Law:

Section:

Section 147(a) and (b) of the Income-tax Act, 1961-Reassessment-Non-disclosure of primary facts - In original assessment ITO allowed assessee's claim of deduction of certain sum paid as commission to sole selling agents-ITO subsequently discovered fresh material leading to conclusion that particulars earlier furnished by assessee were untrue-Whether reopening of assessment under section 147(a ) justified-Held, on facts, yes-Whether proceedings taken under section 147(a) could be supported with reference to section 147(b)-Held, on facts, yes Facts The assessee was a private limited company engaged in the manufacture and sale of electrical goods. During the assessment year 1966-67 pertaining to the accounting year ending 31-3-1966, the assessee claimed a deduction of Rs. 1,27,313 allegedly paid as commission to its sole selling agents. The assessee furnished to the ITO complete details about the payment of commission and its justification. The ITO accepted the claim and allowed the deduction. Later on, while examining the assessee's account for the next assessment year, the ITO, on the basis of certain new material, formed the opinion that the sole selling agency firm had not rendered any service to the assessee and hence the income to the extent of Rs. 1,27,313 paid to the said firm by the assessee in the shape of commission had escaped assessment in the assessment year 1966-67, on account of the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. The ITO, after sending notice to the assessee under section 148, overruled the objection raised by the assessee to the said notice and reassessed its income by including the amount of Rs. 1,27,313. On first appeal, the AAC upheld the reassessment. On second appeal, the Tribunal held that there was no failure on the part of the assessee to disclose fully and truly all material facts and, therefore, the reopening of the proceedings under section 147(a) was not justified. The revenue argued that if the facts found did not satisfy the conditions of clause (a), the reopening of the assessment could be sustained under clause (b) of section 147, but the Tribunal rejected the…

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