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TMI Blog1989 (4) TMI 335X X X X Extracts X X X X X X X X Extracts X X X X ..... di Estate and accessories for recovery of ₹ 2,08,51,230.98 with interest being the arrears of sales tax, agricultural Income Tax, employees' provident fund, etc., due from the petitioner. 3. The petitioner owns the Ponmudi Estate measuring about 892 acres out of which an extent of 600 acres is a tea plantation. The counter-affidavit of the third respondent, Tahsildar, shows the break-up of the tax liability as follows : Rs. Sales tax : 23,37,825.03 Bank arrears due to Small Scale Development Corporation : 41,618.93 Emergency risk : 8,792.77 -do- : 5,206.00 Agricultural income-tax : 1,75,98,366.62 Employees' provident fund : 7,20,936.15 Basic tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales of tea gathered from concerned sales tax authority . Since no objections were received within the time allowed, the assessments were completed under Section 18(4) of the Act treating the assessee as a defaulter. Thus, the estimate of income from tea is based on the details of sales of tea gathered from the sales tax authorities. 6. These orders of assessment were confirmed in revision by the second respondent, Commissioner of Agricultural Income Tax, as per his common order, exhibit P-13, passed during the pendency of the original petition. The contention of the petitioner at the revisional stage that he does not own or possess any agricultural land in Puduppadi based on the certificate of the Village Officer produced as exhibit P-9 was rejected by the revisional authority on the ground that the address of the person shown in the certificate is not the same as in the assessment records, His contention that the estimated income from tea exceeds the statutory limit of 60% was also rejected on the ground that the assessee had not been able to prove the same. The revisional authority found that an assessment under Section 18(4) of the Act became necessary for the default ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ideration local knowledge and repute in regard to the assessee's circumstances, and his own knowledge of previous returns by and assessments of the assessee, and all other matters which he thinks will assist him in arriving at a fair and proper estimate ; and though there must necessarily be guess-work in the matter, it must be honest guess-work. In that sense, too, the assessment must be to some extent arbitrary. 10. In State of Orissa v. Maharaja Shri B.P. Singh Deo [1970]76ITR690(SC) , the Supreme Court observed at p. 691 : The mere fact that the material placed by the assessee before the assessing authorities is unreliable does not empower those authorities to make an arbitrary order. The power to levy assessment on the basis of best judgment is not an arbitrary power ; it is an assessment on the basis of best judgment. In other words, that assessment must be based on some relevant material. It is not a power that can be exercised at the sweet will and pleasure of the concerned authorities. The scope of that power has been explained over and over again by this court. 11. The assessment orders, exhibit P-8 series, show that agricultural income i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nover on sale of tea during the relevant assessment year itself. The assessment accordingly is not in conformity with Section 3 of the Act. The taxable turnover as per its definition in Section 2(xxv) of the Sales Tax Act is the turnover on which a dealer is liable to pay sales tax after making such deductions as are admissible under the Act, The taxable turnover in the present case in each of these years is on the sale of tea produced in the petitioner's estate and processed for the purpose of sale. The admissible deductions under the Agricultural Income Tax Act for expenses of cultivation, maintenance, etc., are not allowed in accepting the taxable turnover as the agricultural income from tea for the relevant assessment year. The estimation of agricultural income from tea as equal to the taxable turnover on the sale of tea for the relevant assessment year is clearly wrong and the orders of assessment are vitiated by these errors apparent on the face of the record. 12. Under Article 246(1) of the Constitution, Parliament has exclusive power to legislate with respect to any of the matters enumerated in List I of the Seventh Schedule to the Constitution. As per Clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manufacture of tea reads : Income derived from the sale of tea grown and manufactured by the seller in India shall be computed as if it were income derived from business and forty per cent of such income shall be deemed to be income liable to tax. 15. It is thus clear that the entire income derived from the sale of tea is not agricultural income. The State Legislature is not competent to levy tax on income other than agricultural income as is clear from the aforesaid entries in the Seventh Schedule of the Constitution. In view of the provisions of law adverted to above, levy of tax by the State under the Agricultural Income Tax Act can relate only to sixty per cent of the income derived from the sale of tea after allowing also admissible deductions under Section 5 of the Agricultural Income Tax Act. In Anglo-American Direct Tea Trading Co. Ltd, v. Commr. of Agrl. I. T. [1968]69ITR667(SC) , it is stated at p. 1216 : . Income from sale of tea grown and manufactured by the seller is derived partly from business and partly from agriculture. This income has to be computed as if it were income from business under the Central Income Tax Act and Rules ; 40 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the aforesaid decisions of this court in Karim-tharuvi Tea Estates Ltd. [1963]48ITR83(SC) and Anglo-American Direct Tea Trading Co. Ltd. [1968]69ITR667(SC) , shows that this court has consistently taken the view that the definition of the term agricultural income for the purposes of the Act of 1922 and the Act of 1961, being Acts pertaining to the levy of Income Tax, has to be considered in the light of Rule 24 of the Indian Income Tax Rules, 1922, in the case of the Act of 1922 and Rules 7 and 8 of the Income Tax Rules, 1962, as far as the Act of 1961 is concerned. An analysis of the said decisions shows that this court has taken the view that, in the case of income from the sale of tea grown and manufactured by an assessee, Rule 24 of the Indian Income Tax Rules, 1922, and Rule 8 of the Income Tax Rules, 1962, although at first glance they appear to be rules of apportionment and computation, must be treated as incorporated in the definition of the term 'agricultural income' in the Act of 1922 and the Act of 1961, respectively. It is true that in both the cases, Karimtharuvi Tea Estates Ltd. [1963]48ITR83(SC) and Anglo-American Direct Tea Trading Co. Ltd. [1968]69ITR6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... March 3, 1983. The pre-assessment notice required the assessee to file objections on or before March 3, 1983. The notice was served on the assessee only on February 25, 1983. The assessee was given only six days' time to file objections to the proposals contained in the pre-assessment notice. The time allowed was too short and the assessment orders were passed on March 3, 1983, even before expiry of the time allowed to file objections. The objections filed on March 9, 1983, could not be considered in view of the orders already passed on March 3, 1983. This, according to us, has resulted in denial of natural justice to the petitioner and he had no opportunity to meet the case put against him in the pre-assessment notice. 19. The revisional authority has not considered any of these aspects borne out by the records of the case. Section 34 of the Act provides for a revision to the Commissioner at the instance of the assessee. The statutory revisional authority is also invested with jurisdiction to make such enquiries as may be found necessary for the disposal of the revision on merits. The revisional authority in the present case has not even perused the orders of assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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