officer was without jurisdiction, and  the  order of reassessment by the Collector  "being  in review and substitution of the order of assessment", want of jurisdiction  in  the order of assessment  attached  to  the order  of reassessment as well.  The respondent  then  moved the Board of Revision against the order of the Commissioner. The Board agreed with the Commissioner, that the  assessment order  made by the Sub-Divisional Officer was  "illegal  and invalid",  but  in the view of the  Board  the  Commissioner exceeded  his  authority in setting aside the order  of  the Sub-Divisional  Officer, which was not challenged in  appeal before him.  However, the Board observed, the illegality and invalidity  of the order of assessment having come to  their notice,  they would take up the matter suo motu in  exercise of  their  revisional  jurisdiction and  declare  the  order passed  by the Sub-Divisional Officer as illegal and set  it aside.   Accordingly,  in  setting aside the  order  of  the Commissioner,  they also set aside the order  of  assessment made by the    Sub-Divisional  Officer,  and  directed  that "Fresh assessment will be     made  according to law".   The Board then referred under s.  24(4) of the Act the following question of law to the High Court of Allahabad for opinion :               "Whether on the facts and having regard to the               provisions of section 25 of the Act, the Board               could  on  the 15th October,  1952,  direct  a               fresh assessment to be made ?"               The  High  Court, recorded an  answer  in  the               negative.   The  State of  Uttar  Pradesh  has               appealed to this Court.               The relevant provisions of the Act are briefly               these  : "Assessing authority" under  the  Act               means   a  person  authorised  by  the   State               Government to assess agricultural income-tax :               s. 2(6).   By s.     3 charge of  agricultural               income-tax and super-tax at the rate or  rates               specified   in  the  Schedule  on  the   total

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             agricultural income of      the previous  year               of every person is imposed.  Section 14 sets               164               up Assessing authorities and prescribes  their               powers. it provides :               "  (1)  For the purposes of  this  Act,  every               Collector,  and Assistant Collector in  charge               of a sub-division shall be assessing authority               and  shall  exercise and  perform  within  his               revenue jurisdiction such powers and duties as               may  be  prescribed, provided that  the  State               Government  may  appoint  any  officer  as  an               assessing  authority for such area as  may  be               prescribed.               (2)   In  particular and without prejudice  to               the  generality  of  the  provisions  of  sub-               section  (1), the following authorities  shall               be  the  assessing authorities  in  the  cases               mentioned against each namely :               (a)   Assistant  Collector  Incharge  of  sub-               division. :               Where the gross agricultural   come  does  not               exceed Rs. 1 lakh.               (b)   Collector  :          In all cases.               (c)   Officer appointed  under proviso to sub-               section (1):               In such cases as may be prescribed".               Section    15,  insofar  as  it  is   material               provides:                     "(1) The Collector shall give  notice,by               the publication in the Official Gazette and in               such  other  manner  as  may  be   prescribed,               requiring    every   person,    whose    total               agricultural  income during the previous  year               exceeded  the  maximum  amount  which  is  not               chargeable   to  agricultural  income-tax   to               furnish to such assessing authority and 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  his  total               agricultural income during the previous year               (2)               (3)   In  the case of any person  whose  total               agricultural income is, in the opinion of  the               assessing authority, such amount as to  render               such person liable to payment of  agricultural               income-tax  in any 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 his  total  agricultural               income during the previous year 165 Section  16  sets  out the procedure of  assessment  by  the assessing authority, and against the order of assessment  by the  assessing authority, an appeal lies under s. 21 to  the Commissioner.  By s. 22 power is conferred upon the Board of Revision either on their own motion or on an application  to call for the record of any proceeding under the Act  pending before or decided by any authority subordinate to the Board, and after such inquiry as they deem necessary, may pass such orders as they think fit.  Section 24 provides for reference

