1. These references at the instance of the assessee arise from the orders passed by the Deputy Commissioner of Agricultural Income-tax, Cannanore, dated August 14, 1989, and August 24, 1989, in exercising his power under Section 34 of the Agricultural Income-tax Act, 1950. Order No. El, 8117 of 1987 dated August 14, 1989, relates to the assessment year 1977-78 and Order No. E1, 11029 of 1988-I dated August. 24, 1989, relates to the assessment years 1978-79 and 1979-80 whereas Order No. El-11029 of 1988-2 dated August 24, 1989, relates to 1980-81 to 1982-83. Following are the questions referred to this court under Section 16(3) of the Agricultural Income-tax Act, 1950 :
'1. Whether an assessment decided by an appellate authority can be again taken up under Section 34 by the Deputy Commissioner in revision ?
2. Whether there are any escapement of income in these cases and is it not a mere 'change in opinion' to disallow expenses already allowed in assessments ?'
2. The relevant facts are as follows : The present assessee is the legal heir of the late Sri Karimbil Kunhikoman who was assessed under the Agricultural Income-tax Act for the assessment years 1977-78, 1978-79, 1979-80, 1980-81, 1981-82 and 1982-83, as per orders dated November 26, 1980, November 20, 1985, November 20, 1985, January 24, 1986, January 24, 1986 and January 25, 1986, by the Agricultural Income-tax Officer, Hosdurg. Appeals were filed by the assessee before the Appellate Assistant Commissioner, Cannanore, in respect of the assessment years 1977-78, 1980-81, 1981-82 and 1982-83. The Appellate Assistant Commissioner remanded the matter to the assessing authority and fresh assessment for the year 1977-78 was completed on November 20, 1985. Assessment for the years 1980-81 to 1982-83 are pending finalisation.
3. At this juncture, the Deputy Commissioner of Agricultural Income-tax issued notice dated November 1, 1988, invoking his power under Section 34 of the Agricultural Income-tax Act, proposing to cancel the assessment for the year 1977-78 on the ground that the deduction granted to the assessee to an extent of Rs. 29,715.10 towards basic tax paid and therefore tax payable under the original assessment as well as the revised assessment was irregular. Since the assessee has derived income only from 20 per cent. of the area out of the 1109.88 acres of land and the balance extent was either immature area or waste land, the basic tax paid in respect of the immature area should have been disallowed. It was stated that as per Section 5(a) of the Agricultural Income-tax Act, as amended with effect from April 1, 1974, basic tax and other land revenue paid can be deducted only in respect of yielding land from which agricultural income is derived. The omission to apply the above provision had resulted in excess allowance as expense to an extent of Rs. 23,773.
4. Pursuant to the receipt of notice, the assessee filed objections contending that the proposal to reopen the assessment was unjust and barred by limitation. It was contended that the entire area for which basic tax was paid was used directly or indirectly for agriculture and, therefore, the same has to be considered for the purpose of assessment. Rejecting the objection raised by the assessee, the Deputy Commissioner passed an order on August 14, 1989, cancelling the assessment order for the year 1977-78 and remitting the case back to the Agricultural Income-tax Officer for fresh disposal, according to law. The revisional authority took the view that as per Section 5(a) of the Agricultural Income-tax Act which was amended with effect from April 1, 1974, the amount paid as basic tax and land revenue is deducted only to the extent of the amount paid in respect of the yielding land.
