01 October 1958
Supreme Court
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MAHARAJ KUMAR KAMAL SINGH Vs THE COMMISSIONER OF INCOME-TAX, BIHAR & ORISSA

Case number: Appeal (civil) 297 of 1955


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PETITIONER: MAHARAJ KUMAR KAMAL SINGH

       Vs.

RESPONDENT: THE COMMISSIONER OF INCOME-TAX, BIHAR & ORISSA

DATE OF JUDGMENT: 01/10/1958

BENCH: GAJENDRAGADKAR, P.B. BENCH: GAJENDRAGADKAR, P.B. AIYYAR, T.L. VENKATARAMA SARKAR, A.K.

CITATION:  1959 AIR  257            1959 SCR  Supl. (1)  10  CITATOR INFO :  E          1959 SC1303  (11,12)  D          1960 SC1232  (7,47)  R          1964 SC 766  (9)  F          1967 SC 230  (5,13)  R          1968 SC 565  (9,11,32)  D          1968 SC 843  (10)  R          1970 SC 300  (4)  RF         1972 SC  29  (4)  F          1976 SC 203  (10,11,12)  D          1976 SC1681  (5)  RF         1977 SC2129  (9)  R          1979 SC1960  (6,14)

ACT:        Income  Tax-Re-assessment -Escaped income -Assessment  order        based on statement of law subsequently found to be erroneous        Escaped  Whether  assessment can be  reopened-"  Information        Escaped-income", meaning of-Indian Income-tax Act, 1922  (XI        Of 1922), as amended by Act 48 of 1948, s. 34(1)(b).

HEADNOTE: In respect of the assessment of the appellant to  income-tax the  Income-tax Officer excluded the amount of  interest  on arrears of rent received by him, in view of the decision  of the   Patna  High  Court  in  Kamakshya  Narain   Singh   v. Commissioner  of  Income-tax, [1946] 14 1. T. R.  673,  that this  amount  was not liable to be taxed, though  an  appeal against  the  said  decision to the  Privy  Council  at  the instance  of  the Income-tax Department  was  then  pending. Subsequently on July 6, 1948, the Privy Council allowed  the appeal and held that interest on arrears of rent payable  in respect of agricultural land was not agricultural income  as it  was  neither rent nor revenue derived from land.   As  a result   of  this  decision  the  Income-tax  Officer   took proceedings under s. 34 Of the Indian Income-tax Act,  1922, as  amended, and revised the assessment order by adding  the aforesaid  amount,  on  the  footing  that  the   subsequent decision  of  the Privy Council was information  within  the meaning  of S. 34(1)(b) of the Act and that  the  Income-tax Officer had reason to believe that a part Of the  assessee’s income,  had escaped assessment.  It was contended  for  the

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appellant  that s. 34(1)(b) was not applicable to  the  case because (1) the information referred to in the section means information  as to facts and cannot include the decision  of the Privy Council on a point of law, 11 and  (2) where income has been duly returned for  assessment and  an assessment order has been passed by  the  Income-tax Officer,  it  cannot  be said that any  income  has  escaped assessment within s. 34(1)(b). Held,  (1) that the word " information " in s.  34(1)(b)  of the  Act  includes information as to the  true  and  correct state  of  the  law and so would  cover  information  as  to relevant judicial decisions; and, (2)  that  the  expression "has escaped  assessment"  in  to cases  where no return has been submitted by  the  assessee. The section is applicable not only where income has not been assessed owing to inadvertence or oversight or owing to  the fact  that no return has been submitted, but also where  are turn   has  been  submitted,  but  the  Income-tax   Officer erroneously fails to tax a part of assessable income. Rajendra  Nath Mukherjee v. Income-tax Commissioner,  (1933) L.R.  61  I. A. 10 and Messrs.  Chatturam Horliram  Ltd.  v. Commissioner of Income-tax, Bihar and Orissa, [1955] 2S.C.R. 290, distinguished. Raja  Benoy Kumar Sahas Roy v. Commissioner  of  Income-tax, West Bengal, [1953] 24 I.T.R. 70, Madan Lal v.  Commissioner of   Income-tax,  Punjab,  [1944]  12  I.T.R.  8   and   The Commissioner  of Income-tax v. Raja of  Parlakimedi,  (1926) I.L.R. 49 Mad. 22, approved. , Maharaja  Bikram  Kishore of Tripura v. Province  of  Assam, [1949] 17 I.T.R. 22o, disapproved.

