RAM BAI versus COMMISSIONER OF INCOME TAX

Citation: [1999] 1 S.C.R. 760 · Decided: 18-02-1999 · Supreme Court of India · Bench: D.P. WADHWA · Disposal: Appeal(s) allowed

Judgment (excerpt)

A 
RAM BAI 
-+ 
v. 
COMMISSIONER OF INCOME TAX 
FEBRUARY 18, 1999 
B 
[D.P. WADHWA AND M. SRINIVASAN, JJ.] 
Income tax Act, 1961: Sections 139(4) and 147(a). 
+ 
c 
Income T~AY 1965-66-Reassessment proceedings--lnitiation of By 
/To-No material to supp01t reassessment-Assessee's land acquired under 
Land Acquisition Act and compensation awarded-Subsequently, civil court 
enhanced compensation including solatium and interest which was affi1med 
by High Court-Assessee filed retum under S. 139( 4) disclosing interest on 
belated payment of compensation as her income-lTO rejected it as invalid, 
D initiated proceedings under S. 147(a) and issued notice-lTO obtained sane-
ti on for reassessment from CIT on the ground that the land acquired was not 
Ir 
agricultural land as it had not been subjected to agricultural operation and 
... 
the capital gains thereon were chargeable to income tax-Validity of-Held, in 
the absence of material to suppo1t reassessment, initiation of reassessment 
E 
proceedings, invalid--Land Acquisition Act, 1894. 
Section 256(1)-lncome Tax-Reference-Scope and power of High 
Court-High Court completely ignored and overlooked the findings off act 
rendered by CIT (Appeals) and ITAT-Fwther, it discussed the matter as if 
-' 
it was sitting in appeal and also assumed that the ITO had looked into the 
F Revenue records in order to reopen assessment-Co1Tectness of-Held, such 
r
a course adopted by High Court, not approved. 
"4. 
Practice and Procedure : 
~
G 
Precedents-High Court decision-Binding nature of-On subordinate 
[
courts and tn1mnals-Judgment of High Court reversed by Supreme Court 
long after reopening of assessment by ITO-However, ITO applied a test 
different from that laid down by High Court in that judgment-C01Tectness 
of-Held, at the time of reopening of assessment High Court judgment held 
<I 
the field and, therefore, binaing on ITO-Hence, ITO not justified in deviating 
H from the said High Court judgment. 
760 
...... 
RAM BAI v.C.l.T 
761 
New plea-Raising of-For the first time before Supreme Court-Such A 
a plea not raised before any authorities or courts below-Permissibility 
of-Held, not permissible-Constitution of India, 1950, Art. 136. 
The appellant assessee's land was acquired under the Land Acquisi-
tion Act, 1894 and the assessee was awarded compensation during the 
previous year relevant to the Assessment Year 1965-66. Subsequently, the 
civil court enhanced the compensation including solatium and interest. 
The same was affirmed by the High Court. The assessee filed a return 
under Section 139(4) of the Income Tax Act, 1961 disclosing the interest 
on the belated payment of compensation as her income. 
Tlie ITO rejected the return as invalid as it was filed beyond the 
period prescribed under Section 139(4) of the Act, initiated proceedings 
under Section 147(a) of the Act and issued a notice under Section 148. The 
ITO obtained sanction for reassessment from CIT on tht ground that the 
land acquired was not agricultural land as it had not been subjected to 
agricultural operation and the capital gains thereon were chargeable to 
income tax. 
B 
c 
D 
Accordingly, the ITO made an order of reassessment and initiated· 
penalty proceedings. But the CIT (Appeals) held that the ITO could not 
have any reason to believe that there was escapement of income as there E 
was no material whatever at that time to indicate that the lands. were 
non-agricultural. The Commissioner of Income Tax allowed the appeal 
and cancelled the order of assessment under Section 147(a). The High 
Court allowed the appeal filed by the Revenue. Hence this appeal. 
On behalf of the respondent-Revenue it was contended that the 
F 
interest accrued from year to year on the compensation paid to the 
assessee would have to be brought to assessment on protective basis and 
the same was sufficient to reopen the assessment, and that the land in 
question did not satisfy the test prescribed by this Court in Officer-i11-
Charge (Court of Wards) case. 
G 
Allowing the appeal, this Court 
HELD : 1.1. The Income Tax Officer has made an assertion in the 
communication to the Commissioner of Income Tax seeking sanction to 
reopen the assessment that the land in question was not subjected to H 
762 
SUPREME COURT REPORTS 
[1999] 1 S.C.R. 
A agricultural operation and that he had reason to believe the income 
chargeable to tax had escaped for the assessment year 1965-66 by reason 
of omission or failure on the part o

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