K.K. Subramanian vs Deputy Commissioner of Agricultural Income Tax and Sales Tax

K.S. Paripoornan, J.—At the instance of an assessee to agricultural Income Tax, the following three questions of law have been referred, for the decision of this court, by the Deputy Commissioner of Agricultural Income Tax and Sales Tax, by order dated November 24, 1987 :

"1. Whether, on the facts and in the circumstances of the case, the Deputy Commissioner was right in law in holding that there was no relationship of employee and employer between the assessee on the one hand and the other co-tenants on the other hand ?

Whether, on the facts and in the circumstances of the case, the Deputy Commissioner was right in applying the case law in Commissioner of Income Tax, Madras Vs. R.M. Chidambaram Pillai and Others, ?

Whether the action for revision of assessment orders many years after the assessments were completed was within reasonable time in the eye of law ?"

We are concerned in this case with assessments for eight years--1971-72 to 1978-79. The assessee, Sri K.K. Subramanian, is a co-tenant of common properties, namely, Puthiyakovilakam Estate, Thirunelly. It was gifted by his father, Sri Krishna Iyer, in favour of the assessee, his three brothers and mother, Smt. Rajammal. The Agricultural Income Tax Officer computed the income from the common properties and the share income of the assessee alone was assessed as per the original assessment orders. The assessment orders for the years 1971-72, 1972-73 and 1973-74 were rendered on January 27, 1975. The assessment orders for the years 1974-75, 1975-76 and 1976-77 were rendered on March 51, 1976. The assessment order for the year 1977-78 was passed on June 28, 1978, and for the assessment year 1978-79 on August 30, 1979. A sum of Rs. 6,000 was allowed by way of salary to the assessee, Sri Subramanian, as the manager of the common properties. This was allowed as a deduction in computing the income from the common properties. It was not assessed in the hands of the assessee. The Agricultural Income Tax Officer rectified the assessment orders for the years 1975-76 to 1978-79, u/s 36 of the Act, on June 25, 1980. Therein, he added back the salary paid to the assessee to the total income from the common properties and apportioned the same among all the other co-tenants. These aspects came to the notice of the Deputy Commissioner, who initiated proceedings u/s 34 of the Act and passed a common order dated September 17, 1983. He held that the orders of assessments for the years 1971-72 to 1978-79 are unsustainable. The assessment orders were set aside and the matter was remitted to the Agricultural Income Tax Officer for fresh disposal. The questions of law referred by the Deputy Commissioner of Agricultural Income Tax and Sales tax, North Zone, Kozhikode, are said to arise from the common order passed by the Deputy Commissioner dated September 17, 1983. We have already formulated the said questions herein above.

We heard counsel. The third question referred to this court is the basic question. If the order passed by the Deputy Commissioner in revision, in exercise of the powers u/s 34 of the Act, cannot be considered to be one passed within a reasonable time, we need not go into the merits of the case. A plea was taken before the Deputy Commissioner that the proposal for revision of assessment was belated and so unsustainable. In his common order dated September 17, 1983, the Deputy Commissioner stated that proceedings u/s 34 of the Act were initiated within a reasonable time and so there is no bar to the revision proceedings. The Deputy Commissioner has not given any reason. In this case, we find that the assessment orders were revised, u/s 34 of the Act, on September 17, 1983. It is admittedly more than eight years after the original assessment orders were passed on January 27, 1975, for the years 1971-72, 1972-73 and 1973-74 ; more than seven years after the assessment orders were passed on March 31, 1976, for the years 1974-75 and 1975-76 ; more than six years, after the original assessment order for the year 1976-77 ; more than five years after the original assessment order for the year 1977-78 and four years after the assessment order for the year 1978-79. The assessments for the years 1975-76 to 1978-79 were rectified u/s 36 of the Act on June 25, 1980.

As to whether the powers u/s 34 of the Act were exercised within a reasonable time depends largely on the facts and circumstances of each case. This court had occasion to consider what should be the reasonable time within which the revisional powers can be exercised, in a series of cases. In Nelliampathy Tea and Produce Co. Ltd. Vs. Commissioner of Agricultural Income Tax, , at page 234, a Bench of this court stated thus :

".... The normal period within which an assessment, once made, can be reopened u/s 35 of the Act, is five years from the end of the assessment year. u/s 36, a mistake could be rectified within three years from the date of the assessment order. Once a final assessment is rendered (after the appeal or revision or reference, as the case may be), the finality attached to the order can be put in peril and the assessment can be reopened normally only in proceedings u/s 35 or 36 of the Act. To reopen the final assessment after the said periods, in exercise of the powers u/s 34 of the Act, demands cogent and sufficient reasons. The power vested in the Commissioner of Agricultural Income Tax should be exercised bona fide and within a reasonable period. The Revenue should be able to demonstrate that there were circumstances beyond control or other supervening events or insurmountable difficulties for not setting in motion the proceedings u/s 34 of the Act within the normal period provided in Sections 35 and 36 of the Act. Whether there were exceptional or extenuating circumstances, explaining the reason for not setting in motion the proceedings u/s 34 of the Act within the normal period, to revise or reopen an assessment which will affect the assessee adversely, would depend upon the facts and circumstances of each case."

Nelliampathy Tea and Produce Co. Ltd. Vs. Commissioner of Agricultural Income Tax, was followed in Iswara Bhat Vs. Commissioner of Agricultural Income Tax, . The various aspects highlighted in the above decisions have not been considered by the Deputy Commissioner of Agricultural Income Tax when he held in a single line order that proceedings u/s 34 of the Act have been initiated within a reasonable time. We are constrained to state that the Deputy Commissioner has not disposed of the matter in accordance with law. The guidelines to determine as to what is the reasonable time within which proceedings u/s 34 of the Act can be initiated were not borne in mind nor applied in passing the suo motu revision order by the Deputy Commissioner of Agricultural Income Tax. The common order passed by the Deputy Commissioner dated September 17, 1983, is infirm. It is not in accordance with law. As to whether the assessment order is passed within a reasonable time, is a question of fact. As to whether there were sufficient and demonstrable reasons as to why the revision powers were exercised long after the period prescribed in Sections 34 and 36 of the Act and whether there were justifiable reasons therefor, is a matter exclusively known only to the Revenue. No reason has been stated in the revision order dated September 17, 1983.

In these circumstances, we are unable to answer the vital question referred to this court (question No. 3). It is only if question No. 3 is decided against the assessee, we have to consider questions Nos. 1 and 2. In these circumstances, while we decline to answer the questions referred to this court for decision, we direct the Deputy Commissioner of Agricultural Income Tax and Sales tax. North Zone, Kozhikode, to restore the revision proceedings for the years 1971-72 to 1978-79 and consider the matter afresh in the light of the Bench decision of this court in Nelliampathy Tea and Produce Co. Ltd.''s case [1991] 100 ITR 227 and Iswara Bhat Vs. Commissioner of Agricultural Income Tax, . The Deputy Commissioner shall pass fresh orders within three months from the date of receipt of a copy of this judgment

The reference is disposed of as above.

A copy of this judgment, under the seal of this court and the signature of the Registrar, shall be forwarded to the Deputy Commissioner'' of Agricultural Income Tax and Sales tax, North Zone, Kozhikode, forthwith.