Rankin, C.J.
1. The assessees are a Hindu undivided family and for the year 1926-1927 an assessment to income-tax was made upon them under Section 23, Clause (4), upon the footing that they had made default in rendering a return of income and submitting accounts. The Income-tax Officer making the assessment to the best of his judgment, assessed upon a total income of Rs. 17,950, under the following heads: Money-lending business, Rs. 11,155; property, Rupees 1,795; other sources, Rs. 5,000; making in all Rs. 17,950. In connexion with the assessment for the next year, namely, 1927-1928 the assessees produced certain accounts from which the Income-tax Officer was of opinion that in the previous year income under the heads business and property had partially escaped assessment. Accordingly, under Section 34 of the Act, he issued a notice stating that he had reason to believe that their income from money-lending and house property, chargeable to income-tax in the year ending 31st March 1927, had partially escaped assessment and that he proposed to assess the income that had escaped assessment and requiring the assessees to deliver a return of their income from all sources chargeable to income-tax during the said year. In compliance with this demand, the assessees filed a return showing that their income chargeable in the said year was : (a) from money-lending business, Rs. 28,287-11-0; (b) from house property, Rs. 1,365, (c) from other sources, Rs. 281; making a total of Rs. 29,933-11-0. Upon the basis of this return, and after an examination of the accounts, the Income-tax Officer re-assessed the petitioners as follows: business, Rs. 28,787; property, Rs. 3,071; other sources, Rs. 5,000, as originally assessed; making a total of Rs. 36,858. It will be seen that as regards money-lending business the Income-tax Officer has raised the assessment from Rupees 11,155, to Rs. 28,787; and as regards property from Rs. 1,795 to Rs. 3,071.
2. Upon the present reference the decision of the Income-tax Officer is not challenged as regards these items. What is contended by the assessees is that the Income-tax Officer was wrong in thinking himself entitled to repeat the original assessment under the heading 'other sources' at the figure 5,000. The contention which they seek to raise is that the Income-tax Officer, acting originally to the best of his judgment under Section 23, Clause (4), assessed them under the head 'other sources' at a figure which was much too high, that he had wrongly assumed that a certain portion of their collections from their zemindaries was chargeable to income-tax, whereas in fact a much smaller portion was so chargeable, a great bulk of this revenue being agricultural.
3. The income-tax authorities have held that this contention cannot be raised in the present proceedings under Section 34; that these proceedings were for the purpose of assessing income from money-lending business and house property which had partially escaped assessment; that the question whether the assessees collections from their zemindaries are or are not, to the extent claimed, agricultural income, has nothing to do with the question whether the original assessment was too low in respect of their money-lending business or their property, i.e., buildings or lands appurtenant thereto : cf. Section 9.
4. The question which has been referred to us is stated as follows:
When an assessment made under Section 23(4) of the Act, is reopened under Section 34 by reason of the income from certain specified heads having been assessed at too low a figure, and proceedings are taken for the purpose of increasing the assessment, is it open to the assesses to show that his income under other heads had been assessed at the original assessment at too high a figure and that such assessment was unwarranted by law?
5. The Commissioner of Income-tax is of opinion that Section 34 provides for the assessment to income-tax of profits or gains which have escaped assessment in any year or which have been assessed at too low a rate; that if; gives no general powers of revision to the Income-tax Officer and that the Income-tax Officer cannot reopen the assessment of the income, profits or gains on an assessee from any source in respect of which he has no reason to believe that the assessee has been under-assessed. In his view, it appears to be the intention of the Act that general powers of revision should only be exercised by the Commissioner acting under Section 33 and that the powers of the Income-tax Officer under Sections 34 and 35 are strictly limited by the terms of the sections themselves.
6. Mr. Gupta, for the assessees, has contended that Section 34 says nothing about heads of income or sources of income. Accordingly, he contends, that one has to look at the total assessment before one can decide whether any income has escaped assessment, while not disputing that steps taken under Section 34 cannot give rise to a right in the assessee to make a claim for a refund, and that the income-tax authorities may at any time abandon the proceedings under this section, he contends that such proceedings entitle the assessee to show that while income under one head may have escaped assessment, income under another head had been over-assessed; in other words, that the whole assessment may be reopened at the option of the assessee who may show what the real truth as to his total income is.
