Law:

Section:

Section 147(a) of the Income-tax Act, 1961 - Reassessment - Non-disclosure of primary facts - Assessment year 1962-63 - Assessee, relying on a CBR Circular, neither charged any interest on sticky advances nor credited any sum to interest suspense account - ITO accepted this method of accounting of interest in original assessment - Whether there was omission or failure of assessee to disclose accrued interest on sticky advance and, therefore, ITO was justified in initiating proceedings under section 147(a) - Held, yes Circulars & Notifications - CBR Circular No. 41(V-6), dated 6-10-1962 FACTS The assessee, relying on CBR Circular No. 41(V-6), dated 6-10-1962, neither charged any interest on bad and doubtful debts nor credited any sum to the interest suspense account. In the original assessment for the assessment year 1962-63, accordingly, no addition on account of interest in respect of those bad and doubtful debts was made as the ITO accepted the method of accounting of interest on such debts. Subsequently the assessment was reopened to assess such interest on sticky loans. On appeal before the Commissioner (Appeals) it was held that the initiation of proceedings under section 147(a) was ab inttio void. The Tribunal, however, held that the ITO had prima facie reason to believe that the assessee had omitted to disclose fully and truly all material facts and in consequence thereof interest income had escaped assessment and, therefore, he had jurisdiction to initiate proceedings under section 147(a)/148. On reference : HELD In Indo-Aden Salt Mfg. & Trading Co. (P.) Ltd. v. CIT [19861 159ITR 624, the Supreme Court held that whether there was such non-disclosure of primary facts as had caused escapement of income from assessment is basically a question of fact. Having regard to the facts and circumstances of this case, it could not be said that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year in question. It was the duty of the assessee to disclose the interest which was not given up as a bad debt and to offer it for taxation. It is immaterial…

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