1. The facts of this case are as follows: The petitioner Jagmohan Goenka had been carrying on a business in colliery (The Jemchary Selected Colliery) at Raniganj, under the name and style of Jagmohan Kishorilal. He has been assessed to income-tax since the assessment year 1937-38. The assessments for the years 1942-43 and 1946-47 have been duly made. The assessment order (under Section 23/3 of the I. T. Act) for 1942-43 is dated 24-5-1944 and that for 1946-47 is dated 18-9-1946.
2. In May/June 1948, notice under Section 22(2) read with Section 34, Income-tax Act was served upon the assessee, for re-opening the assessment for the year 1946-47. The reason given for this was that the assessee had not disclosed the fact that he had received a sum of Rs. 12,246/10/0 as bonus from the Government of India. The re-assessment was made on 29-6-1948.
3. On 26-3-1951, notice was issued upon the petitioner under Section 34, I. T. Act as amended in 1948, for re-opening the assessment for 1942-43. This was served at the colliery upon Kishorilal Goenka, brother of the petitioner. The ground was that the petitioner had been under-assessed for the year 1942-43. A similar notice was issued and served similarly, in respect of the assessment year 1946-47. The ground was also under assessment in this case. We are concerned here with the proceedings initiated by this latter notice. The petitioner complied with the notices under protest (because he disputed the propriety of the service of notice upon his brother).
4. By an order of assessment dated 14-3-1952 (Exhibit E to the petition) the petitioner has been assessed upon a total income of Rs. 20,45,414/- for the assessment year 1946-47. Originally he was assessed in that year (1946-47) upon a total income of Rs. 55,414/-. To this has been added a sum of Rs. 19,94,000/-. It is this order which is attacked in this application.
5. It is alleged that in 1938, the petitioner brought in a sum of Rs. 20,00,000/- into the business. It is impossible to say upon the materials before me as to what the source was. It appears also that during the proceedings under Section 34, books were produced for the year 2001-2002 Dewali as also for 2002-2003 Dewali. In the latter books (corresponding to 1947-48) there is an entry of the sum of Rs. 19,93,999/12/- in the name of Jagmohan Goenka (the petitioner), being the balance to his credit brought down from the previous year, but it is stated that, in the books for the previous year there is no such amount appearing in his name. The assessee was called upon to explain this item and explanation given was that the amount represented acquisitions for many years of moneys received from ancestors. The income tax officer was not satisfied that this was a true explanation or borne out by the books disclosed. He has therefore treated it as undisclosed income for the year 1946-47.
6. The reason given for re-opening the assessment for 1946-47 is that it was discovered that the assessee had made huge investments in a certain limited company and upon a consideration of the books the income-tax officer was satisfied that the amount of Rs. 19,93,999/12/- was income received but undisclosed, out of which the investments were made.
7. On behalf of the petitioner it is alleged that the sum of Rs. 19,93,999/12/- is the adjusted balance of Rs. 20,00,000/- which was duly disclosed in previous proceedings as having been brought in, in the year 1938. In the affidavit in opposition affirmed by Kali Das Bannerjee, the first respondent, it is alleged that no link has been established between the two sums.
8. As against the finding of the income-tax officer dated 14-3-1952, the petitioner has preferred an appeal which is pending. The income-tax officer has proceeded, upon Section 46(2) of the Income-tax Act and certificate proceedings have been taken. The petitioner applied for stay of the proceedings pending the appeal but the stay has been refused. This rule was issued by Bose J. on the 16th July 1952 calling upon the respondents to show cause why a writ in the nature of mandamus, prohibition or certiorari should not be issued preventing the implementation of the order of assessment dated the 14th March 1952, and the certificate issued thereon.
9. Dr. Pal appearing on behalf of the petitioner has taken the following points:
(1) That there was no proper notice under Section 34, Income-tax Act.
(2) That the notice is invalid, having been issued under Section 34 of the Act as amended, which is not retrospective.
(3) The books of account do not warrant the order of re-assessment as made.
(4) That Section 34 of the Act does not authorise the income-tax officer to issue a notice for reassessment for the second time.
(5) Proceedings under Section 46(2) of the Act are incompetent.
10. Dr. Pal has conceded that points Nos. (1) and (3) are dependant upon facts which are disputed and that they cannot be investigated here. They will be investigated in the appeal which is pending. As regards point (2) it is covered by the appeal Court decision -- 'Income-tax Officer v. Calcutta Discount Co., Ltd.', : 23ITR471(Cal) (A). Dr. Pal concedes that this is binding upon me, but he points out that the decision itself is subject to an appeal pending before the Supreme Court, and he does not wish the point to be taken as abandoned. As regards point (5), he concedes that he cannot press it in this application inasmuch as the matter has now passed from the hands of the income-tax officer and the certificate officer is not a party herein. An application under Section 46(5A) would be premature at present.
