The Margin property was not set properly to the Canvas control. It should be the same as Image control's margin properly value. If we don't set Margin to Canvas, It will take the full window size.
Xaml
<Grid x:Name="Gridimage1" Margin="0,0,411,100">
<Image Name="image1" Grid.Column="0" Height="317" HorizontalAlignment="Left" Margin="20,67,0,0" Stretch="Fill" VerticalAlignment="Top" Width="331">
</Image>
<Canvas x:Name="BackPanel" Margin="20,67,0,0">
<Rectangle x:Name="selectionRectangle" Stroke="LightBlue" Fill="#220000FF" Visibility="Collapsed" />
</Canvas>
</Grid>