Satyanarayana Rao, J.
1. The assesses in this case is the Anglo-French Textile Co., Ltd., by agents, Best & Co., Ltd., Madras. The method by which this company's business is being managed has been fully dealt with in the judgments delivered by us this morning in R. C. Nos. 25 and 27 of 1947 and need not be repeated. The question that is referred to us in this reference under Section 66 (1), Income-tax Act, by the Appellate Tribunal is as follows:
'Whether on the facts and in the circumstances of the case when an assessment has been made under Section 23 (1), Income-tax Act, determining the assesses company's income as 'nil' and when proceedings under Section 34 were subsequently started to assess the income which the Income-tax Officer believed to have escaped assessment, the assessee company is entitled to claim that the loss of profits and gains (including depreciation allowance) sustained by it in the previous year should be determined in the course of such proceedings.'
In response to a notice under Section 22 (2) of the Act, during the assessment year 1941-42 the assessee who is treated as a non-resident submitted a nil return of its income. This return was accepted as the assessee company did not carry on any business in British India during the assessment year. The order of the Income-tax Officer is dated 25th March 1942. Thereafter, as it was suspected that the company, though it did not carry on business in British India, had at least a business connection in British India within the meaning of Section 42 (1), of the Act and that the income might be considered to have accrued within the meaning of Section 42 (3) of the Act, a notice under Section 34 read with Section 22 (2) of the Act was issued to the assessee on the ground that the income during the assessment year had escaped assessment. When this notice was served on the assessee, the assessee stated in his return that there was no income during the accounting year, that is, the calendar year 1940, but that there was a loss of a large amount which he was entitled to have it recorded under Section 24 (2) of the Act. The Income-tax Offices rejected this claim and dropped the proceedings under Section 34 of the Act as there was no income which accrued to the assessee or which is deemed to have accrued to the assessee during the accounting year. He was also of opinion that the loss could not be carried forward under Section 24 (2) of the Act as the section had no application to a non-resident. Against this order, there was an appeal by the assessee to the Appellate Assistant Commissioner. The appeal was dismissed by the Commissioner on two grounds: firstly, that under Section 34 of the Act, the assessee was not entitled to claim relief under Section 24 of the Act as the jurisdiction of the Income-tax Officer under Section 31 was confined only to assess the income that had escaped in the year and was not intended to give relief in respect of losses; and, secondly, on the ground that Section 24 of the Act did not apply to non-residents. There was a further appeal to the Appellate Tribunal against the order of the Appellate Assistant Commissioner by the assessee and the Tribunal also agreed with the view of the Appellate Assistant Commissioner. Hence this reference.
2. The second of the grounds on which the order of the Appellate Assistant Commissioner was based was not considered by the Appellate Tribunal presumably for the reason that the decision of the Tribunal on the first question was sufficient to dispose of the appeal and it is for that reason that there was no reference to this Court on the question whether Section 24 of the Act is applicable to non-residents. We need not therefore consider that point.
3. The short point for consideration therefore is whether in a proceeding under Section 34, which is initiated for the purpose of assessing an income which had escaped assessment, or which was under-assessed, or assessed at too low a rate or was the subject of excessive relief, the Income-tax Officer could grant relief to the assessee under Section 24 (3) of the Act. Section 24 (3) of the Act is in these terms:
'When, in the course of the assessment of the total income of any assessee, it is established that a loss of profits or gains has taken place which he is entitled to have set off under the provisions of this section, the Income-tax Officer shall notify to the assessee by order in writing the amount of the loss as computed by him for the purposes of this section.'
The relief therefore contemplated by this sub-clause can be granted only in the course of the assessment of the total income of an assessee. Under Section 34, the Income-tax Officer, in exercising the power conferred by that section if he discovers in consequence of definite information that income had escaped assessment in a previous year or was under-assessed, etc., has to issue notice under Section 22 (2) with a view to assess or reassess 'such income' profits, or gains and thereafter has to follow the procedure laid down by the Act as far as it may be applicable, as if the notice issued under Section 84 was one under Section 22 (2). On the language of Section 34, the assessment or reassessment is confined to such income, profits or gains, which refers us back to the first part of the section, which is confined to income which escaped assessment or which was under-assessed, or which was assessed at too low a rate or was subjected to excessive relief under-the Act. A proceeding initiated under Section 34 is confined only to assessing the income stated above and is not a section which is intended to assess the total income of an assessee. In fact, there is no duty cast upon him to start an enquiry with reference to his total income during the assessment year and he has no power to revise the original assessment except the limited extent to which such power is recognised under Section 34.
4. If, after issuing notice, the Income-tax Officer is satisfied that really no income had escaped assessment in the year, it is open to him to drop the proceedings without proceeding to assess or re-assess the income and the assesses is not entitled, in such an event, to insist that the Income-tax Officer should proceed to assess the income and give him relief under Section 24 (3) of the Act. That is exactly what has happened in this case. After notice under Section 22 (2) read with Section 34, the Income-tax Officer was satisfied that the nil return submitted by the assessee was correct and that no income had escaped assessment. He therefore declined to proceed further in the matter as he was entitled to do under the section. The assessee it is that now insists that he should go on with the assessment and grant him relief under Section 22 (4). The section does not warrant any such procedure and, in our opinion, the assessee is not entitled to relief under Section 24, considering its language for the. reason stated above.
