PETITIONER:
STATE OF UTTAR PRADESH
Vs.
RESPONDENT:
RAJA YADVENDRA DUTT DUBE
DATE OF JUDGMENT:
17/12/1965
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
SUBBARAO, K.
SIKRI, S.M.
CITATION:
1966 AIR 727 1966 SCR (3) 161
CITATOR INFO :
R 1973 SC2384 (4)
ACT:
U.P. Agricultural Income-tax Act, 1948, ss. 14(1) & (2),
15(3), 25–Jurisdiction to assess when gross income exceeds
Rs. 1 lakh-Revision Board whether competent to direct
Collector to make an assessment after period under s. 25 has
expired-Whether Collector can make assessment on basis of
return filed before Sub-Divisional Officer on notice issued
by latter under s. 15(3)-whether assessment can be made on
such return on the basis of notice issued under s. 14(1).
HEADNOTE:
The respondent-assessee had a gross agricultural income of
more than Rs. 1 lakh in 1355 Fasli (July 1, 1947 to June 30,
1948). In response to a notice issued by the Assistant
Collector under s. 15(3) of the U.P. Agricultural Income-tax
Act, 1948, the assessee filled a return of his income and
the said officer made an assessment though under s. 14(2) of
the Act Jurisdiction to assess in cases when the gross
income exceeded Rs. 1 lakh lay within the Collector. The,
Collector thereafter made a reassessment under s. 25 read
with s. 16(4) within the period of limitation prescribed
under the former section i.e. “within one year of the end of
the year in which the income had escaped assessment”. In
appeal by the respondent the Agricultural Income-tax
Commissioner set aside the orders of the Collector and also
of the Assistant Collector and directed the Collector to
make a fresh assessment after giving notice to the res-
pondent. The Board of Revision held that the Commissioner
had rightly decided that the orders in question were invalid
but that the Commissioner was not empowered to set aside the
order of the Assistant Collector which was not challenged
before him. However the Board suo motu set aside the order
of the Assistant Collector and directed that fresh assess
ment be made ”according to law”. The High Court in
reference under s. 24(4) held that having regard to the
limitation provided in s. 25 the Board could not in 1952
direct the Collector to make a fresh assessment for the
period in question. The State of Uttar Pradesh appealed to
this Court.
It was contended on behalf of the State that: (1) The
Assistant Collector could make assessment even in cases when
the gross income exceeded Rs. 1 lakh. (2) The notice under
s. 15(3) issued by the Assistant Collector not having been
set aside by the higher authorities, the Collector could, as
directed by the Board, make an assessment without
transgressing any restrictions in s. 15(3) or s. 25. (3)
without a fresh notice under s. 15(3) the Collector had the
power by virtue of the notice under s. 15(1), to assess the
income of the respondent on the return made pursuant to the
notice issued by the Assistant Collector. (4) Since notice
under 9. 25 for reassessment of the escaped income had been
issued by the Collector within the period prescribed by s.
25(3) and the notice was otherwise valid, assessment
proceedings directed by the Board could be founded by the
Collector on that notice.
