TMI Blog1950 (1) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... the circumstances of the case when an assessment has been made under Section 23(1) of the Indian Income-tax Act, determining the assessee company's income as 'nil' and when proceedings under Section 34 were subsequently started to assess the income which the Income-tax Officer believed to have escaped assessment, the assessee-company is entitled to claim that the loss of profits and gains (including depreciation allowance) sustained by it in the previous year should be determined in the course of such proceedings. In response to a notice under Section 22(2) of the Act, during the assessment year 1941-42 the assessee who is treated as a non-resident submitted a nil return of its income. This return was accepted as the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was not entitled to claim relief under Section 24 of the Act as the jurisdiction of the Income-tax Officer under Section 34 was confined only to assess the income that had escaped in the year and was not intended to give relief in respect of losses ; and, secondly, on the ground that Section 24 of the Act did not apply to non-residents. There was a further appeal to the Appellate Tribunal against the order of the Appellate Assistant Commissioner by the assessee and the Tribunal also agreed with the view of the Appellate Assistant Commissioner. Hence this reference. The second of the grounds on which the order of the Appellate Assistant Commissioner was based was not considered by the Appellate Tribunal, presumably for the reason that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or re-assess such income, profits, or gains and there-alter has to follow the procedure laid down by the Act as far as it may be applicable, as if the notice issued under Section 34 was one under Section 22(2). On the language of Section 34, the assessment or reassessment is confined to such income, profits or gains, which refers us back to the first part of the section, which is confined to income which escaped assessment or which was under-assessed, or which was assessed at too low a rate or was subjected to excessive relief under the Act. A proceeding initiated under Section 34 is confined only to assessing the income stated above and is not a section which is intended to assess the total income of an assessee. In fact, there is no du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the Income-tax Officer is to assess the profits, gains or income that had escaped assessment and not to give any additional relief in respect of losses. Three decisions have been brought to our notice by Mr. C.S. Rama Rao Sahib, the learned counsel for the Income-tax Commissioner, which have a bearing on this question. The first decision is a decision of this Court in P.L.M.P.L. Palaniappa Chtttiar v. Commissioner Income-tax, Madras [1929] 4 ITC 196 ; AIR 1930 Mad 126. It was there held by a Special Bench of three Judges that the Income-tax Officer, acting under Section 34, had to confine himself to that part of the income which had escaped assessment and need not re-assess the income. This conclusion was based on the language of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... injustice or inconvenience in refusing this right to an assessee who has failed to make a return. Such considerations are questions of policy and debatable as such. As a matter of the true construction of this section, it appears to me that if the legislature had meant to say that if in any case it appears to the Income-tax Officer that an assessee has been assessed upon too low a figure or at too low a rate, the Income-tax Officer may issue a fresh notice under Section 22(2) and may proceed to re-assess such assessee afresh, the language employed would have been noticeably different from that which we find in the present section. It is clear that the initial duty of the Income-tax Officer is merely to assess the income which has esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax, Bombay Presidency v. Mrs. Pirojbai [1937] 5 ITR 338 ; ILR 1937 Bom 310 considers the meaning of the expression has escaped assessment and interprets the expression to include a case where the Income-tax authorities by some oversight or for other reasons failed to issue notice under Section 22(2) within the period contemplated by the section and then proceeded to take action under Section 34 on the ground that the income of the year had escaped assessment. Beaumont, C.J., was of opinion that there was no reason to hold that such a case was not covered by the expression has escaped assessment and expressed his view of the section at page 315 in these terms:- The liability to assessment is a risk to which every ..... X X X X Extracts X X X X X X X X Extracts X X X X
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