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TMI Blog1993 (2) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... The lease was periodically renewed. The stock of agricultural produce was also taken over by the lessee who took over the properties as a going concern. The petitioner was assessed for the assessment year 1980-81 and the assessment was completed by order dated March 29, 1986, a copy of which is annexure "B". That was appealed against. Annexure "C" is a copy of the appellate order. The lessee-partnership was also assessed for the same year and the assessment completed by order dated March 29, 1986, a copy of which is annexure "D". That also was the subject-matter of an appeal. While so, the respondent, Commissioner of Agricultural Income-tax, issued a notice dated December 18, 1990, purporting to be under section 34 of the Agricultural Income-tax Act,1950, proposing to cancel annexure "B" assessment. The main reason alleged is that the sum of Rs. 13,44,264.96 received from the Coffee Board during the accounting year relating to the assessment year 1980-81 was wrongly assessed in the hands of the lessee-partnership instead of the petitioner. It was also stated that the value of the stock-in-trade handed over to the lessee-firm should be considered as income of the petitioner for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was the Commissioner right and justified in holding that the amount of Rs. 13,44,264.96 received by the lessee-firm from the Coffee Board during the accounting year relevant to the assessment year 198081" is assessable in the hands of the lessor-petitioner ? (vi) Whether, on the facts and in the circumstances of the case, the Commissioner was right and justified in holding that the value of stock of agricultural produce taken over by the lessee-firm under the lease agreement is assessable in the hands of the lessor-petitioner in the assessment year 1980-81 ? (vii) In the facts and circumstances of the case, was not the receipt from the Coffee Board and the value of the stock taken over by the lessee firm assessable only in its hands for the assessment year 1980-81, by reason of diversion of income in its favour by an overriding title under the lease agreement ? " Heard counsel for the revision petitioner and Sri V. C. James, Senior Government Pleader, for the respondent. The first point argued by learned counsel for the petitioner is that in exercising the powers conferred on the Commissioner under section 34 of the Agricultural Income-tax Act, 1950 (for short, 'the Act"), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by section 9(2)(B) in the assessing authority and has to be exercised in the manner provided. It would not be open to the revising authority to assume that power." The matter was again considered by the Supreme Court in Swastik Oil Mills Ltd. v. H. B. Munshi, Dy. CST, AIR 1968 SC 843 ; [1968] 21 STC 383 ; [1968] 2 SCR 492. It was held that, whenever a power is conferred on an authority to revise an order, the authority is entitled to examine the correctness, legality and propriety of the order and to pass such suitable orders as the authority may think fit in the circumstances of the particular case before it. When exercising those powers, the authority is entitled to hold an enquiry or direct an enquiry to be held and, for that purpose, additional material can be admitted. The Supreme Court further held that if the proceedings were started suo motu, it must not be based on a mere conjecture and there should be some ground for invoking the revisional powers. The Supreme Court observed that the revising authority necessarily has the power to make such order as, in the opinion of that authority, the case calls for when the authority is satisfied that it is an appropriate case for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. That the Agricultural Income-tax Officer has been empowered under section 35 to serve a notice on the person liable to pay tax in respect of any agricultural income which has escaped assessment in any financial year or in a case where income has been assessed at too low a rate is no reason why the power conferred on superior authority under section 34 should not be invoked by him. The exercise of the revisional powers under section 34 by the respondent cannot, therefore, be said to trench upon the powers of the Agricultural Income-tax Officer under section 35 of the Act. The next ground of attack is based on the delay in exercising the powers under section 34 of the Act. The contention is that the exercise of the powers after expiry of five years from the end of the year in which the agricultural income was first assessable is unreasonable and irrational and hence unsustainable. No period of limitation is fixed under section 34 within which the Commissioner should exercise the powers conferred on him under that section. The question arises as to whether suo motu revision proceedings can be initiated at any time and whether any restriction has been imposed on such power. This B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. Since no time-limit is prescribed in section 34 of the Act for exercising the power of revision conferred on the Commissioner, it is possible for the respondent to invoke his power under that section even after the expiry of the period of five years provided under section 35(2) of the Act. But, in such cases, as observed by the court in Nelliampathy Tea and Produce Co. Ltd. v. Commr. of Agrl. I.T. [1991] 190 ITR 227 (Ker), the Revenue should demonstrate that there were circumstances beyond their control for not setting in motion the proceedings under section 34 before the above date. No reason is seen given by the respondent on this aspect. This is a question of fact on which no advertence has been made by the Commissioner. So the matter requires a remit to the Commissioner for consideration of this aspect. By annexure "D" order, the amount of Rs. 13,44,264.96 representing the amount realised by sale of coffee was assessed as the income of the firm to which the properties were leased by the petitioner. Admittedly, the amount was due to the petitioner, the coffee having been supplied by the petitioner before the grant of lease. The assessment happened to be in the name of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment had been made on the Hindu undivided family in respect of the same income, the Revenue had to make appropriate adjustments. The Supreme Court ultimately held that if the assessment proceedings initiated under section 34 (of the Indian Income-tax Act, 1922) culminate in the assessment of the Hindu undivided family, appropriate adjustments have to be made by the Income-tax Officer in respect of the tax realised by the Revenue in respect of that part of the income of the family assessed on the individuals of the said family. It is further observed that to do so is not to reopen the final orders of assessment, but in reality to arrive at the correct figure of tax payable by the Hindu undivided family. After referring to the judicial pronouncements on this aspect, the Supreme Court held that the Income-tax Officer has jurisdiction to initiate proceedings under section 34 of the Act, if the conditions laid down therein are complied with, against a person on the ground that the income, though it has been assessed in the hands of another, has escaped assessment in his hands. Those decisions do not deal with the connected question how the adjustments will have to be made to avoid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le, consumption or use in the manufacture or other process carried on by the assessee. The undertaking in the agreement to retransfer the stock-in-trade to the lessors at the time of termination of the agreement was also relied upon. The contention is that the transfer was of a going concern along with the stock-in-trade and the liability was to retransfer the properties together with the stock-in-trade handed over to the firm. From annexure "A", it does not appear that any consideration was received by the petitioner for the transfer of the stock-in-trade. According to counsel, the value of the stock-in-trade is liable to tax only if it amounts to agricultural income. In this connection, attention is drawn to the decision of the Supreme Court in S. S. Rajalinga Raja v. State of Madras [1967] 63 ITR 617. The Supreme Court was considering the provisions of the Madras Plantations Agricultural Income-tax Act, 1955, with special reference to the definition of agricultural income contained therein. A return was submitted by the assessee disclosing an income of Rs. 5,250 from the plantation. The Agricultural Income-tax Officer learnt that the appellant had sold stocks of cardamom of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear. The Appellate Assistant Commissioner accepted the contention of the assessee that the price of pepper should not have been included in the income for the previous year. The Tribunal reversed that decision and held that the price of pepper should be included in the income of the assessment year irrespective of the fact whether it had been sold or not in that year. On a reference to this court by the Tribunal, it was held that the pepper had not been sold, consumed or used and as such it is clear that the assessee had not derived any income so far as the produce is concerned. The produce received by the assessee who is carrying on agricultural operations is not income in his hands. It is observed that it would become income only when there is a sale of the commodity or consumption or use of the commodity in the business of the assessee. Merely because the produce from his lands was received by the assessee, it does not mean that he has derived any income chargeable to agricultural income-tax. It was also held that the question whether the assessee follows the cash system of accounting or the mercantile system of accounting is not really germane to this discussion. This court hel ..... X X X X Extracts X X X X X X X X Extracts X X X X
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