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TMI Blog1936 (3) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ected the Commissioner of Income-tax, Punjab, to state the case on the following further question of law:- (3) Whether the Commissioner could take action under Section 33 and proceed to enhance the assessment, after having disposed of the assessee's appeal under Section 32 of the Income- tax Act? The assessee is known as the leading wholesale jeweller in Delhi running a business that has been in existence for over a hundred years. For the year 1932-33 the assessee was assessed on a total income of ₹ 18,494, under Section 23(3) of the Act. The assessment order was passed by the Income Tax Officer on the 22nd of July, 1933. In his return the assessee had shown his gross income from the sales of jewellery at ₹ 26,553. He had also shown an income of ₹ 4,724 from the sales of precious stones The Income tax Officer accepted these figures so far as the sales of jewellery and precious stones were concerned. He was, however, of the opinion that the flat rates of 10 per cent. and 5 per cent. profits respectively applied by the assessee were too low, and as there was no proof in support of these rates, he applied the rates of 20 per cent. and 15 per cent. profits r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. The Income-tax Officer had accepted his figure as correctly representing 'sales of jewellery' by his order dated the 22nd of July 1933. The Commissioner of Income-tax, by his order dated the 8th October, 1934, raised this figure to ₹ 50,000. The first question for determination is whether the sum of ₹ 23,447 (being the difference between ₹ 50,000 and ₹ 26,553) can be regarded as income which had escaped assessment within the purview of Section 34 of the Act. The Commissioner was of the opinion that the sales were greatly under-stated at both the Agra and the Delhi shops and that the sales total was not, therefore, complete and true in fact. The meaning of the Commissioner appears to be that a number of sales were not entered in the account books of the assessee and thus the sum of ₹ 26,553 did not represent the total amount realized by the assessee. It was contended by the learned counsel for the assessee that in the circumstances alluded to above the sum of ₹ 23,447 must be regarded as income which had 'escaped assessment' during the year 1932-33 and that as no notice was served on the assessee within one year of the end ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the opinion of the other learned Judges and held that the word 'escape' was not to be read in the widest sense that that word was capable of bearing, and that the word 'escaped' was equivalent to eluded notice in the course of assessment and did not mean 'had avoided being assessed.' In coming to this conclusion the learned Judge relied on the Privy Council ruling reported as I.L.R. 61 Cal. 285 (Rajendranath Mukherjee v. Commissioner of Income-tax, Bengal). I respectfully agree with the opinion of the majority so far as the meaning of the words escaped assessment is concerned. It appears to me, however, that in the present case the sum of ₹ 23,447 must be held to be income which had escaped assessment even if the words escaped assessment are used in the restricted sense as being equivalent to eluded notice. The books of the firm showed income from the sales of jewellery as ₹ 26,553 while the Commissioner computed the income from that source as being ₹ 50,000. The difference between the two incomes did not find any place either in the return or in the books of the company. In the every nature of things, therefore, this income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s income for a financial year are pending, no final assessment having been made upon him, his income has not 'escaped assessment' within the meaning of Section 34 of the Indian Income- tax Act, 1922, so as to make service of a notice within one year of the end of the year, as therein required a condition to assessment. Where a case does not fall within Section 34, an assessment can be made at any time under Section 23, sub-section (1), pursuant to a notice under Section 22, sub-section (2) calling for a return . The observations of their Lordships of the Privy Council must, however, be read subject to the facts of the case which was under consideration by their Lordships at the time of making the observations quoted above. It is, therefore, necessary to make a detailed reference to the facts of that case which were as follows:- Towards the end of year 1926-27, the partners of the registered firm of Martin Co., which also carried on business in Calcutta, purchased the business and assets of Burn Co., The purchase was effected not by or on behalf of the firm of Martin Co., but by the partners of that firm as individuals who contributed funds for the purposes propor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment is not made on income within the tax year, then that income has escaped assessment within that year and can be subsequently assessed only under Section 34 within its time limitation. In that case no order of assessment had ever been made against Burn Co., and their income had at one time been included in the income of Martin Co., and thereafter excluded from such assessment. What was really decided in that case was that an assessment can be made under Section 23(1) of the Act more than a year, in fact at any time, after the assessment year, if in the meantime no final assessment has been made. Rajendranath Mukherjee v. Commissioner of Income-tax, Bengal, does not justify an inference that an assessment is not concluded when the amount of tax payable by the assessee has been determined and a demand notice issued to him. The use of the words 'cancel the assessment', 'make a fresh assessment', and annul or enhance the assessment , in Sections 27, 30 and 31 shows that the proceedings after the issue of the demand notice do not form part of the assessment. I would, therefore, hold that the sum of ₹ 23,447 must be regarded as income which had escaped ..... X X X X Extracts X X X X X X X X Extracts X X X X
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