Kausalya Santhanam vs Agricultural Income Tax Officer and Another

Ramanujam, J.—All the above three writ petitions had been filed by the same petitioner. In respect of her land holdings, the petitioner had

applied for composition u/s 65 of the Agricultural Income Tax Act, 1955, year after year. In respect of the assessment year 1966-67, there was an

order of composition passed on June 16, 1966, on an application made by the petitioner on June 8, 1966. Once an order of composition is made,

that will enure for a period of three years u/s 65. Therefore, though the order of composition was passed on June 16, 1966, for the assessment

year 1966-67, it will enure for three assessment years ending with the assessment year 1968-69. However, the Commissioner of Agricultural

Income Tax, after issuing a show-cause notice to the petitioner as to why the order of composition should not. be cancelled and after getting an

explanation from the petitioner, had cancelled the said order of composition dated June 16, 1966, by his order, dated August 11, 1972. The

petitioner has challenged the validity of the said order of the Commissioner. Subsequent to the said impugned order of cancellation the assessing

authority has naturally to proceed to assess the petitioner''s agricultural income for the years 1966-67 and 1967-68, which had expired by the time

the Commissioner''s order came to be passed. For the assessment year 1966-67, the agricultural income of the petitioner was computed on best

judgment basis at Rs. 13,495.30. For the assessment year 1967-68, her income was computed on the same best judgment basis at Rs.

14,263.70. Since the petitioner has questioned the order of the Commissioner cancelling the order of composition, she has, naturally, questioned

the consequential orders passed by the Agricultural Income Tax Officer for the assessment years 1966-67 and 1967-68 on the ground that, as the

order of the Commissioner cancelling the composition order is bad, the consequential orders of assessment passed by the Agricultural Income Tax

Officer have to be set aside.

The Writ Petitions Nos. 1897 of 1973 and 1896 of 1973 are against the assessment orders passed by the Agricultural Income Tax Officer for

the assessment year 1966-67 and 1967-68, respectively, and Writ Petition No. 1898 of 1973 is directed against the Commissioner''s order

cancelling the order of composition earlier passed by the Agricultural Income Tax Officer.

The petitioner''s attack against the order of the Commissioner is threefold. One is that the Commissioner has no jurisdiction to revise or cancel

an order of composition passed by the Agricultural Income Tax Officer. The other is that even assuming that the Commissioner had jurisdiction to

revise the order of composition based on the provisions of the Amending Act 7 of 1966, which came into force on May 13, 1966, the order of the

Commissioner, so far as the assessment year 1966-67 is concerned, is invalid as the Amending Act was not in force on the first of April, 1966,

which is the relevant date for computation of the agricultural income for the assessment year 1966-67. The third is that the Commissioner has erred

in his finding that the extent of the petitioner''s holding exceeded 50 standard acres.

Learned counsel for the respondents raises a preliminary objection to the maintainability of these three writ petitions. According to him, there is a

right of revision to this court u/s 54 of the Agricultural Income Tax Act against the order of the Commissioner which has been challenged in Writ

Petition No. 1898 of 1973 and a right of appeal against the orders of assessment which have been challenged in the other two writ petitions. But I

do not consider that this preliminary objection has any merit. The Commissioner''s order has been impugned in Writ Petition No. 1898 of 1973 on

the ground that the Commissioner has no jurisdiction to interfere with an order of composition and that the Amending Act 7 of 1966 is bad as it is

discriminatory. When a challenge is made on the basis of the invalidity of the Act which is sought to be invoked by the Commissioner, such a

challenge cannot be made before the Commissioner or in revision petition filed against the Commissioner''s order. A challenge to the validity of the

Act can properly be made only in writ proceedings and not in a revision challenging the Commissioner''s order. If the Commissioner''s order could

be challenged in the Writ Petition No. 1898 of 1973, notwithstanding Section 54 of the Act, then the assessment orders which are merely

consequential to the order of the Commissioner can also be challenged before this court along with the Commissioner''s order. I do not agree with

the learned counsel for the petitioner that the proceedings have abated in view of Section 58(2) of the 42nd Amendment. I have already held that

since the validity of the Amending Act has been challenged, Section 54 of the Act cannot be said to be an alternative remedy. Hence there is no

question of abatement of these proceedings.

As regards the first ground of attack, it is not in dispute that the Tamil Nadu Act 7 of 1966 which took away the benefit of composition in

respect of land holdings beyond 50 standard acres came into force only on May 13, 1966. The said Amending Act has not been made specifically

retrospective so as to be applicable from April 1, 1966, the commencement of the assessment year. According to the petitioner, Tamil Nadu Act 7

of 1966, which came into force on May 13, 1966, cannot be applied to the assessment year 1966-67 which commenced on April 1, 1966. But,

according to the revenue, since the Act had come into force during the assessment year, the assessment has to be made in accordance with the

provisions of the Amending Act. The Commissioner in his impugned order dated August 11, 1972, has stated that the material date is the date of

assessment and if the Amending Act was in force on that date, then the assessment had to be made in accordance with the provisions of the

Amending Act. The question, therefore, is whether the view taken by the Commissioner is legally correct.

The petitioner''s learned counsel submits that the Commissioner''s view that as the Amending Act was in operation at the time when the

assessment came to be made, the assessment should be in accordance with the Amending Act is not legally sustainable in view of the decisions of

this court and of the Supreme Court rendered under the Income Tax Act as well as the Agricultural Income Tax Act. Reference has been made by

the learned counsel to the following decisions. In M. KR. Deivanayagam Pillai Vs. Second Additional Income Tax Officer, Madurai and Another, ,

the question arose as to whether the amendment of Section 49A of the Income Tax Act on March 30, 1948, will apply to the assessment for the

assessment year 1947-48 and this court held that the Act cannot be retrospective and, therefore, will not apply for the assessment year 1947-48.

