Law: Income Tax Act, 1961

Section: 147147(a)

[Indian Income Tax Act, 1961]......Section 147 (a)- Reassessment-Jurisdiction-Failure to disclose material facts-Facts discovered by Officer in original assessment proceedings-Failure of Officer to draw inference and assess amount by over right- Whether Officer competent to initiate reassessment proceedings-Held no. In proceedings for the original assessment of the appellant firm, though the appellant did not disclose certain transactions evidenced by certain drafts, the officer himself discovered the facts relating thereto but by oversight did not bring the amounts represented by the drafts to tax as the income of the appellant. Subsequently, the Income Tax Officer issued a notice under Section 147(a) of the Income Tax Act, 1961, with a view to assess the amounts as the appellants income from undisclosed sources. On a writ petition filed by the appellant, the High Court held that the Income-tax Officer did not apply his mind to the question whether the amounts could be treated as part of the total income of the appellant did not disclose the source of those amounts which were not recorded in the account books, all the conditions for invoking the jurisdiction under Section 147(a) were present. On appeal to the Supreme Court: Held, reversing the decision of the High Court that after discovery of the primary facts relating to the transactions evidenced by the drafts it was for the officer to make the necessary enquiries and draw proper inference as to whether the amounts represented by the drafts could be treated as part of the total income of the appellant. This the officer did not do, It was plainly a case of oversight and it could not be said that income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the appellant to disclose fully and truly all material facts. He could not. thereafter, take recourse to Section 147(a) to remedy the error resulting from his own oversight. Decision of the Allahabad High Court reversed. Cases referred to : Calcutta Discount Co, v. ITO (1961) 41 ITR 191 : (1961) 7 SCR 241 (SC). (1961) 3 Tax 124 (SC); CIT v. Bhanji Lavji (171) 79 ITR 562 (SC) ; CIT v. Burlap Dealers Ltd. (1971) 77 ITR…

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