1967 (8) TMI 30 - HC - Income Tax

Kerala Agricultural Income Tax Act, 1950 - rebate on insurance premium - on noticing that the rebate was wrongly allowed in view of the second proviso to s. 10(e)(i) of the Act, the Agrl. ITO initiated proceedings u/s 35 and revised the assessment - held that improper allowance of rebate of insurance premium can be revoked by resort to s. 35 of the Travancore-Cochin Agrl. IT Act, 1950

Summary

Issues:
Improper allowance of rebate of insurance premium under section 35 of the Travancore-Cochin Agricultural Income-tax Act, 1950.

Analysis:
The respondent was assessed to agricultural income-tax for the assessment year 1959-60 under the Kerala Agricultural Income-tax Act, 1950. Initially, a rebate on insurance premium was allowed, resulting in a net tax payable of Rs. 2,226.97. However, upon realizing the improper allowance of the rebate, the Agricultural Income-tax Officer initiated proceedings under section 35 to revise the assessment. The Tribunal opined that this was not a case of income escaping assessment or being assessed at too low a rate, leading to the reference question regarding the revocation of an improper rebate allowance under section 35.

The court delved into the interpretation of section 35 in the context of the Act and relevant precedents. It was noted that section 35 falls between the revision power under section 34 and the power for rectification of mistakes under section 36. The court emphasized that the power under section 35 is not limited to cases of inadvertent escapement of income but also encompasses deliberate errors in applying the tax provisions during assessment proceedings. Reference was made to a Supreme Court decision regarding a similar provision in the Bihar Agricultural Income-tax Act, which clarified that the assessing officer can assess an item of income omitted earlier, even if it was included in the return and considered exempt at that time.

The court rejected the respondent's attempt to distinguish the Supreme Court decision, asserting that the interpretation of section 35 under the Kerala Agricultural Income-tax Act aligns with the Supreme Court's ruling on the Bihar Act. It was emphasized that the escapement of income from charge includes cases where a part of the income was not returned by the assessee or was considered exempt due to its nature, character, or eligibility for certain allowances. Even if an allowance or rebate was later found to be wrongly granted, the income left out of charge still falls under the purview of income escaping assessment. Consequently, the court answered the reference question in favor of the revenue, without imposing any costs.