9911796707
TMI Blog1998 (8) TMI 65X X X X Extracts X X X X X X X X Extracts X X X X ..... was being fully accepted by the authorities till the assessment year 1986-87. It is stated that under that system the petitioner was returning as its income of the previous year, the entire pool income received by it during the year but deducting therefrom that which relates to the coffee pooled in the earlier years in respect of which it had estimated the price and accounted for in that earlier year and included also the estimated income receivable in respect of its stock at the end of the year. It was on such basis, it is stated, the petitioner filed its return for the earlier years and the method adopted had been fully accepted by the respondent and the assessment completed. The petitioner has produced copies of the assessment orders for the years 1984-85 and 1985-86 as exhibits P-1 and P-2. It is stated that in exhibits P-1 and P-2 the assessing authority, in the column "method of accounting", made the entry as "cash". According to the petitioner, since the accounts of the petitioner were accepted and the assessments were made on the basis of such accounts the petitioner had no reason to challenge those assessment orders in appeal. For the assessment year 1986-87 also, the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar). The further objection taken was that exhibit P-3 assessment order was passed by the assessing authority after due consideration of the method of accounting consistently followed by the petitioner and the successor assessing authority cannot resort to the provisions regarding reopening of the assessment on the same materials as it would amount to a mere change of opinion. It is also stated that the observations of the assessing authority in exhibits P-1 and P-2 that the petitioner has been following the cash system and in exhibit P-3 that the petitioner has been following the mercantile system are also contrary to the admitted method followed by the petitioner. The respondent in exhibit P-9 order rejected all the objections taken by the petitioner and completed the reassessment as proposed. A counter-affidavit is filed by the respondent. It is stated in the counter-affidavit that in column 4 of exhibit P-3 order the method of accounting is noted as "mercantile" and that the assessee-firm had not challenged the same in appeal. It is further stated that as per the profit and loss account filed by the petitioner the coffee value conceded was only Rs. 5,53,457.56, the break up of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exhibit P-7 notice is well within the time provided under section 35 of the Agricultural Income-tax Act, 1950, and under section 41 of the Kerala Agricultural Income-tax Act, 1991. Learned counsel appearing for the petitioner submitted that exhibit P-9 assessment order is null and void. He submitted that under section 41(2) of the Act, no notice shall be issued under sub-section (1) of section 41 after the expiry of five years from the end of the relevant financial year, unless the Commissioner is satisfied on the reasons recorded by the Agricultural Income-tax Officer that it is a fit case for issue of such notice. Learned counsel, with reference to the provisions of sub-section (2) of section 41 read with the charging section, section 3 and the definition of "previous year" in clause (22) of section 2, submitted that the expression "relevant financial year" can only mean the previous year and that in the instant case, since previous year for the assessment year 1986-87 ended on March 31, 1986, the five years' period mentioned in section 41(2) expired on March 31, 1991, and, therefore, the notice dated February 27, 1992, is issued beyond the time provided in section 41(2). Lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be a bar for taking proceedings under section 35 of the old Act and under section 41(1) of the new Act even if the same is the result of a change of opinion on the part of the same officer or if the assessing authority is of opinion that income assessable under the Act has escaped assessment or that it has been assessed at too low a rate. The Government Pleader also submitted that notice under section 35/ 41(2) of the Act is well within the period provided under section 35 of the Act, in that, five years' period from the end of the assessment year expires only on March 31, 1992. He submitted that notice under section 41 was issued on January 10, 1992, and served on the assessee on January 16, 1992, as per the acknowledgment available in the assessment file. He further submitted that the method of accounting adopted by the petitioner is as noted in the original assessment order (exhibit P-3) mercantile in which case the sum of Rs. 2,60,644.28 chargeable to tax has escaped assessment which was rightly included by the respondent in the reassessment order. The Government Pleader accordingly submitted that the reassessment order exhibit P-9 is perfectly valid, He also submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing authority to reopen the assessment reads as follows : "41. Income escaping assessment.--(1) If for any reason agricultural income chargeable to tax under this Act has escaped assessment in any financial year or has been assessed at too low a rate, the Agricultural Income-tax Officer may at any time within ten years of the end of that year and subject to the provisions of sub-section (2), serve on the person liable to pay the tax, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 35 and may proceed to assess or reassess such income and the provisions of this Act, shall, so far as may be apply accordingly as if the notice were a notice issued under that sub-section : Provided that the tax shall be charged at the rate at which it would have been charged if such income had not escaped assessment or full assessment, as the case may be : Provided further that the Agricultural Income-tax Officer shall not issue a notice under this sub-section unless he had recorded his reasons for doing so. (2) No notice shall be issued under sub-section (1) after the expiry of five years from the end of the relevant financial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant assessment year. Section 39 provides for. assessment. Under section 41 of the Act, if income chargeable to tax has escaped assessment in any financial year, notice can be issued. It must be noticed that the section mentions about the escapement of income in any financial year which question arises only in the assessment year and not earlier. Therefore, it necessarily follows that "financial year", "that year" and "relevant financial year" referred to in sections 41(1) and (2) can only mean the "assessment year" and not the previous year. In the instant case, the petitioner has no case that the notice under section 41 of the Act was issued beyond five years from the end of the assessment year. Its case is only that the notice is issued beyond five years from the end of the previous year. Hence, there is no merit in the said contention of the petitioner and it is rejected. There is also no merit in the contention of the petitioner that no notice can be issued under section 41 of the Act on the same set of facts based on which the assessment has been originally completed. It is relevant to note that section 41 of the Act starts with the words "if for any reason". This cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also taken. The petitioner contended that this principle should not be given a go-by merely because within the prescribed time for reopening the Coffee Board declared dividends. It is stated that such declaration subsequent to the year under reference gets duly accounted in the year of receipt as per the method of accounting all along followed. The petitioner had also stated that the assessments for the earlier years were completed accepting the above method of accounting. It was also pointed out that in the assessment year concerned also the assessment was completed accepting the said method of accounting. It was further pointed out that an assessee is entitled to any method of computation of different sources of income and that the assessing authority is bound to accept the same. The petitioner in support of the said submission relied on the provisions of section 7 of the Kerala Agricultural Income-tax Act, 1950, and the corresponding provision, section 40 of the present Act. The assessing authority had rejected the above contention stating that for all the previous years the assessment of the petitioner was completed treating the system of accounting as mercantile, and that, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing authority has not denied the statement of the petitioner that for the assessment years 1984-85, 1985-86 and 1986-87 it had accepted the method of computation based on exhibits P-4 to P-6 profit and loss account. The assessment order for the year 1984-85 (exhibit P-1) shows that the method of accounting followed by the petitioner is "cash" and the assessment order for the year 1985-86 (exhibit P-2) again shows the system as "cash". But in the assessment order for the year 1986-87, the system of accounting is shown as "mercantile". But the fact remains that for all the aforesaid three years, the computation of income made by the petitioner based on the profit and loss account exhibits P-4 to P-6 were accepted with minor variation. The mere fact that the said assessment orders showed the system of accounting as "cash" or " mercantile" by itself cannot be taken as a ground to reject the contention. of the petitioner that the system of accounting followed by it is hybrid, which is evident from the profit and loss account (exhibits P-4 to P-6) and the computation made on that basis accepted in the said assessment orders. According to me, the respondent should have considered ..... X X X X Extracts X X X X X X X X Extracts X X X X
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