Rebate withdrawal in reassessment allowed where section 23A was not properly considered and the original assessment was under-assessed.

Rebate under the Finance Act, 1951 depended not only on the absence of an order under section 23A(1) of the Income-tax Act, 1922, but on whether the Income-tax Officer had in fact considered its application. Where rebate was allowed without proper application of mind to section 23A and the assessment was thereby made at too low a rate, reassessment under section 34 was permissible. A later section 23A order did not reopen that order itself, but it supported the conclusion that the original assessment had omitted chargeable income and was under-assessed.

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Issues: Whether rebate allowed in the original assessment could be withdrawn by reassessment under section 34 of the Income-tax Act, 1922 after a later order under section 23A(1) of the Income-tax Act, 1922 was made.

Analysis: The rebate proviso in Schedule I, Part B of the Finance Act, 1951 was held to depend not merely on the physical absence of an order under section 23A(1), but on the Income-tax Officer having considered whether section 23A applied. If the officer granted rebate without properly applying his mind to section 23A and the assessment was thereby made at too low a rate, the case fell within section 34. The later order under section 23A did not reopen that order itself, but supported the conclusion that the original assessment had omitted chargeable income and had been under-assessed.

Conclusion: The rebate could validly be withdrawn in reassessment under section 34, and the question was answered against the assessee.

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