Escaped assessment under the reassessment provision, not rectification, but limitation barred older assessment years.

Retrospective amendment to the Agricultural Income-tax Act, 1950 made the earlier assessments chargeable at too low a rate, so the proper remedy was reassessment under section 35 and not rectification under section 36. That reassessment power was also subject to the three-year limitation in section 35. The reassessment was therefore time-barred for the assessment years 1958-59, 1959-60 and 1960-61, but remained valid for 1961-62. The impugned order was quashed to the extent it ed the first three years and sustained only for the last year.

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Issues: (i) Whether the reassessment order made after the statutory amendment was governed by section 35 of the Agricultural Income-tax Act, 1950, or by section 36 of that Act. (ii) Whether the reassessment order was within limitation for all the assessment years in question.

Issue (i): Whether the reassessment order made after the statutory amendment was governed by section 35 of the Agricultural Income-tax Act, 1950, or by section 36 of that Act.

Analysis: The original assessments had applied section 3(4) of the Act, and the later amendment altered the charging basis retrospectively so as to bring the same income within section 3(3). On that footing, the matter was one of income having been assessed at too low a rate rather than a mere rectification of an apparent mistake. The proper provision was therefore the reassessment power under section 35 and not the rectification power under section 36.

Conclusion: The reassessment order was governed by section 35 of the Agricultural Income-tax Act, 1950, and not by section 36.

Issue (ii): Whether the reassessment order was within limitation for all the assessment years in question.

Analysis: Section 35 permitted reassessment only within three years from the end of the relevant financial year. The impugned order was made beyond that period for the assessment years 1958-59, 1959-60 and 1960-61, but within time for 1961-62. Accordingly, the reassessment could not survive for the earlier three years, while it could be sustained for the last year.

Conclusion: The reassessment was time-barred for the assessment years 1958-59, 1959-60 and 1960-61, and valid for 1961-62.

Final Conclusion: The impugned order was quashed to the extent it affected the first three assessment years and was sustained for the remaining assessment year, leaving the assessee partly successful.

Ratio Decidendi: Where a prior assessment has resulted in tax being charged at too low a rate, the proper statutory remedy is reassessment under the escaped-assessment provision, and such reassessment must be made within the period of limitation prescribed by that provision.

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