Balanoor Tea and Rubber Co. Ltd. vs State of Kerala

K.S. Paripoornan, J.—The petitioner is a public limited company. It is an assessee under the Agricultural Income Tax Act. In this batch of four cases, we are concerned with four assessment years 1980-81, 1981-82, 1982-83 and 1983-84. For the first three years 1980-81, 1981-82 and 1982-83, assessments were made under the Agricultural Income Tax Act on March 20, 1985. The assessment for the year 1983-84 was made on February 16, 1986. The Commissioner of Agricultural Income Tax took the view that the aforesaid assessment orders dated March 20, 1985, and February 16, 1986, are vitiated and prejudice has been caused to the Revenue. Therefore, he initiated proceedings in revision u/s 34 of the Agricultural Income Tax Act by issue of notices dated November 14, 1990, and December 18, 1990. They were served on the petitioner-assessee. Notwithstanding the objections of the assessee, the Commissioner of Agricultural Income Tax, by a common order dated September 24, 1991, set aside the assessments of the petitioner-assessee for the four years and ordered a remit of the case to the Agricultural Income Tax Office, Perinthalmanna, for the limited purpose of re-examining the company''s claim for deduction of gratuity. The said common order passed by the Commissioner of Agricultural Income Tax for the four years is assailed in these revisions.

We heard counsel for the petitioner, Mr. Premjit Nagendran, and also counsel for the respondent-Revenue, Senior Government Pleader, Mr. V. C. James.

Counsel for the assessee argued that the order passed in suo motu revision by the Commissioner of Agricultural Income Tax dated September 24, 1991, is unreasonable and unfair. Though the plea taken before the Commissioner of Agricultural Income Tax and in the revision memorandum is to the effect that the revisional proceedings are barred by limitation, the argument proceeded on the basis that the revisional order was not passed within a reasonable time. In other words, the Commissioner exercised the powers vested in him u/s 34 of the Act unfairly and unreasonably. We find that the point was mooted before the Commissioner. He took the view that the proceedings were initiated within a reasonable time. No reason is stated. Counsel for the assessee heavily relied on a Bench decision of this court in Nelliampathy Tea and Produce Co. Ltd. Vs. Commissioner of Agricultural Income Tax, and contended that the order passed u/s 34 of the Act is prima facie unreasonable and so deserves to be annulled. In Nelliampathy Tea and Produce Co. Ltd. Vs. Commissioner of Agricultural Income Tax, , this Bench had occasion to state the law 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.

Since the question whether the power has been exercised within a reasonable period depends upon the facts of each case, it is initially for the statutory authority before whom such objection is raised to advert to all the facts and circumstances and then come to a decision on the said question. That has not been done in this case."

The aforesaid Bench decision was followed in a later decision in Iswara Bhat Vs. Commissioner of Agricultural Income Tax, .

In the light of the Bench decision in Nelliampathy Tea and Produce Co. Ltd. Vs. Commissioner of Agricultural Income Tax, , it is evident that the period of five years to reopen the assessments u/s 35 of the Act expired on the following dates, March 31, 1986, March 31, 1987, March 31, 1988, and March 31, 1989. The period within which the assessment orders could have been rectified for the first three years expired on March 20, 1988. The period within which the assessments for the year 1984-85 could have been rectified expired on February 16, 1989. So the periods within which the assessments could have been reopened u/s 35 of the Act and rectified u/s 36 of the Act had expired long before the issue of the notices for suo motu revision by the Commissioner u/s 35 of the Act on December 14, 1990 and December 18, 1990. Prima facie the revisional proceedings are beyond the period fixed for reopening the assessments u/s 35 of the Act or for rectifying them u/s 36 of the Act. So, in the light of the decision in Nelliampathy Tea and Produce Co. Ltd. Vs. Commissioner of Agricultural Income Tax, , to exercise the powers vested in Section 34 of the Act, it requires cogent and sufficient reasons. 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. This aspect has not been borne in mind by the Commissioner of Agricultural Income Tax when he passed the common order for all the four years on September 24, 1991. Since this is a question of fact, it is for the Commissioner to apply his mind, to advert to all the facts and circumstances and come to a positive finding on this aspect. The common order passed by the Commissioner of Agricultural Income Tax on September 24, 1991, discloses an error of law, viz., that the Commissioner has not stated as to why and on what basis the orders passed in revision can be considered to be reasonable as stated by this court in Nelliampathy Tea and Produce Co. Ltd. Vs. Commissioner of Agricultural Income Tax, .

We, therefore, set aside the common order passed by the Commissioner of Agricultural Income Tax dated September 24, 1991, for all the four years. The matter is remitted to the Commissioner for passing fresh orders in accordance with law.

The revisions are allowed. No costs.