5. Notice dated November 17, 1988, was issued by the Deputy Commissioner of Agricultural Income-tax invoking his power under Section 34 of the Agricultural Income-tax Act proposing to cancel the assessments for the years 1978-79 and 1979-80 for two reasons : (1) At the time of final assessment for the years 1978-79 and 1979-80 a sum of Rs. 18,600 was allowed for each year towards salary given to the Superintendent, Karisthan, etc., but as per vouchers produced by the assessee salary paid to the Superintendent, Karisthan, etc., would come to only Rs. 16,800 for each year, and (2) in the return filed for the year 1978-79 the assessee disclosed that 1,500 rubber trees were being tapped and conceded 11 1/4 quintals of rubber. But the income from this item was omitted to be taken into account while completing the assessment for 1978-79 and 1979-80. In response to the notice, the assessee filed her objections contending that the proposal to reopen the assessment was unfair and it would amount to harassment of the legal heirs of the late assessee even if he had committed a mistake in submitting the return. They also contended that if loss was caused to the Revenue by way of negligence of the officers it will not be a ground for reopening the settled dispute. The revisional authority repelled the contentions and by order dated August 24, 1989, cancelled the assessment orders for the years 1978-79 and 1979-80 and remitted the case back to the Agricultural Income-tax Officer, Hos-durg, for fresh disposal according to law. The revisional authority took the view that since the assessee had disclosed in her return for the year 1978-79 that 1,500 rubber trees were being tapped and she had conceded 11 1/4 quintals of rubber, the income on that basis should have been assessed.
6. Another notice dated November 17, 1988, was issued by the Deputy Commissioner of Agricultural Income-tax and Sales Tax, Kannur, in exercise of his power under Section 34 of the Act to cancel the assessments made for the years 1980-81 to 1982-83. The reason given in such proposal was that in the return filed for the year 1978-79 the assessee had disclosed that 1,500 rubber trees were being tapped and she had conceded 11 1/4 quintals of rubber, but the income from this item was omitted to be taken into account while completing the assessment for the years 1980-81 to 1982-83. The assessee filed her objection contending that she has not committed any mistake and if any loss was caused to the Revenue due to negligence of the officers, the assessee (legal heir of original assessee) cannot be penalised. Rejecting the above contentions, the revisional authority passed an order dated August 24, 1989, cancelling the assessment orders for the years 1980-81 to 1982-83 and remitting the case back to the Agricultural Income-tax Officer, Hosdurg, for fresh disposal according to law.
7. The first contention put forward by learned counsel for the assessee is based on the principle of merger. He submitted that the original assessment order for the year 1977-78 had been taken in appeal by the assessee and pursuant to the order passed by the Appellate Assistant Commissioner, a revised order was passed on November 20, 1985. It was thereafter notice was issued under Section 34 on November 1, 1988 and order cancelling the assessment for the year 1977-78 was passed on August 14, 1989. He also pointed out that for the years 1978-79 and 1979-80, the original assessment orders dated November 12, 1981, were the subject-matter of petitions under Section 19 of the Act and revised orders were issued on November 20, 1985. Subsequently, notice dated November 17, 1988, was issued invoking Section 34 and the final order was passed on August 24, 1989. For the years 1980-81 to 1982-83, the assessee had filed appeals before the Appellate Assistant Commissioner who had allowed the appeals on August 21, 1987, and directed the assessing authority to pass fresh assessment order. It was thereafter notice under Section 34 was issued on November 17, 1988, and the order passed on August 24, 1989.
8. It is contended by learned counsel for the assessee that as far as the assessment orders 1977-78 and 1980-81 to 1982-83 are concerned, they have merged with the orders passed by the appellate authority and, therefore, the Commissioner of Agricultural Income-tax had no jurisdiction to invoke the powers under Section 34 of the Act. Learned counsel placed strong reliance on a Bench decision of this court in Anantha Mallan v. Commr. of Agrl. I. T. : [1963]47ITR93(Ker) . In the above case, this court was considering the provisions contained under the Madras Agricultural Income-tax Act, 1950. It was held that if the Commissioner feels aggrieved by an order made by the Appellate Assistant Commissioner of Agricultural Income-tax, the proper procedure to be adopted by him is to direct the Income-tax Officer to file an appeal before the Appellate Tribunal. It would not be proper for him to exercise his revisional powers under Section 34 of the Act as such a procedure would contravene the rule of natural justice and that no one should be a judge in his own cause. According to learned counsel for the assessee, the above decision would apply to this case. Another decision of this court relied on by learned counsel for the petitioner is in Oommen v. Commr. of Agrl I.T. [1963] KLJ 211. In the above case even though an attempt was made for reconsidering the earlier decision of this court in Anantha Mallan v. Commr. of Agrl. I. T. : [1963]47ITR93(Ker) , it was not successful.
