STATE OF MADRAS Vs. VELAYUTHAM THAMPY V

JUDGEMENT

(1.) THE respondent was assessed to agricultural income-tax for the assessment year 1959-60 under the provisions of the Kerala Agricultural Income-tax Act, 1950. He was allowed rebate on insurance premia of Rs. 3,135.14 nP. On that basis, the net tax payable by him was determined at Rs. 2,226.97. Subsequently, noticing that the rebate was wrongly allowed in view of the second proviso to section 10(e) (i) of the Act, the Agricultural Income-tax Officer initiated proceedings under section 35 and revised the assessment. THE respondents appeal failed but in his further appeal, the Tribunal took the view that this was not a case of income that had escaped assessment or had been assessed at too low at rate. At the instance of the revenue the following question has been referred to us.

(2.) BEFORE we proceed to consider this question, we may add that the Tribunals reason was that, in order to invoke section 35, there should be a change in the quantum of income as originally determined, by way of an addition or a change with regard to the rate of tax levied in the first instance.

(3.) LEARNED counsel for the respondent sought to distinguish the decision of the Supreme Court on the ground that it only related to the nature of the income and contended that where rebate, as in this case, had been wrongly allowed, that would not be a case of income escaping assessment. We are unable to agree. Section 35 of the Kerala Agricultural Income-tax Act, having regard to the interpretation placed by the Supreme Court on section 26 of the Bihar Act will cover a case like the one before us as well. The escapement of income from charge, as we mentioned earlier, may be due to the assessee not returning a part of the income or having returned the full income, a part of it was being considered as not chargeable to tax in view of its character or the income not being assessed to tax because it is eligible to a certain allowance directly or in the form of a rebate. Even in cases of allowance or rebate found later to be wrongly allowed it is income that eventually is left out of charge and in that sense, such income chargeable to tax under the Act escapes assessment.