1. The common question that falls for decision in these two writ petitions is whether for the purpose of Section 34 of the Agricultural Income-tax Act (Act No. 22 of 1950), hereinafter referred to as the Agrl. I.T. Act, the AAC of Agrl. I.T. is an authority subordinate to the Commissioner of Agrl. I.T. The additional question of law raised in O.P. No. 1080 of 1980-J is whether the wealth-tax paid in respect of the agricultural land belonging to the assessee is a deductible itemunder Section 5(j) of the Agrl. I.T. Act. In view of the fact that the question whether the AAC is an authority subordinate to the Commissioner is a common question in both the writ petitions, they were heard together and are being disposed of by this common judgment.
2. It is not necessary to state in detail the facts of the case as there appears to be no serious dispute on the question of facts. In both the cases, aggrieved by the decision of the Agrl. ITO, the respective petitioner had taken up the matter in appeal. Not being satisfied with the decision of the AAC, the petitioners filed revisionsunder Section 34 of the Agrl. I.T. Act before the Commissioner. The Commissioner took the view that the AAC who decided the appeals was not an authority subordinate to him ; hence, he dismissed the revisions as not competent. This view expressed by the Commissioner, as already noticed, is under challenge in both the writ petitions. Section 34 of the Agrl. I.T. Act 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 assessee 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.'
3. Section 15(1) of the Agrl, I.T. Act provides as follows :
'15. Income-tax authorities.--(1) There shall be the following classes of income-tax authorities for the purposes of this Act, namely-
(a) The Board of Revenue,
(b) The Commissioner of Agricultural Income-tax,
(c) Assistant Commissioners of Agricultural Income-tax,
(d) Agricultural Income-tax Officers.'
4. By the power conferred on him it is the Agrl. ITO who under Section 18 of the Act makes the assessment. Under Section 31 of the Act, an appeal to the AAC is provided if any assessee objects to the amount of income assessed or tax determined or loss computedunder Section 18 or denied his liability to be assessed under the Act or objects to any order under any of the provisions of Sections 19, 20, 21, 25, 29 and 41 made by the Agrl. ITO. Under Section 32, a second appeal against the orders of AAC is provided if any assessee objects to an order passed by an Agricultural Assistant Commissioner under Section 20 or Section 31 to the Appellate Tribunal. Sub-section (2) of Section 32 provides as follows :
'(2) The Commissioner may, if he objects to any order, passed by an Assistant Commissioner under section 31, direct the Agricultural Income-tax Officer to appeal to the Appellate Tribunal against such order, and such appeal may be made within sixty days of the date on which the order is communicated to the Commissioner by the Assistant Commissioner.'
5. The counsel for the respective petitioner advanced an argument that the view taken by the Commissioner that the AAC is not an authority subordinate to him is patently wrong in view of the fact that, as is evident from Section 15 of the Act, the Commissioner is definitely superior to the AAC ; and, therefore, strictly in conformity with the provisions contained in Sub-section (1) of Section 34, a revision is competent against the order of the AAC to the Commissioner. The Government pleader appearing for the State took the stand that the AAC is not an authority subordinate to the Commissioner and relied on three decisions of the Division Benches of this court in support of this contention : (1) ANantha Mallan v. Commr. of Agrl. I.T. : 47ITR93(Ker) , (2) George Oommen v. Commr. of Agrl. I.T. : 52ITR977(Ker) and (3) Paramu v. STO . On a careful consideration of the reasoning behind the decisions, I am of the view that none of these decisions can be treated as an authority for the proposition that the AAC is not subordinate to the Commissioner for the purpose of Section 34(1) of the Agrl. I.T. Act. In the two earlier cases, namely, Anantha Mallan's case : 47ITR93(Ker) and Oommen's case : 52ITR977(Ker) , the challenge by the assessees were directed against the order passed by the Commissioner purported to be in exercise of his jurisdiction under Section 34 of the Agrl. I.T. Act. The Division Benches found that the exercise of power by the Commissioner was opposed to the principles of natural justice inasmuch as, by virtue of the provisions contained in Section 32(2) of the Act, it was he himself who was to direct the Agrl. ITO to file a second appeal before the AppellateTribunal. It may incidentally be noticed that in neither of these cases it was held that the AAC was not an authority subordinate to the Commissioner, As far as the decision in the other case, namely, Paramu v. STO , the challenge raised by the assessee was against the order passed by the Deputy Commissioner of Sales Taxunder Section 35 of the Kerala General Sales Tax Act, 1963. Sub-section (1) of Section 35, as it then stood, provided as follows:
'35. Powers of revision of the Deputy Commissioner suo motu.--(1) The Deputy Commissioner may, of his own motion, call for and examine any order passed or proceedings recorded under this Act by the Inspecting Assistant Commissioner or any officer or authority of rank below that of an Inspecting Assistant Commissioner arid may make such enquiry or cause such enquiry to be made and, subject to the provisions of this Act, may pass such order thereon as he thinks fit.'
