1978 (10) TMI 37 - SC - Income Tax

Whether an assesses having once exercised the option regarding the method of computation of his agricultural income by filing the requisite declaration along with his return is entitled to change the option under the U. P. Agricultural Income-tax Act, 1948 ? Held that - 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. 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 that year. 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 the Act 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 subsequent, would indisputably be binding on it. Thus 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. Appeal allowed.

Summary

Issues Involved:
1. Whether an assessee can change the option regarding the method of computation of agricultural income under the U.P. Agricultural Income-tax Act, 1948, after initially exercising it.

Issue-Wise Detailed Analysis:

1. Right to Change the Option:
The primary issue was whether an assessee, after initially exercising the option regarding the method of computation of agricultural income, can subsequently change this option under the U.P. Agricultural Income-tax Act, 1948. The appellant-assessee initially opted for the computation method under Section 6(2)(b) but later sought to change it to Section 6(2)(a).

Arguments by Appellant:
The appellant contended that under Section 6(1) of the Act, the option to choose the method of computation is given to the assessee to select whichever method is advantageous. The appellant argued that this option could be exercised every time a return is filed, whether it is the initial return, a subsequent return, or a revised return. The appellant also highlighted that Rule 5 of the U.P. Agrl. I.T. Rules, 1949, mandates the filing of a declaration indicating the option along with "his return of income," which should apply to any return filed under Section 15 of the Act.

Arguments by Respondents:
The respondents argued that the option conferred by Section 6 must be exercised in accordance with the Act and Rules. They contended that the declaration indicating the option must be filed along with the first or initial return, and there is no provision for changing the option with a subsequent or revised return. They also argued that a statement made in a previously filed return does not become wrong merely because the assessee selected the wrong option, thus not giving the right to file a revised return under Section 15(4) for changing the option.

Court's Analysis:
The court examined the provisions of Section 6 and Rules 5, 6, and 7 as they stood originally and after amendments. Originally, Section 6(1) had a proviso restricting the change of option without the permission of the Board of Revenue. However, this proviso was deleted by the Amending Act XVIII of 1954, and the concept of "first return" was removed from Rule 5. The amended Rule 5 required a declaration indicating the option to be filed along with "his return of income," which could apply to any return under Section 15.

The court concluded that under the amended provisions, there is no restriction on the assessee's right to change the option. The expression "his return of income" in Rule 5 applies to any return filed under Section 15, including a revised return under Section 15(4). Therefore, an assessee can change the option by filing a fresh or revised return before the assessment is completed.

2. Validity of the Return Filed on November 8, 1958:
The court examined whether the return filed by the appellant on November 8, 1958, was in response to a notice under Section 15(3) or a revised return under Section 15(4). The court found that the return was filed in response to a notice under Section 15(3), as evidenced by the forwarding letter accompanying the return. The return was treated by the assessing authority as having been filed within time but was rejected on the ground that the appellant had no right to change its option.

3. Best Judgment Assessment under Section 16(4):
The court also considered the provisions of Section 16(4) of the Act, which requires the assessing authority to make a best judgment assessment with due regard to the provisional estimate under Section 15(3B) notwithstanding any option exercised under Section 6(1). The court concluded that irrespective of the option exercised by the assessee, the best judgment assessment must consider the provisional estimate under Section 6(2)(a).

Conclusion:
The court held that the appellant-assessee was entitled to change the option and have the computation of its agricultural income for the relevant year done in accordance with Section 6(2)(a) of the Act. The appeals were allowed, and the order of the Division Bench was set aside, restoring the decision of the learned single judge.

Judgment:
The appeals were allowed. The order of the Division Bench dated September 27, 1965, was set aside, and the order of the learned single judge dated October 13, 1961, was restored. The appellant was awarded costs for Civil Appeal No. 1946(NT) of 1972, while each party bore its own costs for Civil Appeal No. 1249(NT) of 1968.