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of  questions  of law to the High Court for  opinion.   Sub- section (2), insofar as it is material, provides :               "Within sixty days of the communication of  an               order  under  section  21 or  section  22  the               assessee  may,  by application  apply  to  the               Board to refer to the High Court any  question               of law arising out of such order or  decision,               and the Board shall, within sixty days of  the               receipt   of  such  application,  draw  up   a               statement  of  the case, and  refer  it,  with               their opinion to. the High Court:" Under  sub-s.  (4) of S. 24 the High  Court  is  authorised, where  the Board has rejected the application  under  sub-s. (2) or refused to state the case on such application, if the High  Court  is not satisfied about the correctness  of  the decision  of  the Board, to require the Board to  state  the case and refer it to the High Court.  Section 25  authorises the  assessing authority to assess or reassess income  which has  escaped assessment in any year or has been assessed  at too low a rate, after serving a notice on the person  liable to pay agricultural income-tax within one year of the end of the  year  in  which  the  income  has  escaped  assessment. Section  44 confers power upon the State Government to  make rules for carrying out the purposes of the Act. Under  the scheme of the Act, the Collector of the  District is  the  assessing  authority generally in  respect  of  the entire District over which he has revenue jurisdiction,  and he  is  invested with the power to issue  a  general  notice calling upon every person whose income is chargeable to tax, to  make  a return of his income.  The  Assistant  Collector (who is also called the Sub-Divisional Officer) in charge of a sub-division is invested with power as assessing authority within   his   revenue   jurisdiction,   where   the   gross agricultural  income of an assessee does not exceed  Rs.   1 lakh.   Power of the assessing authority under s.  15(3)  to issue a special notice calling for a return may be exercised within the year of assessment, and not thereafter.  Power to reassess under s. 25 166 is also restricted and the assessing authority may not issue a notice of "escaped assessment" after one year from the end of the year of assessment. It  is  necessary to remember that  these  proceedings  come before  us  in appeal against the order passed by  the  High Court on a reference made under s. 24.  Jurisdiction of  the High  Court  under s. 24 is advisory : the High  Court  must answer the question referred to it and cannot travel outside the  terms  of  the reference.  This  caution  is  necessary because  learned  counsel  appearing for  the  parties  have sought  to  canvass many questions which were  never  raised before  the  Board  and even before  the  High  Court.   The question whether the order passed by the Board setting aside the orders of a assessment of the Sub-Divisional Officer and of the Collector and even of the Commissioner is justifiable in law is not referred to us.  We are only concerned to deal with the limited question whether the Board had authority on the  view  expressed by it to make the order  directing  re- assessment, and that question must be decided in the light of the provisions of s. 15(3) and S. 25 of the Act. It may be assumed that a notice under s. 15(1) was issued by the Collector (though there is no reference to such a notice in  the record) requiring every person whose income  exceeds the maximum amount exempt from tax to submit a return in the Form No. 1 (a) prescribed by the Rules.  It is common ground

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however that the respondent filed the return in pursuance of a notice under s.   15(3),   and  that  the   Sub-Divisional Officer found in the course of     the assessment proceeding that the gross agricultural income of   the       respondent exceeded Rs. 1 lakh.  The order of assessment passed by  the Sub-Divisional  Officer was set aside by the  Board  because the Sub-Divisional Officer had no jurisdiction to assess  to tax  income  of  a person whose  gross  agricultural  income exceeded  Rs.  1  lakh,  and  the  Board  agreed  with   the Commissioner  that  the  order of  the  Collector  being  in "review or substitution" of the order of the  Sub-Divisional Officer was also liable to be set aside. Counsel for the State raised three contentions in support of the plea that the Board had power to direct the Collector to make a fresh assessment :               (1)   The Sub-Divisional Officer was  invested               with  authority  to issue a  notice  under  S.               15(3)  calling  for a return, and  since  this               notice  was not set aside by the  Commissioner               or  by  the Board of Revision, in  making  the               order  of assessment pursuant to the order  of               the               167               Board, the Collector will not be transgressing               any statutory restrictions imposed by s. 15(3)               or S. 25 of the Act.               (2)   Without  a fresh notice under s.  15(3),               the Collector has the power, by virtue of  the               notice under s. 15(1), to assess the income of               the respondent on the return made pursuant  to               the   notice  issued  by  the   Sub-Divisional               Officer.               (3)   Since notice under s. 25 of the Act  for               reassessment of the escaped income was  issued               within the period prescribed by s. 25(3),  and               the  notice  was otherwise  valid,  assessment               proceedings  directed  by  the  Board  may  be               founded by the Collector on that notice. In  proceedings  for assessment the  Sub-Divisional  Officer found that the total gross income of the respondent exceeded Rs.  1 lakh, and under s. 14(2) the Collector alone was  the assessing  authority  in  respect  of  the  income  of   the respondent.  The contention raised by counsel for the  State that by the expression "without prejudice to the  generality of the provisions of sub-section (1)" in sub-s. (2) of s. 14 power  is  intended  to  be  conferred  upon  the  Assistant Collector in charge of a sub-division to assess income of an assessee whose gross agricultural income exceeds Rs. 1  lakh cannot be accepted.  The first sub-section of S. 14 declares the  Collector  and the Assistant Collector in charge  of  a sub-division  as assessing authorities within the limits  of their respective revenue jurisdictions.  By sub-s. (2) it is directed that the authorities mentioned in sub-s. (2)  shall be the assessing authorities in the cases "mentioned against each".  Reading sub-ss. (1) and (2) together there can be no doubt  that the Collector is the assessing authority  within his  revenue jurisdiction with unlimited  jurisdiction,  and the  Assistant Collector in charge of a sub-division is  the assessing  authority  within his revenue  jurisdiction  with power  only in cases in which the gross agricultural  income of the assessee does not exceed Rs. 1 lakh. There is in the Act no procedure prescribed about ascertain- ment  of the gross agricultural income of an assessee  which is  determinative of the jurisdiction of the  Sub-Divisional Officer,  but as in other taxing statutes where  the  taxing