11. Thus, the only point left is point No. 4, which I shall now proceed to consider. The way Dr. Pal formulates Ms case is as follows: He argues that Section 34, speaks of 'assessment' and 'reassessment'. The grounds upon which action can be taken under this section are: where income, profits or gains chargeable to income-tax:
(1) Have escaped assessment, or
(2) Have been under-assessed, or
(3) Assessed at too low a rate, or
(4) Have been made the subject of excessive relief, or
(5) Excessive loss or depreciation allowance hasbeen computed.
And the income-tax officer can 'proceed to assess or re-assess such income, profits or gains or recompute the loss or depreciation allowance.'
12. Dr. Pal argues that where such income gain or profits have 'escaped assessment', it is a case of 'assessment' of the amount which has escaped, but where there is under-assessment, there is no question of 'assessment' but it is a case of 'reassessment'. He says that the section grants jurisdiction to the I. T. Officer to re-assess an existing assessment where it is found to be under assessed but once it is re-assessed, there is nofurther power given to re-assess a re-assessment. In other words, the section grants the power (in case of underassessment) to re-assess only once but not to repeat the re-assessment indefinitely.
13. It is somewhat surprising that although this situation must have frequently arisen, there is no authoritative decision, so that it is a matter of first impression. Plausible however as the argument of Dr. Pal sounds, I do not think it will bear a close analysis. Confining ourselves to the case of under-assessment, what does that really signify? The word 'assessment' is not to be taken in too narrow a sense, and does not mean merely the order of assessment but the whole process culminating in the order. 'Rajendra Nath v. Income-tax Commissioner' . Now, why does a case of under-assessment arise? It is either because the assessee has not disclosed his proper income or because the income-tax officer has fallen into an error in computing it. It may be caused by deliberate concealment on the part of the assessee or a mere accident or error either on his part or on the part of the officer carrying out the assessment.
Now take a very simple case. The assessee discloses a certain income from his shop in Calcutta and no other and is assessed accordingly. It is discovered next year that he had another shop at Bikaneer and had not disclosed the income. Under Section 34, he can clearly be proceeded against. The income from the Bikaneer shop has escaped assessment, but the assessee has also been underassessed: Suppose he is proceeded against under Section 34 and his income from the Bikaneer shop taken into consideration. Two years later it is discovered that he had a third shop at Indore and had concealed the income. How can it be said that the authorities are powerless to take proceedings in respect thereof?
14. Then again suppose it is subsequently found that in computing the income of Calcutta shop, the assessee had1 concealed the fact that it dealt with lucrative Government contract, from which he received a substantial income. This income may be said to have escaped assessment and also the result is an under-assessment. Can it be said that because there had been these previous proceedings no further action can be taken? I think not.
15. Take a further case. Suppose after all these proceedings had been completed, it is discovered that in adding up the income of the Calcutta shop, the income-tax officer had left out an item of a lakh of rupees. There has certainly been an under-assessment, but also this sum has escaped assessment. I do not think that the assessee can get away with this sum. And in all such cases, the assessment would be at too low a rate because the total world income of the assessee was previously calculated to be less than what it actually was.
16. It is clear therefore that it is not possible to lay down water-tight frontiers between the several grounds upon which the income-tax officer can act, nor between the act of assessment and re-assessment. Assessment means the computation of the assessee's income (gain or profits) upon which attaches the incidence of taxation and includes the whole process which leads up to it. Re-assessment is only one of the processes by which the final goal is reached. Section 34, I. T. Act has been framed so as to enable the income-tax authorities to reach that goal. The section imposes a time limit (8 years in some case and 4 years in another). Within this time limit there is no restriction imposed as to the number ofproceedings that can be taken to re-open the assessment whether by way of assessment or re-assessment, computation or re-computation.
17. It is obvious that this interpretation will in some cases lead to much hardship on the part of the assessee. Reopening an assessment is a fearful process at all times. If an assessee is made the subject of repeated application of that process, his condition is certainly a fit subject of commiseration. But that cannot be a reason for interpreting the section, otherwise than ac-cording to its plain intendment.
18. If of course the process is repeated mala fide, e.g. if there is any dishonest motive or if it can be shown that it is being done for a collateral purpose, this Court can and will always interfere. But no such imputation has been made or established in this case.
19. I must, therefore, hold that the only pointurged on behalf of the petitioner has failed. Theapplication must therefore be dismissed. The ruleis accordingly discharged and all interim ordersvacated. There will be no order as to costs.