1935 (12) TMI 28 - HC - Income Tax

Summary

Issues:
1. Reassessment of income sources that escaped assessment.
2. Interpretation of Section 34 of the Income Tax Act regarding reassessment.
3. Validity of the supplementary assessment by the Income Tax Officer.

Analysis:
1. The case involved the reassessment of income sources that had escaped assessment during the original assessment for the financial year 1931-32. The Commissioner opined that the Income Tax Officer was correct in reassessing only the income sources that had actually escaped assessment. The Court agreed with this view, emphasizing that under Section 34 of the Act, only income that has escaped assessment can be subsequently charged. In this case, interest on securities and dividends were under-assessed, leading to their escape from assessment. The Court held that the Income Tax Officer had the power to levy tax on these items as they had escaped assessment.

2. The interpretation of Section 34 of the Income Tax Act was a crucial issue in the case. The Court clarified that Section 34 empowers the Income Tax Officer to reassess only income that has escaped assessment. The assesses contended that an item labeled "other sources-Interest" should have been assessed at a lower figure than originally estimated. However, the Court held that the assesses could not seek credit for the over-assessed item as it did not fall under the category of income that had escaped assessment. The Court relied on a previous decision to distinguish between items that were under-assessed and those that had genuinely escaped assessment, emphasizing that the latter category is eligible for reassessment under Section 34.

3. The validity of the supplementary assessment levied by the Income Tax Officer on 12th October 1932 was also questioned. The Court found that the supplementary assessment was correct in this case, as it addressed the under-assessed income sources that had escaped assessment during the original assessment. The Court concurred with the Commissioner's opinion that the reassessment of the income sources that had actually escaped assessment was valid under the provisions of the Income Tax Act.

In conclusion, the High Court of Bombay upheld the reassessment of income sources that had escaped assessment, based on the interpretation of Section 34 of the Income Tax Act. The Court ruled in favor of the Income Tax Officer's actions and affirmed the correctness of the supplementary assessment. The assesses were directed to pay the costs of the Commissioner, and the reference was answered accordingly.