Jyoti Sarup And Anr. vs Board Of Revenue, Uttar Pradesh

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 5 September 1960

Coram: J.C. Shah, K.C. Das Gupta, M. Hidayatullah, N. Rajgopala Ayyangar, S.K. Das

In the matter titled Jyoti Sarup and another versus Board of Revenue, Uttar Pradesh, decided on 5 September 1960, the Supreme Court of India rendered a judgment authored by Justice S.K. Das. The bench comprised Justices J.C. Shah, K.C. Das Gupta, M. Hidayatullah, N. Rajgopala Ayyangar and S.K. Das. The judgment was pronounced by Justice S.K. Das, who noted at the outset that the two appeals pending before the Court and the writ petitions that were connected with those appeals were being heard together and that the opinion rendered in this judgment would govern all of those proceedings.

The appellants in the case were two brothers who owned agricultural land situated in the district of Pilibhit. Under the Uttar Pradesh Agricultural Income‑Tax Act, Act III of 1949 (hereinafter referred to as “the Act”), they were liable to pay tax on income derived from agricultural operations. Section 5 of the Act laid down the procedure for ascertaining what constituted agricultural income, while Section 6 prescribed two alternative methods for computing that income. One method allowed the income to be calculated on the basis of a prescribed multiple of the rent payable on the land, and the other method permitted the income to be measured by the gross proceeds realized from the sale of the produce harvested from the land, after allowing for certain deductions. The text of Section 6, as it existed at the relevant time, read as follows: “(1) The agricultural income mentioned in sub‑clauses (i), (ii) and (iii) of clause (b) of sub‑section (1) of section 2 shall, at the option of the assessee, be computed in accordance with clause (a) or clause (b) of sub‑section (2): Provided that an assessee who has once exercised his option shall not be entitled to vary the method of computation except with the permission of the Board of Revenue. (2) (a) Subject to such deduction in respect of agricultural calamities as may be prescribed, the income shall be deemed to be such multiple, not exceeding 7½ per cent. of the rent of the land, calculated at the latest sanctioned rent rates applicable to hereditary tenants of similar class of soil as the Board of Revenue may fix for each district or portion thereof: Provided that the Board of Revenue may direct that the multiple for calculating income from land newly brought under cultivation shall for the specified number of years be such lower figure as may be specified, or (b) the income shall be the gross proceeds of sale of all the produce of the land subject to the following deductions …”.

In compliance with the provisions of clause (b) of sub‑section (2) of Section 6, the two brothers filed their agricultural‑income returns for the assessment years 1948‑49 and 1949‑50 by computing the income on the basis of the gross proceeds obtained from the sale of all produce cultivated on their lands, after deducting the amounts prescribed in the statute. When the assessment year 1950‑51 arrived, the appellants applied to the Board of Revenue seeking permission to switch their method of computation to the “multiple” method described in clause (a) of sub‑section (2) of Section 6. The Board of Revenue refused to grant the requested permission. Consequently, the appellants instituted two writ petitions in the High Court of Allahabad, seeking appropriate relief on the basis of the Board’s refusal.

In the earlier proceedings the appellants sought two distinct remedies. First, they asked for a writ of mandamus against the Board of Revenue and the Collector of Pilibhit, who were the respondents, directing those officials to furnish the appellants with appropriate forms for filing their agricultural‑income returns under the method of computation specified in clause (a) of sub‑section (2) of section 6 for the assessment year 1951‑52. Second, they prayed for a writ of certiorari to set aside the order of the Board of Revenue that had refused to allow the appellants to vary their method of computation pursuant to the proviso to sub‑section (1) of section 6. Both writ petitions were heard together by the High Court of Allahabad, which dismissed them by a judgment and order dated 9 September 1952. After that dismissal the appellants obtained certificates of fitness under article 133(1)(c) of the Constitution, and they filed two appeals in this Court on the basis of those certificates. In addition, the appellants lodged two separate writ petitions under article 32 of the Constitution. In those petitions they recounted the facts underlying the High Court writ applications and added that, while those proceedings were pending, the deadline for filing the agricultural‑income returns for the year 1952‑53 arrived. The appellants again applied to the Board of Revenue for permission to file the returns using the method prescribed in clause (a) of sub‑section (2) of section 6, but that permission was again denied. Consequently, they filed the two writ petitions in this Court, asking for the same kind of writ of mandamus to be issued, this time concerning the assessment year 1952‑53. It is necessary to note that the Uttar Pradesh Agricultural Income‑Tax (Amendment) Act 1953 (U.P. Act XIV of 1953) later deleted the proviso to sub‑section (1) of section 6 and inserted a new proviso, which, as the Act stated, gave each assessee complete liberty to choose either of the two methods of computing agricultural income in every assessment year. However, the parties concede that the provisions of this amending Act became effective on 1 July 1953, after the close of the 1952‑53 assessment year, which ended on 30 June 1953. Accordingly, those provisions could not affect the assessment for 1952‑53, and this Court is not called upon to consider the position under the amending Act. The appeals and the two writ petitions must therefore be decided solely on the basis of section 6 as it existed before the commencement of Act XIV of 1953. The principal contention raised by the appellants in the appeals is that the High Court erred in interpreting the proviso to sub‑section (1) of section 6. The High Court had held that, although the main part of sub‑section (1) apparently granted an unfettered right to an assessee to select either method of computation, that right was limited by the proviso, which required the assessee to obtain permission from the Board of Revenue before varying the chosen method.

