332 SUPREME COURT REPORTS [1960(1)) r959 having been appointed managing director because of Th C -. . his being a promoter of the company and having e ommissioner II k h f I · El ·of Income-tax actua y ta en over t e concern o nd1a ectnc v. Works from Milkhi Ram and others. The finding in Kalu Babu Lal this case is that the promotion of the Company and Chand the taking over of the concern and the financing of it Das c. J. were all done with the help of the joint family funds and the said B. K. Rohatgi did not contribute anything out of his personal funds if any. In the circumstances, we are clearly of opinion that the managing director's remuneration received by B.K. Rohatgi was, as between him and the Hindu undivided family, the income of the latter and should be assessed in its hands. We, therefore, set aside the answer given by the High Court to the second question and answer the same by saying that the assessment of the whole of the sum of Rs. 61,282 should be on the assessee Hindu undivided family. The result is that this appeal is allowed with costs here and in the Court below. I959 May IS· A ppeaJ, aJ,l,owed. MAHARAJADHIRAJ SIR KAMESHWAR SINGH v. THE STATE OF BIHAR (S. R. DAS, c..J., N. H. BHAGWATI and M. HrDAYATULLAH, ,JJ.) Agricultural Income-tax-Power of Agricultural Income-tax Officer-If can revise his own order of exemption-Bihar Agricul- tural Income-tax Act, I938 (Bihar VII of r938) s. 26. In his return of agricultural income for the assessment year 1944-45, the appellant showed a sum of Rs. 2,82,192, which he had paid to the Tekari Raj for two lease-hold properties taken on Zarpeshgi lease, as one of the items of the total amount of dednction claimed by him as capital receipt. The Agricultural Income-tax Officer accepted his claim and exempted the amount from payment of agricultural income-tax. The Assistant Colljl- missioner of Agricultural Income-tax affirmed the decision. A demand notice was issued and the assessee paid two instalments. Thereafter, the Agricultural Income-tax Officer served on the assessee a notice under s. 26 of the Bihar Agricultural Income- tax Act, 1938, to the effect that income from the said Zarpeshgi lease had escaped assessment and after he appeared, passed a S.C.R. SUPREME COURT REPORTS 333 supplementary assessment order and assessed Rs. 39,512-6-0 as z959 tax. The assessee appealed. The Commissioner of Agricultural Income-tax reversed the said decision. The Province of Bihar Maharajadhiraj moved the Board of Revenue and the two questions it referred to Sir Kameshwar the High Court under s. 25(1) of the Act were, (1) whether in the Singh facts and circumstan<;es of the case, the Agricultural Income-tax v. Officer had jurisdiction to revise his own order under s. 26 of the The· State of Bihar Act and (2) if so, whether the income from the Zarpeshgi lease was taxable under the Act. The High Court answered both the questions in favour of the State of Bihar. Hence this appeal by the assessee by special leave. Held, that under s. 26 of the Bihar Agricultural Income-tax Act, 1938, the Agricultural Income-tax Officer had the power to revise his own order and assess an item of income which, even though shown in the return, he had earlier omitted to tax under a. misapprehension th'at it was not taxable. The use of the words "any reason " in s. 26 of the Act made the section wider than s. 34 of the Indian Income-tax ·Act by dispensing with the conditions which circumscribed the latter section. Kamal Singh v. Commissioner of Income-tax, Bihar G Orissa, A.LR. 1959 S.C. 257, applied. Messrs. Chatturam H orilram Ltd. v. Commissioner of Income- tax, Bihar and Orissa, [1955] 2 S.C.R. 290, distinguished. Case-law discussed. Since the appellant had failed to prove his case that the income in question was income from his money-lending business or that the payment made to the lessor was not by way of premium but as a loan, the income from the lease-hold property which was admittedly agricultural in character, must be held to be liable to tax under the Act, irrespective of the character of the recipient. Crv1L APPELLATE JuRrsmcTION: Civil Appeal No. 254of1954. Appeal by special lea.ve from the judgment and order dated February 19, 1952, of the Patna High Court in Misc. J udl. Case No. 244 of 1949. B. Sen, S. K . .llfajumdar and I. N. Shroff, for the appellant. M. 0. Setalvad, Attorney-General for Irulia, B. K. Saran and R. C. Prasad, for the respondent. 1959. May 15. The Judgment of the Court was delivered by HIDAY AT ULLAH J.