Chandrakantharaj Urs, J.
1. This writ petition is disposed of at the stage of preliminary hearing after notice to the respondent. The counsel for parties have been heard.
2. The petitioner is a coffee planter and an assessee under the Karnataka Agrl. I.T. Act, 1957 (hereinafter) referred to as 'the Act'). In accordance with the return filed by him, he was assessed by the Agrl. ITO, respondent, in accordance with the order dated August 31, 1978. Thereafter, by a notice dated August 16, 1980, the respondent Agrl. ITO, I-circle, Chickmagalur called upon the petitioner to show cause why the order of assessment concluded on August 31, 1978, for the assessment years 1978-79 should not be rectified in respect of four matters. In the notice it was indicated that depreciation had not been calculated correctly, as a result of which a sum of Rs 8,157 came to be allowed on the declared value of the car at Rs. 32,614 at 25% of such value whereas the assessee petitioner was entitled to only 10% depreciation. Secondly, the assessee was intimated that the sale proceed of the car belonging to the estate so that the profits therefrom had not been subjected to tax. Therefore it was liable to tax and the assessee could furnish the sale amount realised with proof. Thirdly, it was pointed out to the assessee that vehicle expenses allowed in the sum of Rs. 30,273.69 used for purpose of estate work was not correct as in the previous years only half the expenditure incurred was allowed. Fourthly, it was pointed out to the assessee that rectification was required in respect of the life insurance policy allowance of Rs. 10,000 as the same was in excess and contrary to law. The assessee was given seven days time to file his objection to the proposed rectification. The assessee by his letter dated October 14, 1980, which is at annex D to the petition contented that the depreciation on the car had been correctly calculated : that there was no profit on the sale of the old car ; that the car was entirely used as the estate maintenance vehicle and therefore, there was nothing wrong in allowing the full expenditure on the maintenance of the car as a deductible it and in so far as the life insurance policy was concerned, he did not show any specific cause.
3. Therefore, the respondent Agrl ITO passed an order of rectification under s. 37 of the Act allowing only 10% depreciation on the car and also reduced the expenditure of car maintenance allowed to be deducted earlier by half thus giving credit only to Rs. 15,136 instead if Rs. 30,273.69 He also added back the sum of Rs 4.129 disallowing the deduction which had been permitted in the previous assessment year in respect of the car sold by the assessee in the assessment year 1977-78. Similar he recalculated the life insurance policy rebate and added back a sum of Rs. 3,237 to the taxable income. In the result, the assessee was called upon to pay Rs. 13,240 as balance of tax. Aggrieved by the rectification order which is at annex. to the petition, the petitioner has approached this court under art. 226 of the Constitution inter alia, contending that the order is patently erroneous and without jurisdiction and therefore, it is liable to be set aside.
4. Shri G. Sarangan learned counsel for the petitioner, has urged that in terms of r. 3 of the Karnataka Agrl. I.T. Rules 1957 (hereinafter referred to as 'the Rules'), he is entitled to 30% depreciation under rr. 3 and 4 the aforementioned Rules. It is his case that under r 3, Pt.(C) of the Rules motor cars and Motor cycles were allowed at 10% depreciation while under r 4(3) of the Rules a further deduction under cl.(e) of s. 5 of the Act at 20% of the cost of new machinery or new plant installed of the Revenue March 1956 was also deductible and therefore instead of the Revenue being prejudiced by allowed 25% deduction only in the original assessment order it was the assessee who had been prejudiced and the rectification order in that behalf was certainly an error.
5. The learned counsels contention is liable to be uphold on the plain language of r 3 and sub-r (3) of r 4 of the Rules. However Smt. Vanaja, learned High Court Govt Pleader appearing for the respondent, has contented that a motor car, is only entitled to 10% as indicated at item 14 in Pt. (c) of r. 3 of the Rules. Though the argument looks attractive on a closer examination. It is seen that the language in sub-r. (3) of r. 3 of the Rules 'other machinery and plant' car is the first item mentioned Therefore a car apart from being a car in itself for the purpose of interpretation must also be held to be machinery and other plant as classified by the Rules themselves. In that which is purchased in the assessee mention is well founder. The car with is purchased in the assessment year i entitled to 10 plus 20% depreciation that is 30% deduction and the Revenue had not been prejudiced and the respondent was clearly in error in law in taking the view that only 10% deduction was permissible.
