Limited scope of reassessment prevents loss carry-forward claim in proceedings confined to escaped income and under-assessment.

Proceedings under section 34 of the Income-tax Act, 1922 are confined to escaped income, under-assessment, excessive relief, or recomputation of loss or depreciation allowance, and the notice fiction operates only for that limited purpose. It does not reopen the entire assessment or require a fresh determination of total income. Carry-forward of loss under section 24(2)(iii) is available only in the assessment of total income, not in a restricted section 34 proceeding. The assessee was therefore not entitled to claim loss carry-forward in such reassessment, and the referred question was answered in the negative.

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Issues: Whether, in proceedings under section 34 of the Income-tax Act, 1922, the assessee could claim carry-forward of losses under section 24(2)(iii) on the footing that a notice issued under section 34 is equivalent in all respects to a notice under section 22(2).

Analysis: The scope of proceedings under section 34 is confined to escaped income, under-assessment, excessive relief, or recomputation of loss or depreciation allowance. The provision creates only a limited legal fiction, by which the notice is treated as one under section 22(2) only for the purpose of reassessing the matters specifically covered by section 34. It does not reopen the whole assessment or require the Income-tax Officer to determine the total income afresh. Relief for carry-forward of loss under section 24(2)(iii) is available only in the course of the assessment of total income and not in a proceeding restricted to section 34. The statutory scheme and legislative history support this confined construction.

Conclusion: The assessee was not entitled to carry forward the losses in proceedings under section 34, and the answer to the referred question was in the negative.

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