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Interpretation of section 34(1) (b) of the Indian Income Tax Act regarding the assessment of income that has escaped assessment. Detailed Analysis: Issue 1: Interpretation of section 34(1) (b) of the Indian Income Tax Act The case involved a question referred under section 66(1) of the Indian Income Tax Act regarding the assessment of income that had escaped assessment. The assessee had initially declared a sum of &8377; 4,000 as interest income in the return for a specific year. However, the Income Tax Officer later found discrepancies and issued a notice under section 34(1) (b) to reassess the income that had escaped assessment. The main question was whether the Officer could assess only the known income at the time of the notice or the entire income that had escaped assessment during that year. Issue 2: Scope of Assessment under section 34(1) (b) The Appellate Assistant Commissioner and the Income Tax Appellate Tribunal held that once proceedings were initiated under section 34(1) (b), the Income Tax Officer had the authority to assess not only the known income but also any other income that had escaped assessment. The Tribunal referred a single question to the High Court, seeking clarification on the extent of assessment permissible under the said provision. Issue 3: Judicial Interpretation and Precedents The High Court referred to the interpretation of similar provisions by other High Courts. The Court cited the Punjab High Court's decision and emphasized the meaning of the term "such income" in the context of reassessment. The Court agreed with the interpretation that once valid proceedings were initiated under section 34(1) (b), the Officer had the jurisdiction and duty to assess the entire income that had escaped assessment during that year, not limited to the known income at the time of the notice. Issue 4: Decision and Rationale Based on the precedents and a thorough analysis of the relevant provisions, the High Court held that the Income Tax Officer was entitled to tax the entire income that had escaped assessment once proceedings were validly initiated under section 34(1) (b). The Court relied on the decisions of other High Courts and concluded that the Officer had the authority to assess any undisclosed income discovered during the reassessment process. Therefore, the Court answered the question in favor of the respondent, allowing the assessment of the entire escaped income. Costs and advocate's fee were also awarded to the respondent. In conclusion, the High Court's judgment clarified the scope of assessment under section 34(1) (b) of the Income Tax Act, allowing the Income Tax Officer to assess the entire income that had escaped assessment once valid proceedings were initiated, based on the interpretation of the term "such income" and relevant precedents from other High Courts.
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