Law:

Section:

Section 147 of Income-tax Act, 1961 - Income escaping assessment - Non-disclosure of primary facts - Assessment years 1959-60 to 1961-62 - Assessee-company had taken over rolling mill - Original assessment of assessee for relevant assessment years was completed - Subsequently, dispute arose between two groups of directors of assessee-company over earning of extra profits by said rolling mill - Matter was referred to arbitration and arbitrators made an award that certain sum was an extra profit which was not reflected in books of account - Said award became final - Based on said fact proceedings under section 147 were initiated and Assessing Officer made additions accordingly - Whether when award had become final, it could be said that Board of Directors had accepted factum of earning of secret profit not reflected in books of account - Held, yes - Whether fact that one of directors and arbitrators did not appear in response to summons issued under section 131 would not make any difference to assessment order and, therefore, reassessment made was valid - Held, yes FACTS The assessee-company had taken over rolling mill. Original assessment of the assessee for the assessment years 1959-60 to 1961-62 was completed. Subsequently, a dispute arose between two groups of directors of assessee-company over the affairs of the said rolling mill. The matter was referred to a board of arbitrators. One group of directors claimed before the arbitrators that extra profit amounting to Rs. 3,08,102 was earned by the rolling mill outside the books of account. The arbitrator confirmed the said claim and made an award. On the basis of the said facts, the proceedings under section 147 were initiated for the relevant assessment years. The reassessment made was set aside by the first appellate authority on the ground that proper opportunity was not given to the assessee to cross-examine the witnesses. During the course of fresh assessment proceedings the Assessing Officer issued summons under section 131 but one of the directors and arbitrators did not appear and, accordingly, the Assessing Officer made additions on account of income arising out of unaccounted profit in the relevant…

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