Law: Income Tax Act, 1961

Section: 148,147

Law: Income Tax Act, 1922

Section: 34

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Information - Position prior to 1-4-1989 - Assessment year 1956-57 - During original assessment ITO discovered that assessee did not disclose transactions evidenced by drafts - He did not make necessary inquiries to find out whether amounts invested in purchase of drafts could be treated as part of total income of assessee - He, after original assessment, issued notice for reassessment to included amounts covered by drafts in income - Whether it was plainly a case of oversight on part of ITO and it could not be said that income chargeable to tax had escaped assessment by reason of omission or failure on part of assessee to disclose fully and truly all material facts and as such recourse to section 147(a) was not valid - Held, yes FACTS During the original assessment the assessee firm did not disclose transactions relating to purchase of two demand drafts. The ITO discovered their transactions and gave opportunities to the partner of the firm to explain the drafts and observed that since the partner was unable to tell to whom drafts sent be him related in spite of specific opportunities given to him, the obvious inference was that moneys of the drafts were that of the firm with which he was connected. He further observed that since those drafts have been sent or received in such circumstances and by such persons connected with the firm the conclusion was obvious that those drafts related to the firm. He did not include the amounts covered by the drafts in the total income of the assessee. Later, after quantum appeal, the ITO issued notice under section 148 invoking section 147(a) stating that those drafts represented undisclosed income of the firm. On writ petition by assessee challenging the notice issued by the ITO, the High Court held that as the assessee did not disclose the source to the amounts invested which were not recorded in the account books produced by the assessee, all the conditions for invoking jurisdictions under section 147(a) were forest. On appeal : HELD That the assessee did not disclose the transactions evidenced by the drafts which the ITO discovered. After this…

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