G. SIVARAJAN, J.: The matter arises under the Kerala Agrl. IT Act, 1991* The petitioner is a registered firm engaged in Agrlcultural and plantation operations and is an assessee to Agrlcultural Income-tax on the files of the respondent. The assessment of the petitioner for the year 1986-87 was originally completed as per Ext. P-3 assessment order dt. 14th Dec., 1987. The said assessment was sought to be reopened by issue of notice dt. 27th Feb., 1992 (Ext. P-7). The petitioner filed Ext. P-8 reply objecting to the reopening, but the assessing authority completed the assessment pursuant to Ext. P-7 as per order dt. 31st Oct., 1922 (Ext. P-9). The petitioner challenges Ext.P-9 order as void, illegal and without jurisdiction.
2. According to the petitioner, it has throughout been maintaining a hybrid system of accounts which was being fully accepted by the authorities till the asst. yr. 1986-87. It is stated that under that system the petitioner was returning as its income of the previous year, the entire pool income received by it during the year but deducting therefrom that which relates to the coffee pooled in the earlier years in respect of which it had estimated the price and accounted for in that earlier year and included also the estimate income receivable in respect of its stock at the end of the year. It was on such basis, it is stated, the petitioner filed its return for the earlier years and the method adopted had been fully accepted by the respondent and the assessment completed. The petitioner has produced copies of the assessment orders for the years 1984-85 and 1985-86 as Exts. P-1 and P-2. It is stated that in EA. P-1 and P-2 the assessing authority, in the column method of accounting, made the entry as 'cash'. According to the petitioner, since the accounts of the petitioner was accepted and the assessments were made on the basis of such accounts the petitioner had no reason to challenge those assessment orders in appeal. For the asst. yr. 1986-87 also the petitioner was following the same method and returned an income of Rs. 1,51,697.77 and the assessment was completed on a sum of Rs. 1,54,511.95 disallowing a sum of Rs. 2,820.18 from out of the expenses claimed by the petitioner by way of deduction. Here also, though the petitioner's accounts and the method of accounting for arriving at the assessable income of the year were accepted, in the column method of accounting it is shown as 'mercantile'. It is stated that for the very same reason stated for the years 1984-85 and 1985-86 the petitioner did not challenge the same in appeal. The petitioner has also produced Exts. P-4, P-5 and P-6 P&L a/c for the years 1984-85, 1985-86 and 1986-87 to show the method of accounting followed by the petitioner for the said three years. The respondent issued Ext. P-7 notice under s. 41 of the Act stating that as the petitioner has been following the mercantile system of accounting throughout, in the assessment for 1986-87 (Ext. P-3) there has been escapement of income and therefore, proposed to determine a sum of Rs. 5,04,686.07 as escaped income and to fix the total income at Rs. 6,59,200 in the place of Rs. 1,54,511.95 fixed as per Ext. P-3 assessment order. In the objection Ext.P-8 filed by the petitioner it is stated that the petitioner had all along employed the hybrid system of accounting and that so, long as the said method of accounting was uniformly followed and accepted the respondent was not competent to adopt a different method as it will, by no means, reflect the true and real income of the year. In the objection Ext. P-8 the petitioner has taken the stand that the notice Ext. P7 is beyond the time provided under sub-s. (2) of s. 41 of the Act. Further contention taken in the objection was that the petitioner has been consistently following the method of accounting in respect of coffee income by accounting the income actually received during the year under reference for the season and also valuing the stock at the estimated value which is based on the pooling agent's certificate and also accounting the excess realised in respect of earlier season received during the year under reference and that this is an accepted method of accounting in respect of coffee in the light of the decision in Mrs. D. G. Graig Jones vs. State of Karnataka (1984) 43 CTR (Kar.) 250 : (1984) 148 ITR 297 (Kar.) Further objection taken was that Ext. P-3 assessment order was passed by the assessing authority after due consideration of the method of accounting consistently followed by the petitioner and the successor assessing authority cannot resort to the provisions regarding reopening of the assessment on the same materials as it would amount to a mere change of opinion. It is also stated that the observations of the assessing authority in Exts. P-1 and P-2 that the petitioner has been following cash system and in Ext. P-3 that the petitioner has been following mercantile system are also contrary to the admitted method followed by the petitioner. The respondent in Ext. P-9 order rejected all the objections taken by the petitioner and completed the reassessment as proposed.