JUDGMENT: CIVIL APPELLATE, JURISDICTION: Civil Appeal No. 297 of 1955. Appeal from the judgment and decree dated April 7, 1954,  of the  Patna  High Court in Misc.  Judicial Case  No.  327  of 1951. A.   V.   Viswanatha  Sastri  and  B.  K.  Sinha,  for   the appellant. K.   N.  Rajagopala Sastri, R. H. Dhebar and D.  Gupta,  for the respondent. 1958.  October 1. The Judgment of the Court was delivered by GAJENDRAGADKAR  J.-This is an appeal with  the,  certificate issued  by  the High Court of Judicature at Patna  under  s. 66A(2)  of the Income-tax Act (hereinafter called  the  Act) and  it raises a, short question of the construction  of  s. 34(1)(b) of the Act.  This 12 question  arises in this way.  Proceedings. were.  taken  by the  Income-tax  Officer,  Special  Circle,  Patna,  against Maharaja Bahadur Rama Rajaya Prasad Singh, the father of the appellant,  to  levy income-tax for the year  1945-46.   The total  income assessed to income-tax by the said  order  was Rs.  1,60,602.  This amount included the sum of  Rs.  93,604 received  by the assessee on account of interest on  arrears of  rent due to him after deduction of  collection  charges. It  was urged before the Income-tax Officer by the  assessee that  this amount was not liable to be taxed in view of  the decision  of the Patna High Court in Kamakshya Narain  Singh v. Commissioner of Income Tax (1).  The Income-tax  Officer, however, held that, since the department had obtained  leave to  appeal to the Privy Council against the  said  decision, the  matter was sub judice and so be would not be  justified

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in  accepting the assessee’s contention.  In the result,  he included  the  said  amount  in the  total  income  for  the purposes of assessment, but ordered that the realisation  of the  tax  on  the  &aid amount should  be  stayed  till  the decision  of the Privy Council or March 31, 1947,  whichever was earlier.  This order was passed under s. 23(3)  of   the Act on December 31, 1945. Against  this order the assessee preferred an appeal  before the  Appellate Assistant Commissioner of Income-tax,  Patna. On  May  8,  1946, the appellate  authority  held  that  the Income-tax  Officer was bound to follow the decision in  the case  of Kamakshya Narain Singh (supra) (1) and so,  he  set aside the order under appeal in regard to the amount of  Rs. 93,604  and  directed the Income-tax Officer to  make  fresh assessment.   He also observed that it was not clear  as  to what  portion of the said amount was interest on arrears  of agricultural  rents and what portion related to interest  on arrears  of non-agricultural rents.  The Income Tax  Officer was accordingly directed to determine the latter amount  and to levy tax on it. Pursuant to this appellate order the Income-tax Officer made a  fresh  assessment under ss. 23(3) and 31 of  the  Act  on August 20, 1946.  By this order the (1)  [1946) 14 I.T.R. 673. 13 total  amount of income liable to tax was  determined  after deducting  the  whole of the amount of Rs. 93,604  from  it. Some other minor reductions were also allowed in  compliance with the appellate order.  The department did not  challenge either the appellate order or the subsequent order passed by the  Income-tax Officer in pursuance of the  said  appellate order. Subsequently,  on July 6, 1948, the appeal preferred by  the department to the Privy Council against the decision of  the Patna  High Court in Kamakshya Narain Singh’s case  (1)  was allowed  and  it was held that interest on arrears  of  rent payable in respect of agricultural land is not  agricultural income for it is neither rent nor revenue derived from land. As a result of this decision, the Income-tax Officer  issued a notice to the assessee under s. 34 of the Act on September 25,  1948.  This notice called upon the assessee to  file  a fresh return as the Income-tax Officer had reason to believe that  a part of the assessee’s income assessable to  income- tax  for  the  year  ending  March  31,  1946,  had  escaped assessment.   It  appears that this notice was found  to  be defective, and so under the provisions of s. 34, as amended, a fresh notice was issued by the officer to the assessee  on March  18, 1949.  The proceedings thus taken by the  officer under  s.  34 ultimately led to a revised  assessment  order passed under s. 23(3) and s. 34 of the Act and the amount of Rs. 93,604 was added to the assessment amount as interest on arrears  of rent.  This revised assessment order was  passed on April 30, 1949.  The assessee appealed against this order but the  appellate authority dismissed the assessee’s appeal and confirmed  the said  order on July 26, 1949.  He held that  the  subsequent decision  of  the  Privy Council in the  case  of  Kamakshya Narain Singh (supra) (1) was information within the  meaning of  cls.  (a) and (b) of s. 34(1) and  that  the  Income-tax Officer bad reason to believe that a part of the  assessee’s income had escaped assessment.  The assessee then moved  the Income-tax Appellate Tribunal; but on August 21, (1)  [1948] 16 I.T.R. 325. 14 1950,  the  tribunal  confirmed  the  order  passed  by  the