HELD : (i) Reading sub-s. (1) & (2) together there can be no
doubt that the Collector is the assessing authority within
his revenue jurisdiction with unlimited jurisdiction and the
Assistant Collector in charge of a sub-division is the
assessing authority within his revenue jurisdiction with
power only in cases in which the gross agricultural income
of the assessee
162
does not exceed Rs. 1 lakh. The Assistant Collector is not
entitled to make assessment in such a case relying on the
generality of the provisions of s. 14(1). [167 F-G]
(ii) When the Assistant Collector arrived at the conclusion
that the gross income of the respondent exceeded Rs. 1 lakh
the proceedings initiated by him including the issue of the
notice must, unless that conclusion is set aside by a
superior authority, be treated as unauthorised, for the
power to issue a notice under s. 15(3) is only conferred
upon the assessing authority and the assessing authority
within the meaning of S. 2(6) s a person authorised to
assess agricultural income-tax. There is no provision in
the Act or the Rules for transfer of proceedings from the
Assistant Collector to the Collector when the Assistant
Collector in dealing with a return finds that he has no
jurisdiction. The Collector therefore could not in the
present case make reassessment on the basis of the return
filed under s. 15(3). In fact having regard to the terms of
the order passed by the Board it was clear that the notice
under s. 15(3) issued by the Assistant Collector had been
quashed by the Board. [168 B-F]
(iii) If the proceedings for assessment were commenced
on a ‘return made pursuant to an invalid notice, and the
proceedings for assessment were set aside on the ground of
want of jurisdiction of the authority making the assessment
the entire proceeding must be deemed to be vacated and
relying upon the return made to the authority who had
assessed the income another authority cannot proceed to
assess the income of the assessee. Mere issue of a notice
under s. 15(1) could not come to the aid of the Collector in
commencing fresh assessment proceedings many years after the
date on which that notice was issued on a return which was
not made; to him. [168 H-169 B]
(iv) The notice under s. 25 issued by the Collector must
also be deemed to have been quashed by the Board. The
Collector had therefore, under the direction given by !he
Board, to issue a fresh notice before a proceeding for
assessment could be started and a fresh assessment could not
be based on the earlier notice. [169 E]
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 123 of 1965.
Appeal by special leave from the judgment and order, dated
November 28, 1963 of the Allahabad High Court in A.I.T.
Reference No. 16 of 1960.
S. T. Desai and O. P. Rana, for the appellant.
A. V. Viswanatha Sastri, M. V. Goswami and B. C. Misra,
for the respondent.
The Judgment of the Court was delivered by
Shah, J. By order, dated May 14, 1949 the Sub-Divisional
Officer, Jaunpur, assessed Raja Yadvendra Dutt Dube
hereinafter called ‘the respondent’-under S. 16(3) of the U.
P. Agricultural Income-tax Act, 1948 to pay agricultural
income-tax for the account period 1355 Fasli (July 1, 1947
to June 30, 1948) on a net income of Rs. 72,769/15/2. Being
of the view that a part
163
of the income of the respondent had escaped assessment, the
Collector of Jaunpur by order, dated June 9, 1950,
recomputed tax under S. 25 read with s. 16(4) of the Act for
the said account period on a total net income of Rs.
80,859/13/6. In appeal by the respondent the Agricultural
Income-tax Commissioner by order dated March 5, 1952, set
aside the orders of the Collector and also of the Sub-
Divisional Officer and directed that the assessment be
reopened by the Collector and fresh assessment of the income
for 1355 Fasli be made after giving notice to the
respondent. In the view of the Commissioner, assessment
made by the Sub-Divisional Officer was without jurisdiction,
and the order of reassessment by the Collector “being in
review and substitution of the order of assessment”, want of
jurisdiction in the order of assessment attached to the
order of reassessment as well. The respondent then moved
the Board of Revision against the order of the Commissioner.
The Board agreed with the Commissioner, that the assessment
order made by the Sub-Divisional Officer was “illegal and
invalid”, but in the view of the Board the Commissioner
exceeded his authority in setting aside the order of the
Sub-Divisional Officer, which was not challenged in appeal
before him. However, the Board observed, the illegality and
invalidity of the order of assessment having come to their
notice, they would take up the matter suo motu in exercise
of their revisional jurisdiction and declare the order
passed by the Sub-Divisional Officer as illegal and set it
aside. Accordingly, in setting aside the order of the
Commissioner, they also set aside the order of assessment
made by the Sub-Divisional Officer, and directed that
“Fresh assessment will be made according to law”. The
Board then referred under s. 24(4) of the Act the following
question of law to the High Court of Allahabad for opinion :
“Whether on the facts and having regard to the
provisions of section 25 of the Act, the Board
could on the 15th October, 1952, direct a
fresh assessment to be made ?”
The High Court, recorded an answer in the
negative. The State of Uttar Pradesh has
appealed to this Court.
