1990 (10) TMI 27 - HC - Income Tax

Summary

Issues Involved:
1. Bar of limitation for the Commissioner of Agricultural Income-tax to revise an assessment after ten years under section 34 of the Agricultural Income-tax Act.
2. The applicability of sections 35 and 36 of the Agricultural Income-tax Act concerning income escaping assessment and rectification of mistakes.
3. Reasonableness and legality of the suo motu revision by the Commissioner of Agricultural Income-tax.

Issue-wise Detailed Analysis:

1. Bar of Limitation for Revision under Section 34:
The core issue revolves around whether the Commissioner of Agricultural Income-tax can revise an assessment after a lapse of about ten years. The applicant contended that initiating proceedings under section 34 after such a long period is barred by limitation and should be considered illegal and without jurisdiction. Despite the absence of a specific time-limit in section 34, the applicant argued that revisions should occur within a "reasonable" time.

2. Applicability of Sections 35 and 36:
Sections 35 and 36 of the Agricultural Income-tax Act provide specific time limits for reopening assessments and rectifying mistakes. Section 35 allows reopening within five years for income escaping assessment, while section 36 permits rectification within three years of the assessment order. The applicant argued that the finality of assessments should be respected and only reopened within these specified periods unless exceptional circumstances justify otherwise.

3. Reasonableness and Legality of the Suo Motu Revision:
The applicant cited precedents such as Bhavani Tea and Produce Co. v. Commr. of Agri. I. T., Deputy Commr. of Agri. I. T. and S. T. v. P. S. B. Paul Pandian, and Krishna Bhatta v. Agri. ITO to argue that revisions after an inordinate delay (nine, ten, and sixteen years, respectively) were deemed unreasonable. The applicant contended that the Commissioner's action was arbitrary and capricious, failing to consider whether the power was exercised within a reasonable period.

Court's Analysis and Judgment:

The court acknowledged that section 34 of the Agricultural Income-tax Act does not prescribe a time limit for revising assessments. However, it emphasized that statutory powers must be exercised bona fide, reasonably, and within a reasonable period. The court noted that the Commissioner of Agricultural Income-tax did not adequately address the applicant's objections regarding the reasonableness of the delay in the revisional order.

The court referred to the Supreme Court's ruling in Government of India v. Citadel Fine Pharmaceuticals, which established that, in the absence of a specific limitation period, statutory powers must be exercised within a reasonable time, depending on the facts of each case.

The court concluded that the Commissioner of Agricultural Income-tax failed to demonstrate exceptional or extenuating circumstances justifying the delay in initiating proceedings under section 34. The court found that the revisional order did not adequately consider whether the power was exercised within a reasonable period, rendering the order potentially irrational and unreasonable.

Conclusion:
The court declined to answer the referred question due to the lack of clarity and proper consideration by the Commissioner of Agricultural Income-tax. Instead, it directed the Commissioner to restore the revisional proceedings for the year 1969-70 and dispose of the matter in accordance with law, considering the observations made in the judgment. A copy of the judgment was ordered to be forwarded to the Commissioner of Agricultural Income-tax, Trivandrum, under section 60(6) of the Agricultural Income-tax Act.