TMI Blog1943 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... ties proceeded to reopen the assessment under Section 34, alleging that part of the income of the assessee-husband had escaped assessment. Section 34 under the Act before the Amendment of 1939 provided that if for any reason income, profits or gains chargeable to income- tax had escaped assessment in any year; or had been assessed at too low a rate, the Income-tax Officer might make a fresh assessment. Under that section all that had to be shown was that income had escaped assessment, or had been assessed at too low a rate, and the cases show that that position might arise by a mere error on the part of the Income- tax Officer. He might change his opinion, and thereupon make a fresh assessment, having to do no more than assert that owing to his mistake income had escaped assessment. Presumably it was desired to curtail the powers of the Income-tax authorities in that respect. Income-tax is a serious item in the expenditure of most people, and an assessee is entitled to know what his liability is, and it certainly seems unreasonable that, if his liability has been fixed at a certain figure, and he has based his future budget on that figure, he should subsequently be told that, ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... believe or finds out , and he followed the same view in a later case, British Sugar Manufacturers Ltd. v. Harris. [1938] 2 K.B. 220. That case went to the Court of Appeal, and he decision was reversed on another point, but the question as to the meaning of discovers was argued, and the Court of Appeal were about to express an opinion, apparently in favour of the appellants, but they were asked not to do so, because it might embarras parties in the event of the Commissioner wanting to take that portion of the decision to the House of Lords. Accordingly they refrained from expressing an opinion: but it is clear from the observation of Lord Justice Romer at page 238 that they were in favour of allowing the appeal on that point. But as to the grounds on which they could have based their decision, and as to the exact meaning they were prepared to put on discovers we have no information. Then there is a Scotch case. Commissioners of Inland Revenue v. Mackinlay's Trustees [1938] 22 Tax Cas. 305, a decision of the Court of Session, in which the Judges adopted the same view as that taken by Mr. Justice Finlay in Williams v. Trustees of W.W. Grundy (supra), and held that discov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the view we take of the first question, it is not necessary to decide that question. But Mr. Setalvad has asked us to express an opinion upon it, because it may be that the Commissioner will appeal to the Privy Council against our decision on the first question, and, therefore, it is desirable to note the argument on the second question. Section 16(3)(b) provides: In computing the total income of any individual for the purpose of assessment, there shall be included so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both. That sub-section was added in 1937, and it is no doubt directed to income of which the wife gets the benefit through the medium of trustees. Under the earlier sub-sections, there is included in the income of the assessee so much of the income of a wife or a minor child as arises from assets transferred directly or indirectly to the wife by the husband otherwise than for adequate consideration or in connection with an agree- ment to live apart, or from assets transferred directly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ived under the Deed of Wakf was not included in the income of the assessee. The assessment was subsequently reopened and that income was included in the income of the assessee. It is, therefore, clear that the re-opening of the assessment was not due to any new fact that had come to the knowledge of the Income-tax Officer but was the result of a mistake in law in applying the amended Section 16(3) of the Income-tax Act to the facts of the case. Now in considering whether the Income-tax Officer was entitled under these circumstances to re-open the assessment, one has first to consider and compare the amended Section 34 with the section as it stood before the amendment was enacted, and one cannot help noticing the striking difference between the old and the new section. Under the old section all that was required was the fact that income had escaped assessment or income had been assessed at too low a rate. If these two facts were present, then the Income-tax Officer was entitled to re-open the assessment for any reason whatsoever. Under the section as it now stands the Income-tax Officer has to discover that income, profits or gains chargeable to income-tax have escaped assessment in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Commissioners shall make an assessment, on the person chargeable, in an additional first assessment............... In the English statute the word discovers is not qualified by any expression as it is in our Section 34. Therefore the discovery under the English statute may be the result of anything that comes to the know- ledge of the surveyor whereas under our statute the discovery must be the result of definite information coming into the possession of the Income- tax Officer. As I was pointing out, in the case reported in Anderton and Halstead, Ltd. v. Birrell [1932] 1 K.B. 271; 16 Tax Cas. 200, the facts were that the assessees were assessed upon the basis of a writing down in two years successively of a doubtful debt and subsequently, by additional first assessments, the writing down of the doubtful debt was disallowed, on the ground that since the writing down of the debt was allowed, it had come to the surveyor's knowledge that the assessees had permitted the debtors to increase their indebtedness to them. Mr. Justice Rowlatt considered whether under Section 125 of the English Act the General Commissioners were entitled to re-assess the assessees on these two d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscovered a fact which was not present to his mind when the original assessment was made. The original assessment was made in 1906, and in 1909 the Income-tax authorities ascertained the existence of a company which made a considerable difference to the return made by the assessee in 1906. The other case is the case reported in Reports of Tax Cases, Volume XXII, Part V, page 305, Commissioners of Inland Revenue v. Mackinlay's Trustee's. There the Lord President Normand at page 312 Construed the word discover to mean find out . But if one turns to his judgment, the Lord President makes it clear that if there were any reason in the context for restricting the word ''discover to the discovery of an error in fact, that restriction would necessarily receive effect, but in his opinion the context did not point to any such restriction. If one looks to our section, as I have already pointed out, the context undoubtedly points to a restriction which must be placed on the construction of the word discover and that restriction and a very important restriction is that the discovery must be the result of definite information which must come into the possession of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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