The relevant provisions of the Act are briefly
these : “Assessing authority” under the Act
means a person authorised by the State
Government to assess agricultural income-tax :
s. 2(6). By s. 3 charge of agricultural
income-tax and super-tax at the rate or rates
specified in the Schedule on the total
agricultural income of the previous year
of every person is imposed. Section 14 sets
164
up Assessing authorities and prescribes their
powers. it provides :
“ (1) For the purposes of this Act, every
Collector, and Assistant Collector in charge
of a sub-division shall be assessing authority
and shall exercise and perform within his
revenue jurisdiction such powers and duties as
may be prescribed, provided that the State
Government may appoint any officer as an
assessing authority for such area as may be
prescribed.
(2) In particular and without prejudice to
the generality of the provisions of sub-
section (1), the following authorities shall
be the assessing authorities in the cases
mentioned against each namely :
(a) Assistant Collector Incharge of sub-
division. :
Where the gross agricultural come does not
exceed Rs. 1 lakh.
(b) Collector : In all cases.
(c) Officer appointed under proviso to sub-
section (1):
In such cases as may be prescribed”.
Section 15, insofar as it is material
provides:
“(1) The Collector shall give notice,by
the publication in the Official Gazette and in
such other manner as may be prescribed,
requiring every person, whose total
agricultural income during the previous year
exceeded the maximum amount which is not
chargeable to agricultural income-tax to
furnish to such assessing authority and within
such period, not being less than thirty days,
as may be specified in the notice, a return in
the prescribed form and verified in the
prescribed manner, setting forth his total
agricultural income during the previous year
(2)
(3) In the case of any person whose total
agricultural income is, in the opinion of the
assessing authority, such amount as to render
such person liable to payment of agricultural
income-tax in any year, he may serve in that
year a notice in the prescribed form requiring
such person to furnish within such period, not
being less than thirty days as may be
specified in the notice, a return in the
prescribed form and verified in the prescribed
manner setting forth his total agricultural
income during the previous year
165
Section 16 sets out the procedure of assessment by the
assessing authority, and against the order of assessment by
the assessing authority, an appeal lies under s. 21 to the
Commissioner. By s. 22 power is conferred upon the Board of
Revision either on their own motion or on an application to
call for the record of any proceeding under the Act pending
before or decided by any authority subordinate to the Board,
and after such inquiry as they deem necessary, may pass such
orders as they think fit. Section 24 provides for reference
of questions of law to the High Court for opinion. Sub-
section (2), insofar as it is material, provides :
“Within sixty days of the communication of an
order under section 21 or section 22 the
assessee may, by application apply to the
Board to refer to the High Court any question
of law arising out of such order or decision,
and the Board shall, within sixty days of the
receipt of such application, draw up a
statement of the case, and refer it, with
their opinion to. the High Court:”
Under sub-s. (4) of S. 24 the High Court is authorised,
where the Board has rejected the application under sub-s.
(2) or refused to state the case on such application, if the
High Court is not satisfied about the correctness of the
decision of the Board, to require the Board to state the
case and refer it to the High Court. Section 25 authorises
the assessing authority to assess or reassess income which
has escaped assessment in any year or has been assessed at
too low a rate, after serving a notice on the person liable
to pay agricultural income-tax within one year of the end of
the year in which the income has escaped assessment.
Section 44 confers power upon the State Government to make
rules for carrying out the purposes of the Act.
Under the scheme of the Act, the Collector of the District
is the assessing authority generally in respect of the
entire District over which he has revenue jurisdiction, and
he is invested with the power to issue a general notice
calling upon every person whose income is chargeable to tax,
to make a return of his income. The Assistant Collector
(who is also called the Sub-Divisional Officer) in charge of
a sub-division is invested with power as assessing authority
within his revenue jurisdiction, where the gross
agricultural income of an assessee does not exceed Rs. 1
lakh. Power of the assessing authority under s. 15(3) to
issue a special notice calling for a return may be exercised
within the year of assessment, and not thereafter. Power to
reassess under s. 25
166
is also restricted and the assessing authority may not issue
a notice of “escaped assessment” after one year from the end
of the year of assessment.
