Case: Delhi Cloth and General Mills Company Limited Vs. State of Uttar Pradesh and Others

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 ActApart from the aforesaid position there is yet one more aspect to which we would like to refer in relation to the question raised before us in these appeals and that arises in view of the provisions of s. 16(4) of the Act under which the assessing authority makes its best judgment assessment. In this connection ss. 15(3), 15(3B) and 16(4) of the Act will have to be considered together. Section 15(3) runs thus:" 15. (3) In the case of any person whose total agricultural income is, in the opinion of the assessing authority, such amount as to render such person liable to payment of agricultural income-tax in any year, he may serve in that year a notice in the prescribed form requiring such person to furnish within such period, not being less than thirty days as may be specified in the notice, a return in the prescribed form and verified in the prescribed manner setting forth (along with such other particulars as may be provided for in the notice), his total agricultural income during the previous yearProvided that the assessing authority may in his discretion extend the date for delivery of the return."7. Section 15(3B) runs thus:" 15. (3B) Along with the notice under sub-section (3) the assessing authority shall send a statement showing a provisional estimate of the agricutural income which in his opinion accrued to the person during the previous year. The estimate shall be prepared in accordance with the provisions of clause (a) of sub-section (2) of section 6 and be in such form and contain such particulars as may be prescribed."8. In the instant case, as we have said above, notice under s. 15(3) was served by the assessing authority upon the appellant and as required by s. 15(3B), along with the notice, the assessing authority had sent a statement showing the provisional estimate of the agricultural income which in its opinion accrued to the appellant during the previous year 1953-54, which estimate was prepared in accordance with the provisions of s. 6(2)(a). Admittedly, the change of option sought to be exercised by the appellant was denied to it by the assessing authority and the assessing authority proceeded with the assessment of the agricultural income of the appellant-assessee in accordance with s. 6(2)(b). Admittedly, further, the assessing authority had issued a notice under s. 16(2) requiring the appellant to produce evidence in support of its earlier returns. On September 29, 1955, the 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."9. 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 to the statement, if any, sent under sub-s. (3B) of s. 15 notwithstanding any option exercised under sub-s. (1) of s. 6 ". It is thus clear that irrespective of whatever option might have been exercised by the assessee the best judgment assessment has to be made by the assessing authority by having due regard to the statement of provisional estimate of agricultural income made in accordance with s. 6(2)(a) of the Act. The non-obstante clause leaves it open to the assessing authority to select whatever basis it considers appropriate for computing and determining the true agricultural income of the assessee ; it may adopt any one of the bases in respect of the entire agricultural area or adopt one basis in respect of one part of agricultural area and the other basis in respect of another part, the only obligation being to have " due regard " to the statement under s. 15(3B). The scheme of s. 16(4) clearly shows that in regard to the best judgment assessment there is nothing sacrosanct about the option exercised by the assessee under s 6(1) of the Act ; equally it can be said that in regard to assessments other than best judgment assessments under the scheme of s. 15, there is nothing sacrosanct about the particular option previously exercised by the assessee and he need not be held bound by it provided he changes the option by filing a subsequent or a fresh or a revised return in accordance with the applicable provisions contained in s. 15, the object being to determine his true agricultural income for the relevant previous year, --though so far as the assessing authority is concerned such option, whether original or sub-sequent, would indisputably be binding on itIn view of the aforesaid discussion, we are clearly of the view that the learned single judge of the Allalhabad High Court was right in his conclusion that the appellant-assessee was entitled to have the computation of its agricutural income for the previous year 1953-54 (1361 Fasli) relevant to the assessment year 1954-55, done in accordance with s. 6(2)(a) of the Act.10.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]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 HighIn our view, there is considerable force in this contention for the reason that whatever restrictions had been imposed on the change of option by the original proviso to s. 6(1) have been removed and the concept of " first return " is deleted from r. 5. That being so, the expression " his return of income " occurring in r. 5 would apply to any of the returns contemplated under s. 15 of the Act, namely, (1) a return filed in pursuance of the general notice issued and published by the Collector under s. 15(1) ; (2) a return filed by the principal officer of a company under s. 15(2) read with r. 21 ; (3) a return filed in pursuance of individual notice served upon an assessee by the assessing authority under s. 15(3), and (4) a return or a revised return filed by an assessee under s. 15(4), provided that in the first three cases the return is filed within the time specified in the notice or the rule or within the extended time granted by the assessing authority and in the last case the revised return is filed on account of discovery of a wrong statement in the previous return and is filed before the assessment is complete. In fact, r. 5 is obligatory and makes it incumbent upon an assessee to file along with his return of income a declaration in Form No. A.I.T.