Assessable vacancy and escaped assessment: property kept ready for occupation may be taxed, and mistaken prior exclusion can be reassessed.

Bungalows kept ready for the owner's occupation, furnished and staffed, were treated as assessable "vacancies" under section 9(1)(vii) of the Indian Income-tax Act, 1922, because ordinary non-let occupation did not take them outside the charging provision. The court also stated that section 34 permitted reassessment where income had escaped assessment due to an erroneous view on facts or law, and not only where income had been wholly omitted. A prior mistaken treatment of the property as non-assessable did not bar reassessment within the statutory period. The reference was answered against the assessee on both issues.

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Issues: (i) Whether bungalows kept ready for occupation by the owner, but not let to tenants, were assessable as "vacancies" under section 9(1)(vii) of the Indian Income-tax Act, 1922. (ii) Whether income-tax could be reassessed for the previous year under section 34 where the Income-tax Officer had earlier treated the property as not assessable.

Issue (i): Whether bungalows kept ready for occupation by the owner, but not let to tenants, were assessable as "vacancies" under section 9(1)(vii) of the Indian Income-tax Act, 1922.

Analysis: The statutory expression "vacancies" was construed according to its ordinary meaning. The bungalows were maintained ready for occupation, furnished, and staffed for use whenever the owner or his guests required them. The fact that they were not let and might remain unoccupied during part of the year did not take them outside the charging provision. A house kept ready for habitation by the owner remained assessable notwithstanding intermittent non-occupation.

Conclusion: The issue was decided against the assessee. The bungalows were held to fall within the assessable category under section 9(1)(vii).

Issue (ii): Whether income-tax could be reassessed for the previous year under section 34 where the Income-tax Officer had earlier treated the property as not assessable.

Analysis: Section 34 was treated as wide enough to cover cases where income chargeable to tax had escaped assessment, whether because it had been omitted altogether or because an erroneous view had been taken on the facts or law. The contrast between "escaped assessment" and income "assessed at too low a rate" showed that the provision was not confined to mere inadvertence. A prior mistaken decision in favour of the assessee did not prevent reassessment within the statutory period.

Conclusion: The issue was decided against the assessee. Reassessment for the prior year was held permissible under section 34.

Final Conclusion: The reference was answered against the assessee on both questions, and the Revenue was entitled to assess the bungalows and invoke reassessment for the earlier year.

Ratio Decidendi: A property kept ready and available for the owner's occupation may constitute assessable vacancy under the charging provision, and escaped assessment includes reassessment of income wrongly excluded on an erroneous construction of the Act.

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