STATE OF UTTAR PRADESH Vs. YASHPAL SINGH

JUDGEMENT

(1.) THIS is a statement of a case referred by the Revision Board under section 24(1) of the U. P. Agricultural Income-tax Act inviting this courts answer to the following question :

(2.) THE assessee, who has elected in favour of the mode mentioned in section 6(2)(b) for computing his total agricultural income, submitted a return in the prescribed form showing his income and expenses. According to the return his gross income was Rs. 10,000 and odd and his expenses of cultivation were Rs. 5,000 and odd. THE assessing authority did not accept the figures of income given by the assessee in his return and estimated his income from cultivation at Rs. 16,000 and odd and his expenses at Rs. 8,000 and odd, taking them to be about half of the income. Since the estimated expenses were more than the expenses mentioned by the assessee in his return, the State applied to the Revision Board in revision for reference of the above-mentioned question to this court for its answer. THE Board in the statement of the case has expressed an opinion that the admission contained in the return that the expenses of cultivation were Rs. 5,000 and odd was not conclusive, that it could be proved to be untrue or mistaken or made for a fraudulent purpose and in that event it would lose all evidentary value, that an admission must be taken as a whole and not accepted in part and rejected in part, that if the actual income is found to be larger there is no reason for saying that the actual expenses are also not larger than what is shown in the return and that when a return is rejected, the assessing authority has to make the assessment on the basis of its best judgment, i.e., the expenses also have to be estimated according to its best judgment.

(3.) THE view that we take does not militate against what this court decided in Hanuman Glass Works, Ferozabad v. Commissioner of Income-tax. It was a case governed by the Indian Income-tax Act, the provisions of which differ materially from those of the U. P. Agricultural Income-tax Act in regard to assessment and deductions. In that case there was no question of rejection of the return and the assessing authority acted under section 13 because the method of accounting had not been regularly employed and the assessing authority could not properly deduce income, profits and gains from the accounts. THE assessee had claimed a deduction on account of remuneration paid to two employees and that claim was rejected by the income-tax authorities for the reason that, upon the evidence produced by the assessee, it could not be held that remuneration to the employees was to be paid not on the actual net profits as worked out by the assessee itself but on the estimate of profits made by the income-tax authorities. This court held that the question whether the commission was to be worked out on the actual profit or on the estimated profits was a question of fact and it appeared that the assessee had produced no evidence to prove that the remuneration was to be a percentage of the estimated profits and not of the actual profits. Further, the amounts claimed as deduction were actually entered in the account books as payments which had actually been made to the employees, and there was no evidence that any greater amount than that recorded had been paid. It must be remembered that the book version of the assessee regarding its profits alone was rejected.