-2 indicating his option under s. 6(1) of the Act and as such the exercise of such option including a change of the option indicated in the declaration filed along with a subsequent return or a fresh return or a revised return will be valid provided the return itself is validly submitted. In this view of the matter it is not possible to accept the view of the Division Bench of the High Court that if once option is exercised by an assessee by filing the requisite declaration along with his return for a particular year he will have no right to change his option by filing a fresh return or a revised return before the assessment is made for thatquestion 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 assessee does get the right to file a revised return under s. 15(4) merely because he wishes to change theThe hearing of the appeal was, therefore, adjourned to enable both the parties particularly the revenue which will be possessing the records to produce material in that behalf and at the resumed hearing, though no material by way of assessment records or files in the custody of the assessing authority was produced by the revenue, the appellant placed on record a copy of the return dated November 7, 1958 (which was filed on November 8, 1958), together with a copy of the declaration in the Form No. A.I.T.-2 and the forwarding letter. The forwarding letter dated November 7, 1958, clearly shows that the return was filed in response to the notice dated April 7, 1955, served upon the appellant under s. 15(3) of the Act. The said letter in terms referred to the notice dated April 7, 1955, under s. 15(3) as also to the statement of provisional estimate of agricultural income for the relevant previous year 1953-54 (1361 Fasli) prepared under s. 6(2)(a) read with s. 15(3-B) accompanying the notice and further stated that the appellant had decided in order to avoid further prolonged litigation, to accept the provisional estimate of agricultural income under s. 6(2)(a) (subject only to necessary corrections as regards area and classification of soil, etc.) and to suffer agricultural income-tax on that basis and requested the assessing authority to complete the assessment in accordance with s. 6(2)(a) of the Act. It is, therefore, clear that the return filed by the appellant on November 8, 1958, was in response to the notice served upon it by the assessing authority under s. 15(3). Moreover, the said return was rejected by 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 thet from the aforesaid position there is yet one more aspect to which we would like to refer in relation to the question raised before us in these appeals and that arises in view of the provisions of s. 16(4) of the Act under which the assessing authority makes its best judgment assessment.the instant case, as we have said above, notice under s. 15(3) was served by the assessing authority upon the appellant and as required by s. 15(3B), along with the notice, the assessing authority had sent a statement showing the provisional estimate of the agricultural income which in its opinion accrued to the appellant during the previous year 1953-54, which estimate was prepared in accordance with the provisions of s. 6(2)(a). Admittedly, the change of option sought to be exercised by the appellant was denied to it by the assessing authority and the assessing authority proceeded with the assessment of the agricultural income of the appellant-assessee in accordance with s. 6(2)(b). Admittedly, further, the assessing authority had issued a notice under s. 16(2) requiring the appellant to produce evidence in support of its earlier returns. On September 29, 1955, the 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) runs16. (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 sectionwill 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 to the statement, if any, sent under sub-s. (3B) of s. 15 notwithstanding any option exercised under sub-s. (1) of s. 6 ". It is thus clear that irrespective of whatever option might have been exercised by the assessee the best judgment assessment has to be made by the assessing authority by having due regard to the statement of provisional estimate of agricultural income made in accordance with s. 6(2)(a) of the Act. The non-obstante clause leaves it open to the assessing authority to select whatever basis it considers appropriate for computing and determining the true agricultural income of the assessee ; it may adopt any one of the bases in respect of the entire agricultural area or adopt one basis in respect of one part of agricultural area and the other basis in respect of another part, the only obligation being to have " due regard " to the statement under s. 15(3B). The scheme of s. 16(4) clearly shows that in regard to the best judgment assessment there is nothing sacrosanct about the option exercised by the assessee under s 6(1) of the Act ; equally it can be said that in regard to assessments other than best judgment assessments under the scheme of s. 15, there is nothing sacrosanct about the particular option previously exercised by the assessee and he need not be held bound by it provided he changes the option by filing a subsequent or a fresh or a revised return in accordance with the applicable provisions contained in s. 15, the object being to determine his true agricultural income for the relevant previous year, --though so far as the assessing authority is concerned such option, whether original or sub-sequent, would indisputably be binding onn view of the aforesaid discussion, we are clearly of the view that the learned single judge of the Allalhabad High Court was right in his conclusion that the appellant-assessee was entitled to have the computation of its agricutural income for the previous year 1953-54 (1361 Fasli) relevant to the assessment year 1954-55, done in accordance with s. 6(2)(a) of the Act