1976 (3) TMI 7 - HC - Income Tax

Summary

Issues Involved:
1. Validity of Ext. P-6 notice under Section 35 of the Agrl. I.T. Act, 1950.
2. Status of the petitioner as "tenants-in-common" or "association of persons."
3. Compliance with procedural requirements under Section 35 of the Act.
4. Jurisdictional issues and the right to raise additional grounds.

Detailed Analysis:

1. Validity of Ext. P-6 notice under Section 35 of the Agrl. I.T. Act, 1950:

The petitioner contended that Ext. P-6 notice was bad in law because the 1st respondent did not record reasons for reassessment under Section 35(1) of the Act. Section 35(1) stipulates that the Agricultural Income-tax Officer (Agrl. ITO) must record reasons for issuing a notice for income escaping assessment. The petitioner relied on precedents like *Agri. ITO v. Srinivasa Naicken* and *Gajendra Transports (P.) Ltd. v. Anamallais Bus Transports (P.) Ltd.*, which emphasize the necessity of recording reasons for reassessment. However, it was held that the reasons need only be recorded in the file and not necessarily communicated to the assessee, as supported by *S. Narayanappa v. CIT*. Therefore, the issuance of Ext. P-6 was deemed valid.

2. Status of the petitioner as "tenants-in-common" or "association of persons":

The petitioner argued that they should be assessed as "tenants-in-common," as previously determined by the Addl. AAC of Agrl. I.T. & S.T., Cannanore, in Ext. P-1 order. The petitioner cited *State of Madras v. VR. M. SM. Karuppan Chettiar*, where the Madras High Court held that mere common management does not constitute an "association of individuals." However, the court found that the petitioner was assessed at too low a rate because they should have been assessed as an "association of persons" due to the joint venture nature of their activities. The court upheld the revised status, justifying the reassessment under Section 35.

3. Compliance with procedural requirements under Section 35 of the Act:

The petitioner claimed that Ext. P-6 did not meet the requirements of Section 17(2) of the Act, which necessitates specific particulars in the notice. The court noted that this contention was not raised before the department and cited *Trivandrum Co-operative District Wholesale Society Ltd. v. Deputy Registrar of Co-operative Societies* to assert that new grounds cannot be introduced at a later stage without exceptional circumstances. Therefore, the procedural compliance of Ext. P-6 was upheld.

4. Jurisdictional issues and the right to raise additional grounds:

The petitioner argued that the reassessment was inspired by administrative directions and lacked independent application of mind by the officer, thus rendering it invalid. They also contended that the right to insist on recorded reasons is a statutory right, and non-compliance cannot be waived. The court, however, found no merit in these contentions, emphasizing that Section 35 allows reassessment if income was under-assessed or escaped assessment. The court concluded that the reassessment was within jurisdiction and complied with statutory requirements.

Conclusion:

The court dismissed the original petition, confirming that the reassessment under Section 35 was valid and complied with procedural requirements. The petitioner's status was correctly revised to "association of persons," and the procedural objections raised were not sufficient to invalidate the reassessment. No costs were awarded.