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Issues Involved:
1. Accrual of Income under Section 41(2) of the IT Act for the Assessment Year 1970-71. 2. Justification of Reopening the Assessment under Section 147(a) of the IT Act. Detailed Analysis: Issue 1: Accrual of Income under Section 41(2) of the IT Act for the Assessment Year 1970-71 Relevant Facts: The assessee's undertaking was taken over by the Madhya Pradesh Electricity Board under the Indian Electricity Act, 1910. The market value of the assets was determined by arbitration, and the umpire awarded a sum of Rs. 12,00,000 plus 20% solatium and additional amounts. The award was confirmed by the District Judge, and the High Court maintained the award with a modification on interest. Key Arguments: - Department's Argument: The income accrued to the assessee when the decree in terms of the award was passed by the District Judge, thus making it taxable for the assessment year 1970-71. - Assessee's Argument: The income accrued on the passing of the award by the umpire. Since the decree was under appeal before the Supreme Court, the money had not become "finally payable and due." Judgment Analysis: The court examined the provisions of Section 41(2) of the IT Act, which deals with the taxability of income when the moneys payable for assets exceed their written down value. The court also considered the definitions of "payable" and "due" in legal dictionaries and previous judgments. The court concluded that the market price of the assets became "due" when the decree in terms of the award was passed by the Civil Court. The pendency of an appeal did not affect the accrual of income. The court stated, "The price, therefore, due for payment to the assessee on the date of the passing of the decree was taxable in the relevant succeeding assessment year to the financial year, in which the decree was passed." Conclusion: The Tribunal was not justified in holding that no income accrued to the assessee under Section 41(2) of the IT Act in the assessment year 1970-71. The question was answered in the negative, in favor of the Department. Issue 2: Justification of Reopening the Assessment under Section 147(a) of the IT Act Relevant Facts: The assessee filed a return showing nil income but included a balance sheet showing the written down value of the assets and the compensation received. The IAC initiated reassessment proceedings under Section 147(a), claiming the assessee failed to disclose the income accrued under Section 41(2). Key Arguments: - Assessee's Argument: All primary facts were disclosed through the balance sheet filed with the return, and the taxability was a matter of legal inference. Letters seeking advice from the taxing authority should be deemed as disclosure. - Department's Argument: The balance sheet did not contain full and true disclosure of all material facts, such as the date of the decree and the decretal amount. Disclosure of some facts outside the return did not suffice. Judgment Analysis: The court emphasized that full and true disclosure of all material facts is required to avoid reassessment under Section 147(a). The balance sheet and letters did not provide complete information necessary for the Assessing Officer to determine taxability under Section 41(2). The court stated, "Even if the balance sheet and the letters of the assessee seeking advice of the Department are taken to be disclosure of relevant facts, that did not amount to full and true disclosure of all material facts." Conclusion: The Tribunal was not justified in holding that the reassessment proceedings under Section 147(a) were unwarranted. The question was answered in the negative, in favor of the Department. Final Judgment: Both questions were answered in the negative, in favor of the Department and against the assessee.
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