VARKEY JACOB Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) Whether proceedings for imposing tax or reopening assessment for assessment years which have attained finality under existing law due to bar of limitation can be revived by the amendment of law which has no express provision of retrospective effect is the question to be considered in this case. Senior advocate Sri. V. Ramachandran appeared for the appellant and Sri. P. K. Ravindranatha Menon, senior Standing Counsel for the Income Tax Department appeared for the respondents. Appellant/petitioner is an unregistered firm and was a lessee of a rubber estate called 'Velanikkara Estate' which was acquired by the Government for establishing Agricultural University. The Government took possession of the estate in 1973 and determined the compensation in March, 1974. Being a lessee of the land, petitioner's share was assessed as Rs. 9,58,192/-. Not being satisfied, the matter was taken for reference under S.18 of the Land Acquisition Act and finally this Court by judgment in L.A.A. No. 247/1980 dated 28.1.1987 awarded compensation including solatium of Rs. 17,59,342/- as the petitioner's share with interest as provided under the Land Acquisition Act. On receipt of the amount, the petitioner was advised that they would be liable to pay tax on the interest granted on the compensation. Hence, it filed returns on 3.1.1990 showing the interest awarded as its income. Dispute in this case pertains to assessment years 1979-80 to 1984-85 for which also he filed returns on 3.1.1990. In these years, the petitioner had no other income than the interest from this amount.

(2.) In M. Jairam v. C.I.T., 1979 KLT 429 : 1979 (117) ITR 638 (Ker.), a Division Bench of this Court held that the entire amount of interest has to be assessed in the year in which it was received. But, the above view was overruled by a Full Bench of this Court in Peter John v. C.I.T., 1985 KLT 687 : 1986 (157) ITR 711 (FB). The Supreme Court in Rama Bai v. C.I.T., 1990 (181) ITR 400 (SC), finally held that interest on enhanced compensation for land compulsorily acquired under the Land Acquisition Act should be counted as having accrued year after year and such interest cannot be assessed to income tax in one lump sum in the year in which the order is made. Therefore, when the assessee filed returns, he spread over the interest for the years 1979-80 onwards. Returns were filed on 3.1.1990 after receipt of the amount. The department accepted the returns for the period from 1985-86 onwards, but did not accept the returns for the years 1979-80 to 1984-85 as filed out of time and issued notice under S.148 of the Income Tax Act for reopening the assessment. Thereafter, assessments were completed under S.143(3) accepting the statements filed by the assessee. In doing so, interest under S.139(8) and 217 of the Income Tax Act was also charged. The contention of the assessee was that notice issued under S.147(a) read with S.148 by the Income Tax authorities is illegal as assessee has disclosed the income and on that basis only assessments were made. Therefore, assessments can be made only under S.147(b) of the Income Tax Act and in view of S.149 the assessments beyond four years of the notice are time barred. The Commissioner in Ext. P13 order found that notices under S.148 were issued only after amendment of the Income Tax Act with effect from 1.4.1989 and therefore amended S.147 will apply. S.147(a) was wrongly quoted and as the notices were issued after 1.4.1989 only the amended section will apply and demand can be made within a period of 10 years.

(3.) It is well settled law that no tax in terms of Art.265 of the Constitution of India can be imposed, levied or collected except by the authority of law. When the wordings are clear, one has to go by the language used by the Legislature. In Cape Brandy Syndicate v. I.R.C., (1921) 1 KB 64 at P.71, it is stated as follows: