Andhra HC (Pre-Telangana)
J. Raghothama Reddy vs Commissioner Of Income-Tax on 12 December, 1991
Equivalent citations: [1992]195ITR895(AP), [1992]61TAXMAN136(AP)
JUDGMENT V. Sivaraman Nair, J.
1. The Income-tax Appellate Tribunal has referred the question : "Whether, on the facts and in the circumstances of the case, there is material on record for the Commissioner to initiate revision proceedings ?" The reference R. C. No. 278 of 1982 was made under section 256(1) of the Income-tax Act, 1961. In R. C. No. 122 of 1985, the petitioner had obtained orders from this court under section 256(2) of the Act requiring the Appellate Tribunal to refer the following questions :
"(3) Whether, on the facts and in the circumstances of the case, the capital gains arising out of the acquisition of lands covered by survey No. 12 which was taken possession of by the Government on October 12, 1973, but in respect of which an award was passed on July 20, 1974, is taxable in the assessment year 1974-75 ?
(4) If the answer to the above question is in the affirmative whether the Commissioner can revise the order for 1974-75 without revising the assessment order for 1975-76 and whether the Tribunal has jurisdiction to direct deletion of the income for the assessment year 1975-76 while the appeal before it was in respect of the assessment year 1974-75 ?
(5) Whether capital gains in respect of survey number 12 can be said to arise in the assessment year 1974-75 when the dispute regarding the title to the land was cleared; only on July 3, 1974, relevant to the assessment year 1975-76 ?
(6) (a) Whether the order of the Commissioner revising the assessment of the assessee for 1974-75 without revising the consequential assessment order of the assessee's son for 1974-75 and 1975-76 results in assessment of the same income in the hands of both the assessee and his son ?
(b) Whether the Tribunal is justified in placing the burden of proving the assessment order of the assessee's son on the assessee and is justified in rejecting the contention of the assessee that it is for the Commissioner who seeks to revise the order, to bring on record the fact that the assessee's son was not assessed on his half share ?
(7) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in upholding the Commissioner's remand order, remanding the assessment proceedings to the Income-tax Officer and disbelieving the compromise memo, especially when Md. Khaja is on more, having died on January 1, 1978 ?
(8) Whether, on the facts and in the circumstances of the case, the Tribunal is justified in upholding the Commissioner's remand order, remanding the proceedings in respect of allowance of expenditure of Rs. 25,000 more so, when the vendor Narasingarao is dead ?"
which the Tribunal has refused in exercise of its powers under section 256(1) of the Act.
3. The short facts which are necessary for us to answer the questions which are referred to us are the following :
4. The two items of landed property belonging to the assessee were notified under section 4 of the Land Acquisition Act on September 22, 1966. That was followed by a declaration under section 6 read with section 17(1) of the Land Acquisition Act which was published on October 6, 1966. On November 17, 1966, the Land Acquisition Officer published a notice under section 9(1) of the Act. Fifteen days thereafter, the Land Acquisition Officer could have taken possession of the land. By virtue of section 17(1) of the Act, the land would have vested absolutely in the Government free from all encumbrances on the date on which possession was so taken. Even though the Land Acquisition could have taken possession of the land immediately after the expiry of fifteen days after the notice under section 9(1) and should reasonably, have so done in view of the opening words of section 17(1) of the Act, possession was taken only on October 12, 1973. Awards were passed in respect of two separate holdings on different dates, i.e., on October 29, 1973 and July 20, 1974. The Income-tax Officer brought the capital gains arising out of the awards passed by the Tribunal to tax in the respective assessment years relevant to the previous years in which the awards were passed and the amounts of compensation were received. The Commissioner sought to revise that order in exercise of his powers under section 263 of the Income-tax Act. He found that the date which was material for deciding the notional date of receipt for computation of capital gains was the date on which the land vested in the Government and that date being October 12, 1973, he revised the order of assessment so as to bring the entire amount of capital gains arising out of receipt of compensation, for acquisition of the two items of property, to tax during the assessment year 1974-75.
5. The assessee had a case that there was a tenant in possession of the two properties. He also advanced a case that the property belonged to the joint family consisting of himself and his son. Before the awards were passed, there was a compromise between the tenant, the assessee and his son, by which the compensation due was apportioned among them. That compromise was accepted by the Income-tax : Officer as genuine. The result was that the capital gains assessable to tax were considerably reduced. The Commissioner of Income-tax found that such reduction was erroneous and prejudicial to the interest of the Revenue. It was on that basis that the Commissioner revised the order under section 263 of the Income-tax Act.
6. The assessee filed an appeal before the Income-tax Appellate Tribunal which remanded the question of apportionment and the question of tenancy for determination by the Assessing Officer for the reason that there was no adequate material to sustain the case of the assessee. / The Tribunal, however, held that the Commissioner of Income-tax had sufficient material to justify exercise of his revisional jurisdiction under section 263 of the Income-tax Act. The Tribunal also found that possession of the property having been taken on October 12, 1973, after publication of a notification under section 17 and a notice under section 9(1) of the Act, the property had absolutely vested in the Government of Income-tax was right in directing assessment of the income arising therefrom for the assessment year 1974-75 in respect of both the properties.
7. It is from the above order of the Income-tax Appellate Tribunal that the above eight questions have now been referred to this court.
