1. The following question has been referred for our decision under section 66(1) of the Indian Income-tax Act :
'Whether, in the course of reassessment proceedings properly initiated under the provisions of clause (a) of section 34(1) of the Act, the assessee can claim the revision of the loss of Rs. 4,49,650 that was determined in the original assessment which had otherwise become final and conclusive so far as he was concerned ?'
2. The assessee is the karta of a Hindu undivided family and in the assessment year 1948-49, corresponding to the account year Samvat 2003, he was assessed under section 23 on 16th June, 1952, in respect of his income from the business of speculation which he carried on both at Bombay and at Indore among other businesses. Later, the Income-tax Officer came to know that the assessee had suppressed speculation profits to the extent of about Rs. 30,000. He, therefore, issued a notice against the assessee under section 34(1) (a) of the Indian Income-tax Act. At that stage the assessee himself disclosed new figures as to his receipts from the speculation business as also of his payments made in the speculation business. The figures as given at the time of the original assessment and as given by the assessee at the time of the reassessment proceedings under section 34 were as follows :
Figures furnished at the time Figures furnished at the time ofof the original assessment. proceedings under section 34.Rs. Rs.Speculation receipts 3,83,436 4,14,585Speculation paymentmade by the assessee 4,49,650 5,35,160
3. It will thus be noticed that the assessee himself showed at the time of the proceedings under section 34 that his receipts from the speculation business were larger by the sum of Rs. 31,149. At the same time, he claimed that his payments were larger by the sum of Rs. 85,510. He explained this difference in the figures of payments made as furnished at the time of the original assessment and as furnished at the time of the proceedings under section 34 by saying that the difference of Rs. 85,510 was accounted for under two heads :
Rs.(i) Mistakes in totalling 46,205(ii) Losses not declared at thetime of the original assessment 39,305-----------Total 85,510-----------
4. The Income-tax Officer accepted the figure of receipts and, on the assessee's own admission, reduced the losses by Rs. 31,149, but he rejected the claim to add to the losses by the sum of Rs. 85,510 claimed as shown above. He held that a claim for relief, which was omitted to be made in the original assessment, could not be made in the proceedings under section 34.
5. In appeal, the Appellate Assistant Commissioner gave a reduction to the tune of Rs. 16,554, but he concurred in the rejection of the assessee's contention that the sum of Rs. 85,510 representing an increased figure of loss could be taken into account. Before the Appellate Assistant Commissioner it was also contended that section 34(2) applied but that contention was rejected on the short ground that the proceedings for reassessment were under section 34(1) (a) and not under section 34(1) (b) and section 34(1) only applied where the reassessment proceedings were under section 34(1) (b).
6. It does not appear that the latter contention was further reiterated before the Tribunal, but when the matter went up in appeal to the Tribunal the only point argued as stated in the order of reference was whether the sum of Rs. 85,510 shown above could be taken into account in reassessment proceedings under section 34(1) (a). The Tribunal held that once the original assessment had become final it was not possible for the assessee to ask for a recomputation of his income as a whole or claim that the items which had become final should be recomputed especially when the case came under section 34(1) (a). The Tribunal also observed in passing that section 34(2) was inapplicable in cases where proceedings are taken under section 34(1) (a). In the result, the appeal was dismissed.
7. Now, quite apart from the general contention that has been raised as to the mode of construction of the provisions of section 34 and similar provisions in the Income-tax Act, Mr. Shah on behalf of the assessee has raised a contention based upon the terms of section 34(1) (a) itself. He has pointed out that, subject to the other conditions laid down in clause (a) of section 34(1) being fulfilled, the section provides that, if the Income-tax Officer has reason to believe that 'Income, profits or gains chargeable to income-tax have escaped assessment for that 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 excessive loss or depreciation allowance has been computed', he 'may proceed to assess or reassess such income, profits or gains or recompute the loss or depreciation allowance'. What is emphasized is that in conferring the power upon the Income-tax Officer to assess or reassess the income, profits or gains the expression used is 'such income, profits, or gains', but when conferring the power to recompute the loss or depreciation allowance the word 'such' is not used before the word 'loss'. The effect of this, according to counsel, is that in the case of income, profits or gains chargeable to income-tax which have escaped assessment, the power is limited to assessing or reassessing such income, profits or gains only, that is to say, income, profits or gains which have escaped assessment, but where it comes to recomputing the loss there is no limitation and it would be open to the Income-tax officer to recompute the entire income so that the assessee would be entitled to have the original assessment determined afresh.
