TaxTMI 
TaxTMI 
1978 (10) TMI 37
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.... computation of agricultural income, (a) rental method (multiple of annual rental income) mentioned in cl. (a) ; or (b) produce method (subject to deductions) mentioned in cl. (b) and under s. 6(1) an option is given to the assessee to select one or the other method, whichever may be advantageous to him. Such option is required to be indicated in a declaration in the prescribed Form No. A.I.T.-2 to be submitted under r. 5 of the U.P. Agrl. I.T. Rules, 1949, along with his return under s. 15 of the Act. For the assessment year 1954-55, a return of the agricultural income for the relevant previous year ending June 30, 1954 (1361 Fasli), was filed under s. 15(2) of the Act on November 27, 1954, by the appellant-assessee, returning a net income of Rs. 1,06,664. Along with the return a declaration in Form No. A.I.T.-2 was also filed indicating the option to be assessed in accordance with s. 6(2)(b) of the Act. On April 4, 1955, the appellant-assessee discovering some mistake in the said return filed a revised return under s. 15(4) of the Act showing the net income at Rs. 98,854 and explaining that the difference was due to certain further deductions that were claimed on account of expen....
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....Act and along with this return, which showed the net income of Rs. 1,79,543-5-9, a declaration in the prescribed Form No. A.I.T.-2 selecting the method of computation of agricultural income under s. 6(2)(a) was also filed and the appellant prayed that it should be allowed to change the option and have its income computed under s. 6(2)(a) instead of under s. 6(2)(b) as previously intimated. The assessing authority, without first deciding the question whether the appellant was entitled to change the option as sought, by its order dated March 27, 1959, made a best judgment assessment in accordance with the method under s. 6(2)(b) of the Act and assessed the appellant's income at Rs. 4,82,231.05 on which the tax liability was assessed at Rs. 2,88,488.46. The appellant challenged the assessment order in an appeal to the Commissioner who by his order dated July 1, 1959, allowed the appeal, set aside the assessment and remanded the case back to the assessing authority with a direction that he should first dispose of the question relating to change of option which the appellant had claimed it was entitled to have and then make the assessment in accordance with law after allowing the app....
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....at appeal this court accepted the preliminary objection raised by the respondents to the maintainability of the appeal on the ground that the High Court was not competent to grant the certificate under art. 133(1)(a) inasmuch as the issue before the High Court was incapable of valuation and the order appealed against could not come within the scope of the said provision, this court, therefore, revoked the said certificate and sent the case back to the High Court for fresh consideration inasmuch as the appellant's prayer for grant of certificate in the High Court was made both under art. 133(1)(a) and 133(1)(c) of the Constitution and directed the High Court to consider the prayer for grant of the certificate under the latter provision. Thereafter, the High Court by its order dated April 18, 1972, granted the certificate under art. 133(1)(c) on the ground that a question of law involved was of substantial importance and also of great public importance and it is on the strength of such certificate that was issued by the High Court that the Civil Appeal No. 1946(NT) of 1972, has been filed by the appellant in this court. However, in both the appeals the principal question raised is wh....
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.... a return, be it the initial or first return or a subsequent return or a revised return, in regard to his agricultural income of any particular previous year, especially, as r. 5 of the U.P. Agrl. I.T. Rules, 1949, makes it incumbent upon the assessee to file a declaration in Form No. A.I.T.-2 indicating his option along with " his return of income ". He urged that this position becomes all the more clear if the provisions of the present s. 6 and r. 5 are considered vis-a-vis the said provisions before they were amended. Secondly, he urged that in the instant case in spite of the appellant having filed its first return of November 27, 1954, and its revised return of April 4, 1955, the assessing authority had served upon it a notice under s. 15(3) along with a statement showing provisional estimate of the agricultural income of the appellant at Rs. 2,07,923-9-0 in accordance with s. 6(2)(a) for the relevant previous year ending June 30, 1954 (1361 Fasli), pursuant to which the appellant filed a fresh return on November 8, 1958, for the said previous year indicating in the accompanying declaration in Form No. A.I.T.-2 the option for computation in accordance with s. 6(2)(a) of the Ac....
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....specified in that notice. In any event, he urged that sub-ss. (1), (2) and (3) of s. 15 are independent provisions and the notice under s. 15(3) does not give an assessee any right to change the option. He further urged that in the instant case the assessee could be said to have acquiesced in the proceedings that were taken by the assessing authority on the two earlier returns which were filed by him based on s. 6(2)(b) and as such the appellant could not be allowed to change the option initially exercised by it. In order to decide the main question that has been raised in these appeals it will be necessary to refer to the provisions of s. 6 and rules 5, 6 and 7, as they stood originally and as they stand now after the amendments. Originally s. 6, which dealt with computation of agricultural income and conferred an option on the assessee to select one or the other of the two methods of computation mentioned therein, ran thus : " 6 . Computation of agricultural income.--(1) The agricultural income mentioned in sub-clauses (i), (ii) and (iii) of clause (b) of sub-section (1) of section 2 shall, at the option of the assessee, be computed in accordance with clause (a) or clause (....
