Law: Income Tax Act (XI of 1922)

Section:

Income tax Act (XI of 1922)-----   ----- S.34(l)(a) Re-assessment Condition precedent Under assessment by reason of failure on the part of assessee to disclose material facts Omission to assess on view of law prevailing at time of original assessment.   The petitioner was a company registered in a former native State. In the original assessments for the assessment years 1944-45 to 1949-50 it was treated as a non resident and its income from sales to the Government and other parties in British India was taken into consideration only for purposes of determining the rate of tax but was not taxed, although particulars of the sales were before the Income tax Officer. Later the petitioner was re-assessed under section 34(1)(a) of the Income tax Act, 1922, for the years 1944-45 to 1946-47 but the Commissioner cancelled those assessments in exercise of his powers under section 33 B and directed the Income tax officer to make fresh assessments. Instead the Income tax officer initiated Re-assessment proceedings afresh by the issue of notices under section 34(l)(a), in order to bring to tax income from sales to the Government and other parties in British India. Similar reassessment proceedings were also initiated for the other assessment years 1947-48 to 1949-50. Proceedings for the year 1947-48 alone were, completed and appeals were taken in regard thereto.   The petitioner filed an application under Article 226 of the Constitution challenging the validity of the notices under section 34(1)(a) and the re assessment proceedings for the year 1947-48   Held, that to justify action under section 34(i)(a) of the income tax Act, 1922, there should have been an underassessment and that under assessment should have been a direct consequence of the failure or omission on the part of the assessee to disclose all material facts necessary for his assessment. The under assessment of the income of the company in this case, if in fact it was under assessment, was not due to any failure or omission on the part of the company to disclose material facts but to the legal view which prevailed at the time of the original assessments. The figures relating to the sales in…