PATHAK, J. - This is a reference made by the Income-tax Appellate Tribunal under Section 66 (1) of the Indian Income-tax Act read with Section 21 of the Excess Profits Tax Act. The questions referred for the decision of this Court by this reference are as follows :-
'(1) Whether the assessee having once exercised his option under Section 8 (2) of the Excess Profits Tax Act (viz., that the business be deemed not to have been discontinued) before the prescribed date and the option so exercised having been accepted by the Excess Profits Tax Officer and the assessment made on the basis thereof (in respect of a chargeable accounting period), the assessee is entitled to withdraw the above option later on at the appellate stage with a view to claim that the business be deemed to have been newly commenced ?
(2) if the answer to question No. (1) above be in the affirmative, whether in the present case, the previous year 1938 determined for the assessment for 1939-40 can by itself be selected as a standard period by the assessee under sub-clause (d) of Section 6 (2) read with the proviso thereto, there having been no (and could not have been any) assessment for 1938-39 for a business deemed to have been newly started on 1st January, 1938, and having the calendar year as its previous year and consequently no previous year determined for that assessment.'
The assessee is the firm of Messrs. A. H. Wheeler & Co. The chargeable accounting periods in respect of which this firm has been assessed to excess profits tax are two : (1) 1st September, 1939, to 31st December, 1939, and (2) 1st January, 1940, to 31st December, 1940. In October, 1940, a notice under Section 13 of the Excess Profits Tax Act was issued to the assessee calling upon him to furnish a return with respect to the first of the chargeable accounting periods mentioned above. By letter, dated November 6, 1940, the assessee while asking for an extension of the date for the delivery of the return, purported to exercise the discretion conferred upon it by Section 8 in consequence of the change having taken place in the persons carrying on the business as a result of the death of one of the partners, and the assessee gave intimation to the Excess Profits Tax Officer in the following terms :-
'Further a change in the constitution of the firm took place with effect from 1st January, 1938, on account of the death of the then senior partner, Mr. E. E. Moreau, but we should like you to treat this business as not having been discontinued for the purposes of computation of standard profits.'
That officer informed the assessee by letter, dated November 22, 1940, that the election made in the assessees letter was approved. In the month of May, 1941, a notice under Section 13 of the Excess Profits Tax Act was issued in respect of the second of the two above-mentioned chargeable accounting periods. It appears that the returns were filed by the assessee in respect of both the chargeable accounting periods in due course. Having elected to treat the business as continuing despite the death of one of the partners, the assessee-firm proceeded to exercise the option conferred upon it by Section 6 (2) in the matter of the selection of the standard periods and asked for the fixation of the standard periods in accordance with clause (d) of sub-section (2) of Section 6 for the purpose of determining the standard profits of the business in relation to both the above-mentioned chargeable accounting periods. The result was that on June 30, 1942, the assessment to excess profits tax was made in respect of both the chargeable accounting periods on the footing that there was no discontinuance of business. Pursuant to the assessment, notice of demand were served upon the firm on July 3, 1942. One day before the service of the notice, namely, on July 2, 1942, the firm addressed a letter to the Excess Profits Tax Officer stating :-
'We have just discovered that it will probably be more advantageous for us to select a slightly different standard period; but we ourselves are rather confused on the point as the Excess Profits Tax Act is beyond our understanding. We shall, therefore, feel grateful if you will kindly fix a date on which one of our partners as also our Accountant can see you good-self and discuss the matter...'
