1970 (8) TMI 25 - HC - Income Tax

Commissioner lacks jurisdiction for income reassessment under Agricultural Income-tax Act; court rules in favor of assessee.

The court held that the Commissioner lacked jurisdiction to reassess income under Section 34 of the Agricultural Income-tax Act, as this power is vested ... Kerala Agricultural Income Tax Act, 1950 - Commissioner exercised his revisional power to direct Agricultural Income-tax Officer to reopen an assessment and make a reassessment after the lapse of the period prescribed for issuing the notice u/s 35 - Whether Commissioner has jurisdiction to pass an order u/s 34 of the Agricultural Income-tax Act, 1950 Issues Involved:1. Jurisdiction of the Commissioner under Section 34 of the Agricultural Income-tax Act, 1950.2. Interpretation and application of Sections 34, 35, and 36 of the Agricultural Income-tax Act, 1950.3. Whether income had 'escaped assessment' under Section 35.4. The validity of the Commissioner's order dated August 23, 1967.5. The impact of the second proviso to sub-section (2) of Section 35 on the Commissioner's powers.Detailed Analysis:1. Jurisdiction of the Commissioner under Section 34 of the Agricultural Income-tax Act, 1950:The primary question referred to the court was whether the Commissioner had jurisdiction to pass an order under Section 34 of the Agricultural Income-tax Act, 1950, in the given circumstances. The court held that the Commissioner does not have the jurisdiction to reassess income that had escaped assessment under Section 34, as this power is specifically conferred upon the Agricultural Income-tax Officer under Section 35.2. Interpretation and Application of Sections 34, 35, and 36:The court examined Sections 34, 35, and 36 of the Act in detail. Section 34 grants the Commissioner the power to revise any proceeding under the Act, but this power is subject to the provisions of the Act. Section 35 deals with income escaping assessment and sets a three-year limit for the Agricultural Income-tax Officer to issue a notice and reassess such income. Section 36 allows for the rectification of mistakes within three years. The court emphasized that the Commissioner's power under Section 34 cannot override the specific provisions and limitations set forth in Sections 35 and 36.3. Whether Income had 'Escaped Assessment' under Section 35:The court referred to the Supreme Court decision in Maharajadhiraj Sir Kameshwar Singh v. State of Bihar, which clarified that income can be said to have 'escaped assessment' even if it was initially considered and exempted by the Agricultural Income-tax Officer. The court concluded that, in this case, the income had indeed escaped assessment, attracting the provisions of Section 35.4. The Validity of the Commissioner's Order Dated August 23, 1967:The Commissioner's order dated August 23, 1967, set aside the assessments for the years 1959-60 and 1960-61 and remanded the cases to the Agricultural Income-tax Officer for fresh disposal. The court found that this order was issued long after the expiry of the three-year period stipulated in Section 35 for reassessment. Therefore, the Commissioner acted without jurisdiction in issuing this order.5. The Impact of the Second Proviso to Sub-section (2) of Section 35 on the Commissioner's Powers:The court analyzed the second proviso to sub-section (2) of Section 35, which states that the limitation period does not apply to reassessments made in consequence of or to give effect to any finding or direction contained in an order under Section 34. However, the court clarified that this proviso does not enlarge the Commissioner's powers under Section 34. It only removes the time limitation for the Agricultural Income-tax Officer once a valid direction has been issued by the Commissioner within the stipulated period.Conclusion:The court answered the referred question in the negative, concluding that the Commissioner did not have jurisdiction to pass the order under Section 34 for reassessment of income that had escaped assessment. The decision was in favor of the assessee and against the department, with no order as to costs.