Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Information - Position prior to 1-04-1989 - Assessment year 1950-51 - Assessee was appointed as employee in a company - His services were, however, prematurely terminated and, in terms of letter of his appointment he was paid for compensation each unexpired year of duration of his service - ITO held that payment of said amount was not compensation for loss of employment but said amount was paid to him in view of his past meritorious service and, therefore, chargeable to tax - Appellate authorities held that said amount was a capital receipt and, hence, not taxable - Later on findings of Enquiry Commission, which was appointed to enquire into affairs of company, that letter appointing assessee on which reliance was placed by assessee before taxing authority was fraudulent and antedated, revenue sought to reasess assessee in respect of said sum and accordingly issue notice to assessee- Whether on facts, it could not be said that ITO had no material before him to come to reasonable belief that assessee at time of his original assessment omitted or failed to disclose truly and fully all material and primary facts - Held, yes - Whether therefore, notice for initiation of reassessment proceedings would have to be upheld - Held yes Words and phrases : Expression 'reason to believe' as occurring in section 147 of the Income-tax Act, 1961. FACTS The assessee was appointed as employee in a company in 1943. As per term of employment if service of assessee was terminated before expiry of 25 years of service assessee would be entitled to compensation calculated at rate of 48,000 for each unexpired year of duration of his employment. In 1949, the assessee's service was terminated and as per the agreement assessee was paid Rs. 7 lakh as compensation for cessation of his employment. When the petitioner was assessed for the relevant assessment year, the ITO held that the payment of the amount of Rs. 7 lakhs was not compensation for loss of employment but the said amount was paid to him in view of the past meritorious services rendered by him to the company and as such subjected the said payment to…

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