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Interpretation of Section 34 of the Income Tax Act regarding re-assessment of taxable income when the rate of tax is sought to be raised. Analysis: The judgment addressed the issue of whether an Income Tax Officer is obligated to re-assess the correct taxable income of the assessee when taking action under Section 34 of the Income Tax Act to raise the rate of tax initially fixed as too low. Section 34 deals with income escaping assessment, allowing the Income Tax Officer to serve a notice for re-assessment if income has been assessed at too low a rate. The provision specifies that tax should be charged at the rate it would have been if the income had not escaped assessment. The petitioner argued that the Officer must re-assess the entire income, not just the portion that escaped assessment, citing Sections 14 and 16. However, the court held that Section 34 applies specifically to cases where income has escaped assessment or been assessed at too low a rate. The inquiry need not extend beyond the facts relevant to raising the tax rate. The assessee is entitled to challenge the omission and original rate, but the Officer is not required to re-open all income items or start fresh assessments. The Officer only needs to focus on the particular item that was omitted. The court concluded that in cases where the tax rate is sought to be raised under Section 34 of the Income Tax Act, the Income Tax Officer is not obligated to determine afresh the correct taxable income of the assessee. The petitioner was directed to pay the costs allowable.
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