TMI Blog1942 (9) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of income which was alleged to have escaped assessment, and reliance is placed on the form of notice given in the Income-tax Manual, which does state the source of the income which is alleged to have escaped assessment. But that form is not statutory. All that is necessary under Section 34 is that a notice should be given which sufficiently draws the attention of the assessee to the case which he has to meet, and as, admittedly, the assessees in this case have only one source of income, namely business, it seems to me plain that a notice saying that income from all sources had escaped assessment was quite sufficient to show them what the case was which they had to meet, namely, that some of their income from the only source from which any income was derived had escaped assessment. The first question will therefore be answered by saying that the notice was valid. The second question is: Whether in the circumstances of the case a part of the applicant's income had escaped assessment within the meaning of Section 34 of the Indian Income-tax Act, so that it could be reassessed by the second Income-tax Officer? The year of assessment is 1936-37, which is the Maru year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. But that view, which was not necessary for the actual decision of the particular case, which dealt with a difference of opinion between two income-tax Officers on a mere matter of estimate, has not found favour with any other High Court in India. This Court differed from that view in Commissioner of Income-tax, Bombay v. Manohar [1935] 3 I.T.R. 372, although we agreed with the actual decision and followed it in that case which was also a case in which one Income-tax Officer had differed from an estimate formed by a previous Income-tax Officer. The Rangoon High Court in a later case, Commissioner of Income-tax v. Dey Brothers [1936] 4 I.T.R. 209, adhered to its former opinion but, as I have said, no other High Court has accepted that view. The other High Courts have taken the view that the only question under Section 34 is whether in fact income has escaped assessment, and that income which might have been, but was not assessed, has escaped assessment and one ground on which income may undoubtedly be shown to have escaped assessment, is that the true facts were not brought to the notice of the Income-tax Officer. But if one admits that in such a case income had escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sess the income, merely because he thinks that owing to some mistake in the first assessment income has escaped assessment. That has been held by the Madras High Court in Commissioner of Income- tax, v. Raja of Parlakimedi 1925] 2 I.T.C. 104, by the Lahore High Court in Amir Singh Sher Singh v. Commissioner of Income-lax 1935] 3 I.T.R. 171, and by the Calcutta High Court in P.C. Mallick and D.C. Aich, In re 1940] 8 I.T.R. 236, whilst there is a dictum of Sir George Rankin in Angle Persian Oil Co., Ltd. v. Commissioner of Income-tax 1933] 1 I.T.R. 129 to the effect that Section 34 is applicable to put right an assessment by which a deduction has been improperly allowed. The Income-tax Tribunal has based its decision in this case very largely on that dictum. The effect of those decisions appears to be to allow Section 34 to be used as a section giving power to the Income-tax Officer to revise his own decision or the decision of his predecessor and in view of the other provisions for revision in the Income-tax Act, e.g., Section 33 and Section 35, it is rather strange that Section 34 should have that effect. But, as I have already pointed out, if it be once admitted that an assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those books it seems difficult to arrive at that conclusion, when an officer who saw the books arrived at an opposite conclusion. The Appellate Tribunal no doubt has agreed with the second officer's conclusion and they say that notwithstanding that the books for the Maru year 1990-91 were originally produced, the fact remains that we have little or no evidence of any straddle business done by the appellants in London in the year in question . But that is really throwing upon the assessee the burden of proving that income has not escaped assessment and that burden is thrown upon them at a time when, through the delay in dealing with the re-assessment, the necessary material is not available. In my opinion, an Income-tax Officer is not entitled to give a notice saying that income has escaped assessment, thereafter to wait for three years and then when the relevant books have been destroyed say that the assessees have failed to prove that the income has not escaped assessment. Therefore whilst I agree that the notice under Section 34 was justified though no fresh material was available, I do not agree that there is evidence that any income had escaped assessment. In my opinion t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra 8 of the grounds of appeal before the Appellate Tribunal, they have stated that in the course of re-assessment, books of S. 1991-92 were called for and examined. The officer did not ask the assessees to produce the books of S. 1990-91. Before the Officer could pass orders the case was transferred to another Income-tax Officer. That officer again never called for the books of S. 1990-91. He examined only the books of 1991-92. Before he also could pass an order the case was again transferred to the Income-tax Officer, Section VII, Central, and it was only in 1940 that the officer asked to see the books of S. 1990-91 (1934-35). The assessees further stated that their books according to their usual practice after the assessment was made by the Income-tax Officer were sent away to their native place except for one preceding year. They had accordingly sent over the books for S. 1990-91 to their native place after the assessment order was made on 9th July 1947. When in 1940 the demand for the reproduction of these books was made they made inquiries and it was found that the same were destroyed along with other old books as they had been moth-eaten. These facts which are set out in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the opinion of the Benches of this Court expressed in considering this section. It may also be noticed that the present discussion centres round Section 34 of the Act as it existed before the amendment. I make this clear, because the words of the amended section correspond more to the section of the English Act in force. Under Section 34 the relevant words are that if for any reason income, profits or gains chargeable to income-tax has escaped assessment, the Income-tax Officer may at any time within one year adopt proceedings by issuing a notice similar to the one under Section 22 of the Income-tax Act. The first case on this point, to which our attention was drawn, is Commissioner of Income-tax v. Raja of Parlakimedi*. It was decided by the Madras High Court. The income of certain houses had not been assessed in a particular year and in a subsequent year on a reconsideration of the matter by another officer, it was held that the income of the houses was assessable. The question arose whether it could be re-assessed retrospectively. In dealing with the question Coutts Trotter, C.J., relied on the words too low a rate used in Section 34 for the construction of the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s used as an argument in support of the contention urged before them. Their Lordships had no occasion to consider the effect and meaning of the words escaped assessment. They only negatived the contention that the words has escaped assessment were equivalent to has not been assessed . In the case of Commissioner of Income-tax, Bombay v. Manohar [1935] 3 I.T.R. 372 a Bench of this Court had occasion to consider the operation of section 34. The facts found there were as follows: The first officer had according to his opinion fixed a certain percentage of the price of gold and silver as profit to be assessed. Obviously that was based on what one might call a rule of thumb. After some time a notice under Section 34 was issued and the second officer in his opinion thought that a higher rate should be taken for calculating the profit. That was equally another rule of thumb laid down by that officer. When the matter came before the Court, the Bench decided that this was not covered by Section 34. The burden of showing that income had escaped assessment (in the sense that the Income-tax Officer had some evidence before him to justify the conclusion that the income had escaped asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 35 the Income-tax authorities came to the conclusion that the amount was improperly allowed and assessed it under Section 34 on the ground that it had escaped assessment in the year in question. It was held that having regard to the plain words of Section 34, it was impossible to say that the amount did not escape assessment in the year in question. In the course of his judgment Derbyshire, C.J., referred to a decision of this Court in Commissioner of Income-tax v. D.R. Naik 1939] 7 I.T.R. 362.. In that case because of an interpretation of certain existing law by the Privy Council it was ascertained that a mistake of law had been committed in making the previous assessment and proceedings were considered to have been properly started under Section 34 within the prescribed time. In the Calcutta case when making the first assessment the Income-tax authorities had the figure of the amount which they allowed before them and after considering it allowed the deduction. The learned Chief Justice held that the amount was not assessed and it was assessed because the Income-tax Officer made a mistake in 1933 which he attempted to put right in January 1935. Having regard to the general words ..... X X X X Extracts X X X X X X X X Extracts X X X X
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