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appellate authority and dismissed the assessee’s appeal.  It was  held  that the provisions of a. 34 as amended  in  1948 applied  to  the  case and that the decision  of  the  Privy Council brought it within the purview of sub-s.   (1)(b)  of s. 34. Meanwhile  the assessee died and the appellant succeeded  to the  estate  of  his  deceased father.   He  then  filed  an application under s. 66(1) of the Act requiring the tribunal to refer the question of law raised in the case to the Patna High  Court  for its opinion.  The  tribunal  rejected  this application  on February 27, 1951.  Thereupon the  appellant moved  the Patna High Court under s. 66(2) of the  Act;  his application was allowed and the tribunal was directed by the High Court on December 15, 1951, to state the case and refer the question of law for its opinion.  In compliance with the requisition  of  the High Court the tribunal  by  its  order passed  on July 23, 1952, submitted a statement of the  case and referred to the High Court for its opinion the  question of  law raised by the appellant.  The question  thus  raised is:  "  Whether  in  the  circumstances  of  the  case   the assessment  order under s. 34 of the Act of the interest  on arrears of rent is legal ?" On April 7, 1954, this reference was  heard by V. Ramaswamy and C. P. Sinha JJ. of the  Patna High  Court and the question was answered by them in  favour of  the  department.   The appellant then  applied  for  and obtained  a  certificate  from  the  Patna  High  Court   on September  13, 1954.  The High Court has certified under  s. 66A, sub-s. (2), of the Act that the case raises a  question of law of a substantial kind and is otherwise a fit case for appeal  to this court.  That is how the present  appeal  has come  before  us; and the question which it raises  for  our decision  is about the true construction of s.  34(1)(b)  of the Act. Section 34 of the Act has been amended in 1939 and in  1948. It is conceded by Mr. Viswanatha Sastri, for the  appellant, that  the present case is governed by the section as it  was amended in 1948.  This amended s. 34, sub-s. (1), deals with cases of income escaping assessment in two clauses.   Clause (a)- covers cases 15 where  income  has  escaped  assessment  by  reason  of  the omission  or failure on the part of the assessee to  make  a return of his income under s. 22.  We are not concerned with this  clause.   Clause (b) of s. 34(1) provides  inter  alia that  " notwithstanding that there has been no  omission  or failure as mentioned in cl. (a) on the part of the assessee, if the Income-tax Officer has, in consequence of information in his possession, reason to believe that income, profits or gains  chargeable to income-tax have escaped assessment  for any  year, or have been under-assessed, or assessed  at  too low  a  rate,  or have been made the  subject  of  excessive relief under the Act, or that excessive loss or depreciation allowance  have  been computed, he may, at any  time  within four  years of the end of that year serve on the assessee  a notice containing all or any of the requirements, which  may be  included in a notice under sub-s. (2) of s. 22, and  may proceed to assess or reassess such income, profits or  gains or  recompute  the loss or depreciation allowance,  and  the provisions  of  this  Act shall, so far  as  may  be,  apply accordingly as if the notice were a notice issued under that sub-section  ".  It  is clear that two  conditions  must  be satisfied  before  the Income-tax Officer can act  under  s. 34(1)(b).   He  must  have information  in  his  possession, which,  in the context, means that the relevant  information must have come into his possession subsequent to the  making

