Law:

Section:

Section 147 of the Income-tax Act, 1961 [Corresponding to section 34(1) of the Indian Income-tax Act, 1922] - Income escaping assessment - Illustrations - Assessment year 1947-48 - At time of original assessment assessee placed before assessing authority all basic facts, fully and truly, which were material for assessment and assessment was completed after careful scrutny by ITO - Assessment remained unchallenged for six and half years - However, reassessing authority expressed doubts over source of capital of assessee and as to how it improved over years and, thus, purported to exercise jurisdiction under section 34(1)(a) of 1922 Act - Assessee offered explanation before reassessing authority that he raised his wealth through jewels and cash left by his mother - ITO pointed out some descriptions in statements of assessee and his father - Assessee examined grandson of two borrowers and this evidence was rejected by ITO on basis that borrowers belonged to same caste as that of assessee and were small traders and could not have borrowed large amount of loans for their business - Account books produced were rejected by ITO as fabricated - As assessee was unable to furnish correct name of his bank, ITO inferred that assessee tried to evade information - Whether different criticisms levelled by ITO on explanation made by assessee at time of reassessment was surmise and suspicion and consequential change of opinion - Held, yes - Whether jurisdiction under section 34(1)(a) of 1922 Act cannot be clutched at by ITO on mere surmises and suspicions - Held, yes - Whether, therefore, proceedings initiated under section 34(1)(a) of 1922 Act was bad in law - Held, yes FACTS The assessment for the relevant assessment year was completed. For more than 6½ years, the assessment remained unchallenged. The ITO expressed certain doubts the receipt of amount by the assessee and, therefore, examined the assessee. The assessee explained that the nucleus of the money originally belonged to the mother. The mother of assessee died when the assessee was only two or three years old. The nucleus represented the mother's stridhan assets of cash and jewellery. The father renamed and converted…

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