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Judgment
SIR LIONEL LEACH, C.J. - On 18th November 1932 E. M. Visvanathan Chettiar was assessed to Income Tax on an income of Rs. 8,277 in
respect of the Tamil year ended 12th April 1932. The assessee was managing member of an undivided Hindu family. The family carried on a
money-lending business at Puduvayal in British India, in the Federated Malay States and in Burma. the year of assessment closed on the 12th April
1933 and on the 13th December 1933 the Income Tax Officer having reason to believe that income earned during the accounting period has
escaped assessment issued a notice u/s 34 of the Indian Income Tax Act. On the 6th October 1934 the assessee filed a statement to the effect that
no income had escaped assessment. On the 25th February 1935 the Income Tax Officer issued a notice to the assessee u/s 23 (2) to produce the
evidence on which he proposed to rely. On the 18th July 1936 the Income Tax Officer gave the assessee notice that on the 24th of that month he
would commence an inquiry into the question of what income had escaped assessment and directed him to appear before him with all his account
books and pass books. The inquiry in fact actually commenced on the 23rd July and continued on the 28th and 29th when it was completed. On
the 30th July 1936 the Income Tax Officer re-assessed the assessee on an income of Rs. 55,000 which included the Rs. 8,277 already assessed.
The reasons for the delay which took place after the issue of the notice u/s 34 on the 13th December 1933 are apparent from the facts set out in
the statement made by the commissioner of Income Tax in making the reference now before us. Inquiries had to be made in Burma and there was
lengthy correspondence with the Income Tax Officials in that country. It is clear that income which should have been assessed in the year of
assessment did escape assessment. The assessee, however, contended before the Commissioner of Income Tax that the Income Tax Officer had
no right in making the further assessment to take into consideration information which he had received after the expiration of the year from the end
of the year of assessment. The Commissioner was asked to state a case on this point, but as he refused the assessee applied to this court and the
commissioner was directed to refer the following question : - ""Where the Income Tax Officer has issued a notice u/s 34, can he, for the purpose of
assessing income which has escaped assessment rely on facts which come to his knowledge after one year from the end of the year of assessment.
As in our view the assessee wishes to read into Section 34 something which is not there I will set it out in full. ""If for any reason income, profits or
gains chargeable to Income Tax has escaped assessment in any year or has been assessed at too low a rate, the Income Tax Officer may, at any
time within one year of the end of that year, serve on the person liable to pay tax on such income, profits or gains, or in the case of a company, on
the principal Officer thereof, a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of Section
22 and may proceed to assess or re-assess such income, profits or gains 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 :
Provided that the tax shall be charged at the rate at which it would have been charged had the income, profits or gains not escaped assessment or
full assessment, as the case may be.
It will be seen that all that the section says is that if for any reason income chargeable to Income Tax has escaped assessment in any year or has
been assessed at too low a rate the Income Tax Officer may within the time specified serve on the assessee the contemplated notice, and after
having done so proceed to assess or re-assess such income. there is nothing in the section which indicates that the enquiry is to be limited in time.
The decision of the Privy Council in the case of Rajendranath Mukherji v. Commissioner of Income Tax, Bengal, has bearings on the question now
before us. The assessees in that case were partners in a firm. After the year of assessment had expired but before the final assessment was made
the Income Tax Officer discovered profits which had not been returned and at a period considerably later than the end of the financial year made
an assessment based on what he had discovered after its close. The appellants submitted that on a true construction of the Act an assessment must
be completed within the year of assessment and if it was not, the only remedy open to the Income Tax Authorities was that provided by section
Their Lordships held that there was no limitation to the time in which the final assessment could be made and that as proceedings for the
assessment of the assessees income for a financial year were pending and no final assessment had been made there was no question of income
having escaped assessment within the meaning of Section 34 so as to make the service of a notice within one year of the end of the year as therein
required a condition of assessment.
In the present case the notice required by Section 34 was given within the period allowed and it was the duty of the Income Tax Officer to
ascertain what income had in fact escaped assessment. The assessment was re-opened so far as such income was concerned. The assessment was
re-opened so far as such income was concerned. To say that the Income Tax Officer shall be limited to facts discovered within a year of the year
of assessment is to say something which the section does not say and if acted upon would defeat the object of the section. We have no hesitation in
answering the reference in the affirmative.
The reference having been decided against the assessee he will pay the costs, Rs. 250.
Question answered in the affirmative.