Law: Income Tax Act, 1922

Section: 34(1)

Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1) of the Indian Income-tax Act, 1922] - Income escaping assessment - General - Assessment year 1950-51 - Assessee was assessed for relevant assessment year wherein transaction of certain shares held by assessee and his relations were held as business transaction by ITO - In course of assessment of subsequent years, ITO found that transaction of shares held by assessee and his close relations were not business transaction as rates quoted therein was high - Accordingly, ITO issued a notice for reassessment stating that income of assessee for relevant assessment year had escaped assessment or had been under assessed - Whether though ITO might have come to receive some information subsequently, yet this was not in respect of any primary fact which assessee was bound to disclose, therefore, ITO did not have jurisdiction to issue impugned notice under section 34 of 1922 Act - Held, yes FACTS The assessee was assessed for the year 1950-51 by the ITO. Later, during the course of assessment for the subsequent years, certain information came to the notice of the ITO, on basis of which notice under section 34 of 1922 Act in March 1959 was issued to the assessee, stating that the income of the assessee assessable to income-tax for the year ending 31-3-1951, had escaped assessment or had been under assessed. The assessee challenged impugned notice by filing writ petition and contending that, in fact, the conditions precedent required for the issue of the notice under section 34 of 1922 Act had not been satisfied and that no definite information came to the notice of the ITO after the date of the assessment and as such the notices were without jurisdiction. HELD There are two eventualities in which the ITO can reopen the case and make a reassessment ; firstly, where there has been failure to disclose all material facts by the assessee and, secondly, where under-assessment, etc., is due to omission or failure on behalf of the assessee to make a return of his income. In both the cases, the ITO can take action and the only difference is that in the first case he can take action within eight years while in the…

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