Excessive rebate can mean assessment at too low a rate, but reassessment notice validity still required examination.

Excessive rebate of super-tax could amount to income being assessed at too low a rate for section 34(1)(b) of the Indian Income-tax Act, 1922, because the phrase covers not only the tax fraction applied to income but also the statutory measure used to compute liability, including rebate and its reduction under the Finance Act, 1956. On that construction, reassessment jurisdiction could be attracted where the rebate was granted without the required reduction. However, the record did not permit a final ruling on the validity of the notice or the precise basis of the reassessment, so the matter was remitted for examination of those points.

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Issues: Whether, for the purposes of section 34(1)(b) of the Indian Income-tax Act, 1922, excessive rebate of super-tax granted under the Finance Act, 1956 could amount to income being assessed at too low a rate, and whether reassessment could be initiated on that footing.

Analysis: The expression "assessed at too low a rate" was held to denote not merely the wrong fraction applied to taxable income, but also a prescribed standard or measure by which tax liability is computed. The scheme of the Finance Act, 1956 showed that super-tax and rebate were both integral parts of the tax measure, and reduction of rebate under the provisos affected the effective rate at which tax was charged. On that construction, an assessee who received rebate without the required reduction could be said to have been assessed at too low a rate. At the same time, the record was insufficient to record a final answer on the validity of the notice and the precise basis on which reassessment proceedings were initiated, since the notice itself was not before the Court.

Conclusion: Excessive rebate could fall within the expression "assessed at too low a rate" under section 34(1)(b), but the matter had to be remanded for the High Court to examine the validity of the initiation of reassessment proceedings on the notice issued.

Ratio Decidendi: Where tax liability is computed by a statutory measure that includes rebate and its reduction, an excessive rebate may constitute assessment at too low a rate for the purpose of reassessment jurisdiction under section 34(1)(b).

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