1982 (11) TMI 41 - HC - Income Tax

Court Invalidates Rectification Order and Demand Notice, Citing Lack of Jurisdiction

EM Viswanathan Chettiar Versus Agricultural Income-Tax Officer

The court held that the rectification order and demand notice lacked jurisdiction and were illegal. It found that the respondent's claim of the Coffee ... Agricultural Income Tax, Mistake Apparent From Record, Rectification Issues: Jurisdiction of the respondent to issue show-cause notice and legality of the assessment order and demand notice.Analysis:The petitioner challenged a demand notice issued by the respondent for a tax amount of Rs. 23,480 for the assessment year 1978-79, based on a rectification order under s. 37 of the Karnataka Agricultural Income-tax Act. The rectification was related to the income from coffee for the accounting period 1977-78. The respondent proposed to assess the total income from coffee at Rs. 4,04,233.82 instead of Rs. 3,68,208.82, based on a price of Rs. 6.00 per point set by the Coffee Board, contrary to the petitioner's declared Rs. 5.50 per point. The petitioner argued that the rectification was unjustified, as the Coffee Board had declared the price at Rs. 4 per point for that year, and his return was based on market trends. The petitioner contended that the rectification order and demand notice were illegal.The power of rectification under s. 37 of the Act allows rectification of apparent errors within a specified period, which must be from the records of the case. In this case, the respondent's claim of the Coffee Board fixing the price at Rs. 6 per point was not supported by the records at the time of the original assessment. The petitioner's counsel cited a Supreme Court decision emphasizing that rectification cannot be based on changing opinions due to external factors. Additionally, the counsel highlighted a rule under the Agrl. I.T. Rules stating that any excess income received in a subsequent accounting period should be considered as income of the previous year, eliminating the need for rectification.The court agreed with the petitioner's arguments, stating that the rectification order and demand notice lacked jurisdiction and were illegal. The court held that the specific provision in the rules regarding excess income already covered the situation, making rectification unnecessary. As a result, the rectification order and demand notice were set aside, and the rule was made absolute with parties bearing their own costs.