JUDGMENT

M.C. DESAI, C.J. - I concur in the answers proposed by my learned brother. According to the wakf deed one-fifth of the income was to be spent on religious and charitable objects described in the wakf deed. Though in the wakf deed the income from the wakf propert : at the time of the execution of the deed was stated to be Rs. 10,000 and consequently the income set apart for religious and charitable objects was said to be Rs. 2,000, there is no doubt that what the wakif intended was that one-fifth of whatever was the actual income of the year was to be spent on religious and charitable objects in that year. That was what he intended but the amount that he intended to be spent on religious and charitable objects is not the amount allowed to be exempted from the assessable income; section 4(3)(i) provides that any income derived from property held under trust or other legal obligation wholly or in part for religious or charitable purposes, in so far as it is applied or finally set apart for application thereto, shall not be included in the total income of the person receiving it. It is, therefore, not enough that according to the trust or other legal obligation a certain income must be spent on religious or charitable purposes in order to be exempt from taxation; it must have been applied, or at least finally set apart for application, for such purposes. Now what happened in the present case is that though according to the wakf deed a certain amount (one-fifth of the actual income) was to be spent for religious and charitable purposes, the assessee applied or finally set apart for application, for such purposes, one-fifth of not the income as found to have been actually received by him, but of the income which he claimed to have received. He claimed to have received less income than he actually received.

Since he claimed to have received a smaller amount as income, naturally he applied, or set apart for application, for religious and charitable purposes, one-fifth of only the smaller amount. As he did not apply or set apart for application one-fifth of the actual income, one-fifth of the actual income ought not to have been deducted from the total income for assessment purposes. This Income Tax Officer ignored the provision of section 4(3)(i) and deducted from the total income one-fifth of the actual income. The result was that a larger sum than was legal was deducted from the total income, i.e., some income escaped assessment. This happened in both the assessment years in question.

The successor of the Income Tax Officer learnt of this mistake committed by his predecessor. How he learnt is not known, but there can be not the slightest doubt that he did learn because he issued notice u/s 34 for the assessment of the escaped income. It goes without saying that he received some information either orally from some one or through a perusal of the assessment order and the relevant law. He did read the assessment order passed by his predecessor, whether suo motu or on an information given to him by somebody that there was a mistake. In either case on reading the assessment order he acquired the information that his predecessor had allowed a larger deduction on account of which he had a reasonable belief that certain income had escaped assessment and he became invested with jurisdiction to proceed u/s 34(1)(b). The information that he acquired by word of mouth of somebody or from perusal was that his predecessor had in contravention of the provisions of section 4(3)(i) allowed deduction of one-fifth of the actual income and not of the amount actually applied or finally set apart for application for religious and charitable purposes. His predecessor had not considered the distinction between the two at all; he had proceeded on the assumption that the assessee was entitled to deduct one-fifth of the actual income regardless of whether the whole of it had been applied (or finally set apart for application) for religious and charitable