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 1940-41 - Whether mere fact that ITO before assessment could have discovered facts which he came to know at a subsequent stage, if he acted with diligence even before assessment, could not in law preclude him from acting under section 34 of 1922 Act if, as a matter of fact, he received definite information subsequently - Held, yes - While assessing assessee-firm ITO had not only a doubt but even shrewd suspicion that some fraud was committed in respect of an item shown to be capital contribution by partners - Though he made enquiries he did not get any definite information before closing of assessment to induce him to come to any reasonable belief that said item represented profits of firm - Subsequently, on receipt of definite information from another ITO to effect that said four partners had no income other than that which they got from firm assessed and that they did not sell any properties of their own to advance large amounts towards capital of partnership, ITO reopened assessment of firm after following due procedure to include said sum as profits of assessee-firm - Whether ITO did not change his opinion on facts, which were already before him at time of first assessment - Held, yes - Whether 'discovery' within meaning of section 34 of 1922 Act was made by ITO on receipt of definite information from another ITO and, therefore, action taken by him under section 34 of 1922 Act was right - Held, yes Words and Phrases: Word 'discover' as occurring in section 34 of the Indian Income-tax Act, 1922 FACTS For the assessment year 1940-41, the assessee firm filed a return showing income. During the scrutiny of the accounts, the ITO came across a transfer of Rs. 1,15,000 from the account of one 'V' to the accounts of the four partners of the assessee firm. Though the ITO suspected that the said amount represented the secret profits of the firm, he was not able to get any definite information to hold that the said sum also was part of the profits of the firm. Ignoring that…

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