9. The learned Government Pleader, on the other hand, would submit that in the facts of the case no contention can be successfully raised by the assessee on the principle of merger. He submits that the subject-matter of the appeals before the Appellate Assistant Commissioner for the years 1977-78 and 1980-81 to 1982-83 is entirely different from the grounds on which the revisional authority had issued notice under Section 34. According to the learned Government Pleader, it is not in all cases that a revisional authority is prohibited from invoking his power under Section 34, when the assessment order had been taken in appeal by the assessee. It is only when the very same point involved in the notice issued under Section 34 had been the subject-matter of the appeal, that it can be said that the revisional authority has no jurisdiction to initiate proceedings under Section 34. In support of his contention, he relies on a decision of the Supreme Court in CIT v. Amritlal Bhogilal and Co. : [1958]34ITR130(SC) and a decision of this court in CIT v. S. Ratnam Pillai : [1991]188ITR494(Ker) . Reliance was also placed on an earlier decision of this court in CIT v. Travancore Tea Estates Co. Ltd. : [1988]172ITR733(Ker) .
10. Section 18 of the Agricultural Income-tax Act, 1950, contained a provision regarding assessment on the basis of the return filed by the assessee. It also provides for passing of best judgment assessment, when the assessee fails to make a return as provided under Section 17 or fails to comply with a notice issued under Section 17. The provisions under Section 19 provide a remedy to the assessee to approach the assessing authority itself to cancel the assessment and to make fresh assessment in accordance with the provisions of Section 18 on the grounds referred to in Section 19. Section 31 provides a remedy to the assessee by way of appeal from the assessment order to the Assistant Commissioner and Section 32 for further appeal to the Appellate Tribunal from the orders of the Assistant Commissioner. The right of appeal to the Appellate Tribunal is open to the Department also. The Commissioner may, if he objects to any order passed by the Assistant Commissioner under Section 31, direct the Agricultural Income-tax Officer to appeal to the Appellate Tribunal against such order. Section 34 gives the revisional power to the Commissioner. The above section reads as follows :
'34. Revision.--(1) The Commissioner may, of his own motion or on application by an assessee, call for the record of any proceeding under this Act which has been taken by any authority subordinate to him and may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such orders thereon as he thinks fit :
Provided that he shall not pass any order prejudicial to an asses-see without hearing him or giving him a reasonable opportunity of being heard :
Provided further that an order passed declining to interfere shall not be deemed to be an order prejudicial to the assessee.
(2) Any order passed under Sub-section (1) shall be final subject to any reference that may be made to the High Court under Section 60.'
11. The Assessing Officer is given the power to issue notice and proceed to assess or reassess if he is satisfied that for any reason agricultural income chargeable to tax under the Act has escaped assessment or has been assessed at too low a rate. This power is granted under Section 35 and period of limitation is prescribed under the Act for exercising the power of the assessing authority under Section 35. Section 36 grants a power of rectification to the authority which had passed an order on appeal or revision to rectify any mistake apparent from the records of the appeal, revision, assessment or refund as the case may be. This in general is the scheme of assessment and appeals and revisions therefrom under the Kerala Agricultural Income-tax Act, 1950.
