Gauhati High Court
Noorbari Tea Company (P.) Limited vs Income-Tax Officer, A-Ward And Anr. on 12 February, 1988
Equivalent citations: [1988]172ITR162(GAUHATI)
Author: B.L. Hansaria
Bench: B.L. Hansaria, S.N. Phukan
JUDGMENT B.L. Hansaria, J.
1. These applications under article 226 of the Constitution have challenged the validity of the notices issued to the petitioner-company under Section 148 of the Income-tax Act, 1961, hereinafter "the Act " concerning the assessment years 1965-66 to 1972-73. The purpose of issuing the notices is to reopen the assessments made for the years in question. The validity of the notices has been questioned on the ground that the Income-tax Officer had acted without jurisdiction. The legal position is that in a case where the jurisdiction of the Income-tax Officer is assailed in issuing notice under Section 148 of the Act, it is for the Department to satisfy the court about the existence of the same. This position has not been disputed before us, and rightly, by Shri Choudhury in view of the catena of decisions of the Supreme Court starting from Calcutta Discount Co. v. ITO [1961] 41 ITR 191 (SC). It is also well-settled that if the Income-tax Officer were to lack jurisdiction, notice under Section 148 can be quashed by this court in exercise of its power under article 226 of the Constitution.
2. The jurisdiction of the Income-tax Officer in issuing the notices has been assailed by the petitioner by referring to the reasons which the Income-tax Officer had recorded as required by Section 148(2) of the Act. A perusal of the reasons which find place in annexure-A against item No. 13 of the affidavit-in-opposition filed by the respondents shows that what had led the Income-tax Officer to issue the notices was the information derived by him that the assessee-company had earned short-term capital gains which had escaped assessment. It has been further stated in this connection that this material fact leading to the earning of the aforesaid capital gain was not disclosed by the assessee at the time of making assessments for the relevant assessment years.
3. The broad facts which led the Income-tax Officer to issue notices are that an area of land measuring 1458-OK-10L belonging to the assessee had been requisitioned on August 13,1964, under the provisions of the Defence of India Act, 1962, The land came to be acquired subsequently by notification dated March 9, 1971. 50% of the acquisition compensation had been received on March 20, 1970, (sic) and the remaining 50% on April 12, 1971, the total being Rs. 3,67,103. Though in the reasons recorded, the Income-tax Officer has made mention about the acquisition having been made on August 13, 1964, from the material on record, there is no doubt that the land had not been acquired on August 13, 1964, but had only been requisitioned. The acquisition really came on March 9, 1971, The point for determination, therefore, is whether the assessee-company can be said to have earned any capital gains prior to the acquisition of land on March 9, 1971.
4. Now, a reference to Section 45 of the Act shows that capital gain arises when there is a " transfer of capital asset" in the previous year. The word "transfer" has been defined in Section 2(47) of the Act to include compulsory acquisition of a capital asset under any law. It is thus apparent that there was no transfer before the land was acquired on March 9, 1971. Therefore, in so far as assessment years 1965-66 to 1971-72 are concerned, it cannot be said that there was any capital gain on the transfer of the land. We are, therefore, not required to examine the question whether the land in question could be said to form part of a "capital asset" of the assessee as defined under Section 2(14) of the Act because of its being agricultural in nature, as is the contention of the petitioner. Even if the land be held to be non-agricultural, it is apparent that the assessee-company had earned no capital gains on it in so far as assessment years 1965-66 to 1971-72 are concerned.
5. The next question is whether for the assessment year 1972-73, it could be said that income has escaped assessment because of the failure of the assessee to disclose fully and truly all material facts. So far as this assessment year is concerned, we find that a notice had been issued to the petitioner-company on March 6, 1973, as at annexure-V of the affidavit-in-reply in Civil Rule No. 384/1975 stating that the exemption claimed by the assessee for the compensation received by it on the ground that the acquisition of land (which was inadvertently mentioned as sale of land in the notice) was relatable to agricultural land was not acceptable, and so it did not qualify for exemption under Section 47(viii). The assessee-company, however, replied, vide annexure-VI dated March 31,1973, of the aforesaid affidavit, that the 1 and was certainly agricultural and to satisfy the Income-tax Officer, produced a certificate in this regard from the Land Acquisition Officer. It is after this correspondence that the assessment order for 1972-73 was passed on September 10, 1974, which did not treat the aforesaid receipt as income of the petitioner. Whether in fact the land was agricultural and whether it qualified to get exemption under Section 47(viii) are matters on which the Income-tax Officer, while passing the assessment order could have taken a view against the assessee but he did not. It may be stated here that it is well-settled that mere change of opinion cannot be regarded as a ground for entertaining the belief that income chargeable to tax has escaped assessment. This apart, it is clear from what has been stated above that there was no failure on the part of the assessee to disclose the fact of receipt of the aforesaid compensation by it.
6. In view of all that has been stated above, we are satisfied that the Income-tax Officer lacked jurisdiction in issuing the impugned notices under Section 148 of the Act. The same are, therefore, quashed. The petitions are allowed accordingly.