Law:

Section:

Section 147, read with section 148, of the Income-tax Act, 1961 - Income escaping assessment - General - Assessment year 1952-53 - Amount spent on purchase of paddy by assessee firm was credited in branch books in name of head office but there was no corresponding debit entry made in books of account of head office - At time of assessment proceedings this fact escaped unnoticed as accounting years of both offices differed - Books of account, balance sheets and profit and loss account were produced before and examined by ITO - However, no intrinsic evidence was there to show that primary fact was brought to notice of ITO either suo motu or at instance of assessee - Discrepancy in two accounts was not apparent until examination of accounts for assessment year 1963-64 - Whether on facts, ITO had reason to believe that under assessment occurred by reason of omission or failure on part of assessee to disclose fully and truly all material facts necessary for assessment for relevant assessment year - Held, yes - Whether, therefore, ITO was justified in issuing notice under section 148 - Held, yes FACTS The assessee firm carried on the business of grain procurement, rice milling, distillation of country liquor, sale of excise drugs, grocery articles and forest products, and contract business. The amount spent on purchase of paddy was credited in the branch book of the assessee in the name of the head office but there was no corresponding debit entry made in books of account of the head office. At the time of assessment proceedings for the relevant assessment year the fact of difference in the two accounts went unnoticed as the accounting years of the rice mill (branch) closed on Diwali Day while that of the head office closed at the end of the financial year. The fact of discrepancy in the two accounts was not apparent until examination of the accounts for the assessment year 1963-64. On 30-9-1962, one of the partners of assessee died. At that time the balance-sheets of the accounts of the head office and branch were prepared. Those two accounts were tallied and the discrepancies came to light. The Assessing Officer found that the income chargeable to tax had escaped…

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