12. The first contention raised by the assessee is that once an assessment order was the subject matter of an appeal under Section 31 before the Appellate Assistant Commissioner, thereafter the Commissioner cannot exercise power of revision under Section 34. We will now consider the two decisions relied on by learned counsel in his support. In Anantha Mallan v. Commr. of Agrl. I. T. : [1963]47ITR93(Ker) , as mentioned earlier, this court had occasion to consider the provisions contained under Section 32 and Section 34 of the Madras Agricultural Income-tax Act, 1950, and it was held that it would not be proper for the Commissioner to exercise his revisional power under Section 34 of the Act, if he is aggrieved by an order of the Appellate Assistant Commissioner of Agricultural Income-tax. On close scrutiny of the facts of this case it is seen that the order issued under Section 34 was for cancellation of the order of the Appellate Assistant Commissioner himself. The Appellate Assistant Commissioner, after having inspected the properties, found the taxable income to be Rs. 2,796-8-0 and accordingly cancelled the assessment since the income was found below the assessable minimum. This order was passed in the appeal filed by the assessee seeking further deductions that were available to a member of a joint family. The Commissioner felt that the order passed by the Appellate Assistant Commissioner was not based on proper grounds and therefore notice was issued under Section 34 in exercise of his revisional jurisdiction. After hearing the assessee, the Commissioner set aside the assessment made by the Agrl. Income-tax Officer. The facts of the above case were entirely different from those available in the case of the revision petitioner before us. Notice under Section 34 had been issued by the revisional authority not for cancelling the order of the Appellate Assistant Commissioner but it was directed against the original assessment orders themselves. In Oommen v. Commr. of Agrl. I. T. [1963] KLJ 211 also this court had considered a case where notice under Section 34 of the Agricultural Income-tax Act was issued to the assessee requiring him to show cause why the order of the Appellate Assistant Commissioner should not be revised. Therefore, we find that these two decisions are of no assistance to the revision petitioner.
13. We will now consider the decisions relied on by the learned Government Pleader. The case considered in CIT v. Amritlal Bhogilal and Co. : [1958]34ITR130(SC) , is strictly applicable to the facts of the present case. The matter arose under the Indian Income-tax Act, 1922. What was sought to be revised by the Commissioner in exercise of his power under Section 33B was an order of the Income-tax Officer granting registration to the firm. The assessee had filed an appeal against the order of assessment before the Appellate Assistant Commissioner. But so long as the Appellate Assistant Commissioner had no jurisdiction to consider the question of registration there is no question of merger of the order granting registration in the appellate order. The order granting registration could never become the subject-matter of an appeal before the appellate authority. Therefore, the theory that the order of assessment merges in the order of the appellate authority and therefore, the Commissioner cannot exercise powers under Section 33B should not apply to the order of registration passed by the Income-tax Officer. But in CIT v. S. Ratnam Pillai : [1991]188ITR494(Ker) , which was a case under Income-tax Act, 1961, this court took the view that since the point considered by the Commissioner while invoking his jurisdiction under Section 263 was not the subject-matter of the appeal before the first appellate authority, the order passed by the Commissioner cannot be held without jurisdiction on the principle of merger. In CIT v. Travancore Tea Estates Co. Ltd. : [1988]172ITR733(Ker) , which is also a Bench decision of this court, considering proceedings under Section 263 of the Income-tax Act, 1961, it was held that the power of the Commissioner under Section 263 remains in full force, notwithstanding the order of the appellate authority, in respect of matters not considered and decided in appeal.
14. The above being the legal position the only other question to be considered is whether the subject-matter of the appeals filed by the assessee for the years 1977-78 and 1980-81 to 1982-83 were identical with the issues raised in the proceedings under Section 34. As mentioned earlier, for the year 1977-78 the ground for revision was one relating to grant of deduction in respect of payment of basic tax and for the years 1980-81 to 1982-83, the irregularity on the basis of which the assessments were cancelled was that the income from 1,500 rubber trees which were admittedly under tapping from 1978-79 and a conceded quantity of 11 1/4 quintals of rubber were not brought under tax. The assessee has no case that these were the aspects which were the subject-matter of the appeals before the Appellate Assistant Commissioner. If that be so, the orders passed by the Deputy Commissioner under Section 34 cancelling the assessment orders 1977-78, 1980-81 to 1982-83 cannot be held without jurisdiction on the principle of merger. As far as 1977-78 and 1978-79 are concerned, admittedly, there are no appeals filed and the contention based on merger has no application to the orders passed under Section 34 cancelling the assessment for these years.