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of  the  assessment order in question and  this  information must lead to his belief that income chargeable to income-tax has  escaped  assessment for any year, or that it  has  been under-assessed  or  assessed at too low a rate or  has  been made  the  subject of excessive relief under the  Act.   Two questions are raised by Mr. Sastri under this sub-section in the   present  appeal.   He  contends  that   the   relevant information means information as to facts and cannot include the decision of the Privy Council on a point of law; and  he argues  that,  where  income  has  been  duly  returned  for assessment  and an assessment order has been passed  by  the Income-tax  Officer, it cannot be said that any  income  has escaped assessment within s. 34(1)(b).  Thus the appellant’s case is that both the conditions required by s. 34(1)(b) 16 have  not  been  satisfied  and  so  the  order  of  revised assessment passed against the appellant is illegal. It  is not disputed-that, according to its  strict  literal’ meaning, the word " information " may include knowledge even about  a state of tile law or a decision on a point of  law. The argument, however, is that the context requires that the word " information " should receive a narrower  construction limiting  it to facts or factual material  as  distinguished from  information  as  to the true state  of  the  law.   In support of this argument Mr. Sastri referred to the marginal notes  of ss. 19A and 20A as well as the province, s  of  s. 22(3) and s. 28 and urged that the information  contemplated by  these  provisions is information as to facts  or  parti- culars  and has no reference to the state of law or  to  any question of law; and so the said word in s. 34(1)(b)  should be  construed to mean only factual information.  We are  not impressed by this arguments If the word " information"  used in any other provision of the Act denotes information as  to facts  or particulars, that would not necessarily  determine the meaning of the said word in s. 34(1)(b).  The denotation of  the said word would naturally depend on the  context  of the  particular provisions in which it is used.  It is  then contended  that  ss. 33B and 35 confer ample powers  on  the specified authorities to revise Income-tax Officer’s  orders and  to  rectify mistakes respectively and so  it  would  be legitimate  to  construe  the  word  "information  "  in  s. 34(1)(b) strictly and to confine it to information in regard to  facts or particulars.  This argument also is not  valid. If the word "information " in its plain grammatical  meaning includes  information as to facts as well as information  as to  the state of the law, it would be unreasonable to  limit it  to  information  as  to  the  facts  on  the  extraneous consideration that some cases of assessment which need to be revised  or  rectified on the ground of mistake of  law  may conceivably  be  covered by ss. 33B and  35.   Besides,  the application  of these two sections is subject to  the  limi- tations  prescribed by them; and so the fact that  the  said sections  confer powers for revision or rectification  would not be relevant and material in construing 17 s.   34(1)(b).   The  explanation  to s. 34  also  does  not assist the appellant.  It is true that under the explanation production before the Income-tax Officer of account books or other  evidence  from which material facts  could  with  due diligence  have  been discovered by the  Income-tax  Officer would  not  necessarily  amount to  disclosures  within  the meaning of the said section; but we do not see how this  can have  any  bearing  oil the construction of cl.  (b)  in  s. 34(1).   On  the other hand, one of the  cases  specifically mentioned  in  s. 34(1)(b) necessarily postulates  that  the

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word "information" must have reference to information as  to law.    Where,   in  consequence  of  information   in   his possession,  the  Income-tax Officer has reason  to  believe that  income  has  been assessed at too low a  rate,  he  is empowered  to  revise the assessment; and there  can  be  no doubt  that  the belief of the Income-tax Officer  that  any given income has been assessed at too low a rate may in many cases be due to information about the true legal position in the matter of the relevant rates.  If the word " information "  in  reference  to this class of  cases  must  necessarily include  information as to law, it is impossible  to  accept the  argument  that, in regard to the  other  cases  falling under  the  same  provision, the same  word  should  have  a narrower  and a more limited meaning.  We would  accordingly hold  that the word " information " in s. 34(1)(b)  includes information as to the true and correct state of the law  and so   would  cover  information  as  to   relevant   judicial decisions.  If that be the true position, the argument  that the  Income-tax  Officer was not justified in  treating  the Privy Council decision in question as information within  s. 34(1)(b) cannot be accepted. in regard to the other condition prescribed by s.  34(1)(b). When  can  income be said to have escaped  assessment?   Mr. Sastri argued that the word "assessment " does not mean only the order of assessment, but it includes all steps taken for the  purpose  of levying the tax and during the  process  of taxation.  That no doubt is true; but the wide denotation of the word 3 18 " assessment" does not really assist the appellant; it  only shows  that along with the order of assessment which  is  an important  act  in the process of taxation, other  acts  and steps adopted in the course of taxation are also included in the  word ; but it is with this " most critical act  in  the process  of  taxation " with which we are concerned  in  the present  appeal.  Then it is urged that the word "escaped  " according  to the Oxford English Dictionary means "to  elude (observations,  search,  etc.);  to elude the  notice  of  a person  "  ;  and the contention is that it  is  only  where income  has not been returned for assessment that it can  be reasonably  said  that income has escaped  assessment.   The dictionary meaning of the word does not support Mr. Sastri’s contention.   According  to the same dictionary the  word  " escape  "  also means " to get clear away from  (pursuit  or pursuer);  to  succeed  in  avoiding  (anything  painful  or unwelcome)";  so  that judging by  +,he  dictionary  meaning alone it would be difficult to (-confine the meaning of  the word  "  escape  " only to cases where no  return  has  been submitted  by  the  assessee.   Even  if  the  assessee  has submitted a return of his income, cases may well occur where the whole of the income has not been assessed and such  part of the income as has not been assessed can well be  regarded as having escaped assessment.  In the present case, interest on  arrears  of  rent  received by  the  assessee  from  his agricultural lands were brought to the notice of the Income- tax Officer; the question as to whether the said amount  can be assessed in law was considered and it was ultimately held that the relevant decision of the Patna High Court which was binding  on  the department justified the  assessee’s  claim that  the said income was not liable to be assessed to  tax. There  is no doubt that a part of the assessee’s income  had not  been  assessed  and, -in that  sense,  it  has  clearly escaped assessment.  Can it be said that, because the matter was considered and decided on the merits in the light of the