6. In Paramu's case the challenge by the assessee against the order of the Deputy Commissioner of Sales Tax dismissing the revision filed by the assessee was on the ground that he had no competence to deal with it and under the Kerala General Sales Tax Act, the Deputy Commissioner was not empowered to revise an order passed in appeal by the AAC. In upholding the view taken by the Deputy Commissioner in para. 3 of the decision, the Division Bench said as follows :
'From the wording of this section, it is clear that the Deputy Commissioner is empowered to revise only the orders passed by the Inspecting Assistant Commissioner or by any officer who is subordinate to the Inspecting Assistant Commissioner. It is not disputed before us that the Appellate Assistant Commissioner is not an authority subordinate to the Inspecting Assistant Commissioner. So it is clear that after the coming into force of the Kerala General Sales Tax Act, 1963, on 1st April, 1963, the Deputy Commissioner has no power to revise an order passed in appeal by the Appellate Assistant Commissioner.'
7. This decision rendered on a construction of the provisions contained in Section 35(1) of the Sales Tax Act, as it then stood, cannot be of any assistance to the Revenue to support its contention that the AAC is not subordinate to the Commissioner. It may incidentally be also noticed that subsequent to the decision in Paramu's case , the section has undergone an amendment by expressly excluding the AAC from the purview of any officer or authority subordinate to the Deputy Commissioner for the purpose of Section 35 of the Act. It has to be borne in mind that the two decisions of the Division Benches construing the provisions of Section 34 of the Agrl. I.T. Act, were rendered in cases where the challenge was directed against the Commissioner exercising his suo motu jurisdiction to revise the order of the AAC when he felt aggrieved by thedecision of the AAC, instead of directing the Agrl. ITO to file a second appeal before the Appellate Tribunal invoking Sub-section (2) of Section 32 of the Act. The broad principle behind that decision as stated by Ansari C.J. : 47ITR93(Ker) was that:
'It is clear that the Commissioner has been given the right of appeal, through his subordinate officers, to the Appellate Tribunal, which is similar to what an ordinary assessee has been given. It is equally clear that the Commissioner has been also vested with revisory jurisdiction as well, which power can be exercised against the assessee ; and, in such cases, a reference can be asked or compelled under section 60.'
8. Though the power sunder Section 32(2) and under Section 34 of the Act have been vested in the same authority, it cannot be so interpreted as to hold that the choice as to which of the two powers he would exercise was conferred on the authority itself I and his choice cannot be interfered with where the exercise is neither mala fide nor perverse nor arbitrary.
9. The well-settled rule of natural justice is that persons should not adjudicate the issue on which there be a real likelihood of their minds being biased. It is said that bias from strong and sincere conviction as to public policy might operate as a more serious disqualification than pecuniary interest, and the Legislature must guard against 'departmental bias'. Probably, Section 32(2) had been framed in partial recognition of the rule that minds biased must not decide ; that is why the Legislature in its wisdom thought that the objections of the Commissioner against the orders of the AAC should be justiciable by an independent authority, namely, the Appellate Tribunal. In that context, the jurisdiction under Section 34 becomes exercisable only in cases where the Commissioner had not already formed an objection in favour of the department, which he was desirous of adjudicating. The fact that the power under Section 34 is subject to the other provisions of the Act, which includes Section 32(2), also fortifies the view expressed above.
10. It would be advantageous to refer to the following provisions contained in Sections 263 and 264 of the I.T. Act, 1961. Section 263 provides :
'(1) The Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the Income-tax Officer is erroneous in so far as it is prejudicial to the interests of the Revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment.
(2) No order shall be made under Sub-section (1)--
(a) to revise an order of reassessment made under section 147, or
(b) after the expiry of two years from the date of the order sought to be revised.
(3) Notwithstanding anything contained in sub-section (2), an order in revision under this section may be passed at any time in the case of an order which has been passed in consequence of, or to give effect to, any finding or direction contained in an order of the Appellate Tribunal, the High Court or the Supreme Court.'
11. Section 264 provides as follows :
'(1) In the case of any order other than an order to which section 263 applies passed by an authority subordinate to him, the Commissioner may, either of his own motion or on an application by the assessee for revision, call for the record of any proceeding under this Act in which any such order has been passed and may make such inquiry or cause such inquiry to be made and, subject to the provisions of this Act, may pass such order thereon, not being an order prejudicial to the assessee, as he thinks fit...'
Explanation 2 to that section states that for the purpose of this section, the AAC shall be deemed to be an authority subordinate to the Commissioner.
12. To remove doubts it would have been advantageous if the Legislature incorporates a provision in Section 34 of the Agrl. I.T. Act, also similar to Explanation 2 to Section 264 of the I.T. Act, 1961. Even in the absence of such a provision, there could hardly be any doubt that the AAC is an authority subordinate to the Commissioner, and as such a revision under Section 34 to the Commissioner by the assessee is competent.
13. The other point that is raised in O. P. No. 1080 of 1980-J relates to the question as to whether the wealth-tax paid is a deductible item of expenditure. It is by now well settled by the various decisions of this court, including the decision reported in George Oommen v. State of Kerala : 110ITR546(Ker) , that wealth-tax paid by an assessee on his agricultural lands is an allowable deduction under Section 5(j) of the Agrl. I.T. Act, 1950, provided the expenditure was wholly and exclusively incurred for the purpose of deriving agricultural income. In this particular case whether the expenditure was so incurred or not, is a matter to be gone into by the assessing authority.
14. For the foregoing reasons, the writ petitions are allowed quashing the orders of the Commissioner declining to exercise the jurisdiction. The revisions shall be taken back on file, and disposed of by the Commissioner according to law and in the light of the observations contained in thisjudgment. No costs.