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Issues:
Assessment under Section 23(4) for default in rendering a return of income and submitting accounts; Reassessment under Section 34 for income that partially escaped assessment; Contention regarding original assessment under the head "other sources"; Interpretation of Section 34 in allowing the assessee to challenge the original assessment under different heads; Scope of Income Tax Officer's powers under Sections 34 and 35; Whether the assessee can reopen the entire assessment under Section 34. Analysis: 1. The case involves a Hindu undivided family assessed for the year 1926-1927 under Section 23(4) for default in filing returns. The Income Tax Officer reassessed the income for the next year under Section 34, where income from money-lending business and property had partially escaped assessment. The assessees contested the reassessment under the head "other sources," claiming the original assessment was too high due to an incorrect assumption regarding revenue from zamindaries being chargeable to Income Tax. 2. The assessees argued that the Income Tax Officer exceeded his authority by reassessing under "other sources" at the original figure of Rs. 5,000. However, the Income Tax authorities held that Section 34 proceedings were specific to income that escaped assessment and not related to the correctness of the original assessment under different heads like zamindari collections. 3. The main issue raised was whether, under Section 34, the assessee could challenge the original assessment under different heads if income from specific sources had been under-assessed. The Commissioner of Income Tax contended that Section 34 focused on income escaping assessment or being under-assessed, limiting the Income Tax Officer's powers to specific instances. 4. The interpretation of Section 34 was crucial in determining the assessee's rights to challenge the original assessment under various heads. The section allowed the Income Tax Officer to reassess income that escaped assessment, with the focus on correcting under-assessed income rather than reopening the entire assessment based on different heads of income. 5. The judges analyzed the language of Section 34, emphasizing that the assessee's ability to challenge the assessment under different heads depended on whether income had genuinely escaped assessment. The court held that while the assessee could contest the correctness of the assessment, once it was established that income had escaped assessment, the assessee could not resist proceedings solely by claiming over-assessment under other heads. 6. Ultimately, the court ruled against the assessees, stating that the Income Tax Officer's duty under Section 34 was to assess the income that had escaped assessment. While the assessee could challenge the correctness of the assessment, they could not resist the reassessment by claiming over-assessment under different heads. 7. The judges unanimously agreed on the decision, with the assessees being directed to bear the costs of the reference. The judgment clarified the scope of Section 34 and the limitations on the assessee's ability to challenge the entire assessment based on different heads of income.
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