Law:

Section:

Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1) of the Indian Income-tax Act, 1922] - Income escaping assessment - Illustrations - Assessment year 1955-56 - Assessee, had disclosed in his return his share in income of a firm - Profit allocation report of his share of profits from that firm was also duty received by ITO, but he failed to include assessee's share of profits from that firm while completing assessment - Later, successor - ITO by issue of notice under section 34(1)(b) of 1922 Act completed reassessment including aforesaid share of profits - ITO sought to justify reopening of assessment under section 34(1)(b) of 1922 Act merely on ground of change of opinion - Whether mere change of opinion did not furnish a justifiable reason for taking action under section 34(1)(b) of 1922 Act - Held, yes FACTS The 'assessee', had a share of profit firm a Madras firm of which he was a partner. He was also carrying on other business and was being assessed at Calcutta. In his return which he filed before the ITO at Calcutta he specifically disclosed his share in the profits of the Madras firm. The profit allocation report of the share of profit from the Madras firm had been received in the ITO's office and duly recorded. The ITO failed to include the said income in the assessee's total income. Later, the ITO after giving due notice, completed reassessment under section 34(1)(b) and included the said income. On second appeal, the Tribunal held that the information on the record in respect of the aforesaid income assessable to tax had escaped the ITO's notice, and, therefore, he was justified in taking action under section 34(1)(b). On reference, the High Court was of the opinion that the mere fact that the ITO changed his opinion subsequently or the fact that he failed to notice a palpable or glazing matter earlier should not be treated as additional information coming to his notice subsequent to the assessment order. The reassessment order was accordingly held as not valid. On appeal before the Supreme Court : HELD The ITO clearly sought to justify the reopening of the assessment under section 34(1)(b) merely on the ground of change of…

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