5. The question with which we are now concerned did not directly arise for decision in any of the cases which had to consider the section. But, as stated by the Appellate Tribunal, it is well established that under Section 34 the only jurisdiction of the Income-tax Officer is to assess the profits, gains or income that had escaped assessment and not to give any additional relief in respect of losses. Three decisions have been brought to our notice by Mr. C.S. Rama Rao Saheb, the learned counsel for the Income-tax Commissioner, which have a bearing on this question. The first decision is a decision of this Court in Palaniappa, Chettiar v. Commissioner of Income tax, Madras, 4 I. T, C. 196 : A. I. R. 1930 Mad; 126. It was there held by a Special Bench of three Judges that the Income-tax Officer, acting under Section 34 had to confine himself to that part of the income which had escaped assessment and need not re-assess the income. This conclusion was based on the language of the section which states that he may proceed to assess or re-assess such income, profits or gains. The assessment or re-assessment is confined therefore to income which had escaped assessment, leaving the rest unchanged. The Allahabad High Court has also taken the same view in a case reported in the same volume in Kasinath Bagla v. Commissioner of Income-tax, U. P. : AIR1932All1 . There it has been held that Section 34 limits the jurisdiction of the income-tax authorities to the assessment of income previously escaping assessment or assessed at too low a rate, but confers no power to revise the original assessment, or to make a new assessment and grant relief on that basis. This view was also adopted by the Calcutta High Court in yet another case reported in the same volume in Satyendra Mohan v. Commissioner of Income-tax, Bengal : AIR1930Cal627 . Dealing with the language of Section 34, Rankin C. J. observes as follows:
'On this footing I am unable to say that the language of Section 34 points to an intention to give to the assessed 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 re-open 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 assessee 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.
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.....'
The above three decisions support our conclusion which is based on a clear and plain reading of the two sections, namely, Sections 34 and 24 (3). On behalf of the assessee, Mr. O. T. G. Nambiar has relied on some decisions but most of them relate to the procedure that is attracted by the language employed in the latter part of Section 34 of the Act. The decision in Commissioner of Income-tax, Bombay Presidency v. Ahmedabad New Cotton Mills Co. has no bearing at all on the construction of Section 34 of the Act, as it relates to the valuation of the opening stock and the closing stock for the purpose of assessment and the effect of Section 13 of the Act. The decision in Commissioner of Income-tax, Bengal v. Mahaliram Ramjeedas only lays down that the Income-tax Officer, before he initiates proceedings under Section 34, is not bound to hold quasijudicial enquiry to determine whether profits had escaped assessment or not. He is not even bound to give notice to the assessee or even inform him of the nature of the alleged escapement. No doubt, at p. 246, the Judicial Committee commented on the unhappy and un-grammatioal phraseology employed in Section 84 of the Act as it then stood. We are not, however, concerned with this question. The decision in. Commissioner of Income-tax, Bombay Presidency v. Mrs. Pirojbai, : AIR1937Bom214 considers the meaning of the expression 'has escaped assessment' and interprets the expression to include a case where the income-tax authorities by some foresight or for other reason failed to issue notice* 'under Section 22 (2) within the period contemplated by the section and then proceeded to take action under Section 34 on the ground that the income of the year had escaped assessment. Beaumont C. J. was of opinion that there was no reason to hold that such a case was not covered by the expression 'has escaped assessment' and expressed his view of the section at p. 315 in these terms :
'The liability to assessment is a risk to which every person in British India entitled to income is liable, and I cannot see why the process of assessment has not been just as much escaped by a person who received no-notice under Section 22 (2) as by a person who receives such a notice, which proves in fact ineffective. It seems tome that a person who receives no notice under Section 22 (2) has escaped assessment, although through no fault of his own, the process of assessment has never been set in motion.'
The decision in Income-tax Commissioner v, D. R. Naik, : 7ITR362(Bom) is authority only for the position that if immovable property is charged for maintenance allowance payable to female members of a joint family by a decree of Court, the amounts paid in discharge of that obligation would not be part of the income of the assesses and does not support the contention urged on behalf of the assessee in the present case. The argument addressed on behalf of the assessee that the Income-tax Officer is bound to proceed to determine the question raised by the assessee under Section 24 (3) and record the loss, notwithatanding the withdrawal of the notice under Section 34 and notwithstanding the fact that the Income. tax Officer had any authority. Nor are we prepared to agree with the contention that under Section 34 the Income tax Officer is bound to proceed to assess the total income afresh and is not confined or restricted to assess only the escaped income. The language of Sections 34 and 24 (3) of the Act is clear and admits of no doubt; and incur opinion, the view of the Appellate Tribunal is correct.
6. The question referred to us must, in our opinion, be answered in the negative and against the assessee.
7. The Income tax Commissioner is entitled to his costs which will be fixed at Rs. 250.