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TMI Blog1958 (10) TMI 2X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision of the Patna High Court in Kamakshya Narayan Singh v. Commissioner of Income-tax. The Income-tax Officer, however, held that, since the Department had obtained leave to appeal to the Privy Council against the said decision, the matter was sub judice and so he would not be justified in accepting the assessee's contention. In the result, he included the said amount in the total income for the purposes of assessment, but ordered that the realisation of the tax on the said amount should be stayed till the decision of the Privy Council or March 31, 1947, whichever was earlier. This order was passed under section 23(3) of the Act on December 31, 1945. Against this order the assessee preferred an appeal before the Appellate Assistant Commissioner of Income-tax, Patna. On May 8, 1946, the appellate authority held that the Income-tax Officer was bound to follow the decision in the case of Kamakshya Narain Singh and so, he set aside the order under appeal in regard to the amount of Rs. 93,604 and directed the Income-tax Officer to make fresh assessment. He also observed that it was not clear as to what portion of the said amount was interest on arrears of agricultural rents and wha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; but on August 21, 1950, the Tribunal confirmed the order passed by the appellate authority and dismissed the assessee's appeal. It was held that the provisions of section 34 as amended in 1948 applied to the case and that the decision of the Privy Council brought it within the purview of sub-section (1)(b) of section 34. Meanwhile the assessee died and the appellant succeeded to the estate of his deceased father. He then filed an application under section 66(1) of the Act requiring the Tribunal to refer the question of law raised in the case to the Patna High Court for its opinion. The Tribunal rejected this application on February 27, 1951. Thereupon the appellant moved the Patna High Court under section 66(2) of the Act ; his application was allowed and the Tribunal was directed by the High Court on December 15, 1951, to state the case and refer the question of law for its opinion. In compliance with the requisition of the High Court the Tribunal by its order passed on July 23, 1952, submitted a statement of the case and referred to the High Court for its opinion the question of law raised by the appellant. The question thus raised is : " Whether in the circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in his possession, which, in the context, means that the relevant information must have come into his possession subsequent to the making of the assessment order in question and this information must lead to his belief that income chargeable to income-tax has escaped assessment for any year, or that it has been under-assessed or assessed at too low a rate or has been made the subject of excessive relief under the Act. Two questions are raised by Mr. Sastri under this sub-section in the present appeal. He contends that the relevant information means information as to facts and cannot include the decision of the Privy Council on a point of law ; and he argues that, where income has been duly returned for assessment and an assessment order has been passed by the Income-tax Officer, it cannot be said that any income has escaped assessment within section 34(1)(b). Thus the appellant's case is that both the conditions required by section 34(1)(b) have not been satisfied and so the order of revised assessment passed against the appellant is illegal. It is not disputed that, according to its strict literal meaning, the word " information " may include knowledge even above a state of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of the said section ; but we do not see how this can have any bearing on the construction of clause (b) in section 34(1). On the other hand, one of the cases specifically mentioned in section 34(1)(b) necessarily postulates that the word " information " must have reference to information as to law. Where, in consequence of information in his possession, the Income-tax Officer has reason to believe that income has been assessed at too low a rate, he is empowered to revise the assessment ; and there can be no doubt that the belief of the Income-tax Officer that any given income has been assessed at too low a rate may in many cases be due to information about the true legal position in the matter of the relevant rates. If the word " information " in reference to this class of cases must necessarily include information as to law, it is impossible to accept the argument that, in regard to the other cases falling under the same provision, the same word should have a narrower and a more limited meaning. We would accordingly hold that the word " information " in section 34(1)(b) includes information as to the true and correct state of the law and so would cover information as to r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t liable to be assessed to tax. There is no doubt that a part of the assessee's income had not been assessed and, in that sense, it has clearly escaped assessment. Can it be said that, because the matter was considered and decided on the merits in the light of the binding authority of the decision of the Patna High Court, no income has escaped assessment when the said Patna High Court decision has been subsequently reversed by the Privy Council ? We see no justification for holding that cases of income escaping assessment must always be cases where income has not been assessed owing to