1933 (12) TMI 32 - HC - Income Tax

Summary

Issues Involved:
1. Discovery of under-assessment by the Inspector of Taxes.
2. The concept of estoppel in income-tax cases.
3. Interpretation of Section 125 of the Income Tax Act, 1918.
4. The distinction between a vested and contingent interest in the context of taxation.
5. The implications of a change in opinion by a new Inspector of Taxes.

Issue-Wise Detailed Analysis:

1. Discovery of Under-Assessment by the Inspector of Taxes:
The judgment addresses whether the Inspector of Taxes can be said to have "discovered" an under-assessment. The court held that the Inspector had indeed discovered an escape from taxation, which is the aim of the section. The discovery may be based on a change of view of the law or a re-examination of previously overlooked documents or material. It was emphasized that the term "discovery" includes coming to a conclusion from an examination and any information received, not just new facts.

2. The Concept of Estoppel in Income-Tax Cases:
It was argued that there could be no estoppel in income-tax cases. The court agreed, stating that there has been no change of position in consequence of any representation, and thus, estoppel does not apply.

3. Interpretation of Section 125 of the Income Tax Act, 1918:
The court examined Section 125, which allows for additional assessments if the surveyor discovers that properties or profits chargeable to tax have been omitted from the first assessments. The court held that the surveyor's discovery, whether based on new facts or a re-evaluation of existing facts, justifies an additional assessment. The court referenced several cases, including R. v. Kensington Income-tax Commissioners and Aramayo, to support this interpretation. The court concluded that the surveyor had indeed discovered that some source of income had not been properly taxed.

4. The Distinction Between a Vested and Contingent Interest in the Context of Taxation:
The case involved the assessment of income from War Stock left in trust for a young gentleman residing in the United States. The court found that the interest of the young gentleman was contingent, not vested, which justified the additional assessments. The court emphasized that both parties had initially arrived at an erroneous conclusion regarding the nature of the interest, leading to an escape of tax.

5. The Implications of a Change in Opinion by a New Inspector of Taxes:
The court noted that the change in opinion by a new Inspector of Taxes did not affect the validity of the additional assessments. It was stated that the position would have been the same even if the former Inspector had changed his opinion upon a re-survey of the facts. The court highlighted that the discovery of an under-assessment can be based on a change in opinion, provided it is based on a re-evaluation of the facts.

Conclusion:
The court concluded that the appeal succeeded, differing from the Special Commissioners. The court held that the surveyor had discovered that properties or profits chargeable to tax had been omitted from the first assessments, justifying the additional assessments. The judgment emphasized that there is no estoppel against the Crown in income-tax cases and that the discovery of under-assessment can be based on a change of opinion.