Commissioner of Income Tax vs K. Unnikrishnan

V.V. Kamat, J.—The following are the two questions expecting our answer with regard to the assessment proceedings for 1984-85 and 1985-86 :

"1. Whether, on the facts and in the circumstances of the case and on an interpretation of Section 143(2)(b) of the Income Tax Act, the Tribunal is right in law and fact in holding that ''the reopening u/s 143(2)(b) pf the Income Tax Act, was bad in law'' ?

Whether, on the facts and in the circumstances of the case and also in the absence of correct details being furnished by the assessee regarding the situation of the agricultural property transferred, the Tribunal is justified in, --

(i) holding that the assessee had given complete details about the transfer of agricultural land ?

(ii) interfering with the reopening and is not the above finding of having given ''complete details'' against facts and unwarranted and the interference uncalled for and wrong ?"

In other words, if the assessee had given complete details about the transfer of agricultural lands, at the same time contending that the amount connected with the transfer transaction is not taxable, could be justifiably reopened under the provisions of Section 143(2)(b) of the Income Tax Act, 1961. This is for the purposes of bringing to tax, the gains arising out of the sale of agricultural lands.

The Income Tax Officer under the above provision after the proceedings of assessment were completed u/s 143(1) of the Act.

The first appellate authority considered this to be bad in law and held that the transfer of agricultural lands did not give rise to any capital gains.

The Income Tax Appellate Tribunal appears to have confirmed the said decision with little modification. The Tribunal held that the transfer of agricultural lands can really be said to give rise to capital gains but the resort to reopening of the assessment u/s 143(2)(b) of the Act would be bad in law. The Tribunal reached this conclusion on the basis of the factual position that the returns filed by the assessee could not be said to be either incorrect or incomplete. This was in view of the fact that transfer of agricultural lands and the consideration amount in regard thereto form part of the return in regard to which the contention was that the same is not taxable.

In the process of reasoning the two appellate authorities on the first count relating to the arising out of capital gains relied on the decision of this court in CIT v. T.K. Sarala Devi [1987] 167 ITR 136, and on the second count with regard to the reopening u/s 143(2)(b) of the Act relied upon the decision of the Tribunal itself. On going through the three orders for both the assessment years, we find that this court (one of us-myself dictated the judgment) in I. T. R. No. 146 of 1987, Commissioner of Income Tax Vs. R. Krishnarjunan, , on June 17, 1996, considered the position fully and squarely. It is considered that when the land is sold, the sale proceeds cannot be understood to be revenue but capital, obviously because it cannot be understood as income derived from the land as the land itself is realised when it is sold. The question was also considered yet from another angle with reference to Section 2(1)(a) of the Act conveying what is "agricultural income".

With regard to the position relating to reopening u/s 143(2)(b) of the Act it is held that the amount received by the assessee as a result of the sale of agricultural land can never be considered as agricultural income in any of the sense of the term. Further, examining the statutory provision of Section 143(2)(b) of the Act it is observed, with reference to Section 143(2)(b) of the Act, that the summary procedure does not require the presence of the assessee or the production of any evidence in support of the return and requires the Assessing Officer to act in a summary manner on the basis of the return and its accompaniments. Appreciating the provisions of Section 143(2)(b) in the background of the initiation u/s 143(2)(b) of the Act it is observed that the provision provides for the assessee to object within a period of one month. It is also observed that Section 143(2)(b) of the Act empowers the Officer to exercise powers under the said provision and all that it requires is that the officer finds it necessary or expedient to verify the correctness and completeness of the return. It is further observed that there is no statutory requirement for the exercise of powers that the Income Tax Officer must have some information, gathered subsequently leading him to the situation as regards the correctness and completeness of the return. This is on reading the plain language of the provision that it is a power given by the statutory provision irrespective of a situation showing exercise of powers u/s 143(2)(b) of the Act and as an independent power based on satisfaction for verification of the correctness or completeness.

Thus, it would be found that this court has considered in detail the position of law in I. T. R. No. 146 of 1987, Commissioner of Income Tax Vs. R. Krishnarjunan, , decided on June 17, 1996.

For the above reasons, we answer question No. 1 in the negative, in favour of the Revenue and against the assessee. We also answer question No. 2 in the negative, in favour of the Revenue and against the assessee.

A copy of this judgment under the seal of the court and the signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench, as required by law.