For taking that view, the reasoning given by this court is that where there was a change in the law even within the course of the assessment year, it

was the law in force at the commencement of the assessment year that should apply in the absence of any statutory provision to the contrary. , The

same view has been taken by the Supreme Court in Commissioner of Income Tax, Bombay Vs. Scindia Steam Navigation Co. Ltd., . The

Supreme Court had held that the amendment of Section 10(2) of the Income Tax Act brought in on 4th May, 1946, was inoperative for the

assessment year 1946-47, that the amendment which came into force on May 5, 1946, was not retrospective and was not in force on April 1,

1946, and that, therefore, the amendment did not apply to the assessment for the assessment year 1946-47. In Karimtharuvi Tea Estate Ltd. Vs.

State of Kerala, , dealing with the similar question which arose in respect of an assessment under the Kerala Agricultural Income Tax Act, the

Supreme Court pointed out at page 264 :

Now, it is well settled that the Income Tax Act, as it stands amended on the first day of April of any financial year must apply to the assessments

of that year. Any amendments in the Act which come into force after the first day of April of a financial year would not apply to the assessment for

that year, even if the assessment is actually made after the amendments come into force.

In a recent decision in M.O.A. Rahaman Sait and Another Vs. Commissioner of Agricultural Income Tax, Madras, and Another, , Koshal J,

has also taken the view that since the assessment year commenced on the first of April, 1966, the amendment brought in by Tamil Nadu Act 7 of

1966, will not stand attracted unless for the assessment year 1966-67 it has been made specifically retrospective.

All the above decisions make it abundantly clear that any change in the law in the course of an assessment year, cannot apply in making the

assessment for that assessment year unless the statutory provision has been made retrospective and that in the absence of such a retrospective

operation, normally, the law as on the date of the commencement of the assessment year should govern the assessment for that year. This is

because the subject of charge both under the Income Tax Act as well as the Agricultural Income Tax Act is not the income of the year of

assessment, but the income of the previous year. When an assessment is made, the income of the previous year is determined as on the date of the

commencement of the assessment year. Therefore, whenever an assessment is to be made, it should be taken to have been made with reference to

the law in force at the commencement of the assessment year. In this case, as already stated, the Amending Act came into force on May 13, 1966,

and it is not specifically made retrospective. Therefore, for the assessment year which commenced on first April, 1966, the assessment has to be

made without reference to the Act 7 of 1966 and the order of the Commissioner so far as it says that as the Amending Act was in force on the

date when the composition order came to be made it has to be applied, is illegal and cannot be sustained. In this view, the Commissioner''s order

so far as it relates to the assessment year 1966-67 has to be quashed, and is quashed, and W. P. No. 1897 of 1973 is allowed. But there will be

no order as to costs.

As regards the assessment year 1967-68, the Amending Act No. 7 of 1966 will have to apply and if the petitioner''s holding during that year is

more than 50 standard acres, there cannot be any order of composition. The petitioner''s case even before the Commissioner is that her holding is

less than 50 standard acres and that would be clear from a perusal of the orders of composition passed for the subsequent assessment years. But

the petitioner has urged before the Commissioner that the land under arecanut crop stood reduced from the assessment year 1967-68 and that,

therefore, her holding will be less than 50 standard acres. The Commissioner, however, held that the aggregate holding of the petitioner came to 16

acres 71 cents which worked out to 50.13 standard acres, that as the petitioner''s holding exceeded 50 standard acres by 13 cents, the order of

composition for that assessment year made by the Agricultural Income Tax Officer cannot be sustained in law. The petitioner has challenged the

said finding given by the Commissioner in Writ Petition No. 1898 of 1973. As a matter of fact, the petitioner has filed a review application before

the Commissioner himself for a review of the order on the ground that adangal extracts for the relevant years will clearly establish the petitioner''s

holding to be less than 50 standard acres. But the said review petition has been dismissed by the Commissioner by an order dated October 31,

1972, holding that no reliance could be placed on the adangal extracts. The petitioner contends before this court that there has been no proper

investigation on the petitioner''s claim that her holding is less than 50 standard acres based on the adangal extracts and other materials produced by

her and that even her attempt to have the impugned orders reviewed had failed. A perusal of the original order of the Commissioner dated October

31, 1972, shows that the Commissioner was not inclined to place any reliance on the entries in adangal made by the local village officers. If the

adangal entries show that the petitioner''s holding is less than 50 standard acres, it is for the revenue to disprove the entries or reject the same on

certain concrete materials or evidence. The mere rejection of the entries in the adangal as unreliable without reference to the person who made the

entries specially when there is no other evidence contra, does not appear to be correct in the circumstances of this case. It is not in dispute that the

petitioner was not given an opportunity to prove the entries in the adangal before the Commissioner, if the Commissioner felt that no reliance could

be placed on the entries in the adangal. I, therefore, feel that the question whether the petitioner''s holding during the assessment year 1967-68 was

above 50 standard acres or not will have to be decided afresh by the Commissioner after giving due opportunity to the petitioner to establish her

case that her holding was less than 50 standard acres during that assessment year. The result is that the Commissioner''s order so far as it relates to

the assessment year 1967-68 and the consequent order of assessment passed by the Agricultural Income Tax Officer for that year will stand

vacated. The Commissioner is directed to dispose of the suo motu proceedings in relation to the assessment year 1967-68 afresh after giving an

opportunity to the petitioner to substantiate her stand that her holding is less than 50 standard acres. With these directions, the Writ Petitions Nos.

1896 and 1898 of 1973 are allowed. There will be no order as to costs.