3. A counter-affidavit is filed by the respondent. It is stated in the counter affidavit that in column 4 of Ext. P-3 order the method of accounting is noted as 11 mercantile" and that the assessee-firm had not challenged the same in appeal. It is further stated that as per the P&L a/c filed by the petitioner the coffee value conceded was only Rs. 5,53,457.56, the break-up of which was also furnished. But as per the coffee valuation report for the season 1985-86 furnished by the pooling agency available at p. 47 of the assessment file, the petitioner had estimated the value receivable for the season at Rs. 5,26,870.19 and deducting the advance payment of Rs. 1,35,460.07 a further sum of Rs. 3,91,409.49 was estimated balance. It is stated that in the case of an assessee maintaining his accounts on the basis of cash system the only thing that is relevant is the price realised by him in the relevant previous year and that in the said system, income would be taxable when actually received whereas in the mercantile system it would be taxable in the year of receipt or on the date of entry of such receipt. It is further stated that in the instant case, admittedly the income is conceded on the basis of estimation and further the assessee-firm has also not disputed the system of accounting mentioned in the assessment order Ext. P-3. Regarding the method of accounting followed by the petitioner an stated in para 2 of the original petition, it is stated that the said averment is not correct. It is stated that in the statement of P&L a/c filed by the assessee for the year ended 31st March, 1986, relevant to the asst. yr. 1986-87 the income. conceded is indusive of the closing stock value of cardamom and balance coffee value receivable from Paulson Coffee Curing Works and, therefore, in arriving at the income the assessee has adopted the mercantile method of accounting and that is why the method of accounting was termed as mercantile in Ext. P-3 assessment order. It is further stated that for the asst. yr. 1985-86 also the method of accounting adopted is the same. It is also stated that the fact that the income disclosed by the petitioner has been accepted does not preclude the assessing authority from reopening the assessment as the details of excess payments came to the notice of the assessing authority only on 30th Oat., 1991 whereas the original assessment was completed as early as 14th Dec., 1987. It is further stated that the assessing authority has got power to reopen the assessment for any reason if income chargeable to tax under the Act has escaped assessment in any financial year or that it has been assessed too at low a, rate. Regarding the plea of bar of limitation it is stated that Ext. P-7 notice is well within time provided under s. 35 of the Agrl. IT Act, 1950, and under of the Kerala Agrl. IT Act, 1991.
4. Learned counsel appearing for the petitioner submitted that Ext. P-9 assessment order is null and void. He submitted that under s. 41(2) of the Act, no notice shall be issued under sub-S. (1) of s. 41 after the expiry of five years from the end of the relevant financial year unless the Commissioner is satisfied on the reasons recorded by the Agrl. ITO that it is a fit case for issue of such notice. The learned counsel, with reference to the provisions of sub-s. (2) of S. 41 read with the charging section. Sec. 3 and the definition of 'previous year' in sub-s. (22) of s. 2, submitted that the expression "relevant financial year can only mean the previous year and that in the instant case, since previous year for the asst. yr. 1986-87 ended on 31st March, 1986, the five years' period mentioned in s. 41(2) expired on 31st March, 1991, and therefore, the notice dt. 27th Feb., 1992, is issued beyond the time provided in s. 41(2). The learned counsel further submitted that the petitioner has been following the hybrid system of accounting as is evident from Exts. P-4, P-5 and P-6 P&L a/c which were accepted by the respondent in the assessment orders Ext. P-1 to P-3. The learned counsel also submitted that under the provisions of s. 40 of the Act the assessing authority is bound to compute the Agrlcultural income chargeable under the Act in accordance with the method of accounting regularly employed by the assessee and that in the instant case, it can be seen from Exts. P-1 to P-6 that the assessee has been regularly following hybrid system of accounting in so far as the income from coffee is concerned and it was being accepted by the assessing authority also. Learned counsel further submitted that the fact that in the Column 4 of Exts. P-1 and P-2 against method of accounting followed it is noted as cash system and in Ext. P-3 order it is noted as mercantile system will not in any manner alter the method of accounting following by the petitioner as is discernible from Exts. P-4 to P-6 P&L A/c acted upon by the assessing authority in Exts. P-1 to P-3 assessment orders. The learned counsel also submitted that the petitioner was not al all aggrieved by the assessment orders Exts. P-1 to P-3 as the accounts of the petitioner have been accepted by the assessing authority in the assessment ordes. The counsel also wanted to make a submission with reference to the provisions of s. 99 of the Act the that in respect of the matters which have become final under the Agrl. IT Act, 1950 there is no provision in the new Act for reopening the same.
