1967 (9) TMI 27 - HC - Income Tax

Income escaping assessment owing to allowance of excessive loss - Whether in the course of reassessment proceedings properly initiated under the provisions of cl. (a) of s. 34(1) of the Act, the assessee can claim the revision of the loss that was determined in the original assessment which had otherwise become final and conclusive so far as he was concerned - Held, no

Issues Involved:
1. Whether the assessee can claim the revision of the loss determined in the original assessment during reassessment proceedings under section 34(1)(a) of the Indian Income-tax Act.
2. Applicability of section 34(2) in reassessment proceedings under section 34(1)(a).
3. Interpretation and scope of section 34(1)(a) concerning recomputation of loss.
4. The applicability of section 35 for rectification of mistakes.

Detailed Analysis:

1. Revision of Loss in Reassessment Proceedings:
The primary issue was whether the assessee could claim the revision of the loss of Rs. 4,49,650 determined in the original assessment during reassessment proceedings under section 34(1)(a). The court noted that the assessee disclosed new figures during reassessment, showing larger receipts and payments in the speculation business. The Income-tax Officer accepted the revised receipts but rejected the claim to add Rs. 85,510 to the losses, stating that a claim for relief omitted in the original assessment could not be made in section 34 proceedings. The Tribunal upheld this view, emphasizing that once the original assessment became final, it was not possible to recompute the entire income or correct errors and omissions made by the assessee under section 34(1)(a).

2. Applicability of Section 34(2):
The Appellate Assistant Commissioner rejected the contention that section 34(2) applied, stating that section 34(2) is only applicable where reassessment proceedings are under section 34(1)(b). This contention was not reiterated before the Tribunal, which concurred that section 34(2) was inapplicable in cases under section 34(1)(a).

3. Interpretation and Scope of Section 34(1)(a):
The court analyzed the terms of section 34(1)(a), which allows the Income-tax Officer to assess or reassess escaped income, profits, or gains, or recompute loss or depreciation allowance. The court rejected the assessee's argument that the absence of the word "such" before "loss" implied a broader power to recompute the entire income. The court clarified that the power to "recompute the loss" is limited to the loss and does not extend to a general recomputation of income, profits, or gains. The court emphasized that section 34(1)(a) is intended for the benefit of the revenue, not the assessee, and recomputation of loss is limited to cases where excessive loss or depreciation allowance has been computed.

4. Applicability of Section 35 for Rectification of Mistakes:
The court noted that section 35 provides a clear power for rectification of mistakes in favor of the assessee. The mistakes pointed out by the assessee, including errors in totaling and undeclared losses, could be rectified under section 35. The existence of section 35's rectification power negates the interpretation that section 34(1)(a) allows for a general recomputation of the entire assessment.

Conclusion:
The court concluded that the Tribunal was correct in its view that the assessee could not claim the revision of the loss determined in the original assessment during reassessment proceedings under section 34(1)(a). The court answered the question referred for its decision in the negative, stating that the assessee shall pay the costs of the Commissioner. The judgment emphasized that the scope of reassessment under section 34(1)(a) is limited to escaped income, profits, or gains and does not allow for a general recomputation of the entire assessment.

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