CHIMANRAM MOTILAL Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THIS appeal calls into question a supplementary assessment made by the Income-tax Officer, under Section 34 of the Indian Income-tax Act and confirmed by the Appellate Assistant Commissioner of Income-tax, A Range, Bombay, on December 9, 1940.

(2.) THE contest is in regard to the assessment made in the assessment year 1936-37. THE original assessment for the year in question was made by the Income-tax Officer on July 9, 1937 computing the appellants assessable income at Rs. 1,47,160. Some time later, on definite information received, the same Income-tax Officer issued a notice under Section 34 to the appellant to make a fresh return of his income, stating that his income from all sources had partially escaped assessment. THE matter came before another Income-tax Officer who on July 23, 1940, made a fresh assessment, computing the assessable income at Rs. 4,54,417. THE appellant asks that this later assessment be set aside on three main grounds, which we will consider in order.

(3.) THE last point taken by the appellants learned council is that the re-assessment under Section 34 was illegal as it was not proved that any income had escaped assessment at the time when it was originally made. From the facts stated before, it must be perfectly clear that the original assessment was wrong as the Income-tax Officer had taken into account the Bombay transaction of 15 months instead of 12 months; and secondly, because the sum of Rs. 3,000 had been received by the appellant as income and not accounted for in his books. THE learned counsel relies upon the case of the Commissioner of Income-tax, Bombay v. Gopal Vaijnath. But far from supporting the appellant it appears to be reinforcing the view that we take of the case. THE actual decision of the case depended upon its particular facts; but the observations of Beamount, C.J., and Rangnekar, J., are clearly to the effect that Section 34 should not be confined to cases in which a source has escaped assessment, but that its provisions extend to correcting assessment in which a deduction had been improperly allowed. THEir Lordships expressed themselves in full agreement with the remarks by Rankin, C.J., in the Anglo-Persian Oil Company (India) Ltd. v. THE Commissioner of Income-tax, which are to the effect that the Income-tax authorities can put right an assessment by which a deduction has been improperly allowed. That is exactly the case here. THE Income-tax Officer who first made the assessment committed an error of judgment which amounted to a mistake of law by allowing a deduction of Rs. 2,95,619 from the assessable income of the appellant who had brought in 15 months transactions instead of 12 months in the computation. In other words, it was an improper deduction which could, in our opinion, be set right under Section 34. We, therefore, hold that he was fully justified in assessing the appellant endorse action 34 of the Indian Income-tax Act.