8. On the first question whether, on the facts and circumstances of the case, there was material on record for the Commissioner to initiate revisional proceedings, we need only state that the chronology of events as mentioned above is sufficient indication that the Commissioner had material justifying initiation of proceedings under section 263 of the Act. The relevant dates are not in dispute. The declaration under section 6 read with section 17 was published on October 6, 1966, thereby authorising the Land Acquisition Officer to take possession of both the items of property 15 days after the publication of section 9(1) notice. That notice was issued on November 17, 1966. It was thereafter that, on October 12, 1973, the Land Acquisition Officer took possession of both items of land. Irrespective of the date on which the award was passed, the provision of section 17 of the Act became operative, thereby vesting the land absolutely in the State Government. On these very facts, the Commissioner was justified in initiating proceedings under section 263 of the Income-tax Officer holding that the Income-tax Officer was erroneous in his order and such error had prejudiced the interests of the Revenue by splitting up the capital gains as assessable in two different assessment years. We, therefore, answer the question in R. C. No. 278 of 1982, against the assessee and in favour of the Revenue.
9. On question No. 1 in R. C. No. 122 of 1985, the submission of counsel for the assessee is that the long delay between November 17, 1966, when section 9(1) notice was published on October 12, 1973 when possession was actually taken, negatived the urgency for taking such possession. Counsel submits that such urgency is the basic requirement of section 17 and that having been negatived by the very conduct of the land acquisition authorities, vesting of the property in the Government pursuant thereto has to be ignored. Hid further submission is that if vesting under section 17(1) is out of the way, the provision which operates is section 16 of the Land Acquisition Act, which provides that possession can be taken only after the Collector has made an award under section 11 of the Act. Counsel, therefore, submits that the possession which was taken on October 12, 1973, must be treated as advance possession without reference of the provisions of section 17 of the Land Acquisition Act and such taking of possession has to be related to section 16 of the Land Acquisition Act. He submits that in that event, the date of vesting would be the date of passing of the award, and, therefore, the order of assessment passed by the income-tax Officer would be the order which should have been passed according to law. In that event, counsel submits that there would have been no error in the proceedings of the Income-tax Officer and there would have been no justification for revision of the assessment under section 263 of the Income-tax Act. He, therefore, submits that the Commissioner, in revising the order and the Appellate Tribunal in affirming the revisional order of the Commissioner have erred in law. Counsel referred us to the decision in Babu Singh v. Union of India, , to the effect that if there was inordinate delay after the Land Acquisition Officer invoked his power under section 17 of the Land Acquisition Act, that may reflect upon the exercise of power under section 17 and it may indicate that there was no urgency and, therefore, there was colourable exercise of power. We are not called upon to consider the effect of delay intervening between the notification invoking the urgency clause and the actual delivery of possession covered by the notification. We can only answer the questions put to us on the case stated. We shall not persuade ourselves to stray out of the clearly delineated limits of the advisory jurisdiction as confined to the question referred to us under section 256 of the Income-tax Act.
10. We are not persuaded to accept the submission of counsel on the effect of delay in taking possession after the notification under section 17 of the Land Acquisition Act. A plain reading of section 17 indicates that the Collector is entitled to take possession of the land mentioned in the notification on the expiration of fifteen days from the date of publication of the notice under section 9(1) of the Act, and "the said land vests absolutely in the Government free from all encumbrances". We understand the purpose of the section to be to enable the Land Acquisition Officer to take possession immediately. It does not create an obligation that the Land Acquisition Officer shall take possession the land immediately after the expiry of fifteen days of the publication of the notice under section 9(1) of the Land Acquisition Act. Counsel submits that the obligation to take possession within a reasonable time after publication of section 9(1) notice must be inferred from the opening words of section 17(1) of the Act "in cases of urgency". We understand the logic of the submission, but cannot, while exercising the jurisdiction to answer questions which are referred to us under section 256 of the Income-tax Act, so interpret the notification as to alter its effect and to convert possession to have been taken under any other provision of the Act. Had the assessed challenged the notification under section 17 he could perhaps have made use of the inordinate delay to succeed in avoiding the notification. The only question before us is the effect of the notification under section 17 and the taking of possession in due compliance with the provisions thereof. We are not persuaded to agree with the petitioner that we shall deemed it to be a possession taken under section 16 because of the delay involved in taking possession after the notification under section 17 and the publication of the notice under section 9(1) of the Land Acquisition Act.
11. In view of the above legal position, we have to answer the first question in R. C. No. 122 of 1985 against the assessee and in favour of the Revenue to the effect that October 12, 1973, the date on which possession was taken of the two items of property and on which date the properties vested in the State Government was the material date for purposes of bringing the income to assessment and that the relevant assessment year was 1974-75.
12. In respect of the other questions which have been referred in R. C. No 122 of 1985, counsel submits that, if we answer the earlier questions against the assessee, the Tribunal might be right in holding that there was no sufficient material on record, that there shall be a factual investigation and that a comprehensive remand was, therefore, justified.
13. Counsel submits that, in view of the comprehensive remand for a more detailed factual investigation, it is not necessary for him to press this court to answer those questions. In view of the above submissions we do not find it necessary to answer questions Nos. 2 to 6 in R. C. No. 122 of 1985.
14. In the result, we answer the question in R. C. No. 278 of 1982 in favour of the Revenue and against the assessee. We answer question No. 1 in R. C. No. 122 of 1985 also in favour of the Revenue and against the assessee. We decline to answer the other questions because it is not necessary for us to answer those questions because it is not necessary for us to answer those questions in view of the comprehensive remand and because the facts necessary to answer those questions are not before us.
Parties will suffer their respective costs.