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1959 Supreme(Cal) 232
HIGH COURT OF CALCUTTA
Sinha
MOOLJEE SICKA - Appellant
Versus
SECOND ADDITIONAL INCOME-TAX OFFICER V (I) - Respondent
Matter 228 Of 58
Decided On : NOVEMBER 26, 1959
A change in law can constitute sufficient information for the Income-tax Officer to reopen an assessment under Section 34(1)(b) of the Income Tax Act, 1922, provided that the assessee has not adduced sufficient evidence to prove that the facts have changed since the previous assessment.
Headnote:
INCOME TAX - Reassessment - Change in law - Whether sufficient information to reopen assessment - Income Tax Act, 1922, S. 34(1)(b).
Fact of the Case:
The petitioner, a firm engaged in collecting and selling Tendu leaves, claimed exemption from income tax for the assessment year 1953-54 on the ground that the income was agricultural income. The exemption was granted based on a previous decision of the Calcutta High Court, which held that pruning of Tendu shrubs constituted an agricultural operation. However, the Supreme Court subsequently held that pruning of plants of spontaneous growth, like the Tendu plants in this case, did not amount to agriculture and was therefore not exempt from income tax.
Finding of the Court:
The court held that the change in law, as clarified by the Supreme Court decision, constituted sufficient information for the Income-tax Officer to reopen the assessment under Section 34(1)(b) of the Income Tax Act, 1922. The court found that the assessee had not adduced sufficient evidence to prove that the facts had changed since the previous assessment, and therefore, the Income-tax Officer had reason to believe that part of the income had escaped assessment.
Issues: 1. Whether the change in law constituted sufficient information to reopen the assessment under Section 34(1)(b) of the Income Tax Act, 1922? 2. Whether the assessee had adduced sufficient evidence to prove that the facts had changed since the previous assessment?
Ratio Decidendi: 1. The court held that the change in law, as clarified by the Supreme Court decision, constituted sufficient information for the Income-tax Officer to reopen the assessment under Section 34(1)(b) of the Income Tax Act, 1922. The court reasoned that the exemption granted in the previous assessment was based on the now-overruled decision of the Calcutta High Court, and that the assessee had not adduced sufficient evidence to prove that the facts had changed since then. 2. The court found that the assessee had not adduced sufficient evidence to prove that the facts had changed since the previous assessment. The court noted that the assessee had not taken advantage of the new proceedings to adduce evidence, and that the evidence adduced was not sufficient to establish a change in facts.
Final Decision: The court dismissed the assessee's petition, holding that the Income-tax Officer had acted within his powers in reopening the assessment and that the assessee had not provided sufficient evidence to prove that the facts had changed since the previous assessment.
( 1 ) THE facts in this case are shortly as follows: The petitioner firm carries on business, inter alia, in the collecting and selling of Tendu leaves, which are used for the manufacture of Bidis. It has also factories for the manufacture of Bidis. but with this we have no concern in this case. The immediate facts which have given rise to the necessity of making this application are as follows: For the assessment year 1953-54, the petitioner had been assessed to Income-tax. In that assessment year, it was in possession of certain lands at Gondia and Champa in Madhya Pradesh, which were utilised for the growing, collecting and selling of Tendu leaves. In that assessment, the petitioner claimed certain exemptions in respect of income-tax derived from the above operations on. the ground that it was agricultural income. Exemption was granted and the following is the relevant part of the assessment order:"the aforesaid profit worked out includes an relement of agricultural income for Tendu leaves grown and sold in view of the Calcutta High Court decision in this case in which it was held that to the extent to which the profit from Tendu leaves can be ascribed to the process of pruning the Tendu leaves, it wa,s an agricultural income within the meaning of Section 3 (1) of the Indian Income-tax Act. Since it is not definite to what extent pruning has been resorted to. an estimated amount equivalent to 50 p. c. of the total profit on account of Tendu leaves is allowed as agricultural income".
( 2 ) SO far as the assessment of that particular year is concerned there was no appeal. In order to understand what all this is about, it is necessary to refer back to the decision Mooljee Sicka and Co, In re, (19391 7 I. T. R. 493 (Cal ). This case related to the petitioner firm, and also related to the same question in respect of lands in Madhya Pradesh, which were utilised for the growing, collecting and selling of Tendu leaves. It was a reference under Section 66 (2) of the Indian Income-tax Act, as it then stood. It appears that the Court called upon the Commissioner to have a supplementary statement of the case prepared, so as to answer certain questions formulated by the Court. The answers which are also set out, show that it was found as a fact that the Tendu plants in question were entirely of wild growth, and there was no breaking up of the land nor ploughing nor raising-up of the soil. It was also round as a fact that during some months of the year, the operation of priming took place in order to increase the yield, and in fact had resulted in a higher yield and softer leaves. Derbyshire, C. J. who delivered the judgment held that most of the operations were non-agricultural, but to the extent to which pruning of the Tendu shrubs occurred, there was, in a technical and legal sense, a cultivation of the soil in which the Tendu shrubs grew. According to the learned Chief Justice, this 'pruning' amounted to an agricultural. operation of the land on which the shrubs grew, and it amounted to 'agriculture', and the income was therefore subject to a proportionate exemption. It was therefore held that so much of the profit derived from the collection and preparation of the Tendu leaves as could be shown to he produced by the pruning of the Tendu shrubs, should be allowed. This was in connection with the assessment in 1934. Since then, the petitioner firm was being assessed on that footing. We are concerned in this case with the assessment of the year 1953-54. In that year, the very same claim for exemption was made and it was allowed in terms set out above. It is quite obvious. from the quotations made above that the Income-tax Officer was granting an exemption on the footing of the judgment of this High Court in 1939-7 I. T. R. 493 (Cal) mentioned above. Therefore, he did it on the footing that the exemption was to be granted in respect of a proportionate part of the income which could be attributed to the pruning of Tendu leave
