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TMI Blog1943 (9) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... nd. Thereupon the Income-tax authorities proceeded to reopen the assessment under Section 34, alleging that part of the income of the assessee-husband had escaped assessment. Section 34 under the Act before the Amendment of 1939 provided that if for any reason income, profits or gains chargeable to income- tax had escaped assessment in any year; or had been assessed at too low a rate, the Income-tax Officer might make a fresh assessment. Under that section all that had to be shown was that income had escaped assessment, or had been assessed at too low a rate, and the cases show that that position might arise by a mere error on the part of the Income- tax Officer. He might change his opinion, and thereupon make a fresh assessment, having to do no more than assert that owing to his mistake income had escaped assessment. Presumably it was desired to curtail the powers of the Income-tax authorities in that respect. Income-tax is a serious item in the expenditure of most people, and an assessee is entitled to know what his liability is, and it certainly seems unreasonable that, if his liability has been fixed at a certain figure, and he has based his future budget on that figure, he sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to pure point of law. Mr. Justice Finlay was inclined to accept the view of the earlier case that "discovers" means only "has reason to believe" or "finds out", and he followed the same view in a later case, British Sugar Manufacturers Ltd. v. Harris. [1938] 2 K.B. 220. That case went to the Court of Appeal, and he decision was reversed on another point, but the question as to the meaning of "discovers" was argued, and the Court of Appeal were about to express an opinion, apparently in favour of the appellants, but they were asked not to do so, because it might embarras parties in the event of the Commissioner wanting to take that portion of the decision to the House of Lords. Accordingly they refrained from expressing an opinion: but it is clear from the observation of Lord Justice Romer at page 238 that they were in favour of allowing the appeal on that point. But as to the grounds on which they could have based their decision, and as to the exact meaning they were prepared to put on "discovers" we have no information. Then there is a Scotch case. Commissioners of Inland Revenue v. Mackinlay's Trustees [1938] 22 Tax Cas. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act," and the answer is in the negative. The second question raised is: "Whether the income received by Lady Khatun Mariam has been rightly included in the income of the assessee under Section 16(3)(b) of the Act." In the view we take of the first question, it is not necessary to decide that question. But Mr. Setalvad has asked us to express an opinion upon it, because it may be that the Commissioner will appeal to the Privy Council against our decision on the first question, and, therefore, it is desirable to note the argument on the second question. Section 16(3)(b) provides: "In computing the total income of any individual for the purpose of assessment, there shall be included so much of the income of any person or association of persons as arises from assets transferred otherwise than for adequate consideration to the person or association by such individual for the benefit of his wife or a minor child or both." That sub-section was added in 1937, and it is no doubt directed to income of which the wife gets the benefit through the medium of trustees. Under the earlier sub-sections, there is included in the income of the assessee so much of the income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ises on this reference is ther the Income-tax Officer was entitled to re-open the assessment under Section 34 of the Indian Income-tax Act (XI of 1922). It seems that in the first instance the income which Lady Khatun Mariam, the wife of the assessee, received under the Deed of Wakf was not included in the income of the assessee. The assessment was subsequently reopened and that income was included in the income of the assessee. It is, therefore, clear that the re-opening of the assessment was not due to any new fact that had come to the knowledge of the Income-tax Officer but was the result of a mistake in law in applying the amended Section 16(3) of the Income-tax Act to the facts of the case. Now in considering whether the Income-tax Officer was entitled under these circumstances to re-open the assessment, one has first to consider and compare the amended Section 34 with the section as it stood before the amendment was enacted, and one cannot help noticing the striking difference between the old and the new section. Under the old section all that was required was the fact that income had escaped assessment or income had been assessed at too low a rate. If these two facts were pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... If the surveyor discovers.........that a person chargeable has been allowed, or has obtained from and in the first assessments, any allowance, deduction, exemption, abatement, or relief not authorised by this Act, then and in every such case............the additional Commissioners shall make an assessment, on the person chargeable, in an additional first assessment..............." In the English statute the word "discovers" is not qualified by any expression as it is in our Section 34. Therefore the discovery under the English statute may be the result of anything that comes to the know- ledge of the surveyor whereas under our statute the discovery must be the result of definite information coming into the possession of the Income- tax Officer. As I was pointing out, in the case reported in Anderton and Halstead, Ltd. v. Birrell [1932] 1 K.B. 271; 16 Tax Cas. 200, the facts were that the assessees were assessed upon the basis of a writing down in two years successively of a doubtful debt and subsequently, by additional first assessments, the writing down of the doubtful debt was disallowed, on the ground that since the writing down of the debt was allowed, it had co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was whether the wordm "discovers" as contended by the assessee meant "ascertains by legal evidence", and Mr. Justice Bray at page 889 took the view that "discovers" did not mean "ascertains by legal evidence". As a matter of fact, if one looks at the facts of that case, the surveyor of taxes had discovered a fact which was not present to his mind when the original assessment was made. The original assessment was made in 1906, and in 1909 the Income-tax authorities ascertained the existence of a company which made a considerable difference to the return made by the assessee in 1906. The other case is the case reported in Reports of Tax Cases, Volume XXII, Part V, page 305, Commissioners of Inland Revenue v. Mackinlay's Trustee's. There the Lord President Normand at page 312 Construed the word "discover" to mean "find out". But if one turns to his judgment, the Lord President makes it clear that if there were any reason in the context for restricting the word ''discover" to the discovery of an error in fact, that restriction would necessarily receive effect, but in his opinion the context did not point ..... X X X X Extracts X X X X X X X X Extracts X X X X
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