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binding  authority of the decision of the Patna High  Court, no  income has escaped assessment when the said  Patna  High Court  decision has been subsequently reversed by the  Privy Council ? We see no 19 justification  for  holding that cases  of  income  escaping assessment  must always be cases where income has  not  been assessed owing to inadvertence or oversight or owing to  the fact  that  no return has been submitted.  In  our  opinion, even  in  a case where a return has been submitted,  if  the Income-tax  Officer  erroneously  fails to  tax  a  part  of assessable  income, it is a case where the said part of  the income  has escaped assessment.  The appellant’s attempt  to put  a very narrow and artificial limitation on the  meaning of the word escape " in s.    34(1)(b)   cannot    therefore succeed. Mr. Sastri, however, argues that the narrow construction  of the  expression  "has  escaped assessment  "  for  which  he contends   has  been  approved  by  the  Privy  Council   in Rajendranath  Mukherjee v. Income-tax Commissioner (1).   He relies  more  particularly on the observation  made  in  the judgment  in this case that "the fact that s. 34 requires  a notice to be served calling for a return of income which has escaped assessment ,strongly suggests that income which  has already been duly returned for assessment cannot be said  to have escaped ’assessment within the statutory meaning".   In order to appreciate the effect of this observation it  would be  necessary to examine the material facts in the case  and the  specific  points raised for the decision of  the  Privy Council.   It appears that, in 1930 the  Income-tax  Officer had  made  an assessment order on Burn & Co., which  was  an unregistered firm, assessing them’ to income-tax and  super- tax  for  the  year 192728 under the  Act.   The  individual partners  of Burn & Co., who were the appellants before  the Board, contended that it was not competent to the officer to make the impugned assessment on the firm after the expiry on March  31,  1928,  of  the year  in  respect  of  which  the assessment  was  made.  The Commissioner of  Income-tax  met this  plea  by referring to the other relevant  facts  which explained the delay in making the assessment order.  Towards the  end of 1926-27, the partners of the registered firm  of Martin & Co., had purchased the business and assets of  Burn &  Co.  This transaction was effected not on behalf  of  the firm (1)  (1933) 61 I.A. IO, 16. 20 of  Martin  &  Co.,  but by the  partners  of  the  firm  as individuals.   In  April  1927, the  Income-tax  Officer  of District  I  issued a notice to Burn & Co., under  s.  22(2) calling  for  a return of their total income  for  the  year ending March 31, 1927, with a view to assessing them for the year 1927-28.  A similar notice was issued by the Income-tax Officer of District 11.  When these notices were issued both the  officers did not know that the business of Burn &  Co., had been bought by the partners of Martin & Co. Subsequently this transaction was brought to the knowledge of the income- tax authorities whereupon Burn & Co.’s file was  transferred by  the  officer dealing with District 11, and  in  February 1928,  an  assessment  order was made on Martin  &  Co.,  in respect  of the combined incomes returned by Martin  &  Co., and  Burn & Co., on the footing that the business of Burn  & Co.,  had  become  a branch of Martin & Co.  Martin  &  Co., appealed  against  this  assessment  and  their  appeal  was allowed by the High Court in May 1930.  It was held that  an income  of a registered firm cannot, for the purpose of  the