The Excess Profits Tax Officer having completed the assessment prior to the receipt of this letter had become functus officio and could not take any action on it, but in the two appeals which had been preferred by the assessee from the two assessment orders, the assessee firm took up the position that it should be treated as a new firm which commenced its business on January 1, 1938, and the standard period applicable to it was the period from January 1, 1938, to December 31, 1938, which was the 'previous year' as determined under Section 2 of the Indian Income-tax Act for the purpose of the income-tax assessment for the year ending 31st of Match, 1940. In taking up this position, the assessee-firm withdrew the option which had been exercised by it in the course of the assessments made by the Excess Profits Tax Officer, and taking advantage of Section 8 (1) of the Excess Profits Tax Act selected the standard period provided by clause (d) of sub-section (2) of Section 6 of that Act. It appears that the Income-tax department was represented by the Excess Profits Tax Officer before the Appellate Assistant Commissioner of Excess Profits Tax. The Appellate Assistant Commissioner remarked : 'The department takes no exception to the appellants withdrawing his application under Section 8 (2) at this stage if the option claimed is otherwise found available to the appellant.' The result was that the assessee-firm having resiled from the election made by it before the Excess Profits Tax Officer and the withdrawal of the election having been accepted by that officer, the Appellate Assistant Commissioner proceeded to decide the appeals before him upon the footing that no election had been made by the assessee in terms of Section 8 (2) of the Excess Profits Tax Act. The Appellate Assistant Commissioner took view that the assessee was not entitled to take the benefit of clause (d) of sub-section (2) of Section 6 inasmuch as no business having been carried on by the assessee prior to January 1, 1938, there could be no 'previous year' determinable under Section 2 of the Indian Income-tax Act for the purpose of the income-tax assessment for the year ending 31st of March, 1939, and 'previous year' determined for the year ending 31st of March, 1940, could not alone attract the application of clause (d) of sub-section (2) of Section 6. In the result, the Appellate Assistant Commissioner dismissed the appeals of the assessee and confirmed the assessee and confirmed the assessment made by the Excess Profits Tax Officer in respect of both the above-mentioned chargeable accounting periods. Against the orders of the Appellate Assistant Commissioner, the assessee appealed to the Income-tax Appellate Tribunal. The Tribunal upheld the orders of assessment with a modification with which this reference is not concerned. In doing so, it rested its decision not only upon the ground taken by the Appellate Assistant Commissioner regarding the non-applicability of clause (d) of sub-section (2) if Section 6 in a case where the 'previous year' is available only for one of the two assessment years mentioned in that clause, but also took the additional ground that the Income-tax department did not possess the 'legal right to concede that the appellant (assessee) could withdraw the notice given in writing under Section 8 (2)...' and, that in any event, such a withdrawal could not be made after the return had been delivered and assessment made.
Thereupon the assessee made applications under Section 66 (1) of the Indian Income-tax Act, read with Section 21 of the Excess Profits Tax Act, to the Income-tax Appellate Tribunal to refer questions of law arising out of its orders with the result that the Tribunal submitted a statement of the case and referred the questions mentioned above for decision to this Court.
With regard to the first question, it has been submitted on behalf of the Commissioner of Income-tax that election once exercised and intimated to the Excess Profits Tax Officer cannot be varied at a later stage of the assessment, much less in appeal after the assessment is complete; while the contention on behalf of the assessee is that it is open to the assessee to withdraw the election and to vary the option, particularly when the Crown statute contains no provision for the withdrawal of the election. Options as under other statutes; and sometimes a careful provision is made by the statute itself, whereby it is intended to conform the rights of varying the option upon the person to whom such option was given. In the Indian Income-tax Act, for example, under Section 2 (11) an option is given to the assessee to choose the 'previous year' in the manner laid down therein. But a exercised it but with the consent of the Income-tax Officer and upon such conditions as that officer may think fit. The absence of a similar provision in the Excess Profits Tax Act leads to the inference that it was not in the contemplation of the legislature to give the power to the assessee to vary the option after it has once been exercised.
It is obvious that where an assessee elects to treat his business as continuing after a change in the persons carrying on such business owing to the death or retirement of a partner, certain legal consequences flow from the exercise of such election. The machinery of the Excess Profits Tax Act has to be set in motion in a particular manner and the proceedings in relation to assessment have to be carried on by the Excess Profits Tax Officer upon the footing that there was no discontinuance in the business a partner. It is manifest, therefore, that an option once exercised but later varied would lead to inconvenient results. All the proceedings taken by the Excess Profits Tax Officer up to the stage of the reversal of the option would have to be set aside and the assessment would have to be restarted from the stage when the election was made in accordance with Section 8 (2) of the Profits Tax Act.