8. We are unable to accept this construction of the section because even having regard to its terms the power conferred upon the Income-tax Officer is to 'recompute the loss' and when the legislation speaks of recomputing the loss it means only the loss and not the income, profits or gains, so that this particular clause cannot empower a general recomputation of the income, profits or gains. We do not think that, if the Income-tax Officer were acting under this clause, he would have the power to determine afresh the original assessment or, as is claimed in the present case, to correct the errors and omissions made by the assessee.
9. This clause was inserted by the Act 48 of 1948, whereas the clause relating to income, profits or gains remained the same as before, prefixed by the word 'such'. Though no doubt the word 'such' has not been used before the word 'loss', we do not think that it makes any material difference nor does it appear that it was necessary to use that word in order to show that it is only the jurisdiction of the officer to recompute losses and nothing more. So far as income, profits or gains are concerned, it was necessary to specify that the jurisdiction of the officer is limited to assessing or reassessing only the escaped income, profits or gains and income, profits or gains may escape in several ways, but so far as the excessive loss or depreciation allowance is concerned, there is a specific provision in the statute for the computation of loss in each case of head of charge or in the case of depreciation allowance in section 10(2). So far as the loss is concerned, the officer has to come to the conclusion, in the first instance, that excessive loss had been allowed to the assessee, in which case alone he would have the jurisdiction the recompute the loss, but since the connotation of the word 'loss' under the several provisions of the statute is fixed and limited, what is meant by 'excessive loss' is also limited and, therefore, there appears to be no need to have used the word 'such' before the word 'loss'.
10. Apart from that, the expressions 'excessive loss' and 'the loss' in the section appear in the context of the entire provisions of the section which deal with income escaping assessment and where excessive loss is allowed and a recomputation of the loss takes place, it seems to us that recomputation can only take place with a view to garnering in the income escaping assessment under the first clause. It is clear from the provisions of the section itself that it was not intended for the benefit of the assessee but only for the benefit of the revenue.
11. Moreover, we find that where an assessee is affected by such an error as has been pleaded on behalf of the assessee in the present case, a clear power of rectification of mistakes in favour of the assessee is granted by section 35. The mistakes which were pointed out in the present case on behalf of the assessee were, as we have shown above, two. Firstly, that there were mistakes in totalling, and secondly, that there was an amount of loss not declared at the time of the original assessment. If these were indeed mistakes, as is now sought to be made out, the power of rectification would clearly be under section 35. The existence of such a power by contrast negatives the interpretation which the assessee seeks to put upon the provisions of section 35. Looking at the section from any point of view and considering it in the context of the other provisions of the Act, we cannot suppose that when the original section applied only to escaped income, profits or gains, it was the intention of the legislature while introducing the clause as to loss in 1948, to provide that in the case of loss, the power of the assessing officer extended to Predetermining the whole assessment which so far as the income, profits or gains are concerned was in terms expressly limited only to escaped income. In the setting in which this clause occurs we do not think we can accept the construction that counsel would have us put upon it.
12. Reference was made on behalf of the assessee to the general principles of construction of a taxing statute as stated in Commissioner of Income-tax v. Shahzada Nand & Sons, where it is observed that in a taxing statute one has to look merely at what is clearly stated, and in a case of reasonable doubt the construction most beneficial to the subject is to be adopted. The first part of the rule is no more than an elaboration of the usual rule that the expressed intention must always guide the court. In the present case upon the terms of section 34(1) (a) we cannot see any other construction possible and in our opinion a consideration of its terms leaves no room for doubt as to what was intended by the legislature.