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Act., be aggregated with the income of an unregistered  firm but  that  the income of each must  be  separately  assessed irrespective of the fact that the persons interested in  the profits  of both concerns are the same.  In  consequence  of this  decision,  the assessment made on Martin  &  Co.,  was amended by the elimination therefrom of the income  returned by Burn & Co., and in November 1930, an assessment was  made on Burn & Co., on their income as returned by them in  Janu- ary  1928.   It was this assessment which was  the  subject- matter  of  the appeal before the Privy Council.   It  would thus  be  noticed  that the  principal  question  which  the appellants raised before the Privy Council was: Whether  the assessment made under s. 23(1) on the appellants in November 1930  for  the  year 1927-28 was a legal  assessment  ?  The argument was that, on a true construction of the  Income-tax Act, it was obligatory on the Income-tax Officer to complete the  assessment proceedings within the year  of  assessment, and  in the event of such assessment not being so  completed the only remedy open to the income-tax 21 authorities  was to proceed under s. 34.  This argument  was repelled  by the Privy Council.  Their Lordships  held  that neither  s.  23 nor any other express provision of  the  Act limited  the time within which an assessment must  be  made. They   then  examined  the  other  argument  urged  by   the appellants  that  s. 34 implied a  prohibition  against  the making  of an assessment after the expiry of the  tax  year. In  dealing with this argument, s. 34 was construed  and  it was  observed that the argument sought to put upon the  word "assessment  "  too narrow a meaning, and upon  the  word  " escaped  "  too wide a meaning.  It was in  this  connection that  their  Lordships approved of the observation  made  by Rankin  C. J. in Re: Lachhiram Basantlal (1)  that  I....... income  has not escaped assessment if there are  pending  at the  time proceedings for the assessment of  the  assessee’s income  which have not yet terminated in a final  assessment thereof  ".  In  other words, the conclusion  of  the  Privy Council  was  that  so long as  assessment  proceedings  are pending  against  an assessee and no final  order  has  been passed  thereon, it would be premature to suggest  that  any income  of the assessee has escaped assessment.  It is  only after the final order levying the tax has been passed by the Income-tax  Officer that it would be possible  to  predicate that   any  part  of  the  assessee’s  income  has   escaped assessment.  In the result their Lordships held that " since proceedings  pursuant  to  the  notice  issued  against  the appellants under s. 22(2) had been pending and no order  had been passed against the appellants in the said  proceedings, it  would not be possible to accept their argument that  the Income-tax Officer should have taken action against them  in respect  of the income for the relevant year under s. 34  of the  Act ". If this decision is considered in the  light  of the  relevant  facts and the nature of the  argument  raised before  the  Privy Council by the appellants,  it  would  be difficult  to accept the contention that, according  to  the Privy  Council, s. 34 would be inapplicable wherever  notice under s. 22(2) has been issued against an assessee, a return has been submitted by him and (1)  (1030) I.L.R. 58 Cal. 909, 912. 22 a  final order has been passed by the Income-tax Officer  in the  said assessment proceedings.  To say that, so  long  as the assessment proceedings are pending, it is impossible  to assume  that any income has escaped assessment is very  much different  from  saying that income cannot be said  to  have

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escaped assessment wherever assessment proceedings have been taken  and a final order has been passed on them.  We  must, therefore,  hold  that this decision does  not  support  Mr. Sastri’s  contention about the inapplicability of s.  34  in the present case. In  this  connection  it may be relevant  to  refer  to  the decision  of  the  Calcutta  High  Court  in  Be:  Lachhiram Basantlal  (supra) (1) because, as we have  already  pointed out, the statement of the law made by Rankin C. J. in regard to  the  effect of s. 34 of the Act in this  case  has  been expressly  approved  by  the Privy Council in  the  case  of Rajendra Nath Mukherjee (supra) (2).  While dealing with the assessees’ argument that the order of assessment was invalid Since it had been passed more than one year after the expiry of  the  relevant  financial year and  that  the  Income-tax Officer  might have acted under s. 34, Rankin C.  J.  stated that income cannot be said to have escaped assessment except in the case where an assessment has been made which does not include  the  income.  It is true that this  observation  is obiter  but  it  is fully  consistent  with  the  subsequent statement of the law made by the learned Chief Justice which has received the approval of the Privy Council. Mr. Sastri has also relied on the decision of this Court  in Messrs.  Chatturam Horliram Ltd. v. Commissioner of  Income- tax, Bihar & Orissa (1) in support of his construction of s. 34.   In Chatturam’s case (supra) (3) the assessee had  been assessed  to income-tax which was reduced on appeal and  was set aside by the Income-tax Appellate Tribunal on the ground that the Indian Finance Act of 1939 was not in force  during the  assessment  year in Chota Nagpur.  On a  reference  the decision of the tribunal was upheld by the High (1)  (1930) I.L.R. 58 Cal. 909, 912.  (2) (1933) 61  I.A.10, 16.          (3) [1955] 2 S.C.R. 290. 23 Court.   Subsequently the Governor of Bihar promulgated  the Bihar  Regulation IV of 1942 and thereby brought into  force the   Indian   Finance   Act  of  1939   in   Chota   Nagpur retrospectively as from March 30, 1939.  This ordinance  was assented  to by the Governor-General.  On  February  8,1944, the Income-tax Officer passed an order in pursuance of which proceedings  were  taken  against  the  assessee  under  the provisions  of s. 34 and they resulted in the assessment  of the assessee to income-tax.  The contention which was raised by  the  assessee in his appeal to this Court was  that  the notice  issued  against him under s. 34 was  invalid.   This Court  held that the income, profits or gains sought  to  be assessed  were  chargeable to income-tax and that it  was  a case  of  chargeable income escaping assessment  within  the meaning  of s. 34 and was not a case of mere  non-assessment of  income-tax.  So far as the decision is concerned, it  is in  substance inconsistent with the argument raised IVY  Mr. Sastri.   He,  however, relies on the observations  made  by Jagannadhadas  J.  that  " the  contention  of  the  learned counsel   for  the  appellant  that  the   escapement   from assessment   is   not  to  be  equated   to   non-assessment simpliciter  is not without force " and he points  out  that the  reason  given by the learned judge in  support  of  the final   decision   was  that   though   earlier   assessment proceedings  had been taken they had failed to result  in  a valid  assessment  owing  to some  lacuna  other  than  that attributable  to the assessing  authorities  notwithstanding the  chargeability  of income to the tax.  Mr.  Sastri  says that  it is only in cases where income can be shown to  have escaped  assessment  owing to some lacuna  other  than  that attributable to the assessing authorities that s. 34 can  be