5. I have heard the learned Government pleader appearing for the respondent. He reiterated the submissions made in the counter-affidavit and particularly submitted that the assessing authority derives the power to reopen an assessment when it is satisfied that the Agrlcultural income chargeable has escaped assessment in any financial year for any reason by virtue of the provisions of s. 35 of the Agrl. It Act, 1950, and s. 41 of the Kerala Agrl. IT Act 1991. The government pleader submitted that reassessment in the case is well within the limits of law. He futher submitted that the fact that the assessment for the year has been completed earlier will not be a bar for taking proceedings under s. 35 of the old Act and under s. 41(1) of the new Act even if the same is the result of a change of opinion on the part of the same officer or if the assessing authority is of opinion that income assessable under the Act has escaped assessment or that it has been assessed at too low a rate. The government pleader also submitted that notice under s. 35/41(2) of the Act is well within the period provided under s. 35 of the Act, in that, five years period from the end of the assessment year expires only on 31st March, 1992. He submitted that notice under s. 41 was issued on 10th Jan., 1992 and served on the assessee on 16th Jan., 1992, as per the acknowledgment available in the assessment file. He further submitted that the method of accounting adopted by the petitioner is as noted in the original assessment order (Ext. P-3) mercantile in which case the sum of Rs. 2,60,644.28 chargeable to tax has escaped assessment which was rightly included by the respondent in the re-assessment order Government pleader accordingly submitted that the re-assessment order Ext. P-3 is perfectly valid. He also submitted that the petitioner has got an effective alternate remedy by way of an appeal as provided under s. 72 of the Kerala Agrl. IT Act, 1991, and that the petitioner has approached this Court without availing the said remedy.
6. I shall first dispose of the contention taken by the government pleader that the writ petition under Art. 226 of the Constitution of India is not maintainable. According to the respondent, against Ext. P-9 assessment order an appeal is provided under s. 72 of the Kerala Agrl. IT Act, 1991, and the petitioner can agitate all the matters agitated in this original petition successfully in the appeal provided under s. 72 of the Act and no special circumstances exist for exercise of the extraordinary jurisdiction under Art. 226 of the Constitution of India. The contention of the counsel for the petitioner, on the other hand, is that Ext. P-7 notice and Ext. P-9 reassessment order are null and void. This original petition is filed as early as 16th Dec., 1992. The same was admitted and has been pending for the last five years. In these circumstances, it will not be proper on the part of this Court, at this point of time, to throw away the writ petition on the ground that an alternate remedy by way of appeal is provided under the stature. In the light of the above. I do not accept the contention of the respondent regarding the maintainability of this original petition.
7. Now I shall deal with the contention of the petitioner that the reassessment proceedings are barred by limitation. For the said purpose, it is necessary to refer to the relevant provisions of the Act. Sec. 3 is the charging section. Sub-s. (1) thereof reads as follows :
"(1) Tax at the rate or rates specified in the Schedule to this Act shall be charged for each assessment year in accordance with the subject to the provisions of this Act, on the total Agrlcultural income of the previous year of every person."
Assessment year is defined in s. 2(9) as follows :
"(9) `assessment year means the period of twelve months commencing on the 1st day of April every year."
Previous year is defined in s. 2(22) of the Act as follows :
"(22) previous year means the financial year immediately preceding the assessment year."
Sec. 41 of the Act, sub-s. (1) and (2) thereof which gives power to the assessing authority to reopen the assessment reads as follows :
"41. Income escaping assessment.(1) If for any reason Agrlcultural income chargeable to tax under this Act has escaped assessment in any financial year or has been assessed at too low a rate, the Agrl. ITO may at any time within ten years of the end of that year and subject to the provision of sub-2. (2), serve on the person liable to pay the tax, a notice containing all or any of the requirements which may be included in a notice under sub-s. (2) of s. 35 and may proceed to assess or reassess such income and the provisions of this Act, shall, so far as may be apply accordingly as if the notice were a notice issued under that sub-section.
Provided that the tax shall be charged at the rate at which it would have been charged if such income head not escaped assessment or full assessment, as the case may be :
Provided further that the Agrl. ITO shall not issue a notice under this sub-section unless he had recorded his reasons for doing so.
(2) No notice shall be issued under sub-s. (1) after the expiry of five years from the end of the relevant financial year unless the Commissioner is satisfied on the reasons recorded by the Agrl. ITO that it is a fit case for issue of such notice."
