Cochin Plantations Ltd. vs State of Kerala

K.K. Usha, J.—This reference at the instance of the assessee is directed against the order passed by the Kerala Agricultural Income Tax Appellate Tribunal, Addl. Bench, Kottayam, in A. I. T, A. No. 158 of 1981. The following questions of law are raised for decision of this court :

" (i) Whether, on the facts and in the circumstances of the case, the original order of assessment ceases to be operative, when an order has been passed u/s 35 of the Agricultural Income Tax Act, 1950, in reassessment proceedings ?

(ii) Whether, on the facts and in the circumstances of the case and in the light of the decision of this court reported in Commissioner of Income Tax Vs. K. Kesava Reddiar, , the Tribunal is justified in holding that the original assessment order is operative in spite of the reopening ?

(iii) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in holding that the requirement of Section 19 of the Agricultural Income Tax Act has not been established to reopen the assessment ?"

The relevant facts are as follows :--For the assessment year 1975-76, returns were not filed by the assessee in spite of notice issued u/s 17(2) on May 17, 1975, and show-cause notice issued on August 28, 1975, proposing to make assessment u/s 18(4). Notice u/s 18(4) was issued on November 8, 1975, asking for production of accounts and returns. An application for adjournment was filed, which was granted and the case was adjourned to December 2, 1975. Again the assessee wanted time and, therefore, pre-assessment notice dated October 18, 1976, was issued proposing the assessment. Even though time granted in this notice expired on November 1, 1976, there was no response from the assessee. The Inspecting Assistant Commissioner (Special) completed the assessment on November 3, 1976. But the assessment order was communicated to the assessee only on December 4, 1976. In the meanwhile, on November 5, 1976, the assessee filed returns. On receipt of the assessment order, the assessee filed an application u/s 19 of the Agricultural Income Tax Act, 1950, for cancelling the assessment and to pass fresh assessment order on the basis of the returns filed by the assessee.

The petition filed u/s 19 was dismissed by the assessing authority on December 6, 1976. Aggrieved by the above order, the assessee filed an appeal before the Additional Deputy Commissioner (Appeals). While the appeal was so pending, notice u/s 35 was issued on May 5, 1977, by the assessing authority. But the above proceedings were finally dropped by order dated August 31, 1977. The appeal filed by the assessee against the order rejecting his application u/s 19 was dismissed on March 21, 1981. It took up the matter before the Tribunal. The Tribunal held the view that since the application filed by the assessee was u/s 19 and the appeal filed by it is against the order rejecting the application u/s 19, it cannot be considered on the merits. It also took the view that the requirement of Section 19 has not been established to reopen the assessment.

From the averments contained in the petition filed by the assessee u/s 19 it is seen that the managing director of the petitioner-assessee-company was unwell and he was admitted in Medical College Hospital for treatment during the relevant period. These were the circumstance under which, according to the assessee, it could not comply with the directions contained in the earlier notice in time. But it is a fact that the assessee had filed its returns on November 5, 1976, i.e., about a month before the assessment order was served on it. Taking into consideration all the facts and circumstances of the case, we are of the view that the assessee had made out a case u/s 19, which would justify an order in its favour. Apart from the above, as mentioned earlier, the assessee had filed its returns much before the assessment order was served on it. This court had occasion to consider the validity of such assessment order in a series of decisions. It has been uniformly held that the assessment order becomes effective only when it is issued from the office of the assessing authority. In T. R. C. No. 6 of 1981, a Division Bench of this court has taken the view that assessment will not be over until the assessment is communicated to the assessee. The assessment order becomes operative only on service on the party intended to be affected thereby. In Govt. Wood Workshop v. State of Kerala [1987] 1 KLT 804, another Division Bench had occasion to consider a similar question and following the view taken by a Bench of this court in T. R. C. S. Nos. 15 and 16 of 1981, it was held that the order of any authority cannot be said to be passed unless it is in some way pronounced or published or the party affected has the means of knowing it. It is not enough if the order is made, signed, and kept in the file, because such order may be liable to change at the hands of the authority who may modify it, or even destroy it, before it is made known, based on subsequent information, thinking or change of opinion. To make the order complete and effective, it should be issued, so as to be beyond the control of the authority concerned, for any possible change or modification therein. By applying the above principle it has to be taken that before the assessment order has become effective by issuing the same by the office of the assessing authority, the assessee has filed its returns. Taking into consideration all these aspects, we are of the view that the application filed u/s 19 by the assessee is to be allowed and fresh opportunity should be given to the assessee on the basis of the returns filed by it on November 5, 1976.

In the light of the above view which we are taking regarding the scope of the application filed by the assessee u/s 19, we do not think it is necessary for us to go into the other questions raised in this revision regarding the effect of the order passed u/s 35 of the Agricultural Income Tax Act, 1950. In the result, we set aside all the three orders passed by the authorities and direct the assessing authority to proceed with the assessment on the basis of the returns filed by the assessee on November 5, 1976.

The revision stands allowed to the above extent.