Law: Income Tax Act, 1961

Section: 147,148

(a) Income-tax---Reassessment---Complete disclosure of all relevant facts by assessee--¬.Income escaping assessment---Subsequent discovery of mistake in assessment---Reassessment within four years permissible---Conversion of capital asset into stock-in-trade and transfer by partners to firm in assessment year 1991-92---Assessment of assessee for assessment year 1991-92 completed on 31-1-1994---Reassessment notice for assessment year 1991-92 in 1996 proposing to tax capital gains justified--" Reason to believe", meaning of---Indian Income Tax Act, 1961, Ss.45, 147 & 148. The power to make assessment or reassessment within four years of the end of the relevant assessment year would be attracted even in cases where there has been a complete disclosure of all relevant facts upon which a correct assessment might have been based in the first instance, and whether it is an error of fact or law that has been discovered or found out justifying the belief required to initiate the proceedings. The word "escaped assessment", where the return is filed, cover the case of discovery of a mistake in the assessment caused by either an erroneous construction of the transaction or due to its non-consideration, or caused by a mistake of law applicable to such transfer or transaction even where there has been a complete disclosure of all relevant facts upon which a correct assessment could have been based. In cases where the Assessing Officer had overlooked something at the first assessment, there can be no question of any change of opinion, when the income which was chargeable to tax is actually taxed as it ought to have been under the law, but was not, due to an error committed at the first assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the Assessing Officer has a cause or justification to think or suppose that income had escaped assessment, he can be said to have a reason to believe that such income had escaped assessment. The words "reasons to believe" cannot mean that the Assessing Officer should have finally ascertained the facts by legal evidence. Unless the ground or the material on which his belief is based, is…

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