It is necessary to remember that these proceedings come
before us in appeal against the order passed by the High
Court on a reference made under s. 24. Jurisdiction of the
High Court under s. 24 is advisory : the High Court must
answer the question referred to it and cannot travel outside
the terms of the reference. This caution is necessary
because learned counsel appearing for the parties have
sought to canvass many questions which were never raised
before the Board and even before the High Court. The
question whether the order passed by the Board setting aside
the orders of a assessment of the Sub-Divisional Officer and
of the Collector and even of the Commissioner is justifiable
in law is not referred to us. We are only concerned to deal
with the limited question whether the Board had authority on
the view expressed by it to make the order directing re-
assessment, and that question must
be decided in the light of the provisions of s. 15(3) and S.
25 of the Act.
It may be assumed that a notice under s. 15(1) was issued by
the Collector (though there is no reference to such a notice
in the record) requiring every person whose income exceeds
the maximum amount exempt from tax to submit a return in the
Form No. 1 (a) prescribed by the Rules. It is common ground
however that the respondent filed the return in pursuance of
a notice under s. 15(3), and that the Sub-Divisional
Officer found in the course of the assessment proceeding
that the gross agricultural income of the respondent
exceeded Rs. 1 lakh. The order of assessment passed by the
Sub-Divisional Officer was set aside by the Board because
the Sub-Divisional Officer had no jurisdiction to assess to
tax income of a person whose gross agricultural income
exceeded Rs. 1 lakh, and the Board agreed with the
Commissioner that the order of the Collector being in
“review or substitution” of the order of the Sub-Divisional
Officer was also liable to be set aside.
Counsel for the State raised three contentions in support of
the plea that the Board had power to direct the Collector to
make a fresh assessment :
(1) The Sub-Divisional Officer was invested
with authority to issue a notice under S.
15(3) calling for a return, and since this
notice was not set aside by the Commissioner
or by the Board of Revision, in making the
order of assessment pursuant to the order of
the
167
Board, the Collector will not be transgressing
any statutory restrictions imposed by s. 15(3)
or S. 25 of the Act.
(2) Without a fresh notice under s. 15(3),
the Collector has the power, by virtue of the
notice under s. 15(1), to assess the income of
the respondent on the return made pursuant to
the notice issued by the Sub-Divisional
Officer.
(3) Since notice under s. 25 of the Act for
reassessment of the escaped income was issued
within the period prescribed by s. 25(3), and
the notice was otherwise valid, assessment
proceedings directed by the Board may be
founded by the Collector on that notice.
In proceedings for assessment the Sub-Divisional Officer
found that the total gross income of the respondent exceeded
Rs. 1 lakh, and under s. 14(2) the Collector alone was the
assessing authority in respect of the income of the
respondent. The contention raised by counsel for the State
that by the expression “without prejudice to the generality
of the provisions of sub-section (1)” in sub-s. (2) of s. 14
power is intended to be conferred upon the Assistant
Collector in charge of a sub-division to assess income of an
assessee whose gross agricultural income exceeds Rs. 1 lakh
cannot be accepted. The first sub-section of S. 14 declares
the Collector and the Assistant Collector in charge of a
sub-division as assessing authorities within the limits of
their respective revenue jurisdictions. By sub-s. (2) it is
directed that the authorities mentioned in sub-s. (2) shall
be the assessing authorities in the cases “mentioned against
each”. Reading sub-ss. (1) and (2) together there can be no
doubt that the Collector is the assessing authority within
his revenue jurisdiction with unlimited jurisdiction, and
the Assistant Collector in charge of a sub-division is the
assessing authority within his revenue jurisdiction with
power only in cases in which the gross agricultural income
of the assessee does not exceed Rs. 1 lakh.
