Plantation Corporation of Kerala Ltd. vs Commissioner of Agricultural Income Tax

P.A. Mohammed, J. 1. These tax revision cases have been filed by a company known as "Plantation Corporation of Kerala Ltd.", Kottayam. The dispute involved in these cases centres round the agricultural Income Tax assessment for the years 1978-79 and 1981-82. In T. R. C. No. 210 of 1992, annexure "H" order passed by the Commissioner of Agricultural income tax and Sales tax, Trivandrum, u/s 34 of the Agricultural Income Tax Act, 1950, for the year 1981-82 is challenged, whereas in T. R. C. No. 239 of 1992 a similar order passed by the Commissioner for the year 1978-79 is under attack.

The petitioner-companies carried on the business of growing and planting rubber, cashew, etc. As per annexure "A" in T. R. C. No. 210 of 1992, the Inspecting Assistant Commissioner completed the assessment for the year 1981-82. That order was passed on January 14, 1987. There was an appeal from the said order and the Deputy Commissioner as per annexure "C" order allowed the appeal filed by the assessee in part and accordingly the assessment order for the year 1981-82 was directed to be modified. Being dissatisfied with the said order, the assessee filed a further appeal before the Tribunal. The Tribunal also by annexure "D" order dated September 6, 1990, granted certain reliefs in favour of the assessee. The Tribunal accordingly directed the assessing authority to revise the assessment in view of the directions contained therein. As far as the year 1978-79 is concerned, the Inspecting Assistant Commissioner completed the assessment against the assessee-company as per annexure "A" order dated December 31, 1983. Subsequently, the Commissioner of Income Tax issued annexure "B" notice dated March 30, 1991, u/s 34 of the Act proposing to revise suo motu the assessment order for the year 1978-79. A similar notice evidenced by annexure "E" dated March 30, 1991, was issued by the Commissioner for the assessment year 1981-82. Thereupon, the assessee-company filed objections against the proposal to revise the assessments suo motu. However, after hearing the objections, the Commissioner passed orders for revision of assessment orders for the years 1981-82 and 1978-79, Consequently, the Commissioner directed the assessing authority to issue revised assessment orders in view of the directions contained therein.

Counsel for the assessee contended that in both the cases, the Commissioner has exercised the suo motu power u/s 34 of the Act not within the reasonable time. According to him, there is unreasonable delay in taking action under said provision and the impugned orders are vitiated for the reason that there is no explanation from the Commissioner for the delay.

As against annexure "E" notice for the year 1981-82 the assessee-company, inter alia, raised the following objection as to limitation in annexure "F" :

" The initiation of proceedings u/s 34 are barred by the laws of limitation in that it has not been invoked within a reasonable time. In any event, under the Agricultural Income Tax Act, 1991, the proceedings are clearly time-barred."

Likewise, for the year 1978-79, the assessee-company has raised the following objection as to limitation in annexure "C" :

"At the outset your proceedings are barred by the laws of limitation in that it is initiated more than seven years after the assessment order. In any event, under the Agricultural Income Tax Act, 1991, it is time-barred. "

In so far as the year 1981-82 is concerned, the Commissioner of Income Tax in annexure "H" order observed as to the question of limitation thus :

"The objections were examined with reference to the connected records. The original assessment was completed on January 14, 1987. There is, therefore, no unreasonable delay in initiating action u/s 34."

Likewise, the Commissioner, in respect of the year 1978-79, observed as to limitation in annexure "F" order thus :

" There is delay of nearly seven years since the original assessment, but a notice on this particular point had already been issued by the assessing authority as early as on May 24, 1984, and objections got filed. The delay since then is not fatal and the decision in Paul Pandian''s case [1981] 128 ITR 809 (Ker) is not applicable. The objections are rejected."

In the aforesaid facts, what is required to be examined is whether the proceedings u/s 34 of the Act have been initiated by the Commissioner within "a reasonable time" in respect of the assessment years 1978-79 to 1981-82. We have considered this question in T. R. C. No. 16 of 1992 Dr. Thomas Varghese Vs. State of Kerala, ) and connected cases where a similar action taken by the revisional authority u/s 34 of the Act has been questioned. In that case, we have held as to what is "reasonable time". We said (page 380) : "It is not the time that is fixed by the authority who is to exercise the power. Nor is it the one that is fixed by the person who would be affected by the exercise of such power. It is the time that a reasonable man who is instructed on the facts of the case, feels just and proper. The reasonableness of time in a particular case paramountly depends on the facts and circumstances of each case".