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invoked.   We  do  not  think that a  fair  reading  of  the judgment  can lead to this conclusion.  The observations  on which  reliance is placed by Mr. Sastri have naturally  been made  in  reference to the facts with which  the  Court  was dealing  and they must obviously be read in the  context  of those facts.  It would be unreasonable to suggest that these observations were intended to confine the application of  s. 34 only to cases where 24 income escapes assessment owing to reasons other than  those attributable   to   the   assessing   authorities.    Indeed Jagannadhadas J. has taken the precaution of adding that  it was  unnecessary  to  lay  down  what  exactly   constitutes escapement  from assessment and that it would be  sufficient to  place  their decision on the narrow ground to  which  we have just, referred.  We are satisfied that this decision is of no assistance to the appellant’s case. It  appears  that  the construction of s. 34 has  led  to  a divergence  of judicial opinion in the High Courts  of  this country,  and so it would be necessary to refer  briefly  to the  decisions  to which our attention was invited  in  this appeal.  In Madan Lal v. Commissioner of I. T., Punjab  (1), the  majority decision of the Full Bench of the Lahore  High Court held that s. 34 of the Act, as it stood then, was  not confined to cases where income had not been returned at all. It applied also to cases where an item of income is included in the return made by the assessee but is left unassessed by the  Income-tax  Officer, or, if assessed in the  first  in- stance,  the  assessment is cancelled by  any  appellate  or revisional  authority.   Din Mohammad J. who  delivered  the majority  judgment  has  expressed his  agreement  with  the opinion  of  Coutts  Trotter C. J. in  The  Commissioner  of Income-tax  v.  Raja  of Parlakimedi (2) that  the  words  " escaped assessment " apply even " to cases where the Income- tax   Officer   has  deliberately   adopted   an   erroneous construction  of  the  Act as much as to  a  case  where  an officer  has  not considered the matter at all,  but  simply omitted  the assessable property from his view and from  his assessment ". The next case which has been cited before us is the decision of the Bombay High Court in The Commissioner of  Income-tax, Bombay  v.  Sir  Mahomed Yusuf Ismail  (3).   In  this  case Beaumont  C. J. construed the word " definite information  " in  s.  34 and held that in order to take action  under  the said  section, there must be some information as to  a  fact which leads the Income-tax Officer to discover that income (1) [1935] 3 I.T.R. 438.     (2) (1926) 49 Mad. 22, 28. (3)  [1944] 12 I.T.R. B. 26 has  escaped  assessment or has  been  under-assessed.   The learned  Chief Justice, however, added that the fact may  be as  to the state of the law, for instance, that a  case  has been  overruled or that a statute has been passed which  has not been brought to the attention of the Income-tax Officer. Chagla J. who delivered a concurring judgment was  inclined, to hold that the word " information " in the section must be confined only to information as to facts or particulars  and cannot  include information as to law.  In his opinion, "  a mistake of law or misunderstanding of the provisions of  the law is not covered by the language of the section as amended in  1939  ". It may be pointed out that in  coming  to  this conclusion  the learned judge appears to have relied on  the observations of Rowlatt J. in Anderton and Halstead Ltd.  v. Birrell  (1)  that "the word I discover’ in s.  125  of  the English Act does not include a mere change of opinion on the

