PANT ENTERPRISES Vs. ADDL AGRL INCOMETAX AND SALES

JUDGEMENT

(1.) THIS is a revision filed by the asessee under Section 78 of the Kerala Agricultural Income Tax Act 1991 (hereinafter called "the Act") against the order in second appeal issued by the Agricultural Income Tax Appellate Tribunal confirming petitioner's assessment for the year 2001-2002. The petitioner is a partnership firm engaged in agricultural operations. The crops cultivated are essentially coffee and pepper. The petitioner which was being assessed to tax on coffee income on receipt basis until the assessment year 1995-96, opted for payment of tax at compounded rate based on extent of yielding area of plantation in terms of Section 13 of the Act. After availing composition of tax under Section 13 for the assessment years 1995-96 to 2000-2001, the petitioner re-opted for payment of tax based on income from the assessment year 2001-2002 onwards in terms of Section 39 (3) of the Act. Even though the Assessing Officer originally completed assessment for year 2001-2002 b determining net loss at Rs. 5,98,150/-, the said assessment was reopened and revised assessment was issued vide Annexure-VI on the ground that the assessment originally completed by allowing deduction of opening stock of Rs. 20,28,200/- and depreciation of Rs. 48,770/- was under a mistake and against the provisions of Section 13 (6) of the Act. The objection raised by the assessee against reopening of assessment was only against disallowance of opening stock and not against disallowance of depreciation in accordance with Section 13 (6) of the Act. Even though the assessee contended that the assessee is following the mercantile system of accounting and there is a no scope for assessing value of opening stock in the year in which the assessee reported from system of compounding under Section 13 (2) to regular assessment, the Assessing Officer held that until the assessment 1995-96 when the assessee opted for payment of tax at compounded rate under Section 13 (1) of the Act, the assessee was following the cash system of accounting and following the same system of accounting the Assessing Officer disallowed the claim of exemption made by the petitioner on value of opening stock of crops sold by the assessee during the accounting year relevant for the assessment yea 2001-2002 and made revised assessment. The assessee's successive appeals before the first appellate authority and the Tribunal were rejected and therefore the assessee has approached this Court with this revision against the order of the Tribunal.

(2.) EVEN though several questions are raised for our decision, we feel in substance there are only two issue that arise from the order of the Tribunal calling for decision by us under Section 78 of the Act. We therefore redraft the two questions as follows:

(3.) WE have heard counsel appearing for the assessee and the Government Pleader appearing for the respondents and have also gone through the argument note filed by assessee's counsel. Counsel for the assessee contended that there was no justification for reopening the original assessment completed under Section 42 of the Act, as there was no apparent mistake in the original assessment. We find that reopening is done for correcting the original assessment wherein opening stock of coffee sold in the previous year was not assessed and depreciation was granted in terms of the claim of the assessee. It is seen that on reporting from composition under Section 13 (1) to regular assessment under Section 39, the assessment has to be completed as a new assessment as provided under Section 13 (6) of the Act and the assessee shall not be entitled to carry forward of any loss from the preceding year or depreciation. Obviously the claim of depreciation by the assessee and the deduction allowed in original assessment by the Officer was against Section 13 (6) of the Act and the assessee has conceded that there is a mistake in the assessment to that extent by not pursuing the claim in appeals or before us in this revision. Therefore, atleast for disallowance of depreciation even according to the assessee, the assessment was rightly revised under Section 42 of the Act. So far as the other disallowance is concerned i. e. claim of exemption of opening stock which sold in the previous year relevant for the assessment year concerned, the assessee's contention is that it is a debatable issue which is not a matter for rectification under Section 42 of the Act. On going through the original assessment, we find that the officer has not considered the question as to whether opening stock of crop sold during the previous year has to be assessed or exempted. Moreover, it is stated in the original assessment that the method of accounting followed by the assessee was mercantile system. However, the specific finding in the revised assessment is that the petitioner was following cash system of accounting until it opted for compounding in the assessment year 1995-96 and therefore, the officer proceeded to assess the opening stock of crops sold in the previous year following the cash system of accounting. Section 40 (1) of the Act stipulates that agricultural income chargeable to tax shall be computed in accordance with the method of accounting regularly employed by the assessee. Therefore, if there is a mistake in the form of violation of Section 40 (1) in adopting the system of accounting in the original assessment, then the officer is certainly entitled to rectify such assessment to bring the assessment consistent with Section 40 (1) of the Act by invoking powers under Section 42 of the Act. Moreover, we also find that Section 41 (1) of the Act authorizes the officer to assess escaped income within ten years from the end of the relevant year. The procedure prescribed for reopening and completion of reopened assessment under Section 42 and for assessing escaped income under Section 41 are one and the same. We have already noted above that there has been a mistake in the original assessment atleast in respect of the deduction of depreciation allowed contrary to Section 13 (6) of the Act and the assessee has conceded that the Assessing Officer is entitled to correct the mistake under Section 42 of the Act. So far as the next ground for rectification of assessment under Section 42 is concerned, we have already found that in view of the finding of the Officer that the system of accounting based on which original assessment was completed was not the system regularly employed by the assessee and so much so, there was violation of Section 40 (1) and such mistake in original assessment could be rectified in proceedings under Section 42 of the Act. In any case in it settled position that misquoting or non-mentioning of a Section is not a ground for setting aside an order invalid. We have already found that even if the officer has no jurisdiction to rectify the assessment under Section 42, since he has powers under Section 41 to revise the assessment as an income escaping assessment, the revised assessment in the absence of allegation of any procedural irregularity has to be upheld. Therefore, we uphold the reassessment under Section 42 read with Section 41 of the Act and consequently reject the challenge against the order of the Tribunal in sustaining the re-assessment.