13. So far as the first of the two clauses of section 34(1) (a) is concerned, namely, 'income, profits or gains chargeable to income-tax have escaped assessment...... ', the contention raised in this reference was raised in a number of cases and decided against the assessee. It has been held that the section refers only to the income which has escaped assessment and which alone can be subsequently brought to charge and it is not, therefore, open to an assessee when charged in that way to reopen the whole assessment and to seek to be allowed credit in respect of some item which has not received credit due to some mistake or which has been over-assessed. In Madhavjee Damodar v. Commissioner of Income-tax. a similar argument was advanced in this court in a case where the income under the head 'interest' was, subsequently, found to be larger and sought to be brought to charge as escaped income. In that case it was urged that the income from other sources had, however, been over-computed and allowance should be made for that over-computation. The High Court held :
'Here two items were brought definitely into the assessment, viz., interest on securities, and dividends, and those two items were under assessed, and to the extent to which they were under-assessed they have escaped assessment. There is nothing to show that the other item 'other sources' - Interest, which includes interest on mortgages, bank deposits, and so forth, would have been assessed at a lower figure if the Income-tax Officer had had the right figure in respect of the interest on securities and dividends. It seems to me, therefore, that this is a case in which certain items have escaped assessment, although it is true, that another item has been over assessed. But credit cannot be given to the assessee in respect to the latter item.'
14. No doubt in that case, the income under another head of charge was claimed to have been over-assessed and in the present case the income under the same head of charge is concerned, but we do not think that in principle that would make any difference so far as the applicability of section 34(1) (a) is concerned.
15. The decision in Madhavjee Damodar's case was followed in S. Inder Singh Gill v. Commissioner of Income-tax by a Division Bench of this court (to which my learned brothers was a party). The Division Bench in that case considered the ambit of section 34 and remarked at page 297 :
'The scope of reassessment under section 34 is a limited scope. It is an assessment only in respect of the income that has escaped assessment. The first assessment which relates to the income which had been disclosed has already become final and in the reopened assessment under section 34, it is not open to the assessee to agitate that the income which had already been computed been recomputed.'
16. The same view has been taken in Commissioner of Income-tax v. A. D. Shroff and in Seth Kasinath Bagla v. Commissioner of Income-tax.
17. Next it was urged that, even if it is not possible to determine afresh the entire assessment, at least upon the facts found it should have been held that the proceedings under section 34 could not be taken and should have been dropped. In this respect Mr. Shah pointed out that the authorities including the Tribunal have throughout accepted the statement of the assessee that there were mistakes in totalling to the extent of Rs. 46,205 included in the amount of Rs. 85,510 and having regard to those mistakes the figure of losses was liable to be increased and therefore the proceedings taken for recomputing 9the loss with a view to garnering in further income ought to have been dropped. Now no doubt this question was raised before the Tribunal as appears from paragraph 9 of their order under appeal and the Tribunal answered it by referring to the decision in Madhavjee Damodar's case but it seems that after the answer was given by the appellate authority no further steps were taken on the part of the assessee to agitate this point. No reference was asked for on this question nor is the question referred to us. On the contrary, the assessee had expressly asked for two questions to be referred as shown in paragraph 7 of the reference, but none of these two questions would, in our opinion, cover this alternative contention that at least the proceedings under section 34 should have been dropped. Mr. Shah urged that the assessee had gone a step further and has asked for a larger relief, namely, that the entire assessment made against him should be recomputed and that included in this larger relief is always the lesser relief, namely, that the proceedings under section 34 should be dropped. We do not think that we can by this process of reasoning consider that the alternative submission has been referred to us for decision. The question framed for our decision certainly does not reflect it, even by implication. Since the question was not raised, we do not think that we have any jurisdiction to go into it.
18. So far as the assessee is concerned, two questions were sought to be raised in the application for reference. We have gone through those questions and we do not think that either of those two question covers the point raised.
19. Therefore, we think that the Tribunal was correct in the view that it took. We answer the question referred for our decision in the negative. The assessee shall pay the costs of the Commissioner.
20. Question answered in the negative.