Law:

Section:

Section 147 of the Income-tax Act, 1961 [Corresponding to section 34 of the Indian Income-tax Act, 1922] - Income escaping assessment - Information - Position prior to 1-4-1989 - Assessment year 1942-43 - Assessee-company in its return for relevant assessment year included a sum as item of income received from 'K' company - ITO excluded said sum on ground that during course of assessment of 'K', that sum was disallowed as expenditure - Assessment became final as no appeal was filed against it - However, 'K' filed appeal against its assessment before Tribunal who held that expenditure incurred by 'K' was allowable - After said order of Tribunal, ITO in case of assessee issued notice under section 34 of 1922 Act to assess amount of said expenditure as income of assessee - Whether order of Tribunal could not be said to be definite information which led to discovery that assessee's income had escaped assessment - Held, yes - Whether facts were fully known to ITO and if he had made mistake at time of assessment, there were other methods of correcting that error and such error could not be rectified by him by issuing notice under section 34 of 1922 Act - Held, yes - Whether, therefore, re-assessment made was not justified - Held, yes FACTS The assessee-company in its return for the relevant assessment year included a sum as an item of income received from 'K' company towards the deferred price of dusuti cloth. The ITO, however, excluded that amount from the return on ground that during the course of assessment of 'K' company, this item had been claimed as an expenditure but it was disallowed by the ITO. The assessment became final as no party appealed against it. Against the assessment order of the ITO in the case of the 'K' company, there was an appeal and the case ultimately reached the Tribunal which disagreed with the ITO and allowed the sum as expenditure incurred by 'K' company and gave them credit for it under section 10(2)(xv) of the 1922 Act. After the decision of the Tribunal in the case of the 'K' company, the ITO issued a notice to the assessee under section 34 of the 1922 Act to assess the amount of said expenditure as income of the assessee. On…

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