COMMISSIONER OF INCOME TAX Vs. AMBAT ECHUKUTTY MENON

JUDGEMENT

(1.) These six appeals by special leave preferred by the Commissioner of Income-tax from the judgments of the Kerala High Court are all inter-connected and arise out of different proceedings in relation to one assessment year only. They have, therefore, been heard together and are being disposed of by this judgment.

(2.) The assessee-respondent is a Hindu undivided family owning large agricultural lands in the State of Kerala. In 1905 the family purchased in court auction some lands covering an area of about 200 acres. There were two irrigational channels in the land drawing water from a river. According to the Sanad, there were about 772 trees of various kinds like Karimpana, coconut trees, jack trees, tamarind trees, Maruthu etc. There were other trees of spontaneous growth but they were not in one block. They were interspersed among the paddy fields as the land aforesaid was meant for paddy cultivation. By an agreement dated Nov. 28, 1960 the assessee sold to one Valappa Routher trees from about 60 acres of land forming part of the 200 acres aforesaid. Since the original term stipulated in connection with the payment of money by Rowther could not be adhered to by him, further agreements were entered into deferring and spreading the payments over some years. The assessee under the impression that the money which is received from Rowther on account of sale of trees was not chargeable to income-tax under the Indian Income-Tax Act did not file any voluntary return. On Feb. 28, 1963 the Income-tax Officer, Palghat wrote to the Karnavan of the assessee family pointing out that he had information that the assessee had leased certain private forests to Velappa Rowther for cutting timber; and that the assessee had received Rs.75,000/- during the relevant year. The corresponding assessment year would be 1961-62. The assessee was asked to explain why no voluntary return had been filed. In reply to the letter of the Income-Tax Officer the assessee wrote a letter dated the 3rd April, 1963 stating therein that there was no lease but an out and out sale of the entire standing timber trees except certain specified varieties and that the sale was effected with a view to extend wet or dry cultivation in its fields in the area; the receipts therefrom were of a capital nature or in any event it was an agricultural income. The assessee, however, concluded its letter by stating that he had no deliberate intention of avoiding to file any return.

(3.) Thereafter the Income-Tax Officer served a notice on the assessee under S.148 of the Income-tax Act, 1961, hereinafter called the Act. In response to the same the assessee filed a return on 25-3-1966 showing a total net income of Rs.626.63 paise for the previous year ending on 31-3-1961. The Income-tax Officer held that out of the total number of trees numbering 772 four varieties were not sold and roughly speaking the number of trees sold and allowed to be cut as per the agreement came to 367. The trees were of spontaneous growth and the whole of the amount of Rs.1,75,000/-, although the whole of it was not paid during the accounting year, represented the assessee's income which had accrued as per the terms of the agreement in that very year. He accordingly assessed the whole of the amount to income-tax.