TMI Blog1952 (2) TMI 26X X X X Extracts X X X X X X X X Extracts X X X X ..... tax but on the 22nd March, 1946, the Agricultural Income-tax Officer issued notice under Section 26 on the ground that agricultural income from Gaya zarpeshgi lease should have been taxed. In response to the notice the assessee filed a fresh return and after examination of the accounts the Agricultural Income-tax Officer determined the net income from the Gaya zarpeshgi lease to be ₹ 2,50,879 and after adding it to the total income imposed a tax of ₹ 39,512 and odd. The assessment was approved by the Assistant Commissioner on 23rd March, 1946. The assessee appealed to the Commissioner who held that no income had escaped assessment and the Agricultural Income-tax Officer had no jurisdiction to apply Section 26 of the Act. The Commissioner allowed the appeal. On behalf of the State of Bihar a revision application was filed before the Board of Agricultural Income-tax who has referred the case to the High Court under Section 25(1) of the Act. The question referred are: (1) Whether in view of the circumstances of the case, and particularly the manner in which, after due consideration, the Agricultural Income-tax Officer in his first judgment dated the 10th March, 1947, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orities. The Agricultural Income-tax Officer is therefore entitled to proceed under this section to reassess income if he thinks that owing to some mistake in the first assessment a part of the income has not been assessed. It is not necessary that there must be new facts brought to the notice of the Agricultural Income-tax Officer or that there should be any change in the law. Dr. Sultan Ahmad also stressed the argument that the phrase escaped assessment must mean not that the question has been considered and decided in favour of the assessee but the Agricultural Income-tax Officer had omitted to consider the question at all. Learned counsel contended that the section cannot apply to a case where the Agricultural Income- tax Officer has upon consideration reached the erroneous conclusion that a part of the income was not assessable. But such a consideration is not possible in view of the later part of the section, where income.........has been assessed at too low a rate . This clause cannot refer to a matter of a mere inadvertence but must refer to a deliberate assessment made by the Agricultural Income-tax Officer in the preceding year with knowledge of the facts. The phrase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, 1930, was a legal assessment. It was contended on behalf of the appellant that an assessment once begun if not completed within the year could not be made unless it was done under Section 34. The argument was negatived on the ground that Section 23 under which assessment was made contained no limitation of time during which assessment could be made. The Judicial Committee observed that income had not escaped assessment within the meaning of Section 34 since proceedings for assessment were pending and no final order had been made. The ratio of the case is that an assessment could be made under Section 23(1) of the Act more than a year, in fact at any time after the assessment year, if in the meantime no final assessment has been made. But Dr. Sultan Ahmad referred to the dictum at page 16: To say that the income of Burn Co., which in January, 1928, was returned for assessment and which was accepted as correctly returned, though it was erroneously included in the assessment of Martin Co., has 'escaped' assessment in 1927-28 seems to their Lordships an inadmissible reading. The fact that Section 34 requires a notice to be served calling for a return of income which has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and Rani Bhuvaneshwari Kuer. The zarpeshgi lease is based on two documents called indentures of lease between the assessee and Rani Bhuvaneshwari Kuer. From these documents it is apparent that the lessee had advanced a sum of ₹ 17,16,000 to Rani Bhuvaneshwari Kuer; that in consideration thereof the assessee was granted the right to enjoy rent and profits of the villages mentioned in schedule 1 for a term of 28 years commencing from the first day of Asarn 1342 Fs. The other conditions were: (1) that ₹ 1,000 should be annually paid to the lessor by the lessee as rent of the leasehold properties, (2) that revenue and other Government demands will be paid by the lessor as the leasehold properties were only part of certain tauzis for which public dues were jointly payable, (3) that after payment of the stipulated rent of the lessor and after deducting 12 per cent of the aggregate amount payable by the Mokarraridars as expenses of collection the assessee was entitled to appropriate the remaining profits to himself. According to the terms of the zarpeshgi lease the assessee is de facto landlord and has sole right to collect rent from the tenants. There is no stipulation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of that portion of each instalment which represented on an actuarial valuation the interest on the unpaid purchase price. To put it in other words, there was no transmutation of the principal sum into annuities but the annual payments were instalments of the principal sum with interest on actuarial valuation calculated in a way familiar to accountants and actuaries. The material facts of the present case are manifestly different. In my opinion, the present case comes within the authority of Kumar Gopal Saran Narain Singh v. Commissioner of Income-tax [1935] 3 I.T.R. 237 ; I.L.R. 14 Pat. 552., in which the appellant had transferred an estate to Rani Bhuvaneshwari Kuer in consideration of (a) payment of the transferor's debts of 10 lacs and odd, (b) cash payment of 4 lacs and odd, and (c) annual payment of ₹ 2,40,000 to the transferor for his life. It was held by the Judicial Committee that the owner of the estate had exchanged capital asset for a life annuity which was taxable as income in his hands, that the annual payments were not instalments of the capital sum, that they were part of the price of the sale but that did not make them necessarily capital pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l powers and obligations of an owner to manage the estate, collect rents, pay the Government revenue and taxes and to exercise all powers in relation to raiyats that an owner might exercise. There was also a clause in the contract that after deducting from a gross estimated rental the estimated costs of management and thika rent ho was to take the balance (thika profits). It was held by the Judicial Committee that the thika profits were agricultural income and not income from money- lending business. In view of these considerations I would answer both the questions referred in favour of the State of Bihar. The assessee must pay the cost of this reference. Hearing fee 10 gold mohurs. SARJOO PRASAD, J.--I agree that the questions under reference should be answered in the manner proposed by my learned brother. The decision of the question, whether in the circumstances of the case the Agricultural Income-tax Officer had jurisdiction to revise his order under Section 26 of the Agricultural Income-tax Ant, has caused me considerable embarrassment. The argument on behalf of the assessee that the officer had no jurisdiction to do so when he had already decided on a previous occasi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged, except in the cases provided for in Section 34 of the Act. This argument their Lordships did not entertain. They held that there was no such limitation in Section 23 of the Act itself. They then proceeded to examine the provisions of Section 34, in view of the argument advanced, and opined thus:- Their Lordships do not accept the inference sought to be drawn from Section 34, that it is only where income has escaped assessment in the tax year, or has been assessed too low in that year, that an assessment may be made after the expiry of the tax year. It may be that, in the two cases to which the section applies, if no notice is served within the year following the tax year, no subsequent assessment or re-assessment can be made of the income which has escaped assessment or been assessed too low. But that is not to say that in no other case can an assessment be made after the expiry of the tax year . This is really the crux of their judgment. It would thus be clear that the appellants also agreed that Section 34 was not applicable to the case in question and on that hypothesis asked the Judicial Committee to draw an inference in their favour which it refused to do. Thei ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
