Law:

Section:

Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1) of the Indian Income-tax Act, 1922] - Income escaping assessment - Illustrations - Assessment year 1955-56 - Assessee company was including its dividend income in year in which dividend warrants were actually encashed and not in year in which dividend was declared - ITO was aware of this method Continuously followed by assessee and had accepted same - For assessment year subsequent to assessment in question, assessee declared dividend income on basis of same method but ITO held that it was assessable in relevant assessment year and, therefore, reopened assessment of relevant assessment year under section 34(1)(a) of 1922 Act - Whether on facts, escapement of income was not due to omission on part of assessee to disclose fully and truly material facts necessary for assessment but on account of system of accounting adopted by assessee which had been allowed by department and, therefore, provisions of section 34(1)(a) of 1922 Act were not attracted - Held, yes FACTS The dividend income pertaining to the relevant assessment year was shown by the assessee in the return for the subsequent assessment year. The ITO held that there was omission on the part of the assessee to disclose fully and truly the material fact necessary for assessment. He further held that the fact that the assessee had shown this income in the return filed for the subsequent assessment year did not exonerate it of the liability under section 34(1)(a) of the 1922 Act in respect of the relevant assessment year. He, therefore, included the dividend income for the relevant assessment year. On appeal, the AAC deleted the amount of dividend but directed the ITO to include the amount in the subsequent assessment year. On revenue's further appeal, the Tribunal observed that the ITO knew that in all the past years the assessee's system of accounting for the dividend income was to treat it as its income only when the dividend warrants had been encashed, that the same method had been followed by the assessee in respect of its dividend income for the assessment year in question as also for the succeeding assessment year, and that while…

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