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authority   is   constituted   a   tribunal   of   exclusive jurisdiction  the  authority  has  the  power,  subject   to rectification  by a superior Court, to decide facts  on  the proof of which his jurisdiction depends.  The Sub-Divisional Officer  had  therefore power to decide  whether  the  gross agricul- 168 tural  income of the respondent did or did not exceed Rs.  1 lakh The notice under S. 15(3) was issued to the  respondent by the Sub-Divisional Officer, presumably on the  assumption that the gross agricultural income of the respondent did not exceed Rs. 1 lakh but when the Sub-Divisional Officer  found on scrutiny of the return that the gross agricultural income of the respondent exceeded Rs. 1 lakh, he could not exercise the  powers  of  the  assessing  authority.   There  is   no provision in the Act or the Rules for transfer of proceeding from  the Sub-Divisional Officer to the Collector, when  the Sub-Divisional  Officer in dealing with a return finds  that he  has no jurisdiction.  When he arrived at the  conclusion that the gross income of the respondent exceeded Rs. 1 lakh, the  proceeding  initiated  by  the  Sub-Divisional  Officer including  the issue of notice must, unless that  conclusion is set aside by a superior authority, be held unauthorised, for  the  power to issue a notice under s. 15  (3)  is  only conferred  upon the assessing authority, and  the  assessing authority  within  the  meaning  of  S.  2(6)  is  a  person authorised  to  assess agricultural  income-tax.   The  Sub- Divisional  Officer  had  no power  to  assess  agricultural income of the respondent, because his gross income  exceeded Rs. 1 lakh, and he had on that account no power to issue the notice. It is true that the Board of Revision did not expressly  Set aside the notice issued by the Sub-Divisional Officer  under S.  15 (3), but the Board agreed with the Commissioner  that the  original  order  of  assessment  passed  by  the   Sub- Divisional  Officer "was absolutely  without  jurisdiction", and  directed  that  the  entire case  be  reopened  by  the Collector and fresh assessment of the income for Fasli  year 1355  be  made by the Collector after giving notice  to  the respondent.   The  Board thereafter passed  the  same  order which  the Commissioner claimed without authority  to  make. It  must, therefore, be held that the notice issued  by  the Sub  Divisional Officer was not only unauthorised,  but  was also quashed by the Board. The  second  contention that when notice under S.  15(1)  is issued,  the Collector may without a notice under  S.  15(3) commence  fresh assessment proceeding on the return made  to the Sub-Divisional Officer has no substance.  This  question does  not appear to have been raised or argued at any  stage before the Board.  Again, if the proceedings for  assessment were  commenced on a return made pursuant  to  an  invalid notice, and the proceedings for assessment were set aside on the  ground of want of jurisdiction of the authority  making the assessment, the entire proceedings must, be deemed to be vacated, and relying upon the 169 return  made to the authority who had assessed  the  income, another  authority cannot proceed to assess- the  income  of the assessee.  Mere issue of a notice under s. 15(1)  cannot come  to  the  aid  of the  Collector  in  commencing  fresh assessment  proceedings many years after the date  on  which that  notice was issued, on a return which was not  made  to him.   When  after  a general notice a  special  notice  was issued unauthorisedly and proceedings were taken pursuant to that  special  notice, the general notice cannot  be  relied

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upon  to  start  fresh  proceeding  for  assessment  on  the assumption that the return must be deemed to be made to  him pursuant to the general notice.  The Collector must,  before proceeding to assess, issue under s. 15(3) a notice when  no return was filed pursuant to the notice under s.- 15 ( 1  ), and a notice under s, 15(3) cannot issue after expiry of the year of assessment to which the notice relates. The  third contention also has,no substance.  The  Collector issued a notice under s. 25 for reassessing income which had escaped   assessment   and  assessed  the  income   of   the respondent,  but  the proceeding of the  Collector  was  set aside  as  unauthorised, and the Collector was  directed  to start a fresh proceeding for assessment.  The notice  issued by  the  Collector must also be deemed to be  quashed.   The Collector  has, therefore, under the direction given by  the Board,  to  issue  a fresh notice before  a  proceeding  for assessment  may  be started, and the earlier  notice  issued under s. 25 cannot be relied upon by the Collector. The  High Court was therefore right in the answer  which  it recorded.   It  is somewhat unfortunate that on  account  of the  diverse orders passed by the authorities-from  time  to time  without a correct appreciation of the scheme.  of  the Act, the respondent escapes liability to pay tax which  was lawfully   due,by   him,  but  that   cannot   justify   the commencement  of a fresh proceeding for assessment  contrary to the provisions of the statute. The appeal fails and is dismissed.  There will, however,  be no order as to costs in this Court and in the High Court. Appeal dismissed. L7 Sup CI/66-12 170