As per s. 41 of the Act, if Agrlcultural income chargeable to tax under the Act has escaped assessment in any financial year, the assessing authority may, at any time within ten years of the end of that year, serve a notice and may proceed to assess or reassess such income. Sub-s. (2) further says that no notice shall be issued under sub-s. (1) after the expiry of five years for the end of the relevant financial year unless the sanction of the commissioner is obtained. The contention of the petitioner is that the words `financial year, `that year and `relevant financial year unsaid in s. 41(1) and (2) refer to the `previous year and not to the assessment year. Under s. 3 which is the charging section, the income which is chargeable to tax for each assessment year is the income of the previous year. Assessment year is defined in s. 2(9) as the period of twelve months commencing on the 1st day of April every year. Previous year is also defined in s. 2(22) as the period of twleve months immediately preceding the assessment year. In the context of the definition of assessment year and previous year if we look to s. 41 and consider the expressions `financial year and the `relevant financial year used in sub-ss. (1) and (2) thereof, it appears to me that the expression `financial year would only mean the assessment year. For, the definition of the assessment year is the same as the financial year which is the period of twleve months commencing from the 1st day of April every year. In this context, it must be noted that the assessment under the Act is in respect of the income of the previous year relevant to the assessment year which is the twelve months preceding the assessment year. The obligation to file the return under the Act arises only after the previous year is over and in the month of July of the assessment year and subsequently (vide s. 35 of the Act). Under sub-s. (2) of s. 35, if any person who. According to the assessing authority, is assessable to tax under the Act, the said authority may before the end of the relevant assessment year issue a notice to such person requiring him to furnish a return of his Agrlcultural income. Here, the expression used in relevant assessment year. Sec. 39 provides for assessment. Under s. 41 of the Act, if income chargeable to tax has escaped assessment in any financial year, notice can be issued. It must be noticed that the section mentions about the escapement of income in any financial year which question arises only in the assessment year and not earlier. Therefore, it necessarily follows that `financial year, `that year and `relevant financial year refereed to in s. 41(1) and (2) can only mean the `assessment year and not the previous year.
8. In the instant case, the petitioner has no case that the notice under s. 41 of the Act was issued beyond five years from the end of the assessment year. Its case is only that the notice is issued beyond five years from the end of the previous year. Hence, there is no merit in the said contention of the petitioner and it is rejected. There is also no merit in the contention of the petitioner that no notice can be issued under. S. 41 of the Act on the same set of fact based on which the assessment has been originally completed.
9. It is relevant to note that s. 41 of the Act starts with the words `if for any reason. This Court has occasion to consider the scope of the expression `if for any reason in Inmail vs. State of Kerala (1979) 43 STC 123 (Ker.) in the context of the provisions of s. 19 of the Kerala General ST Act. Repelling the contention of the assessee in that case that on a mere change of opinion on the same materials the assessment already completed cannot be reopened the Division Bench of this Court observed that the wide and comprehensive way in which s. 19 opens is sufficient to make it clear that the power of reassessment can be exercised if, for any reason, the whole or any part of the turnover of a dealer has escaped assessment or has been assessed at a lower rate. It is further observed that the reason being immaterial, it is on the terms of section of no consequence whether what happened was a mere change of opinion on the part of the succeeding officer from that formed by his predecessor. The same view has been taken by subsequent Division Benches also. Hence the said contention is also rejected.