6. It was next contended by Mr. Sarangan that the assessee did not disclose the sale price of the car in the relevant assessment year 1978-79, which ought to have been treated as a profit accrued to the estate clearly and fell, if true, within the ambit of the correction available to the officer under s. 36 of the Act as above escaped income and was not a matter for rectification under s. 37 of the Act If the income from the sale of the car was not disclosed in the return, it was a clear case of suppression of an item of the income of the assessee. That fell within the procedure prescribed under s. 36 of the Act and was not a matter fir rectification under s. 37 of the act. I need not say more than its because the assessee in his reply to the show-cause notice had declared that he did not make any profit by the sale of the car and therefore, the question of three being any income does not arise. The respondent was clearly in error in following the novel motif of calculating the depreciation allowed on the car in the previous assessment year and adding that back to the income in the rectification proceedings. That was totally uncalled for and without jurisdiction having to the plain language of s. 37 of the Act.
7. Mr Sarangan next contended that the expenditure on the vehicles which was incurred exclusively for the maintenance of the estate, was correctly allowed after full knowledge of such disclosure and, therefore by any stretch of imagination the mistake was not an apparent error on the face of the record, merely because the respondent found from the record of the previous years assessment that only half the expenditure had been allowed in that previous year. In any event, the rectification could not be made on the basis of other records than the records pertaining to the relevant assessment year. It was next contented that the rectification could not be founded on extraneous material disclosed from other records which did not form part of the records in the relevant assessment year. On both grounds urged, the assessee should succeed. If knowingly, the ITO had allowed the full expenditure as deductible expenditure as deductible expenditure it cannot be said later that he should have allowed only half. He did so with a knowledge that the vehicle was used exclusively for the maintenance of estate work. If it was a mistake due to his negligence and such a mistake and therefore there is no justification to look at the previous years records of the assessment and rely upon that material to come to the conclusion that only half the expenditure should have been allowed. It is a well settled principled now that for rectification an apparent error of law or fact must be apparent from the records of the particular case itself and not on the basis of facts discovered from other sources. In that view of the matter the rectification in disallowing half the expenditure on the maintenance of the car was also without jurisdiction or as a result of an illegal exercise of jurisdiction.
8. In so far as the rectification relating to the amount deducted towards life insurance policy premia, the learned counsel for the assessee, fairly conceded that there was an error in allowing Rs. 10,000 as the assessee was entitled in terms of s. 5A of the Act in the sum of Rs. 7,000 and 40% of the sum in excess of Rs. 10,000 alone and no more. It is admitted that the assessee paid Rs. 13,691.05 as premia in the relevant assessment year and in terms of s. 5A(a),(c) of the Act he was entitled to Rs. 7,000 deduction plus 40% of the amount by which such aggregate exceeded Rs. 10,000. The 40% of Rs. 3,691 is Rs. 1,582.05. Therefore, the assessee is entitled to a deduction in respect of life insurance premia at Rs. 8,482 and no more. That being an apparent error of law, the respondent had jurisdiction to rectify the same under s. 37 of the Act.
9. In accordance with the conclusion reached by me above, the rectification order is set aside in respect of all items except the item relating to insurance policy. The respondent shall issue notice of demand for such tax as may be found due by the assessee in respect of the excess deducting given to the payment of insurance premia to the extent indication above.
10. In the result, rule will accordingly issue and be made absolutes.
11. Smt. Vanaja learned High Court Government pleader, is permitted to file her memo of appearance within two weeks from today.
12. There will be no order as to costs.