1976 (5) TMI 18 - SC - Indian Laws

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 ? Held that - 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. The appeals are allowed.

Issues Involved:
1. Jurisdiction of the Commissioner under section 34 of the Kerala Agricultural Income-tax Act, 1950.
2. Assessment of income that had "escaped assessment" under section 35 of the Kerala Agricultural Income-tax Act, 1950.
3. Time limitation for reassessment under section 35.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Commissioner under section 34 of the Kerala Agricultural Income-tax Act, 1950:
The core issue was whether the Commissioner had the jurisdiction to revise the assessment under section 34 of the Kerala Agricultural Income-tax Act, 1950. The respondent contended that the proposed revision of her late husband's income, which was said to have "escaped assessment," was outside the scope of section 34. The High Court, by a majority, held that the power of revision vested in the Commissioner under section 34 could not be invoked for assessing income that had "escaped assessment," which should be addressed under section 35. The Supreme Court, however, concluded that the Commissioner had jurisdiction under section 34 to make the order he did. The Court noted that "the power of revision is exercisable 'subject to the provisions of this Act'," and the Commissioner acted within his jurisdiction to remand the cases for fresh disposal according to law.

2. Assessment of income that had "escaped assessment" under section 35 of the Kerala Agricultural Income-tax Act, 1950:
The High Court found that this was a case of "escaped assessment" and that the power of revision under section 34 could not be utilized for reassessment of income that had escaped assessment, which should be done under section 35. The Supreme Court examined the relevant provisions and the facts of the case, noting that the Agricultural Income-tax Officer had allowed certain deductions after applying his mind to the claim. The Court held that this was not a case where the Agricultural Income-tax Officer omitted to assess any item of income disclosed in the assessee's return. Instead, it was a case where the Officer might have committed an error in allowing excessive deductions, but this did not constitute "escaped assessment." The Court stated, "Every case of under-assessment is not a case of escaped assessment," and supported this view with the precedent from Deputy Commissioner of Agricultural Income-tax and Sales Tax, Quilon v. Dhanlakshmi Vilas Cashew Co.

3. Time limitation for reassessment under section 35:
The High Court held that the Commissioner's order directing reassessment was invalid as it was made after the expiry of the period prescribed by section 35 for reassessment of income that had escaped assessment. The appellant contended that the second proviso to section 35 removed the time limitation for reassessment made in consequence of a direction under section 34. However, the Supreme Court, having determined that this was not a case of escaped assessment, found that this question did not arise for consideration. The Court concluded that the Commissioner's action under section 34 was within jurisdiction, and thus the time limitation issue under section 35 was irrelevant in this context.

Conclusion:
The Supreme Court allowed the appeals, holding that the Commissioner had jurisdiction under section 34 to revise the assessment and remand the case for fresh disposal. The question referred to the High Court under section 60(2) was answered in the affirmative. No order as to costs was made.

← Previous Next →