It should be borne in mind that there is a time-limit prescribed for the exercise of this option, and the election has to be communicated to the Excess Profits Tax Officer in a formal manner by notice given to him in writing before the prescribed date. And if power to vary the election is conceded to the assessee, what would be the limit to the exercise of that power Could election be made and withdrawn any number of times These considerations lead to the conclusion that the election once made is absolute and is not subject to variance thereafter at the sweet will of the assessee. This result is in consonance with the general principles governing cases where the power of election is accorded to an individual by the law. These general principles have been thus stated by Lord Blackburn in the case of Benjamin Scarf v. Alfred George Jardine :-
'Now on that question there are a great many cases; they are collected in the notes to Dumpors case and they are uniform in this respect, that where a man has an option to choose one or other of two inconsistent things, when once he has made his election it cannot be retracted, it is final and cannot be altered. `Quod semel placuit in electionibus, amplius displicere non potest. That is Coke upon Littleton and I do not doubt that there are many older authorities to the same effect; but that rule has been uniformly acted upon from that time at least down to the present. When once there has been an election to do one of the two things you cannot retract it and do the other things; the election once made is finally made.'
The question of the right to vary the option also arose before the House of Lords in the case of Cory Brothers & Company Limited v. The Owners of the Turkish Steamship 'Mecca' in relation to the right of the creditor to make appropriation of payments made by the debtor. In that case, the effect of the communication of the appropriation made by the creditor was also considered. At page 292, Lord Herschell is reported to have remarked :-
'The question to determined is what was the effect of the transmission to the respondents of the statement of account of August 22. It is clear that if the appellants had merely entered in their own books an account such as was transmitted, it would not have amounted to any appropriation by them, and they would still have been at liberty to appropriate the payment as they pleased. It is equally clear, however, that when once they had made an appropriation and communicated it to their debtors, they would have no right to appropriate it otherwise.'
This was also the view taken by a Full Bench of this Court consisting of Sir Shah Muhammad Sulaiman, C.J., Bennet and Iqbal Ahmad, JJ. (as they then were), in the case of Gajram Singh v. Kalyan Mal. The Full Bench observed :-
'The creditors right to made the appropriation would certainly last until he had done something which puts an end to his option. In the case of Cory Brothers & Co. v. Owners of the 'Mecca', Lord Macnaghten laid down that the creditor may exercise his right until the very last moment. It has been held in some cases that the option may be exercised even during the pendency of the suit : see Seymour v. Pickett and Kunjamohan Shaha v. Karunakanta Sen. But no case has been cited where the option has been allowed as of right after the judgment has been pronounced by the first Court. It seems to us that if the creditor has not chosen to make any appropriation until the Court pronounces its option, the provisions of Section 61 come into operation, and it is the duty of the Court to direct the appropriation in accordance with that section. After the decree of the first Court has been passed it would be too late for the creditor to make up his mind to appropriate the payment in a particular way. The appellate Court should as a rule pass the decree which the trial Court would have passed on the date when it decided the case.'
In that case it was also observed that :-
'The fact that the creditors counsel offers to make the appropriation in the appeal should not carry any weight.'
The answer given by the Full Bench to the question referred to it was :-
'The creditor can appropriate the payment to any debt until the judgment is pronounced by the trial Court, but not thereafter.'
Their Lordships of the Privy Council set the seal of their approval on the view taken by the Full Bench in the above case in their decision in Rama Shah v. Lal Chand. Their Lordships applied the law as laid down by Lord Herschell in the case of Cory Brothers and Company Limited v. The Owners of the Turkish Steamship 'Mecca' and proceeded :-
'There is no obligation upon the creditor to make the appropriation at once though when once he has made an appropriation and communicated it to the debtor, he would have no right to appropriate it otherwise.'
