Escaped-income reassessment does not require determination of loss or depreciation relief under total-income provisions.

Proceedings for escaped-income assessment under section 34 of the Income-tax Act, 1922 are confined to income, profits or gains that have escaped assessment and are not a fresh assessment of total income. Section 24(3) applies only in the course of assessing an assessee's total income, so the assessee cannot compel the officer to continue a section 34 proceeding merely to record a loss or grant depreciation relief where no escaped income is found. The result was that no right existed to insist on determination of loss under section 24(3) in such proceedings.

---

---

Issues: Whether, in proceedings under section 34 of the Income-tax Act, 1922 for assessment of escaped income, the assessee could a determination of loss and depreciation allowance under section 24(3) of the Income-tax Act, 1922.

Analysis: Section 24(3) applies only in the course of the assessment of the total income of an assessee. Section 34 authorises the Income-tax Officer only to assess or reassess the income, profits or gains that have escaped assessment, or have been under-assessed, assessed at too low a rate, or wrongly given excessive relief. A proceeding under section 34 is therefore confined to the escaped item and is not a proceeding for a fresh assessment of the total income. If, after notice, the officer finds that no income has escaped assessment, he may drop the proceedings. In such a proceeding, the assessee cannot insist that the officer must continue merely to record a loss or grant relief under section 24(3).

Conclusion: The assessee had no right to compel determination of loss under section 24(3) in proceedings under section 34, and the question was answered in the negative.

---