-This appeal, with the special HUiayatullah J. leave of this Court, has been filed by Maharajadhiraja 334 SUPREME COURT REPORTS [1960(1)] Sir Kameshwar Singh of Darbhanga (hereinafter refer- red to as the assessee) against the judgment of theMaharajadhiraj Sir Kameshwar High Court of Patna dated February 19, 1952, by I959 Singh which the High Court answered in the affirmatiye the v. following two questions referred to it under s. 25(1) of T_he State of Biharthe Bihar Agricultural Income-tax Act, 1938: Hidayalullah j. (1) "Whether in view of the circumstances of the case, and particularly the manner in which, after due consideration, the learned Agricultural lncome- tax Officer in his first judgment dated the 5th January, 1946, had held that the assessee was not liable to be assessed for the receipt on account of the zarpeshgi lease, the learned Agricultural Income- tax Officer has jurisdiction to revise his own order under s. 26 of the Act ; and (2) Whether if he had the jurisdiction to revise his own order, under section 26 of the Act, the in- come from the zarpeshgi lease of the assessee was taxable under the Act." The facts of the case lie within a very narrow com- pass. For the assessment year 1944-45 which cor- responded to the year of account 1351 Fasli, the assessee returned Rs. 37,43,520 as his agricultural income. He claimed a deduction of Rs. 9,42,137 -3-lOt on account of land revenue, rent etc., including a sum of Rs. 2,82,192 shown to have beeu paid to the Tekari Raj from which two leasehold properties were taken on zarpeshgi lease by indentures dated August 15, 1931, and January 31, 1936, respectively. The amount was sought to be deducted as a capital receipt. The Agricultural Income-tax Officer of Darbhanga by his order dated December 28, 1945 accepted this contention, and exempted the amount from payment of agricultural income-tax. He observed: "Out of H,s. 9,42,137-3-lOt claimed on account of Land Revenue and rent, Rs. 2,82,192 is shown as payment to Tekari Raj and then taken towards the realisation of Zarpeshgi Loan to self. I have gone through the bond of Gaya Zarpeshgi Lease. This payment is allowed to the assessee, as it is a capital income according to the terms of the bond. At the S.C.R. SUPREME COURT REPORTS 335 same time, I think, this amount of Rs. 2,82,192 x959 should be treated as income to Tekari Raj and M aharajtJdhiraj assessed in Gaya Circle along with other income of Sir Kameshwar Tekari Raj as it is credited to that Raj by the assessee Singh and then set off against the Zarpeshgiloan advanced v. to Tekari Raj." The State of Bihar The assessment was approved by the Assistant Com- Hidayatullah J. missioner of Agricultural Income-tax on January 4, 1946, and on the day following, the Income-tax Officer passed his formal order and issued a demand notice. The assessee paid two instalments out of three, when on March 22, 1946, the Agricultural Income-tax Officer recorded the following order :- "It appears that some agricultural income from Gaya Zarpeshgi lease which should have been taxed for the year 1944-45 (1351 Fasli) has escaped assess- ment. Issue notice under section 26 fixing the 20th May 1947." After the assessee appeared, a supplementary assess- ment order was passed and Rs. 39,512-6-0 were asses- sed 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 s. 26 of the Bihar Agricultural Income- tax Act, 1938 (hereinafter referred to as the Act). The assessee appealed. The Commissioner of Agri- cultural Income-tilix reversed the decision. He pointed 336 SUPREME COURT REPORTS [1960(1)] I959 out that the agricultural income from Tekari Raj pro- Maharajadhiraj perty was returned by the assessee but was held to be Sir Kameshwar exempt and thus could not be said to have escaped Singh assessment so as to bring the case within s. 26 of the v. . Act. The Province of Bihar (as it was then called) The State of Bihar moved the Board of Revenue, Bihar which by a Hidayatullail J. resolution dated February 7, 19.48, referred the two questions to the High Court of Patna. The Board did not express any opinion on the two qu~tions. In the High Court, both the questions were answered in favour of the State of Bihar. Leave having been refused by the High Court, the assessee applied for, and obtained special leave from this Court. Section 26 of the Act, under which the Agricultural Income-tax Officer purported to act is substantially the same ass. 34 of the Indian Income-tax Act, prior to its amendment. Necessarily, therefore, the rulings on the interpretation of the latter section were freely cited by the contending parties. Section 26 of the Act reads as follows : " If for any reason any agricultural income chargeable to agricultural income-tax has escaped assessment for any financial year, or has been asses- sed at too low a rate, the Agricultural Income-tax Officer may, at any time within one year of the end of that financial year, serve on the person liable to pay· agricultural income-tax on such agricultural income 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 17, and may proceed to assess or re-assess such income, 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 if such income had not escaped assessment cir full assessment, as the case may be. " For facility of reference, the previous s. 34 before the amendment in 1948 of the Indian Income-tax Act may lik11wise be quoted here. It read : S.C.R. SUPREME COURT REPORTS 337 " If in consequence of definite information which x959 has come into his possession the Income-tax Officer Maharajadhiraj discovers that income, profits or gains chargeable to Sir Kameshwar income-tax have escaped assessment in any year, Singh or have been under-assessed, or have been assessed v. at too low a rate, or have been the subject of exces- The State of Bil"" sive relief under this Act the Income-tax Officer Hidayat-:Z1a1s