15. The next contention of the petitioner that has to be considered is whether jurisdiction under Section 34 can be invoked in the case of escaped assessment. According to learned counsel for the assessee, for the years 1980-81 to 1982-83 the reason given for invoking Section 34 is that the income from 1,500 rubber trees which had been tapped was not brought under tax, even though it was included in the return of 1978-79. Learned counsel would submit that it is a clear case of assessment of escaped income and if that be so, it is only the assessing authority which can take appropriate proceedings by invoking Section 35 of the Agricultural Income-tax Act, 1950, and that too within the period of limitation prescribed therein. Reliance was placed by learned counsel on two decisions of this court in Suppan Chettiar v. Commr. of Agrl. I. T. [1958] KLJ 834 and Smt. Lucy Kochuvareed v. Commr. of Agrl. I. T. : [1971]82ITR845(Ker) . In the first case, this court took the view that in the case of escaped income proceedings can be taken only under Section 35. In exercise of revisional powers under Section 34 of the Travancore-Cochin Agricultural Income-tax Act the Commissioner cannot reopen the assessment and make reassessment including the 'escaped income' but can only give a direction to the Agricultural Income-tax Officer to take steps under Section 35. Since the decision reported in Smt. Lucy Kochuvareed v. Commr. of Agrl. I. T, : [1971]82ITR845(Ker) has been reversed by the Supreme Court in Commr. of Agrl. I. T. v. Lucy Kochuvareed : [1976]103ITR799(SC) , we do not propose to discuss the facts or findings in the decision of this court relied on by learned counsel for the assessee. The learned Government Pleader points out that in view of the dictum laid down by a Full Bench of this court in Madras Rubber Factory Ltd. v. State of Kerala [1979] 44 STC 208, it can no longer be contended that in the case of escaped assessment no proceeding can be initiated by the Commissioner under Section 34 of the Agricultural Income-tax Act. In the above decision, this court had considered similar provisions as contained in Section 19 of the Kerala General Sales Tax Act, 1963, giving power to the assessing authority for assessing escaped turnover and the power of revision given to the Deputy Commissioner under Section 35. This court took the view that power given under these two sections are distinct and separate. They have been conferred on two different authorities, the power of revision being conferred on a superior authority. A valid exercise of the revisional power is not an infringement of the power of the assessing authority for assessing escaped turnover. There is no bar or inhibition against getting at escaped turnover in exercise of the revisional power under Section 35, so long as the grounds for exercise of that power are made out. We are of the view that the learned Government Pleader was fully justified in relying on the above decision in support of his contention that even if the direction given by the Commissioner under Section 34 is to assess escaped income it does not vitiate the proceedings for lack of jurisdiction. As far as assessment order 1977-78 is concerned, the issue involved is allowing of a deduction for which the assessee was not legally entitled to. It cannot be treated as escaped income as was held by the Supreme Court in Commr. of Agrl. I.T. v. Lucy Kochuvareed : [1976]103ITR799(SC) .
16. Part of the second question is whether the order passed by the revisional authority is not a mere change of opinion. We do not find that the concept of change of opinion would arise in this case because the authority who is exercising jurisdiction under Section 34 is not the authority who had passed the original order. Therefore, there is no question of change of opinion arising in this case.
17. In the light of the above, we answer question No. 1 in the affirmative against the assessee and in favour of the Revenue in the light of the finding that the Deputy Commissioner had not issued notice under Section 34 in respect of an assessment order which is fully merged with an appellate order. We are inclined to re-draft question No. 2 as follows :
'Whether the Deputy Commissioner in exercise of the power under Section 34 has jurisdiction to direct assessment of escaped income ?'
18. We answer the question in the affirmative against the assessee and in favour of the Revenue.
19. A copy of this judgment under the seal of this court and the signature of the Registrar will be sent to the Commissioner of Agricultural Income-tax, Thiruvananthapuram.