John Beaumont, Kt., C.J.
1. This is a case stated by the Commissioner of Income-tax: under Section 66(2) of the Indian Income-tax Act. The question arises in this way.. The assessee carries on business at Nasik as a money lender, and he also buys. and sells gold and silver. He buys ornaments, turns them into metal, and. sells the metal in Bombay. He keeps no books of account, and, therefore, the Income-tax Officer was not able to ascertain with accuracy what the profits were from the sales of gold and silver, but in the year of assessment 1932-33 the Income-tax Officer added to the assessee's income a certain percentage on the sale of gold and silver, three per cent, on the sale of gold and five per cent, on the sale of silver, and on that basis he made the assessment under Section 23(5) of the Act. In the next year of assessment a different Income-tax Officer dealt with the matter, and he came to the conclusion that, as the price of gold had risen very rapidly during the last two months of the previous year of assessment, the Income-tax Officer for that year had underestimated the profits derived from the sale of gold ; he considered that the flat rate on sale of gold should have been fifteen per cent, instead of three per cent., and on that basis he came to the conclusion that income had escaped assessment for the year 1932-33, and he, therefore, re-assessed the income under Section 34 of the Income-tax Act. There was an appeal to the Assistant Commissioner, who agreed generally with the view taken by the Income-tax Officer, but for some reason, which is not apparent, he assessed the income on the sale of gold at four per cent, on the sale price, and the income on the sale of silver at ten per cent, on the sale price ; that is to say, he raised the original rate by one per cent, in the case of gold and five per cent, in the case of silver, and made an assessment on that basis.
2. The question which the Commissioner has raised is : ' Whether in the circumstances of the case, a part of the income, profits and gains from sales of gold in the year 1987 Samvat can be said to have ' escaped' assessment within the meaning of Section 34 of the Income-tax Act, 1922, at the time of the original assessment for the year 1932-33.' That question purports to be a summary of three questions which the assessee had desired to raise, and which related to the income generally of the assessee and covered income from the sale of silver as well as his income from the sale of gold. I think the omission in the. question raised by the Commissioner of any reference to the sale of silver must be by inadvertence. Clearly, having regard to the assessment made by the Assistant Commissioner, the question should cover both the sale of gold and of -silver in Samvat 1987. The question should be amended in that way.
3. We have had some discussion as to the meaning and scope of Section 34 of the Income-tax Act. That section provides that if for any reason the 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, within a time limit therein specified, re-assess such income. It seems to me that the burden of showing that income has escaped assessment or that it has been assessed at too low a rate, lies on the Commissioner. We have been referred to a decision of the full bench of the Rangoon High Court in In re The Commissioner of Income-tax v. U Lu Nyo I.L.R (1933). 12 Ran 118, as supporting the proposition that income from a particular source cannot be re-assessed under Section 34. I agree with the actual decision in that case which was one where the Income-tax Officer of the subsequent year disagreed with the estimates of the Officer in the previous year, but in the course of his judgment the learned Chief Justice said that the Income-tax Officer had no jurisdiction to revise the assessment for the previous year which was completed and had become final. If that proposition is correct, it would confine Section 34 to cases in which a source of income has escaped assessment, which in my view is too narrow a limit. I feel no doubt that if it were proved that Rs. 2,000 had been received as income from a particular source, while the assessment was only on Rs. 1,000, or if it were proved that the assessment was at a flat rate of three per cent, whilst in fact profits at a higher rate had been made, then income would have escaped, assessment within the meaning of Section 34. That view was taken by the Calcutta High Court in In re The Anglo Persian Oil Company (India) Limited I.L.R1933) Cal. 840, and by the Madras High Court in The Commissioner of Income-tax, Madras v. Raja of Parlakimedi I.L.R(1925) Mad. 22, with both of which decisions I agree. The question in this case really is whether the Income-tax Officer has proved that any income escaped assessment. In my opinion all that the evidence comes to-is that the Income-tax Officer of the subsequent year thinks that the Income-tax ' Officer of the earlier year made a wrong assessment as to income, and he gives-his reasons for so thinking. But he does not prove that in fact the assessee received any greater income than the income in respect of which he was assessed. It is not suggested that any facts which were before the second Income-tax Officer were not before the first Income-tax Officer. I guard myself against expressing any opinion upon what the position would be if it were shown that the assessee had given false evidence or suppressed material facts, and thereby induced the assessment made by the first Income-tax Officer. That is not the case here. The first Income-tax Officer knew, or had the means of knowing, that the price of gold was rising and with that fact before him he estimated the profits at a particular rate on sales, and the second Income-tax Officer does no more than say that in his opinion on the facts the estimate of the first Income-tax Officer was obviously too low. That is not proof that any income escaped assessment or was assessed at too low a rate. In my opinion the question, amended as I have suggested, must be answered in the negative.
4. The assessee to have his taxed costs from the Commissioner on the Original Side scale.
5. I agree. I think the burden of proving that the income has escaped assessment within the meaning of Section 34 of the Income-tax Act was on the income-tax authorities, and it has clearly not been discharged. The question as to the true construction of Section 34 of the Act was raised on behalf of the assessee, and I would like to state my view upon it. There seem to be-from the: decided cases two views taken as regards the meaning of this section. One view is that the section is used in correcting an assessment in which a deduction has been improperly allowed or a low rate has been calculated or there has been underassessment otherwise. The other view is that the word ' escaped' refers to income which has actually escaped assessment and not to any income which has already been the subject of assessment. In my opinion the first view is correct. The words of the section are clear, and upon the plain meaning of the section there seems to be no reason to limit the scope of the section. All that the section means is that if in the taxing year the income assessed is not the whole of the income in the year of assessment, then within a time-limit provided in the section it is open to the Income-tax authorities to revise it, whether the assessment previously made was inadvertent or deliberate or was due to a wrong allowance or improper deduction or a low rate. I respectfully dissent therefore from the view taken by the Rangoon High Court in In re The Commissioner of Income-tax v. U Lu Nyo I.L.R(1933) Ran. 118 where it was held that it was not open to an Income-tax Officer to go behind and revise the assessment made by his predecessor which was completed and had become final. In my opinion the remarks of the learned Chief Justice in that case in the last paragraph at page 121 are too wide and do not correctly represent the meaning of the section. In my opinion, the true meaning of the section is as indicated in the remarks, though obiter, of Chief Justice Rankin in In re The Anglo Persian Oil Company (India) Limited I.L.R (1933) Cal. 840, namely :-
I see no way of holding that section 34 is inapplicable to put right an assessment, by which a deduction has been improperly allowed. Such a case is, in my opinion, a case of income escaping assessment......
6. I agree, therefore, that the question raised must be answered in the negative.