It is therefore necessary for this court to examine whether the time taken by the Commissioner in initiating action u/s 34 is reasonable or not. This is not a case where the assessee has not raised any objection as to the delay. As far as the year 1981-82 is concerned, though the original assessment order was passed on January 14, 1987, the notice u/s 34 was issued on March 30, 1991, and the objection was filed on April 5, 1991. As pointed out above, a specific objection has been taken as to the delay in initiating the action u/s 34. The final order was passed on February 23, 1992. That means there is a delay of five years and nine days in revising the assessment order dated January 14, 1987, invoking the power u/s 34 of the Act. As far as the year 1978-79 is concerned, the original assessment order was finalised on December 31, 1983, and annexure "B" notice was issued on March 30, 1991, and objection was filed on April 5, 1991. The final order u/s 34 was passed on February 25, 1992. That means there is a delay of eight years and three months in revising the assessment order for the year 1978-79 dated December 31, 1983, u/s 34. Therefore, the said delay cannot be said to be reasonable in the circumstances of the case.

Now, let us examine whether there is any explanation for the aforesaid delay in invoking the power u/s 34. We have in the judgment referred to supra observed that if the Commissioner is taking suo motu action u/s 34, it is his duty to explain the delay caused in taking such action, though no period of limitation is prescribed in that behalf. There is no case for the Commissioner in these cases that all the relevant papers were not brought to his notice in time. No explanation at all is forthcoming in the notices issued prior to the passing of the order u/s 34. Specific objections as to limitation were raised to the notices proposing suo motu action. When such objections are raised, it is the paramount duty of the Commissioner to explain with facts and figures the reasons for the delay in taking action u/s 34.

As far as the year 1981-82 is concerned, the Commissioner says that there is no "unreasonable, delay". It cannot be said to be correct because the original assessment order was admittedly finalised on January 14, 1987, and it was the said order which was sought to be revised. The question is what was the reason for the delay. The appellate order was passed by the Tribunal on September 6, 1990, and thus all the matters with regard to the assessment have become final and conclusive. No circumstance is stated in support of the delay for exercise of the power suo motu. The Commissioner is bound to explain the reasons for the delay as aforesaid. Without any supporting material we cannot say that there was no unreasonable delay. The Commissioner has no case that because of the pendency of the appeal before the Tribunal or before the first appellate authority, the delay was caused. Such reasons will not also prevent the Commissioner from taking action u/s 34 to revise the original order. He seeks to revise the original assessment order passed on January 14, 1987. Therefore, he ought to have explained the reasons for delay from the date of passing of the final assessment order till the action u/s 34 was taken. In the absence of such reasons it can only be said that the impugned order is vitiated for unreasonable delay.

So far as the assessment year 1978-79 is concerned, the Commissioner himself admitted that there is seven years'' delay since the original assessment order. Absolutely no material is available before this court to examine as to how the delay has been caused. The Commissioner says that on the same point the assessing authority has issued a notice on May 24, 1984. We fail to understand the stand taken by the Commissioner. If the officer proposes to take action for assessment of escaped turnover, it is for him to issue notice u/s 35 and not the Commissioner u/s 34. The said circumstance cannot be said to be a reason for delaying the matter by the Commissioner. In this connection, the learned Government Pleader has brought to our notice that the assessing authority can initiate action for assessment of escaped turnover u/s 35 within a period of five years. Of course, it is true but it does mean that the Commissioner is allowed to take action within a period of five years for initiating action u/s 34. In this context, it must be recalled that the powers under Sections 35 and 34 are independent and separate. When the assessing authority is authorised to assess the escaped turnover within a prescribed period of five years u/s 35, that is the function of the assessing authority and not the function of the Commissioner. When the power u/s 34 is clearly an extraordinary power conferred on the Commissioner, he cannot escape by saying that the power can be exercised by him within a period of five years. Therefore, the Commissioner is not entitled to get a period of five years for invoking the power u/s 34. Even though the Government Pleader makes a formidable plea in this regard, we do not find our way to accepting the said contention in view of the fact that the provisions contained in Sections 34 and 35 are separate and distinct and one cannot be applied for the other.

In view of the above discussion, we set aside the impugned orders passed by the Commissioner u/s 34 of the Act in respect of the years 1981-82 and 1978-79. The tax revision cases are accordingly allowed.