Case: Commissioner Of Agricultural Income Tax, Trivandrum Vs. Smt. Lucy Kochuvareed

the agricultural income was first assessed though the first proviso to sub-section (2) extends the time for reassessment in a case where notice under sub-section (1) had been issued within the time prescribed by the sub-section, till the expiry of one year from the date of service of the notice even if at the time of reassessment the prescribed period of three years had elapsed. The second proviso to sub-section (2) states that the limitation of time prescribed by section 35 will not apply to an assessment or reassessment made in consequence of any direction contained in an order under section 31, section 32, section 34 or section 60. Section 36 empowers the authority which passed an order on appeal or revision, within three years from the date of such order, and the Agricultural Income-tax Officer within three years from the date of any assessment made by him, to rectify any mistake apparent from the record of the appeal, revision, assessment or refund, as the case may be. Sub-section (1) of section 60 provides that the assessee or the Commissioner may require the Appellate Tribunal to refer to the High Court any question of law arising out of an order under section 32(5). Sub-section (2) of section 60 permits an assessee who is served with a notice of an order under section 34 which is prejudicial to him to require the Commissioner to refer to the High Court any question of law arising out of such orderThe majority decision of the High Court took the view that this was a case of escaped assessment and that the power of revision conferred on the Commissioner by section 34 of the Act could not be, utilised for the purpose of reassessment of income that escaped assessment disregarding the provisions of section 35. Sub-section (1) of section 34 makes it clear that the power of revision is exercisable "subject to the provisions of this Act". It was pointed out in the majority judgment that section 35 contains a specific provision for reassessment of income that had escaped assessment and it was held that revisional powers under section 34 could be availed of to reopen cases of escaped assessment only within the time limit and in accordance with the procedure prescribed by section 35. Before us, Mr. Patel, learned counsel for the respondent, reiterated the same contention. Mr. Krishnamurthy Iyer appearing for the appellant challenged the decision of the High Court on two grounds : (1) the income sought to be reassessed was not income that had "escaped" assessment and, as such, the provisions of section 35 are not relevant for the present purpose ; and (2) assuming this was a case of income escaping assessment, even then the second proviso to sub-section (2) of section 35 removes the bar of time for any assessment or reassessment made to give effect to a direction under section 34. On the first question the High Court found, relying on the decision of this court in Maharajadhiraj Sir Kameshwar Singh v. State of Bihar that this was a case of escaped income. In Kameshwar Singhs case one of the provisions that came up for interpretation was section 26 of the Bihar Agricultural Income-tax Act, 1938, which is similar in many respects to section 35(1) of the Act we are concerned with in this appeal. It was held in Kameshwar Singhs case that under section 26 of the Bihar Act, the Agricultural Income-tax Officer was competent to "assess any item of income which he had omitted to tax earlier, even though in the return that income was included and the Agricultural Income-tax Officer then thought that it was exempt". The same view was taken in an earlier decision of this court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax that : "even if the assessee has submitted a return of his income, cases may well occur where the whole of the income has not been assessed and such part of the income as has not been assessed can well be regarded as having escaped assessment". But the question that arises in the case before us is not covered by either of these decisions. This is not a case where the Agricultural Income-tax Officer omitted to assess any item of income disclosed in the assessees return. Here the assessee made a full disclosure of his income and claimed certain deductions. It is not disputed that he was entitled to claim some deductions for the maintenance of the immature rubber plantation. The Agricultural Income-tax Officer allowed such deductions as he thought proper after considering the matter. The Commissioner in remanding the cases to the Agricultural Income-tax Officer "for fresh disposal according to law" thought that the deductions allowed were excessive. The Agricultural Income-tax Officer may have committed an error in allowing deductions to the extent he did, but he did so after applying his mind to the claim. Every case of under-assessment is not a case of escaped assessment. The view we take finds support from the decision of this court in Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Dhanlakshmi Vilas Cashew CoOn the other question, the High Court held that the order of the Commissioner directing the Agricultural Income-tax Officer to reassess the income for the two years was bad, having been made after the expiry of the period prescribed by section 35 for the reassessment of income that had escaped assessment. For the appellant it was contended that the second proviso to section 35 removed the limitation of time in the case of a reassessment made in consequence of a direction or order under section 34. As we have held that this was not a case of escaped assessment, this other question does not arise for consideration.5. In our opinion the Commissioner in this case had jurisdiction to make the order he did under section 34, and the question referred to the High Court under section 60(2) should, therefore, be answered in the affirmative.6.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]On the first question the High Court found, relying on the decision of this court in Maharajadhiraj Sir Kameshwar Singh v. State of Bihar that this was a case of escaped income. In Kameshwar Singhs case one of the provisions that came up for interpretation was section 26 of the Bihar Agricultural Income-tax Act, 1938, which is similar in many respects to section 35(1) of the Act we are concerned with in this appeal. It was held in Kameshwar Singhs case that under section 26 of the Bihar Act, the Agricultural Income-tax Officer was competent to "assess any item of income which he had omitted to tax earlier, even though in the return that income was included and the Agricultural Income-tax Officer then thought that it was exempt". The same view was taken in an earlier decision of this court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax that : "even if the assessee has submitted a return of his income, cases may well occur where the whole of the income has not been assessed and such part of the income as has not been assessed can well be regarded as having escaped assessment". But the question that arises in the case before us is not covered by either of these decisions. This is not a case where the Agricultural Income-tax Officer omitted to assess any item of income disclosed in the assessees return. Here the assessee made a full disclosure of his income and claimed certain deductions. It is not disputed that he was entitled to claim some deductions for the maintenance of the immature rubber plantation. The Agricultural Income-tax Officer allowed such deductions as he thought proper after considering the matter. The Commissioner in remanding the cases to the Agricultural Income-tax Officer "for fresh disposal according to law" thought that the deductions allowed were excessive. The Agricultural Income-tax Officer may have committed an error in allowing deductions to the extent he did, but he did so after applying his mind to the claim. Every case of under-assessment is not a case of escaped assessment. The view we take finds support from the decision of this court in Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Dhanlakshmi Vilas Cashew CoOn the other question, the High Court held that the order of the Commissioner directing the Agricultural Income-tax Officer to reassess the income for the two years was bad, having been made after the expiry of the period prescribed by section 35 for the reassessment of income that had escaped assessment. For the appellant it was contended that the second proviso to section 35 removed the limitation of time in the case of a reassessment made in consequence of a direction or order under section 34. As we have held that this was not a case of escaped assessment, this other question does not arise forour opinion the Commissioner in this case had jurisdiction to make the order he did under section 34, and the question referred to the High Court under section 60(2) should, therefore, be answered in the affirmative.