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TMI Blog1936 (3) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... hich it would have been charged had the income, profits or gains not escaped assessment or full assessment, as the case may be. 2. The question is not happily framed and is too wide, the substance of it having regard to the matter in controversy being whether there were any materials upon which the Income-tax Officer or the Assistant Commissioner could find that the income, profits and gains which were the subject of the assessment under S. 34 had escaped assessment in the year 1931-32. 3. The material facts lie within a narrow compass. Up till January 1932, the business of a chemist and druggist in Mogul Street, Rangoon, was carried on in partnership by the Dey brothers, a manager appointed by the elder brother, Dr. Dey, being in charge of the business. After January 1932, the younger brother, L.M. Dey, who is the assesses, became the sole proprietor and employed a different manager to carry on the business for him. The assessment order of the Income-tax Officer in respect of the year 1931-32, was passed on 16th June 1931, in the following terms : The books have been scrutinized, and the return checked and found in order. I accept the return of income, viz. ₹ 8,267. Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 30-31)," and merely because the figures in the latter years showed a larger profit on a smaller turn-over the Income-tax Officer arbitrarily estimated that 30 per cent, of the figure for sales in 1930-31 must have represented the gross profit, and he assessed the income, profits and gains of the assessee upon that footing. On appeal the Assistant Commissioner reduced the assessment from ₹ 59,130 to ₹ 40,180, but otherwise affirmed the assessment, stating that "the main ground for the rejection of the accounts remains, namely, that the analysis of the trading account shows a rate of gross profits which is substantially below the rates shown in subsequent accounts. And it is this Department's case that this result is due to an under-statement of the closing stock for the year. The following table sets out the trading results for the relevant years, as shown in the firm's accounts : Assessment year Opening Stock Purchases Sales Closing Stock Gross Profit Percentage (1) (2) (3) (4) (5) (6) (7) Rs. Rs. Rs. Rs. Rs. 1930-31 1,41,874 2,82,755 3,60,862 1,11,822 48,054 13.3 1931-32 1,11,822 2,40,477 3,07,335 88,421 43,457 14.1 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C 757 = 59 Bom 626 = 37 Bom L R 697, while agreeing with the actual decision in 12 Rang 118 Commissioner of Income-tax v. U Lu Nyo, 198S Rang 350 = 146 I C 300 = 12 Rang 118 (S B), appear to have been under the impression that in 12 Rang 118 Commissioner of Income-tax v. U Lu Nyo, 198S Rang 350 = 146 I C 300 = 12 Rang 118 (S B), this Court had held that "income from a particular source cannot be re-assessed under S. 34." With all due respect the Court in 12 Rang 118 Commissioner of Income-tax v. U Lu Nyo, 198S Rang 350 = 146 I C 300 = 12 Rang 118 (S B), did not, and did not purport to, lay down the law in that sense. In 12 Rang 118 Commissioner of Income-tax v. U Lu Nyo, 198S Rang 350 = 146 I C 300 = 12 Rang 118 (S B), as in 59 Bom 626 Commissioner of Income-tax, Bombay v. Gopal Vaijinath, 1935 Bom 410 = 158 I C 757 = 59 Bom 626 = 37 Bom L R 697, an income-tax officer in a subsequent year of assessment, arriving at a different estimate of the income that had accrued in the previous years from that at which the income-tax officer in the previous year had arrived, proceeded to re-assess under S. 34 the difference between the amount of the two estimates as being income that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed in the year of assessment in which they are chargeable, whether or not they are derived from the same source as income that has been so assessed, are within S. 34 and are liable to be assessed within the period prescribed in that section as being income, profits and gains that have escaped assessment : 9 Rang 28 Commissioner of Income-tax, Burma v. T.S. T.S. Chettyar Firm, 1931 Rang 383 = 132 I C 559 = 9 Rang 28 (S B); 12 Rang 118 Commissioner of Income-tax v. U Lu Nyo, 198S Rang 350 = 146 I C 300 = 12 Rang 118 (S B); 58 Cal 909 In re Lachiram Basantilal, 1931 Cal 545 = 183 IC 187 = 58 Cal 909 = 35 CWN 310 (SB); 60 Cal 840 In re Anglo-Persian Oil Co. (India) Ltd., 1933 Cal 777 = 149 I C 919 = 60 Cal 840 = 37 CWN 480; 61 Cal 132 In re Burn and Co., 1934 Cal 515 = 150 I C 404 = 61 Cal 132 = 38 C W N 204 (S B); 61 Cal 285 Rajendranath Mukherji v. Commissioner of Income-tax Bengal, 1934 P C 80 = 147 I C 668 = 61 I A 10-61 Cal 285 (P C); 62 Cal 1011 In re Ramjidas Mahallram, (1935) 62 Cal 1011; 2 I T C 173 Commissioner of Income-tax, Madras v. R. Sundaresa Aiyar, (1926) 2 I T C 173 and 16 Lah 937 Madan Mohan Lal v. Commissioner of Income-tax, Punjab. 1935 Lah 742 = 158 I C 718 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ected in toto there were ex necessitate rei no material from which the inference drawn by the income-tax authorities could have been deduced; and even if assuming that, the Income-Tax authorities were justified in the circumstances in coming to the conclusion that the value of the "closing stock" was based not on its true value to the assesses but on the "invoice" price, without taking into account, for example, the cost of freight, of import duty, it does not follow that the calculation of the gross profit as returned was incorrect unless the value of the "opening stock" had been otherwise and/or truly assessed. But not only was there no evidence, before the Income-Tax authorities that the "opening stock" and the "closing stock" were not valued on the same basis, but from the table itself it appears that in each year the "opening stock" stood at exactly the same figure as the "closing stock" of the previous year, a fact which would militate against the view that the "opening stock" and the "closing stock" in the return of the assessee for the year of assessment had not been valued in the same ..... X X X X Extracts X X X X X X X X Extracts X X X X
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