GOVERNMENT OF BIHAR Vs. MOTIHARI ESTATE LTD

JUDGEMENT

(1.) This is a reference under Section 25(2) of the Bihar Agricultural Income-tax Actr - hereinafter called the Act - by the Board of Agricultural Income-tax, Bihar - hereinafter called the Board - to this Court at the instance of the assessee to answer the contention that "the income of the assessee should have been computed according to the provisions of Section 7(1)(a), and not under Section 7 (1)(b), and on this point the Agricultural Income-tax Officer was wrong in his interpretation of the provisions of Section 17(3) of the Act."

(2.) The undisputed facts are these. For the year of assessment 1940-41 the assessee filed a return on the 14 November, 1941, before the Agricultural Income-tax Officer in respect of his agricultural income for the year ending 31st July, 1940. The income returned was Rs. 1,35,088 and was based upon the actual receipts and expenditure in the accounting period. A balance sheet as on 31 July, 1940, showing the revenue and profit and loss account for this year prepared by the incorporated accountants was also filed. On the 26 May, 1941, a notice was served by the Income-tax Officer on the assessee to submit accounts and other evidence in support of his return as the officer was not satisfied that the return was correct and complete. The assessee instead of submitting the accounts filed an application stating that he should be assessed under Section 7(1)(a). This provision enacts that "the agriculture income mentioned in sub-clause (2) of clause (a) of Section 2 shall, at the option of the assessee, be deemed, for the purposes of the assessment to agricultural income-tax, to be a multiple" which shall not exceed six -the multiple has now been raised to eight. That application is dated the 23 of May, 1941, and is to be found at page 13. It states that on the 13 of February, 1941, the assessee submitted a return for the assessment year 1940-41 and that the officer will kindly treat that return as cancelled and substitute the attached one in its place. It is stated further : "By virtue of the option allowed to us under Section 7(1) of the Bihar Agricultural Income-tax Act, 1938, we hereby adopt the method of assessment as laid down under sub-section (a) of Section 7(1). We have shown in the return the actual rent paid, and in order to arrive at the assessable income this sum will have to be multiplied by the multiple fixed for other district by the Bihar Board of Agricultural Income-tax." It will be noticed that this application was made before the service on the assessee of the notice issued by the Income-tax Officer under Section 18(2) of the Act - the notice was served on the 26 of May requiring the assessee to submit accounts and evidence on the 10 of June, 1941. On the 3 of June, 1941, the assessee was informed by the Income-tax Officer that as he had already exercised his option in submitting the original return, he cannot be allowed to change the basis. On the 5 of June, 1941, the incorporated accountants on behalf of the assessee wrote a letter to the Income-tax Officer, which is to be found at page 14, stating that they have been asked by the assessee to send a reply to the letter of the 3rd of June, 1941. The accountants after drawing attention to Section 17(3) of the Act, which gives the assessee every right to make a revised return or a fresh return before the assessment is made, requested the Income-tax Officer to accept a fresh return filed by the assessee. The Income-tax did not agree and proceeded to make an assessment based on the original return and found that the actual amount of agricultural receipts. By an order dated the 21 of June, 1941, the assessable income was fixed at Rs. 1,95,068.

(3.) Against this assessment the assessee preferred an appeal to the Commissioner of Agricultural Income-tax, who by an order dated the 27 January, 1942, reduced the assessment to Rs. 1,94,465. The assessee then preferred two applications to the Board on the 24 March, 1942. He prayed that the order of the Commissioner be revised inter alia on the ground that the assessee should have been assessed under Section 7(1)(a) and not under Section 7(1)(b) of the Act. By the second petition it was prayed that the question of law should be referred to the High Court for decision. On the 10 October, 1942, the Board came to the conclusion that there was a question of law whether the assessee was entitled to exercise his option twice before the assessment, and that this question would be referred to the High Court. That question accordingly has been referred to this Court. There were two either minor questions which are disposed of by the board and no reference has been made to this Court.