CONSOLIDATED COFFEE LIMITED Vs. AGRICULTURAL INCOME TAX OFFICER

JUDGEMENT

(1.) THE petitioner-company is a coffee grower. Its accounting year ended with June 30. THE writ petition pertains to the assessment year 1988-89 (previous year ending on June 30, 1987). THE petitioner submitted its annual return of income; along with the return the petitioner also submitted the audited accounts as well as the report of the auditor and a few other documents. THE first respondent who is the assessing authority decided to make a provisional assessment under section 20 of the Karnataka Agricultural Income-tax Act, 1957 ("the Act", for short) while considering the return filed by the petitioner. In the process, the first respondent thought it fit to issue a proposition notice pointing out that the petitioner had estimated the value of the coffee at Rs. 8 per point and the petitioner has not disclosed any definite and specific principle or basis for arriving at this rate of Rs. 8 per point.Consequently,the first respondent proposed to apply rule 9(c) of the Rules which provides for the valuation of points under certain circumstances According to the first respondent, the rate per point declared by the Coffee Bard for the years 1984-85, 1985-86 and 1986-87 were Rs. 8.60, Rs. 12 and Rs. 8.15, respectively. THE average of this came to Rs. 9.58. THE first respondent proposed to apply this rate to the points"returned" by the petitioner. It is unnecessary to refer to the other aspects referred to in the proposition notice. THE petitioner objected to this. THE objections were overruled and an order came to be passed by the first respondent under rule 12(2) of the Rules. According to the first respondent, the formula prescribed under rule 9(c) of the Rules for estimating the average rate for proposed by the first respondent in the proposition notice was applied while making an order under section 20 of the Act. This is under challenge in this writ petition.

(2.) MR. Sarangan, learned counsel for the petitioner, contended that the procedure adopted by the first respondent was beyond the scope of section 20 and that, while making a provisional assessment under the said provision, the first respondent is not permitted to traverse beyond the requirement of making a provisional assessment of tax for which purpose he had to proceed only in a summary manner.

(3.) AS per section 20(3), there is no right of appeal against a provisional assessment. Further, the other parts of the provision provide for adjustments to be made after a regular assessment. There is also a statement that nothing done or suffered by reason of, or in consequence of any provisional assessment made under the section shall prejudice the determination on the merits in issue which may arise in the course of regular assessment under section 19. A reading of sub-section (1) makes it clear that the assessing authority shall have to proceed in summary manner to make a provisional assessment of the tax payable by the assessee. Section 20 is not a mandatory stage to be followed by the assessing authority in every case. It is purely optional assessment of the tax payable by the assessee. Section 20 is not a mandatory stage to be followed by the assessing authority in every case. It is purely optional to the assessing authority either to make a provisional assessment order or not. In an appropriate case, he may have recourse to section 20 to make a provisional assessment of the tax payable by the assessee, which itself indicates that the assessing authority shall have to compute the tax payable by the assess under section 20 and this computation shall have to be made by recourse to a procedure which is summary. Nowhere does section 20 contemplate a power in the assessing authority to reject the basis of the return and apply the standards found reasonable by the assessing authority. Since the return of the assessee has to be accepted the assessee is denied the right of appeal against the provisional order of assessment. In Jaipur Udyog Ltd. v. CIT , the Supreme Court was considering the scope of section 141 of the Income-tax Act, 1961, which also provides for making an order of provisional order of assessment. In Jaipur Udyog Ltd. v. CIT , the Supreme Court was considering the scope of section 141 of the Income-tax Act, 1961, which also provides for making an order of provisional assessment. In the said case, the assessing authority recomputed the aggregate losses of earlier years on the basis of the computation in the regular assessments for certain earlier years and he raised a demand based on this recomputation ignoring the computation made by the assessee in its return. The Supreme Court held that it was not open to the Income-tax Officer to reject or ignore the claim of the assessee made in the return, while the Officer was proceeding under section 141. In this regard, the Supreme Court observed (at page 805) :