inadvertence or oversight or owing to the fact that no return has been submitted. In our opinion, even in a case where a return has been submitted, if the Income-tax Officer erroneously fails to tax a part of assessable income, it is a case where the said part of the income has escaped assessment. The appellant's attempt to put a very narrow and artificial limitation on the meaning of the word "escape" in section 34(1)(b) cannot therefore succeed. Mr. Sastri, however, argues that the narrow construction of the expression "has escaped assessment" for which he contends has been approved by the Privy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed by the High Court in May 1930. It was held that an income of a registered firm cannot, for the purpose of the Act, be aggregated with the income of an unregistered firm but that the income of each must be separately assessed irrespective of the fact that the persons interested in the profits of both concerns are the same. In consequence of this decision, the assessment made on Martin & Co. was amended by the elimination therefrom of the income returned by Burn & Co., and in November 1930, an assessment was made on Burn & Co. on their income as returned by them in January 1928. It was this assessment which was the subject-matter of the appeal before the Privy Council. It would thus be noticed that the principal question which the appellants raised before the Privy Council was : Whether the assessment made under section 23(1) on the appellants in November 1930 for the year 1927-28 was a legal assessment ? The argument was that on a true construction of the Income-tax Act, it was obligatory on the Income-tax Officer to complete the assessment proceedings within the year of assessment, and in the event of such assessment not being so completed the only remedy open to the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is very much different from saying that income cannot be said to have escaped assessment wherever assessment proceedings have been taken and a final order has been passed on them. We must, therefore, hold that this decision does not support Mr. Sastri's contention about the inapplicability of section 34 in the present case. In this connection it may be relevant to refer to the decision of the Calcutta High Court in In re Lachhiram Basantlal because, as we have already pointed out, the statement of the law made by Chief Justice Rankin in regard to the effect of section 34 of the Act in this case has been expressly approved by the Privy Council in the case of Rajendranath Mukerjee. While dealing with the assessee's argument that the order of assessment was invalid since it had been passed more than one year after the expiry of the relevant financial year and that the Income-tax Officer might have acted under section 34, Chief Justice Rankin stated that income cannot be said to have escaped assessment except in the case where an assessment has been made which does not include the income. It is true that this observation is obiter but it is fully consistent with the subsequent st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir reading of the judgment can lead to this conclusion. The observations on which reliance is placed by Mr. Sastri have naturally been made in reference to the facts with which the court was dealing and they must obviously be read in the context of those facts. It would be unreasonable to suggest that these observations were intended to confine the application of section 34 only to cases where income escapes assessment owing to reasons other than those attributable to the assessing authorities. Indeed Jagannadhadas, J., has taken the precaution of adding that it was unnecessary to lay down what exactly constitutes escapement from assessment and that it would be sufficient to place their decision on the narrow ground to which we have just referred. We are satisfied that this decision is of no assistance to the appellant's case. It appears that the construction of section 34 has led to a divergence of judicial opinion in the High Courts of this country, and so it would be necessary to refer briefly to the decisions to which our attention was invited in this appeal. In Madan Mohan Lal v. Commissioner of Income-tax, the majority decision of the Full Bench of the Lahore High Court hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overruled by the Court of Appeal in Commercial Structures Ltd. v. R.A. Briggs. Soon after the decision of the Bombay High Court was reported, the same question was raised before the Madras High Court in Raghavalu Naidu & Sons v. Commissioner of Income-tax. Leach, C. J., who delivered the judgment of the court agreed with the construction which had been put on the expression "definite information" by the Bombay High Court on the ground that "it is very desirable to avoid conflict on such a question". He, however, added that in view of the opening words of the amended section as it was amended in 1939, the word "discovers" means something more than "has reason to believe" or "satisfies himself" and that consequently it would not be right to regard the English decisions on the meaning of the word "discovers" in section 125 of the English Act as being in point. He also made it clear that in following the Bombay decision they did not imply that the definite information must relate to a pure question of fact because it was impossible to lay down a rule to cover all cases in which this section can be invoked. In the Calcutta High Court, conflicting views have been expressed on this po ..... X X X X Extracts X X X X X X X X Extracts X X X X
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