J. may, in ~,ny case in which he has reason to believe that the asseSilee has concealed the particulars of his income or deliberately furnished inaccurate parti- culars 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-sec- tion (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 have "escaped assessment" so that the Agricultural Income-tax Officer could exercise his powers under s. 26 of the Act to tax it. This question arising under s. 34 of the Indian Income-tax Act has been considered on many an occasion by the High Courts and also by the Privy Council and this Court. The Patna High Court has correctly pointed out that the preponderance of opinion is in favour of holding that such income can be said to have escaped assess- ment. The High Court in deciding that the Agricultural Income-tax Officer had jurisdiction to revise his earlier assessment referred to the opening words of s. 26, namely, "for any reason" and observed that it was 43 338 SUPREME COURT REPORTS [1960(1)] ~959 not necessary to give a restricted meaning to the word "escaped'', and that if an item of income was notMaharajadhiraj Sfr Kam.,hwar charged to tax due to a mistake or oversight on the Singh part of the taxing authorities, that item could well v. come within the term "escaped". According to the Tll< Stat• of Bihar High Court, the phrase "escaped assessment" was not - confined to cases where there had been an inadvertentHUlayatullah J. omission, but in view of the later part· of the section "where income ... has been assessed at too low a rate", included a case where there was a deliberate action. Learned counsel for the assessee contends that the generality of the words "any reason " has no bearing upon the construction of the words " escaped assess- ment ", that the word " assessment " does not connote the final determination to tax income but the entire process by which the result is reached, and that inas- much as the income was actually returned and held to be exempt, there was no question of an "escaped assessment " because it passed through the processing of income. He also contends that the later part of the section which deals with assessment at too low a rate cannot be called in aid to decide when income can be said to have escaped assessment. He submits that the section has no application to cases where income is returned but is held to be not liable to tax and relied upon the following cases ; M aharaja Bikram K ishore v. Province of Assam('), Commissioner of Income-tax v. Dey Brothers('), Madan Mohan Lal v. Commissioner of Inn:nn,e-tax (3) (per Dalip Singh, J.) and Chimanram Moi:l.al (Gold and Silver), Bombay v. Commissioner of Incorr;~-tax (Central), Bombay(') (per Kania, J., as he then was). The learned Attorney-General drew the attention of the Court to other cases in which the view has been taken that even if income 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 (6 ), The (1) [1949] 17 I.T.R. 220. (2) [1936] 4 l.T.R. 209. (3) [1935] 3 l.T.R. 438, (4) (1942) I.L.R. i943 Bom. 206. (5) [1933] l l.T.R. 129. (6) [1940] 8 l.T.R. 236. S.C.R. SUPREME COURT REPORTS 339 Commissioner of Income-tax v. Raja of Parlakimedi (1) .r959 OhimanramMoti Lal (Gold and Silver), Bombay v. Oom- Maharajadhiraj missioner of Income-tax (Central), Bombay (2) and Madan Sir J(ameshwar Mohan Lal v. Commissioner of Income-tax (3 ). The Singh learned Attorney-General also relied strongly upon a v. recent decision of this Court in Kamal Singh v. Commis- The State of Bilitw sioner of Income-tax, Bihar and Orissa ('), where ft f 11 h h Hidayatullali ]. Gajendragadkar, J., a er a review o a t e aut ori- ties, held thats ..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 Messrs. Chatturam Horilram Ltd. v. Commissioner of Income-tax, Bihar and Orissa( 5) 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 case('), the point arose under the following circumstances. The father of the appel- lant in that case was assessed to income-tax for the year 1945-46. The total income assessed to income- tax was Rs. 1,00,000 which included a sum of Rs. 93,604 received by him on account of interest on arrears of :rent due to him after deduction of collection charges. It was urged before the Income-tax Officer that this interest was not assessable to income-tax being agricul- tural income, in view of the decision of the Patna High Court in Kamakshya Narain Singh v. Commis- sioner of Income-tax (6 ). The Income-tax Officer did not accept this contention on the ground that an appeal was pending against the Patna High Court's decision, before the Privy Council. On appeal, the - Appellate Assistant Commissioner held that the Income-tax Officer was bound to follow the decision of the High Court, and he set aside the order and directed the Income-tax Officer to make a fresh assessment. The Income-tax Officer thereupon deducted the amount (1) (1926) I.L.R. 49 Mad. 22. (4) A.LR. 1959 S.C. 257. (2) (1942) I.L.R. 1943 Born. 206. (5) [1955] 2 S.C.R. 290. (3) [1935] 3 I.T,R. 438. (6) [1946] 14 I.T.R. 67J. 340 SUPREME COURT REPORTS (1960(1)] z959 and brought only the remaining income (after some Maharajadhiraj minor adjustments) to tax. His order was passed on s;, I