Reassessment cannot replace one valid tax computation method with another merely to raise taxable income.

Reassessment under section 147(b) could not be initiated merely because the Income-tax Officer later preferred another permissible method of computation under rule 33 of the 1922 Rules that would produce a higher taxable income. The original assessment was legally valid, and the existence of an alternative lawful method did not itself show escaped income or any error brought to light by subsequent information. The reassessing officer could not sit in appeal over the original choice of method or substitute his own discretion for a prior valid computation. Reopening was therefore unjustified on these facts.

---

---

Issues: Whether reassessment could be initiated on the ground of escaped income merely because, in the original assessment, the Income-tax Officer had adopted one permissible method under rule 33 of the Income-tax Rules, 1922, and in reassessment sought to substitute another permissible method that would yield higher taxable income.

Analysis: The reassessment power under section 147(b) of the Income-tax Act, 1961, and the corresponding reopening provision under the 1922 Act presuppose that income has escaped assessment because of an error or omission brought to light by subsequent information. Rule 33 of the Income-tax Rules, 1922, conferred discretion to compute income in one of several legally permitted ways where the actual income could not be ascertained. The original assessment was held to be legally correct and not vitiated by error. The mere fact that another lawful method would have produced a higher tax liability did not show escaped income, nor did it justify the reassessing officer in sitting in appeal over the original assessing officer or in substituting his own choice of method for a valid earlier choice.

Conclusion: Reassessment under section 147(b) was not justified on these facts, and the original method of computation could not be displaced merely because an alternative permissible method might have resulted in a higher assessment.

---