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

One T. V. Kochuvareed who owned rubber plantations in Trichur was assessed by the Agricultural Income-tax Officer, Trichur, on a net agricultural income of Rs. 31, 662 and Rs. 30, 856, respectively, for the assessment years 1959-60 and 1960-61. The assessee had in his possession immature rubber plantation covering 193 acres during the assessment year 1959-60 and 293 acres during the assessment year 1960-61. In computing the income for the said two years, the Agricultural Income-tax Officer had disallowed out of the expenses claimed for the upkeep and maintenance of the immature area Rs. 2, 500 for the year 1959-60 and Rs. 3, 500 for the year 1960-61. T. V. Kochuvareed died in 1961 leaving behind him as his heir and legal representative his wife who is the respondent before us. On March 13, 1963, the Commissioner of Agricultural Income-tax issued a notice under section 34 of the Kerala Agricultural Income-tax Act, 1950, to the respondent, which was served on her on March 15, 1963, proposing to revise suo motu the assessment for the said two years on the ground that the deductions allowed were excessive and without any proper basis as a result of which Rs. 16, 800 for the year 1959-60, and Rs. 25, 800 for 1960-61 had "escaped assessment". The respondent was asked to file objections, if any, within fifteen days of the receipt of the notice. The respondent in her objection contended that the proposed revision of her husbands income which was said to have "escaped assessment" was outside the scope of section 34. On this objection another notice was served on her on September 26, 1966, stating that the expression "escaped assessment" used in the earlier notice was inadvertent and asking the respondent to file further objections, if she liked, after this clarification. The respondent filed further objections on October 12, 1966, which the Commissioner rejected by his order dated August 23, 1967, and remanded the cases to the Agricultural Income-tax Officer for fresh disposal. The relevant part of this order is as follows " In these circumstances I find that the disallowance of Rs. 2, 500 for 1959-60 and Rs. 3, 500 for 1960-61 towards upkeep and maintenance of immature area is irregular as it is not based on any rational method. The orders of assessment for these years are therefore set aside and the cases are remanded to the Agricultural Income-tax Officer, Trichur, for fresh disposal according to law after examining each item of expenditure individually and the general charges by applying the principles laid down by the Kerala High Court in its judgment reported in [1964] 52 ITR 629 (Commissioner of Agrl. Income-tax v. Johnsons Estates and Agencies (P.) Ltd.). "At the instance of the respondent the Commissioner of Agricultural Income-tax referred the following question of law to the High Court of Kerala under section 60(2) of the Kerala Agricultural Income-tax Act,Whether, on the facts and in the circumstances of the case, the Commissioner has jurisdiction to pass an order in this case under section 34 of the Agricultural Income-tax Act, 1950 ?High Court by a majority held that the power of revision vested in the Commissioner under section 34 of the Act could not be invoked for the purpose of assessing income that had "escaped assessment" and that such income could be assessed only by resorting to the procedure under section 35 of the Act. In these appeals by special leave the appellant questions the correctness of this decision.

Court's reasoning:
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.