Thus it appears that in the case of appropriation of payments made by a creditor, the limit of time set to such a right is the date of the judgment and, before that event occurs, the right could be exercised at any time; and further the communication of the exercise of the election need not be formal.
In the case of election under Section 8 (2) of the Excess Profits Tax Act, as has been stated above, communication of the election has to be made in a formal manner by notice in writing and there is a statutory time limit to the exercise of that power. The present case is, therefore, a fortiori and the general principle uniformly adopted by the highest Courts would apply to the present case with greater force. It would seem that after the time prescribed by the statute for the making of the election under Section 8 (2) of the Excess Profits Tax Act has expired, there is no option left to the assessee, and it is not open to him to change his mind after the communication of the election made by him to the Excess Profits Tax Officer and after the expiry of the time-limit prescribed by the statute. I cannot better conclude the consideration of this question than by quoting the following observations of Sir Asutosh Mookerjee in the case of Baikunta Nath Dey v. Nawab Salimulla Bahadur :-
'When a litigant has the right to choose between two remedies which are not co-existent but alternative, he may select and adopt one as better adapted than the other to work out his purpose; but once he has made his choice, and adopted one of the alternative remedies, his act at once operated as a bar as regards the other, and the bar is final and absolute.'
It is worthy of note that the case of Benjamin Scarf v. Alfred George Jardine mentioned above and this case of Baikuntha Nath Dey v. Nawab Salimulla Bahadur have been followed by a Bench of this Court consisting of Sir Lal Gopal Mukerji and Young, JJ., in the case of Mangat Rai v. Duli Chand.
The next question which must be considered now is whether the election once exercised cannot be withdrawn after the assessment, even with the consent of the Excess Profits Tax Officer. The question bristles with difficulties. If 'statutory election' - if I may use that expression - is once made final and conclusive, no amount of consent on the part of an officer of the Crown, who is bound to act in accordance with the terms of the statute, should be allowed to permit the assessee to re-open the matter. To hold otherwise would lead to the result that such an officer is entitled to release the assessee from the restriction of the time-limit imposed by the statute for the exercise of the option. Learned counsel for the department has contended that the Excess Profits Tax Officer is not competent, under the law, to bind the Crown by the statements and declarations for which no power is expressly conferred upon him by the statute. Reliance has been placed by him on the case of the trustees of the will of H. K. Brodie v. Commissioners of Inland Revenue. In that case, the assessee sought to found a case of estoppel upon a statement made by the Inspector of Taxes contained in a letter addressed by the latter to the assessee that no income-tax would be claimed in respect of certain sums. The plea of estoppel was repelled by Finlay, J., and one of the grounds upon which the learned Judge rested his decision was that it was no part of the duty of the officials of the Inland Revenue to make contracts or to make declarations. In the opinion of that learned Judge, it was impossible to hold that the Crown was, in the circumstances, bound by the statements made by those officials.
At the time when an election is made one of the two alternative rights is abandoned, and, having regard to the nature of the act of 'election', it is not possible to hold that a right to retract subsists after the act becomes final and conclusive. It should not be open to the party to whom the right of election is given for the exercise of which right a time-limit is imposed, to retract the same after the expiry of the time-limit, as that would nullify the statute. Thus the Crown would not be bound by an act of its officer who acts in a manner which is opposed to the terms of the statute. I am, therefore, of opinion that the consent of the Excess profits Tax Officer would not avail the assessee and the election, which was deliberately made, could not be retracted. For these reasons, I would answer the question No. 1 in the negative.
In view of the answer given to the first question, the second question becomes immaterial and is only of an academic interest. For this reason I do not consider it necessary that the second question should be answered.
WALI ULLAH, J. - I agree.
BY THE COURT. - We answer the first question referred to us in the negative and we direct that the assessee will pay the costs of the Income-tax department, which we assess at Rs. 200.
Council for the department is given six weeks time in which to file his certificate. A copy of this judgment, under the seal of the Court and the signature of the Registrar, will be sent to the Appellate Tribunal.
Reference answered accordingly.