Law: Income Tax Act, 1922

Section: 34(1)

Section 148 of the Income-tax Act, 1961 [Corresponding to section 34(1) of the Indian Income-tax Act, 1922] - Income escaping assessment - Issue of notice for - Assessment years 1947-48 to 1954-55 - Assessees, who were partners in a firm, were assessed for relevant assessment years in status of resident and ordinarily resident - Later on, ITO came to know that assessees were non-residents and that they had income outside taxable territories which if taken into account would attract tax at a rate higher than that at which they were assessed - Accordingly, ITO reopened assessments of assessees by issuing notices under section 34 of 1922 Act and thereafter assessed them at rates applicable to non-residents - Whether fact as to whether assessee is a resident or non-resident being a material fact, it was incumbent upon assessee to make a disclosure of that particular fact - Held, yes - Whether since assessees had failed to disclose this material fact in his return for relevant assessment years, case clearly fell within scope of section 34(1)(a) of 1922 Act - Held, yes - Whether therefore, reassessments under section 34 of 1922 Act for all relevant assessment years were valid - Held, yes FACTS Assessees were partners in a firm. They were assessed for the relevant assessment years in the status of resident and ordinarily resident. In the course of the assessment proceedings for the assessment year 1956-57, the ITO became aware that assessees were non-residents and that they had income outside the taxable territories which if taken into account under the relevant provisions of the Act, would attract tax at a rate higher than that at which they had been assessed. Accordingly, he reopened the assessments of the assessees for the said years and issued notices to them under section 34 of 1922 Act. In the returns filed by the assessees in response to these notices, they declared their status as non-residents and furnished their incomes as they appeared in the original returns made by them. They objected to the proceedings under section 34 of Act as illegal. The ITO, however, assessed them to tax at the rates applicable to non-residents but on the income that arose or…

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