There is in the Act no procedure prescribed about ascertain-
ment of the gross agricultural income of an assessee which
is determinative of the jurisdiction of the Sub-Divisional
Officer, but as in other taxing statutes where the taxing
authority is constituted a tribunal of exclusive
jurisdiction the authority has the power, subject to
rectification by a superior Court, to decide facts on the
proof of which his jurisdiction depends. The Sub-Divisional
Officer had therefore power to decide whether the gross
agricul-
168
tural income of the respondent did or did not exceed Rs. 1
lakh The notice under S. 15(3) was issued to the respondent
by the Sub-Divisional Officer, presumably on the assumption
that the gross agricultural income of the respondent did not
exceed Rs. 1 lakh but when the Sub-Divisional Officer found
on scrutiny of the return that the gross agricultural income
of the respondent exceeded Rs. 1 lakh, he could not exercise
the powers of the assessing authority. There is no
provision in the Act or the Rules for transfer of proceeding
from the Sub-Divisional Officer to the Collector, when the
Sub-Divisional Officer in dealing with a return finds that
he has no jurisdiction. When he arrived at the conclusion
that the gross income of the respondent exceeded Rs. 1 lakh,
the proceeding initiated by the Sub-Divisional Officer
including the issue of notice must, unless that conclusion
is set aside by a superior authority, be held unauthorised,
for the power to issue a notice under s. 15 (3) is only
conferred upon the assessing authority, and the assessing
authority within the meaning of S. 2(6) is a person
authorised to assess agricultural income-tax. The Sub-
Divisional Officer had no power to assess agricultural
income of the respondent, because his gross income exceeded
Rs. 1 lakh, and he had on that account no power to issue the
notice.
It is true that the Board of Revision did not expressly Set
aside the notice issued by the Sub-Divisional Officer under
S. 15 (3), but the Board agreed with the Commissioner that
the original order of assessment passed by the Sub-
Divisional Officer “was absolutely without jurisdiction”,
and directed that the entire case be reopened by the
Collector and fresh assessment of the income for Fasli year
1355 be made by the Collector after giving notice to the
respondent. The Board thereafter passed the same order
which the Commissioner claimed without authority to make.
It must, therefore, be held that the notice issued by the
Sub Divisional Officer was not only unauthorised, but was
also quashed by the Board.
The second contention that when notice under S. 15(1) is
issued, the Collector may without a notice under S. 15(3)
commence fresh assessment proceeding on the return made to
the Sub-Divisional Officer has no substance. This question
does not appear to have been raised or argued at any stage
before the Board. Again, if the proceedings for assessment
were commenced on a return made pursuant to an invalid
notice, and the proceedings for assessment were set aside on
the ground of want of jurisdiction of the authority making
the assessment, the entire proceedings must, be deemed to be
vacated, and relying upon the
169
return made to the authority who had assessed the income,
another authority cannot proceed to assess- the income of
the assessee. Mere issue of a notice under s. 15(1) cannot
come to the aid of the Collector in commencing fresh
assessment proceedings many years after the date on which
that notice was issued, on a return which was not made to
him. When after a general notice a special notice was
issued unauthorisedly and proceedings were taken pursuant to
that special notice, the general notice cannot be relied
upon to start fresh proceeding for assessment on the
assumption that the return must be deemed to be made to him
pursuant to the general notice. The Collector must, before
proceeding to assess, issue under s. 15(3) a notice when no
return was filed pursuant to the notice under s.- 15 ( 1 ),
and a notice under s, 15(3) cannot issue after expiry of the
year of assessment to which the notice relates.
The third contention also has,no substance. The Collector
issued a notice under s. 25 for reassessing income which had
escaped assessment and assessed the income of the
respondent, but the proceeding of the Collector was set
aside as unauthorised, and the Collector was directed to
start a fresh proceeding for assessment. The notice issued
by the Collector must also be deemed to be quashed. The
Collector has, therefore, under the direction given by the
Board, to issue a fresh notice before a proceeding for
assessment may be started, and the earlier notice issued
under s. 25 cannot be relied upon by the Collector.
The High Court was therefore right in the answer which it
recorded. It is somewhat unfortunate that on account of
the diverse orders passed by the authorities-from time to
time without a correct appreciation of the scheme. of the
Act, the respondent escapes liability to pay tax which was
lawfully due,by him, but that cannot justify the
commencement of a fresh proceeding for assessment contrary
to the provisions of the statute.
The appeal fails and is dismissed. There will, however, be
no order as to costs in this Court and in the High Court.
Appeal dismissed.
L7 Sup CI/66-12
170