7. This controversy must be determined, if possible, upon the words of the section which are as follows:
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), Section 22, and may proceed to assess or reassess 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 subsection:
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.
8. The section begins by contemplating a case in which income, profits or gains has escaped assessment and it says that the Income-tax Officer may serve notice upon the person liable to pay tax on such income. The notice may contain all or any of the requirements which may be included in a notice under Section 22(2). The ultimate step is that the Income-tax Officer may proceed to assess such income. The words which have reference to a case in which income has been assessed at too low a rate may, for the present purposes, be disregarded as they refer to a separate type of case. Broadly speaking, as the section is expressed, it deals with income which has escaped assessment and it provides how the Income-tax Officer may proceed to assess it. In the present case the assessee's income from their business is found to have been Rs. 28,787 of which all but Rs. 11,155 has escaped assessment; and their income from property is found to have been Rs. 3,071 of which the excess over Rs. 1,795 has escaped assessment. I do not think that it can be said in such a case as this that the sums which represent the difference, i.e., Rs. 17,632 and Rs. 1,276, are not income which has escaped assessment because the assessees have been charged too much in respect of the zemindari collections.
9. If the question of the zemindari collections was in any way intermixed with the question of the profits in the money-lending business, or the question of the assessee's property within the meaning of Section 9 of the Act, the mere circumstance that it falls under a different head or is to be regarded as a different source would not in my opinion, exclude it from consideration. It is not always clear whether a particular income should be entered under one head or another. I know of no limits which can be laid down so as to prejudice the question whether any particular receipts have or have not escaped assessment, and I am not prepared to say that it is never open to an assessee to show, for this purpose, that his income under one head must be reduced if his income under another head is to be enhanced. In the case before us however it appears to be clear enough that the extent to which the zemindari collections are exempt from income-tax as being agricultural income is not affected by, and has no bearing upon the question of the profits of the business of money-landing or the question of the annual value of the assessee's buildings and land appurtenant thereto of which they are the owners. In any event, the question which has been referred to us and argued before us assumes this.
10. On this footing I am unable to say that the language of Section 34 points to an intention to give to the assessee a right to reopen the whole assessment before being rendered liable to further tax. It is not for the Court to determine whether the administrative inconvenience entailed by such a right would be much or little, or whether it would afford any sufficient reason for refusing to the assessee a right to reopen the whole matter. Nor is it for the Court to consider whether there is any real injustice or inconvenience in refusing this right to an assessea who has failed to make a return. Such considerations are questions of policy and debatable as such. As a matter of the true construction of this section it appears to me that if the legislature had meant to say that if in any case it appears to the Income-tax Officer that an assessee has been assessed upon too low a figure or at too low a rate, the Income-tax Officer may issue a fresh notice under Section 22(2) and may proceed to reassess such assessee afresh, the language employed would have been noticeably different from that which we find in the present section.
11. It is clear that the initial duty of the Income-tax Officer is merely to assess the income which has escaped. If this be right then I think that it would require express words to confer on the assessee a right to reopen other and unconnected matters. It is true that there is no express reference in the section to sources or heads of income. But these will usually come into the question in favour of the assessee since the assessment order will usually assess him at a lump sum under each head, and in any case in which such an assessment has been made in default of a return of income or of production of accounts the assessee will thus be able to contest the whole assessment made under that head if it is afterwards said to be insufficient.
12. It appears to me therefore that the question which has been referred to us must be answered against the assessees. But I am not altogether satisfied with the form in which it is expressed. In my opinion it is always open under Section 34 to an assessee to show in any way he can that the income, profits or gains alleged to have escaped assessment have not in truth and in fact escaped assessment, and for this purpose it is not true that income, profits or gains have necessarily escaped assessment because they have not been assessed under the right head. But if it is once shown that income has escaped assessment, the assessee cannot under Section 34 resist proceedings to assess it merely by showing that other income, profits or gains have been assessed at too high a figure.
13. The assessees must pay the cost of this reference.
C.C. Ghose, J.
14. I agree.
Buckland, J.
15. I agree.