COMMISSIONER OF INCOME TAX Vs. ZAVERI A J

JUDGEMENT

(1.) THE questions raised on this reference relate to the validity of the proceedings of assessments under section 34(1) (a) for the assessment year 1952-53 and under section 34(1) (b) for the subsequent assessment year 1953-54 and are as follows :

(2.) THE facts briefly stated are as follows :

(3.) AS pointed out by the Supreme Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax two conditions must be satisfied before the Income-tax Officer can act under section 34(1) (b). He must have information, which comes into his possession subsequent to the making of the original assessment order and that information must lead to his belief that income chargeable to tax has escaped assessment, or has been under-assessed or assessed at two low a rate or has been made the subject of excessive relief. The question to be considered is whether two conditions have been satisfied in the present case. It may be pointed out straightaway that there is not much dispute as to the satisfaction of one of the conditions, viz., that income had escaped assessment. The income of the assessee from the medical stores for the assessment year 1953-54 was liable to tax and no assessment had been made of the same. The same income, however, was assessed in the hands of Mehta, but that assessment had been set aside by the decision of the Tribunal. The income, therefore, which was liable to assessment had in this process escaped assessment. It was sought to be argued that this is not a case of income having escaped, because the income was offered for the process of assessment and it was in the assessment proceedings that no assessment was made on it. It was not, therefore, a case of escaptement from assessment but merely a case of no assessment and there is a distinction between a case of income escaping assessment and a case of no assessment. The argument, however, has not much substance in view of the decision of the Supreme Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax already referred to. One of the arguments that was urged in that case was 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 the meaning of section 34(1). It was sought to be argued that, if income had been returned and subjected to the process of assessment, it cannot be said to have escaped assessment because a part of it has been erroneously held to be not liable to tax. This contention, however, was negatived by the Supreme Court and it was held that, even in a case where a return has been submitted and the Income-tax Officer erroneously fails to tax a part of the assessable income, it is a case where the said part of the income has escaped assessment.