TMI Blog1959 (5) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... and the receipts represented a capital return. If, however, the payment to the lessor was premium and not a loan, the income, being agricultural, from these leasehold properties was assessable under the Act. We are of opinion that it was so, and that the Agricultural Income-tax Officer was right when he assessed it to agricultural income-tax. The income was not the income of money-lending, and this does not depend upon the character of the recipient. The Thika profits were clearly agricultural income being actually derived from land. The answer to the question by the High Court was thus correct. Appeal dismissed. - Civil Appeal No. 254 of 1954 - - - Dated:- 15-5-1959 - Judge(s) : BHAGWATI., HIDAYATULLAH., S. R. DAS JUDGMENT The judgment of the court was delivered by HIDAYATULLAH, J. --- This appeal, with the special leave of this court, has been filed by Maharajadhiraja Sir Kameshwar Singh of Darbhanga (hereinafter referred to as the assessee) against the judgment of the High Court of Patna dated February 19, 1952, by which the High Court answered in the affirmative the following two questions referred to it under section 25(1) of the Bihar Agricultural Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cultural income from Gaya zarpeshgi lease which should have been taxed for the year 1944-45 (1351 Fasli) has escaped assessment. Issue notice under section 26 fixing the 20th May, 1947." After the assessee appeared, a supplementary assessment order was passed and Rs. 39,512-6-0 were assessed as tax on Rs. 2,52,879. In deciding the matter, the Agricultural Income-tax Officer gave the following reasons : "According to the terms of the lease the assessee is to remain in possession and enjoy the usufruct of the lands given in lease for a fixed number of years on payment of an annual thica rent of Rs. 1,000 to the lessor and thus satisfy himself for the entire amount of consideration money of the zarpeshgi lease in question. In fact, by this zarpeshgi lease the assessee has been given the grant of lands for a fixed term on a fixed rent. Whatever income is derived from these lands during the tenure of this lease, is the income of the assessee and as such it should be taxed in the hands of the assessee and not in the hands of the lessor. The Agricultural Income-tax Officer purported to act under section 26 of the Bihar Agricultural Income-tax Act, 1938 (hereinafter referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been under-assessed, or have been assessed at too low a rate, or have been the subject of excessive relief under this Act the Income-tax Officer may, in any case in which he has reason to believe that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars thereof, at any time within eight years, and in any other case at any time within four years of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or in the case of a company, on the principal officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22, and may proceed to assess or re-assess such income, profits or gains, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice were a notice issued under that sub-section : Provided that the tax shall be charged at the rate at which it would have been charged had the income, profits or gains not escaped assessment, or full assessment, as the case may be :..." The short question is whether income which was returned but was held to be exempt from tax could be said to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come is returned and deliberately not charged to tax, the condition required for the application of the section is fulfilled. He cited the following cases in support of his contention : Anglo-Persian Oil Co. (India) Ltd. v. Commissioner of Income-tax, P. C. Mullick and D. C. Aich, In re, Commissioner of Income-tax v. Raja of Parlakimedi, Chimanram Moti Lal v. Commissioner of Income-tax and Madan Mohan Lal v. Commissioner of Income-tax. The learned Attorney-General also relied strongly upon a recent decision of this Court in Kamal Singh v. Commissioner of Income-tax, where Gajendragadkar, J., after a review of all the authorities, held that section 34 of the Indian Income-tax Act was applicable to a case where an item of income was returned but, deliberately and after consideration, was held to be not liable to tax. Learned counsel for the assessee contends that the point was left open in that case, and refers to Chatturam Horilram Ltd. v. Commissioner of Income-tax as having held the contrary. Before referring to the other authorities of the High Courts, it will be proper to see if the two cases of the Supreme Court are in point or not, and if so, which of them. In Kamal Singh's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the notice of the Income-tax Officer. Gajendragadkar, J., however, did not confine the phrase to such a narrow meaning. He observed : "Even if the assessee has submitted a return of his income, cases may well occur where the whole of the income has not been assessed and such part of the income as has not been assessed can well be regarded as having escaped assessment. In the present case, the rents received by the assessee from his agricultural lands were brought to the notice of the Income-tax Officer ; the question as to whether the said amount can be assessed in law was considered and it was ultimately held that the relevant decision of the Patna High Court which was binding on the Department justified the assessee's claim that the said income was not liable to be assessed to tax. There is no doubt that a part of the assessee's income had not been assessed and, in that sense, it has clearly escaped assessment. Can it be said that, because the matter was considered and decided on the merits in the light of the binding authority of the decision of the Patna High Court, no income has escaped assessment when the said Patna High Court decision has been subsequently reversed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of section 26 of the Act do not involve possessing of or coming by some fresh information. The section says : "If for any reason any agricultural income chargeable to agricultural income-tax has escaped assessment for any financial year ... the Agricultural Income-tax Officer ... may proceed to assess ... such income ..." The use of the words "any reason" which are of wide import dispenses with those conditions by which section 34 of the Indian Income-tax Act is circumscribed. The point which was thus left over by Gajendragadkar, J., cannot arise in the context of the Act we are dealing with. In view of this clear opinion, it is hardly necessary for us to consider again the cases which preceded the decision of this court. The most important of them are considered in the judgment of Gajendragadkar, J. Most of the cases are also considered in the judgment of Harries, C. J., and Mukherjea, J. (as he then was) in Maharaja Bikram Kishore v. Province of Assam. In all the cases where a contrary view was taken, reliance was placed upon the decision of the Privy Council in Rajendra Nath Mukherjee v. Income-tax Commissioner, particularly a passage wherein it was observed : "Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eponderance of opinion in the High Courts is also to accept the contrary view, and we think rightly. The learned counsel for the assessee argued that the decision of this court in Chatturam Horilram Ltd. v. Commissioner of Income-tax discloses a different view, and that we should follow it in preference to the later view of Gajendragadkar, J. We do not think that in the case last cited the point was the same. The same case was relied upon before the Bench of Venkatarama Aiyar, Gajendragadkar and Sarkar, JJ., and Gajendragadkar, J., distinguished it. This is what he observed : "Mr. Sastri has also relied on the decision of this court in Chatturam Horilram Ltd. v. Commissioner of Income-tax, in support of his construction of section 34. In Chatturam's case, the assessee had been assessed to income-tax which was reduced on appeal and was set aside by the Income-tax Appellate Tribunal on the ground that the Indian Finance Act of 1939, was not in force during the assessment year in Chota Nagpur. On a reference the decision of the Tribunal was upheld by the High Court. Subsequently the Governor of Bihar promulgated the Bihar Regulation IV of 1942 and thereby brought into force the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow ground to which we have just referred. We are satisfied that this decision is of no assistance to the appellant's case." For the reasons we have given, we are of opinion that the Agricultural Income-tax Officer was competent under section 26 of the Act to assess an item of income which he had omitted to tax earlier, even though in the return that income was included and the Agricultural Income-tax Officer then thought that it was exempt. The answer given by the High Court was therefore correct. This brings us to the second question. The income was received from the leasehold properties, and was agricultural income. The contention of the assessee is that it may be agricultural income in the hands of the Tekari Raj but in his hands it was capital receipt and in repayment of the loan of about Rs. 17,00,000 paid to Rani Bhuwaneshwari Kuer. The State of Bihar, however, denies that there was a loan or a mortgage at all. The assessee, it is contended, was placed in possession for a number of years on a rent of Rs. 1,000 per year and the amount paid was premium and not a loan. The documents in question are two. They are plainly indentures of lease between the Rani and the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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