10. Now coming to the contention of the petitioner that it has consistently been following hybrid system of accounting in so far as it relates to the amounts realisable on the coffee delivered to the pool, it has to be held that there is merit in the submission of the counsel. The petitioner in the objection to the reassessment notice filed before the respondent, had stated that it has been consistently following the method of account in respect of the coffee income by accounting the income actually received during the year under reference for the season and also valuing the stock at the estimated value which is based on the pooling agents certificate and also accounting the excess realised in respect of earlier season received during the year under reference. It is also stated that this is the accepted method of accounting in respect of coffee in the light of the decision Miss D. G. Graig Jones vs. State of Karnataka (supra). It is also stated that at the time when the assessment was completed the Coffee Board had not declared the final dividend ad so it has accounted actual receipts and reasonable estimate was made in respect of the balance value to be received based on the pooking agents certificate and actual receipts during the year under reference in respect of earlier periods are also taken. The petitioner contended that this principle should not be given a go-by merely because within the prescribed time for reopening the Coffee Board declared dividends. It is stated that such declaration subsequent to the year under reference gets duly accounted in the year of receipt as per the method of accounting all along followed. The petitioner had also stated that the assessments for the earlier years were completed accepting the above method of accounting. It was also pointed out that in the assessment year concerned also the assessment was completed accepting the said method of accounting. It was further pointed out that an assessee is entitled to any method of computation of different sources of income and that the assessing authority is bound to accept the same. The petitioner in support of the said submission relied on the provisions of s. 7 of the Kerala Agrl. IT Act, 1950, and the corresponding provision, s. 40 of the present Act. The assessing authority has rejected the above contention stating that for all the previous years the assessment of the petitioner was completed treating the system of accounting as mercantile and that the assessee has not questioned the same so far. It is further stated that the income conceded by the petitioner for the purposes of assessment in each year is estimated on the basis which is the procedure followed in the mercantile system of accounting and that it is now settled that in the case of assessee following the mercantile system of accounting the entire payment for the coffee pool during a particular season has to be assessed in the year in which the entry regarding sale of coffee to the Coffee Board was made in the books of accounts of the assessee and, therefore, the petitioner disputes this system now.
11. From the above, it would appear that the assessing authority did not accept the contention of the petitioner that the return of income based on the hybrid system of accounting was not accepted on the ground that for the earlier assessment years, the system of accounting maintained by the assessee was determined as mercantile and that this year also the system of accounting maintained by the petitioner is mercantile.
12. In this connection, it has to be noted that as per the provisions of s. 40 of the Act (s. 7 of the earlier Act) Agrlcultural income chargeable to tax shall be computed in accordance with the method of accounting regularly employed by the assessee. Form the above, it is clear that if an assessee has been maintaining a particular system of accounting regularly it is obligatory on the IT authorities to adopt that system in computing the income (See Kerhave Mills vs. CIT AIR 1953 SC 187). If an assessee is following the method of accounting of Agrlcultural produce in a particular manner even if the system followed is a queer one, it is called a hybrid system and is an acceptable one [vide Vaidyanatha Mudaliar vs. State of Madras (1976) 104 ITR 444 (Mad) . The assessee had clearly stated that it has been following the hybird system of accounting and has also produced the copies of the P&L a/c for the years 1984-85, 1985-86 and 1986-87 and submitted that the computation made on the basis of the above P&L a/c was accepted and, therefore, the assessing authority cannot refuse to accept the said method of computation in proceedings under s. 41 of the Act, for, it would amount to change of the system of accounting, which is against the provisions of s. 40 of the act. The assessing authority has not denied the statement of the petitioner that for the asst. yrs. 1984-85, 1985-86 and 1986-87 it had accepted the method of computation based on Exts. P-4 to P-6 P&L a/c. The assessment order for the year 1984-85 (Ext. P-1) shows that the method of accounting followed by the petitioner is cash and the assessment order for the year 1985-86 (Ext. P-2) again shows the system as cash. But in the assessment order for the year 1986-87, the system of accounting is shown as mercantile. But the fact remains that for all the aforesaid three years, the computation of income made by the petitioner based on the P&L a/c Exts. P-4 to P-6 were accepted with minor variation. The mere fact that the said assessment orders showed the system of accounting as `cash or mercantile itself cannot be taken as a ground to reject the contention of the petitioner that the system of accounting followed by it is hybird, which is evident from the P&L a/c (Exts. P-4 to P-6) and the computation made on that basis accepted in the said assessment orders. According to me, the respondent should have considered the matter independently and on the basis of Exts. P-4 to P-6 P&L a/c and the assessment completed on that basis. Since the respondent had not considered the question independently and in the light of Exts. P-4 to P-6 P&L a/c and the assessment orders Exts. P-1 to P-3 apart from the system of accounting noted therein, I am of the opinion that the said question must be directed to be considered afresh by the respondent.
13. I accordingly quash the assessment for the assessment for the year 1986-87 dt. 31st Oct., 1992 (Ext. P-9). I direct the respondent to complete the assessment afresh in accordance with law and in the light of the observations contained in this judgment, with notice and opportunity to the petitioner. It is open to the petitioner to adduce further evidence in support of the contention that it has been consistently following the hybrid system of accounting. The respondent will consider the said question without being influenced by the fact that for the earlier years the system of accounting maintained by the petitioner is noted as `cash or `mercantile.
The original petition is allowed. But in the circumstances of the case, there will be no order as to costs.