Ram Bai vs Commissioner Of Income Tax

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

1999 Supreme(SC) 217

1999(2) Supreme 178
Supreme Court of India
(From Andhra Pradesh High Court)
D.P. Wadhwa & M. Srinivasan, JJ.
Ram Bai -Appellant
versus
Commissioner of Income Tax -Respondent
Civil Appeal No. 4911 of 1993
Decided on 18-2-1999
Counsel for the Parties :
For the Appellant : T.V. Ratnam, Advocate.
For the Respondent : T.L.V. Iyer, Sr. Advocate, S. Rajappa and B.K. Prasad, Advocates.

Headnote:Income Tax Act, 1961-Section 147(a)-Reassessment-Validity of -Land of assessee acquired by Government in 1965-Enhanced compensation with interest award in 1970-Return filed showing interest alone as income-Return rejected as beyond time prescribed u/s 139(4)-Reassessment u/s 147 (a) to tax entire compensation to capital gains tax-No material on record to indicate that land in question is not agricultural land-Mere assertion in communication to Commissioner seeking sanction for reopening that I.T.O. had reason to believe capital gains income chargeable to tax escaped assessment not sufficient - Condition precedent for reopening assessment not fulfiled - Reassessment set aside.
       Held : Apart from the communication to sent to the Commissioner seeking sanction to reopen, there is nothing on record to disclose the material on which the I.T.O. decided to reopen the assessment. He has made an assertion in the said communication that the land in question was not subjected to agricultural operation and that he had reason to believe, the income chargeable to tax had escaped for the assessment year 1965-66 by reason of omission or failure on the part of the assessee to make a valid return. But for such assertion, no reference has been made to any material on the basis of which he proceeded to invoke the provisions of Section 147(1) of the Act. Even the assertion as such was a bare one without any reference to the materials on the basis of which he made the said assertion. (Para 6)
       Further held : The Commissioner of Income-tax (Appeals) and the Appellate Tribunal have discussed the matter in great detail and pointed out several facts which were sufficient to show that the land in question was an agricultural land. In the face of such materials if the I.T.O. wanted to reopen the assessment he should have at least some materials to the contrary which could enable him to say that he had reason to believe that the lands were non-agricultural lands and there was escapement of income. The High Court has while answering the reference completely ignored and overlooked the findings of fact rendered by the Commissioner of Income-tax (Appeals) and Appellate Tribunal and proceeded to discuss the matter as if it was sitting in appeal over the order of the Tribunal. The High Court has also assumed that the I.T.O. had looked into the Revenue records and other connected records on the basis of which he came to the conclusion that the reopening of the assessment was necessary. We are unable to agree with the reasoning of the High Court. (Paras 9 & 10)

Judgment

Srinivasan, J.-The appellant owned certain lands in Nacharam village near Hyderabad. The Government of Andhra Pradesh acquired the same under the provisions of the Land Acquisition Act. A sum of Rs. 25,240/- was awarded as compensation by the Land Acquisition Officer on 20.11.65. On a reference at the instance of the appellant, the civil court enhanced the compensation to Rs. 2,72,136/- including solatium and interest. The same was affirmed on appeal by the High Court on 16.10.70. The appellant filed a return under Section 139(4) of the Income-tax Act (hereinafter referred to as the ‘Act’) On 17.2.72 disclosing the interest on belated payment of compensation as her income. The I.T.O. rejected it is invalid as it was filed beyond the period prescribed under Section 139(4) of the Act. The I.T.O. initiated proceedings under Section 147(a) of the Act for the year ending 31.3.65 in March 1973 and issued a notice under Section 148 on 21.4.73. He sought the sanction of the Commissioner on the ground that the land acquired was not agricultural land as it had not been subjected to agricultural operation and the capital gains thereon were chargeable to income-tax.

2. On 4.9.78, the I.T.O. made an order of assessment holding that a sum of Rs. 2,43,934/- was payable as tax and initiated penalty proceedings. On appeal by the assessee, the Commissioner of Income-tax (Appeals) held that the I.T.O., could not have had any reason to believe that there was escapement of income as there was no material whatever at that time to indicate that the lands were non-agricultural. The Commissioner allowed the appeal and cancelled the order of assessment under Section 147(a). The Department approached the Income-tax Appellate Tribunal with an appeal but in vain as the Tribunal agreed with the Commissioner and confirmed his order.

3. The Revenue applied for reference to the High Court on the following three questions:

1. Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal is correct in holding that the reassessment proceedings were not valid by considering only a part of the Income-tax Officer’s note?

2. Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal is justified in holding that the Income-tax Officer had no reason to believe that the land was not agricultural and in view of the Andhra Pradesh High Court’s decision in the case of CIT v. Officer-in-charge (Court of wards) versus CWT (72 ITR 552) which was not accepted by the Department?

3. Whether on the facts and in the circumstances of the case, the Appellate Tribunal is justified in holding that the lands are agricultural lands?

4. By a detailed order, the Tribunal rejected the application with reference to Questions 2 and 3 but referred only the first question by recasting it as follows:

“Whether on the facts and in the circumstances of the case the Appellate Tribunal was right in holding that the reassessment proceedings initiated by the Income-tax Officer in this case were not valid in law?"

The High Court by its judgment dated 1.4.91 answered the question in the negative in favour of the Revenue and against the assessee. Aggrieved by this, the assessee filed this appeal on Special Leave.

5. We have earlier referred to the fact that the Tribunal referred only one question to the High Court for its decision and refused to refer the other two questions as desired by the Revenue. The High Court has mentioned in its judgment that the counsel appearing before it made a representation that the other two questions were also subject-matter of another reference. The High Court has recorded in its judgment that the particulars about the other alleged reference were not furnished and thus the only question to be considered was that referred to it by the Tribunal.

6. We have already mentioned that the I.T.O. sought sanction of the Commissioner to reopen the matter. That was

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1999 Supreme(SC) 217

Cases Referred (2)