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same  facts and figures upon the same question  of  account- ancy,  being a question of opinion ". Incidentally,  we  may observe  that  this  statement of the  law  by  Mr.  Justice Rowlatt  appears  to  have been overruled by  the  Court  of Appeal in Commercial Structures Ltd. v. R. A. Briggs (2). Soon  after  the  decision  of the  Bombay  High  Court  was reported the same question was raised before the Madras High Court  in Raghavalu Naidu & Sons v. Commissioner of  Income- tax, Madras (3).  Leach C. J. who delivered the judgment  of the court agreed with the construction which had been put on the  expression "definite information " by the  Bombay  High Court  on  the ground that "it is very  desirable  to  avoid conflict  on such a question ". He, however, added  that  in view  of the opening words of the amended section as it  was amended in 1939, the word " discovers " means something more than  ’has  reason to believe’ or ’ satisfies  himself’  and that  consequently  it  would not be  right  to  regard  the English  decisions on the meaning of the word " discovers  " in s. 125 of (1)  [1932] I. K. B. 271.  (2) [1949] 117 I.T.R.  Supplement 30. (3)  [1945] 13 I.T.R. 194, 197. 4 26 the  English Act as being in point.  He also made  it  clear that  in following the Bombay, decision they did  not  imply that the definite information must relate to a pure question of  fact  because it was impossible to lay down  a  rule  to cover all cases in which this section can be invoked. In  the  Calcutta High Court, conflicting  views  have  been expressed  on  this point.  In Maharaja  Bikram  Kishore  of Tripura  v.  Province.  of  Assam (1),  Harries  C.  J.  and Mukherjea  J. had to deal with the construction of s. 30  of the  Assam  Agricultural Income-tax Act (Assam IX  of  1939) which corresponds to s. 34 of the Act.  They held that where a  certain  income has been included in his  return  by  the assessee but was not assessed on the ground that it was  not assessable, it cannot be treated as income which has escaped assessment   and  reassessed  under  s.  30  of  the   Assam Agricultural  Income-tax Act.  In his judgment  the  learned Chief  Justice has mentioned that the earlier  decisions  of the   Calcutta  High  Court  were  no  doubt   against   the contentions  of the appellant but he took the view that  the question  was really concluded by the decision of the  Privy Council in Rajendra Nath Mukherjee’s case (supra) (2).   The Privy Council decision was read by the learned Chief Justice as  supporting the view that s. 34 would be inapplicable  to cases where income has been returned, assessment proceedings have  been  taken and a final order of assessment  has  been passed  by the Income-tax Officer against the assessee.   We have  already  pointed out that the decision  of  the  Privy Council  does  not support this view.  In Raja  Benoy  Kumar Sahas  Roy  v.  Commissioner  of  1.  T.,  West   Bengal(1), Chakravartti C. J. and Lahiri J. have taken a contrary view. They  have  held that information as to the  true  state  or meaning  of the law derived freshly from an external  source of  authoritative character is definite  information  within the meaning of s. 34. It  appears that, in construing the scope and effect of  the provisions of s. 34, the High Courts have had (1) [1949] 17 I.T.R. 220.    (2) (1933) 61 1,A. 10, 16.                   (3) [1933] 24 I.T.R. 70. 27 occasion  to decide whether it would be open to the  Income- tax Officer to take action under s. 34 on the ground that he

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thinks  that  his original decision in making the  order  of assessment  was wrong without any fresh information from  an external  source or whether the successor of the  Income-tax Officer can act under s. 34 on the ground that the order  of assessment  passed  by his predecessor  was  erroneous,  and divergent  views  have been expressed on  this  point.   Mr. Rajagopala Sastri, for the respondent, suggested that  under the provisions of s. 34 as amended in 1948, it would be open to the Income-tax Officer to act under the said section even if  he merely changed his mind without any information  from an  external  source and came to the conclusion that,  in  a particular  case, he had erroneously allowed  an  assessee’s income  to escape assessment.  We do not propose to  express any  opinion  on this point in the present appeal.   In  the result we hold that the Patna High Court was right in coming to the conclusion that the decision of the Privy Council was information within the meaning of s. 34 (1)(b) and that  the said decision justified the belief of the Income-tax Officer that  part of the appellant’s income had escaped  assessment for the relevant year. The  appeal  accordingly fails and must  be  dismissed  with costs.                                   Appeal dismissed. 28