Judgement

M. 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 19-2-1952, by which the High Court answered in the affirmative the following two questions referred to it under S. 25 (1) of the Bihar Agricultural Income-tax Act, 1938:

(1) Whether in view of the circumstances of the case, and particularly the manner in which, after due consideration, the learned Agricultural Income-tax Officer in his first judgment dated 5-1-1946 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 S. 26 of the Act, the income from the zarpeshgi lease of the assessee was taxable under the Act."

2. The facts of the case lie within a very narrow compass. For the assessment year 1944-45 which corresponded to the year of account 1351 Fasli, the assessee returned Rs. 37,43,520 as his agricultural income. He claimed a deduction of Rs. 9,42,137-3-10 1/2 on account of land revenue, rent etc., including a sum of Rs. 2,82,192 shown to have been paid to the Tekari Raj from which two leasehold properties were taken on zarpeshgi lease by indentures dated 15-8-1931, and 31-1-1936, respectively. The amount was sought to be deducted as a capital receipt.

3. The Agricultural Income-tax Officer of Darbhanga by his order dated 28-12-1945 accepted this contention, and exempted the amount from payment of agricultural income-tax. He observed:

" Out of Rs. 9,42,137-3-10 1/2 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 same time, I think, this amount of Rs. 2,82,192 should be treated as income to Tekari Raj and assessed in Gaya Circle along with other income of Tekari Raj as it is credited to that Raj by the assessee and then set off against the Zarpeshgi loan advanced to Tekari Raj."

The assessment was approved by the Assistant Commissioner of Agricultural Income-tax on 4-1-1946, and on the day following, the Income-tax Officer passed his formal order and issued a demand notice.

4. The assessee paid two instalments out of three, when on 22-3-1946, 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 assessment. Issue notice under S. 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.

5. 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, 1988 (hereinafter referred to as the Act).

6. The assessee appealed. The Commissioner of Agricultural Income-tax reversed the de