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....Lucknow) [1952] 50 ALJ 557 and Justice Mukherji took the view that " this proviso (meaning the proviso to sub-s. (1) of s. 6) means that once and only once during the course of an assessee's ' assessable life ', can he, unfettered, exercise the option given to him under s. 6(1) of the Act and that if once he has exercised his option, he cannot, without the permission of the Board, take the other alternative." Justice Bind Basni Prasad, the other Member of the Bench, observed thus : " My interpretation of s. 6(1) is that if after the commencement of the U.P. Agricultural Income-tax Act, an assessee has once selected one method of computation of agricultural income he cannot vary it subsequently in any year without the permission of the Board of Revenue. The proviso is not limited in its application to variation of such method in the course of a year. " Thereafter, the legislature thought of amending these provisions. By the Amending Act XVIII of 1954, the aforesaid proviso to s. 6(1) was deleted with effect from July 1, 1954, and an altogether different proviso unconnected with the option was substituted. By a Notification No. 2590/ I-C-289-C-53 dated August 29, 1953, the word....
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.... thus : " In pursuance of section 6(1), I .......... do hereby declare that I have elected the method of computation of agricultural income provided by section 6(2)(a)/6(2)(b) and have computed my income accordingly." It seems to us clear that s. 6 as originally framed gave an assessee the right to exercise the option, unfettered, only once after the commencement of the Act and if he once selected one method of computation of agricultural income he could not vary it subsequently in any year without the permission of the Board of Revenue which was given absolute discretion to grant or to refuse such permission. At any rate, that was how the original unamended provisions were authoritatively interpreted by the Allahabad High Court. Relying upon the deletion of the original proviso to s. 6(1) of the Act by the Amending Act XVIII of 1954, and the deletion of the word " first " which occurred originally in r. 5 as also the deletion of rr. 6 and 7, counsel for the appellant contended that whatever may have been the position under the original s. 6 and original rr. 5, 6 and 7, under the amended s. 6 read with the amended r. 5, it would be clear that there is no restriction on the as....
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....estion that arises is whether the return filed by the appellant on November 8, 1958, was in pursuance of the notice served by the assessing authority upon the appellant under s. 15(3) of the Act or whether it was a revised return filed under s. 15(4) of the Act and this question assumes significance because it was along with this return that the assessee had filed a declaration in Form No. A.I.T.-2 indicating a change in the option and praying that the computation of its agricultural income should be made in accordance with s. 6(2) of the Act instead of under s. 6(2)(b) as mentioned in the declarations filed along with two earlier returns dated November 27, 1954, and April 4, 1955. It is obvious that if the return dated November 8, 1958, was filed under s. 15(4) then in order to avail of the change of the option the appellant will have to show that it was really a revised return in the sense that the same had been filed because of a wrong statement discovered in the earlier returns filed by him. The Division Bench of the High Court has rightly taken the view that a wrong statement in the earlier returns does not mean selection of a wrong option by the assessee ; in other words, the....
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....y the assessing authority not on the ground that it had been filed beyond time but on the ground that the appellant had no right to change its option which clear suggests that the return was treated by the assessing authority as having been filed within time but the same was rejected on merits holding that the appellant was not entitled to change its option. It is thus clear that the return filed by the assessee on November 8, 1958, was not a revised return under s. 15(4) but a fresh return filed within time in response to notice under s. 15(3) served upon it by the assessing authority and as such the appellant was entitled to change its option and have the computation of its agricultural income made in accordance with s. 6(2)(a) of the Act. The fact that the appellant had produced some evidence in pursuance notice received under s. 16(2) in relation to its earlier returns or inspection of the records of the assessing authority cannot and does not amount to acquiescence or waiver of its right to file a declaration indicating its option afresh along with the return validly filed in response served under s. 15(3) of the Act. Apart from the aforesaid position there is yet one more ....
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....he assessing authority served a further notice upon the appellant informing the latter that agricultural income to the tune of Rs. 38,947 had escaped assessment and invited objection from the appellant whereafter it seems that the assessing authority not being satisfied with the evidence produced by the appellant proceeded to make its best judgment assessment under s. 16(4). Section 16(4) runs thus : " 16. (4) If the principal officer of any company or other person fails to make a return under sub-section (2) or (3) of section 15, as the case may be, or, having made the return, fails to comply with all the terms of the notice issued under sub-section (2) of this section or to produce any evidence required under sub-section (3) the assessing authority shall make the assessment to the best of his judgment with due regard to the statement, if any, sent under sub-section (3-B) of section 15, notwithstanding any option exercised under sub-section (1) of section 6." It will appear clear from the aforesaid provision contained in s. 16(4) that whenever the assessing authority proceeds to make the assessment to the best of its judgment the same is required to be made " with due regard....