The Court observed that the statutory provision expressly stated that an assessee who had once exercised an option could not change the method of computation without the permission of the Board of Revenue. The appellants argued that this restriction applied only to a single assessment year and that the assessee remained free to change the method in any other year without seeking permission. The High Court rejected this argument, holding that the wording of the proviso was absolute and unqualified, meaning that once the option was exercised, any variation required the Board’s permission. The Court agreed with the High Court’s interpretation. Although, as the appellants’ counsel noted, the Act – like the Indian Income‑tax Act, 1922 – generally provides for assessment of each year on the income of the preceding year, this does not imply that the limitation in the proviso is confined to one year. The proviso must be read in the context of the language used and the overall scheme of section 6, which sets out two alternative methods of computation and, by its substantive clause, gives the assessee a choice between them. The proviso then adds that once the option is exercised, no variation is allowed without the Board’s permission. The appellants attempted to insert the words “in any one year” after “computation” in the proviso, but such an insertion was not permitted because the scheme of the Act requires each assessee to file a return by a prescribed date, after which, under section 15(4), only corrections of mistakes or omissions may be made through a revised return. The statute does not grant a right to change the method of computation after filing the return for the assessment year. If the proviso were to allow such variation, it would have been reflected in section 15(4), and a conflict would arise between the two provisions.

The Court further noted that the appellants relied on the proviso to section 2(11)(i)(a) and section 13 of the Indian Income‑tax Act, 1922, in support of their construction. However, the Court found that these provisions were not helpful in determining the true scope and effect of the proviso to sub‑section (1) of section 6 because the language differed and the legislative purpose of those provisions was distinct. Section 13 of the Income‑tax Act deals with the method of accounting regularly employed by the assessee and does not involve an option, while the proviso to sub‑clause (i)(a) of section 2(11) addresses a situation where an assessee has been assessed in respect of a newly set up business, profession or vocation and, even before any assessment is made, cannot change the previous year without the consent of the Income‑tax Officer. The Court concluded that these income‑tax provisions did not support the appellants’ desired reading of the proviso in the present Act.

In this matter, the Court observed that Section 13 of the Income‑Tax Act deals with the accounting method habitually used by the assessee and does not involve any option, therefore its purpose differs from that of the proviso to sub‑clause (i)(a) of Section 2(11). The proviso to that sub‑clause states that once an assessee has been assessed in respect of a newly‑set‑up business, profession or vocation, and has exercised the option under sub‑clause (c), the assessee may not alter the previous year for that source without obtaining the consent of the Income‑tax Officer, who may impose conditions. The Court did not see how this provision could aid the appellants in construing the proviso to sub‑section (1) of Section 6 in the manner they sought. The appellants further contended that the Board of Revenue had failed to apply its mind when it refused permission to vary the method of computation. The record showed that an officer of the Board noted the appellants’ application, and that note was forwarded to the Deputy Secretary, who endorsed it with his own opinion. The endorsed note was then presented to the Senior Member of the Board, B. V. Bhadkamkar, who signed beneath the Deputy Secretary’s endorsement, indicating approval of the proposed orders. The note explained that although the multiple‑method approach was simpler and uncontroversial, some assessee might desire a variation to reduce tax payable in a particular year, and that such variation would create administrative difficulties. The appellants argued that the Senior Member’s signature did not reveal the reasons for refusing permission. However, the High Court had held that a senior officer’s signature on a note signifies approval of its contents. Consequently, the Court concluded that the Board had indeed considered all relevant factors before denying the permission, and the claim of non‑consideration could not be accepted. Finally, the appellants argued that the proviso to sub‑section (1) of Section 6 granted the Board an unfettered discretion without guiding principles, rendering it susceptible to discriminatory application and violating Article 14’s guarantee of equal protection. The Court rejected this contention, referring to the decisions in Matajog Dobey v. H. C. Bhari and Ram Krishna Dalmia v. S. R. Tendolkar, which state that a discretionary power is not automatically discriminatory. The Court noted that Section 6 itself provides sufficient guidance by delineating two alternative methods, each with its own advantages and disadvantages, and that the assessee may initially choose either method but cannot change it without Board permission. Hence, the Board must exercise its discretion reasonably, taking into account relevant factors such as the administrative difficulties of changing the computation method, and the discretion vested in the Board is not per se discriminatory.

The Court held that a discretionary power is not inherently discriminatory and that an allegation of abuse of power cannot be readily presumed merely because the discretion is vested in a senior authority rather than a lower‑level official. It observed that the provisions of section 6 furnish adequate guidance to the Board of Revenue for exercising the discretion conferred by the impugned proviso. Section 6 sets out two alternative methods of computation, each having its own advantages and disadvantages, and permits the assessee to select one of these methods at the outset. Once the assessee has made that election, the selected method may not be altered without obtaining the Board’s permission. The Court emphasized that, in exercising its discretion, the Board must act reasonably and must take into account all relevant factors, including the difficulties that a change in the method of computation would create. Accordingly, the Court concluded that the discretion vested in the Board is not per se discriminatory. The appellants sought leave to adduce additional evidence at this stage to demonstrate that the Board had, in other cases, allowed variation of the method of computation. The Court noted that it was not aware of the facts of those other cases, nor was it in a position to conduct a detailed examination of each case, as it was not hearing an appeal against the Board of Revenue. Consequently, the Court refused the appellants’ request for permission to introduce the additional evidence. On the basis of the foregoing reasoning, the Court found that the appeals must fail and ordered their dismissal. The related writ petitions were also dismissed because, in the Court’s view, no infringement of any fundamental right arose. Accordingly, the appeals and the connected writ petitions were dismissed with costs. Since all four cases were heard together on a single argument, there will be only one set of hearing fees, to be paid equally by the two appellants‑petitioners.