Discovery of undercharge includes legal error on known facts; additional assessment power applies under Section 125.

Section 125 of the Income Tax Act, 1918 was construed broadly: a Surveyor may "discover" an undercharge even where the earlier assessment was wrong in law on facts already known, because discovery covers recognition that the legal effect of those facts was misapplied. The Court also rejected any reading that would confine "undercharged" to factual or accidental errors, holding that the term includes an assessment understated through a mistake of law. On that construction, the statutory power for additional assessment was available, and the taxpayer's challenge failed.

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Issues: (i) Whether, for the purpose of Section 125 of the Income Tax Act, 1918, a Surveyor discovers an undercharge when he concludes that the first assessment was wrong in law on the same facts already before him. (ii) Whether the expression "undercharged" in Section 125 is confined to cases of factual error and excludes a mistaken view of the law.

Issue (i): Whether, for the purpose of Section 125 of the Income Tax Act, 1918, a Surveyor discovers an undercharge when he concludes that the first assessment was wrong in law on the same facts already before him.

Analysis: The statutory language was treated as wide enough to cover the discovery that the earlier assessment was erroneous because the legal effect of known facts had been misunderstood. The Court preferred the reasoning that "discover" means finding out that chargeable profits or properties were omitted or that the taxpayer had been underassessed, even where the omission resulted from a mistake of law rather than from a newly ascertained fact. Earlier observations suggesting that discovery could not include a mere change of opinion on the same facts were not treated as controlling where they did not decide the point.

Conclusion: The discovery requirement was satisfied even though the error was one of law on facts already known.

Issue (ii): Whether the expression "undercharged" in Section 125 is confined to cases of factual error and excludes a mistaken view of the law.

Analysis: The Court held that there was no basis for reading into the section a limitation that would confine "undercharged" to accidental or factual mistakes only. The words were given their ordinary meaning, and the Court rejected an artificial narrowing of the provision. On that construction, an undercharge includes an assessment that is wrong because the law has been misapplied.

Conclusion: The word "undercharged" includes an underassessment caused by a mistake of law.

Final Conclusion: The statutory power to make additional assessments applied to the present case, and the taxpayer's challenge failed.

Ratio Decidendi: Under Section 125 of the Income Tax Act, 1918, a discovery includes finding out that an assessment is legally wrong on the facts already known, and an undercharge is not confined to factual mistakes.

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