Calcutta High Court
Jasmine Commercials Ltd. vs Deputy Commissioner Of Income-Tax on 13 August, 1997
Equivalent citations: [2000]109TAXMAN172(CAL)
ORDER
At the centre of controversy in these nine petitions, being disposed of together by this common judgment, is the receipt of an amount of Rs. 99,95,929 received on 2-4-1991 and sought to be assessed as 'receipt of arrear rent' under the head 'lncome from business 'for the previous year ending 31-3-1992 corresponding to the assessment year 1992-93. Respondent No. 1, the assessing officer, passed the order on 28-2-1995 whereby he assessed the aforesaid amount of Rs. 99,95,929 as arrears of rent as the 'income from business'. This order was challenged by the petitioner before the Commissioner (Appeals) who vide his order dated 22-12-1995, while disagreeing with the assessment order passed by respondent No. 1 and allowing the appeal of the petitioner, held that the action of respondent No. 1 in including the aforesaid amount as being arrears of rent and as 'business income' of the petitioner for the assessment year 1992-93, was not in order and, accordingly, the Appellate Commissioner deleted the aforesaid amount from the assessment in the aforesaid assessment year and granted appropriate relief to the petitioner. Even though the revenue has filed an appeal against the order of the Commissioner (Appeals) before the Tribunal and the said appeal is still pending consideration, a notice under section 148 of the Income Tax Act, 1961 Income Tax Act was issued on 26-3-1996 whereby the respondent No. 1 observing that he has reasons to believe that the income of the petitioner for the assessment year in question chargeable to tax has escaped assessment within the meaning of section 147 of the Act, he proposed to reassess the income and, accordingly, required the petitioner to deliver to him a return in the prescribed form and other documents in support thereof. Identical notices were issued in respect of the first assessment year in all the nine petitions. These are the notices which are impugned in all these petitions. This also is the subject-matter of challenge by the petitioner.
2. Some facts relevant to the controversy between the parties may be briefly stated as below:
Dejoc, Tea Co. India (P.) Ltd. had purchased the property situated at No. 3 1, Shakespeare Sarani, Calcutta, from its previous owner in terms of a registered deed of conveyance executed on 30-11-1987 subject to the then existing lease for an unexpired period of 4 years which lease was in favour of the Consulate General of U.S.S.R. in Calcutta. The total lease period was 23 years out of which four years were still existing as on the date of purchase of the property by Dejoo Tea Co. India (P.) Ltd. because the original lease deed by the erstwhile owner of the said property was executed on 14-12-1957 in favour of the Consulate General of U.S.S.R. in Calcutta. The lease had commenced on 15-1-1958 and was to expire on 15-1-1981. As is noticed, since Dejoo Tea Co. India (P.) Ltd. had purchased the property on 30-11-1977, about 4 years of unexpired term of the lease still remained. On the expiry of the lease period as on 15-1-198 1, the lessee refused to vacate the property in question. In view of the protection enjoyed by the lessee under section 86 of the Code of Civil Procedure, 1908, it was not possible for the owner of the property to evict the lessee by filing a suit against it and, accordingly, the owner, ie.,DejooTeaCo. (P.) Ltd., filed various petitions before this court and the Supreme Court contending that section 86 was unconstitutional and ultra vires, etc., etc. However, this is not relevant for our purposes except to say that after a protracted litigation between the parties for a number of years a settlement was finally arrived at between Dejoo Tea Co. India (P.) Ltd. and the Consulate General of U.S.S.R. through the intervention of the Central Government and in pursuance of such settlement two agreements were executed between the parties on 2-4-1991 which, interalia, provided that the Consulate General of U.S.S.R. shall vacate the premises latest by 14-1-1996 and that from 15-1-1991 it shall be paying monthly rent at the rate of Rs. 2,83,246, and that it shall pay an aggregate sum of Rs. 90 lakhs calculated at the rate of Rs. 9 lakhs per year by way of compensation for continued occupation of the property for the period 15-1-1981 till 14-1-199 1. It is this clause of the agreement which has given rise to this petition. Admittedly, by the force of this agreement the aforesaid amount of Rs. 90 lakhs plus a further sum of Rs. 95,929 was received by the petitioner on 2-4-199 1.
Dejoo Tea Co. India (P.) Ltd. got merged and amalgamated with Jasmine Commercials Ltd., the petitioner No. 1 in this petition, with effect from 1-4-1991 in pursuance to an order dated 4-5-1992 passed by this court in Company Petition No. 81 of 1992. Consequent upon the aforesaid merger and amalgamation, all assets and liabilities of the said Dejoo Tea Co. India (P.) Ltd. with effect from April 1, 1991 stood vested in the petitioner company. Because of the aforesaid taking over of the assets and liabilities of Dejoo Tea Co. India (P.) Ltd., the petitioner has now come up in this court against the impugned notices issued under section 147, read with section 148. The reasons cited by respondent No. 1 in support of the impugned notices are that since the aggregate amount reflected arrears of rent at the rate of Rs. 9 lakhs per month and because the Commissioner (Appeals) refused to agree with respondent No. 1 that the aggregate amount can be assessed as 'income from business' for the assessment year 1992-93, the rent at the rate of Rs. 9 lakh per year being arrears of rent for the past 10 years be assessed as income for the previous year for which the rent was meant, relevant to the assessment year in question and, therefore, since this amount of Rs. 9 lakhs for each previous year relevant to the assessment year had escaped assessment, the assessing officer desired to reassess the income on this ground and, accordingly, asked the petitioner to furnish returns in the prescribed forms.
Main challenge to the impugned notice is based upon the ground that under section 147 four years is the maximum period of limitation provided whereby an assessing officer can initiate action for reassessment in a case where income has escaped assessment. It is alleged and contended that in this case since the impugned notices were issued on 26-3-1996, in respect of all the relevant assessment years for which reassessments were sought to be done, the limitation period of 4 years already stood expired and, therefore, the assessing officer had no jurisdiction to initiate action under section 147 and, hence, the notices impugned were bad in law.
3. It is also contended by the learned advocate for the petitioners that the proceedings under section 147 can be initiated after the expiry of 4 years from the end of the relevant assessment year only if two conditions are satisfied, viz., firstly, that the assessing officer has reasons to believe that income chargeable to tax has escaped assessment and secondly, that such assessment had escaped by reasons of the omission or failure on the part of the assessee to make a return under section 139 of the Act or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material f acts necessary for the assessment f or the relevant assessment year.
4. Under section 14 of the Act, all income for the purposes of charging income-tax and computation of total income has been classified under different heads of income and 'Income from house property', is one of such heads finding mention in clause (c) of section 14. Part (c) of Chapter IV of the Act containing sections 22 and 24 and section 27 deal with the chargeability of the income-tax arising out of income from house property. Annual value of house property has been defined in section 23. The contention of the learned advocate for the petitioners is that a combined reading of sections 22 and 24, read with section 27, clearly establishes that it is only the annual value of the property which is assessable to income-tax for any particular assessment year arising out of the income received in the previous year relevant to such assessment year.
5. If the contentions of the learned advocate for the petitioners are accepted, the inevitable conclusion which may appear is that the amount of Rs. 99,95,929 which the petitioner admittedly received as rent arrears and which admittedly constitutes the petitioner's income from house property is not liable to tax at all since proceedings under sections 147 and 148 cannot be initiated, firstly, because the said income cannot be called to have escaped assessment and secondly, since the petitioner cannot be accused of omission or failure to disclose fully and truly all material f acts, the limitation of 4 years would come into play and as the proceedings under section 147 are sought to be initiated admittedly after a period of 4 years, the assessing officer has no jurisdiction to do so. This coupled with the contention that in view of the definition of 'annual income' finding mention in section 23 the rent arrears for the previous years relevant to the assessment years cannot be charged to tax since it would not constitute the 'annual income' for those particular previous years.
Could it be the intention of the Legislature that such an income which has escaped assessment should be left untaxed? Is there a lacuna in the Act which does not provide for an eventuality, like the present one, where an income admittedly received in the course of an assessment year may be left tree from the charge of income-tax, if the interpretation put upon the aforesaid relevant provisions of the Act by the petitioner is accepted. 1 must say that the learned advocate for the respondents did appear to be at a loss to fully explore the true contours of the interpretation to these relevant sections so as to bring the said income within the purview of chargeability of the tax. The question involved is indeed high) vexed and requires an authoritative pronouncement by a larger Bench, after a more detailed and sustained consideration and examination. 1 am saying so because the issues involved in this case not only touch upon a very important and substantive question of law but also has the potential of affecting other identical matters in future. Reference to a larger Bench for hearing seems all the more imperative and important because there is no earlier precedent which can be relied upon while deciding the issues involved, either by way of any High Court judgment or the pronouncement by the Apex Court.
6. I am therefore, of the opinion that this case, for the foregoing reasons, should be heard by a larger Bench. I, therefore, direct that this file be placed before the Hon'ble acting Chief Justice for His Lordship's kind consideration to refer this case for hearing before a larger Bench in view the questions of law as involved and as mentioned in the foregoing paras.