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Issues Involved:
1. Agricultural Income Exemption 2. Reassessment under Section 34(1)(b) of the Indian Income-tax Act 3. Validity of Reopening Assessment 4. Onus of Proof for Exemption Issue-wise Detailed Analysis: 1. Agricultural Income Exemption: The petitioner firm engaged in the business of collecting and selling tendu leaves claimed exemptions on income derived from these activities, asserting it as agricultural income. The initial assessment for the year 1953-54 granted this exemption based on a precedent set by the Calcutta High Court in In re Moolji Sicka and Co. (1939), where it was held that pruning tendu shrubs amounted to an agricultural operation, thus qualifying for exemption. The Supreme Court, however, in Commissioner of Income-tax v. Raja Benoy Kumar Sahas Roy (1957), dissented from this view, stating that operations on plants of spontaneous growth, including pruning, do not amount to agricultural operations and thus do not qualify for exemption. 2. Reassessment under Section 34(1)(b) of the Indian Income-tax Act: The Income-tax Officer issued a notice under Section 34(1)(b) of the Indian Income-tax Act to the petitioner, calling for a return on the grounds that income for the year 1953-54 had escaped assessment due to a change in the law. This was based on the Supreme Court's decision, which altered the legal understanding of what constitutes agricultural income. 3. Validity of Reopening Assessment: The petitioner argued that the reopening of the assessment was without jurisdiction, contending that the Income-tax Officer had no new facts to suggest that the situation had changed since the 1934 assessment. The court, however, held that the reopening was valid. The exemption granted in 1953-54 was based on the precedent set by Moolji Sicka's case, which had been overturned by the Supreme Court. Therefore, the change in law constituted sufficient "information" for the Income-tax Officer to believe that income had escaped assessment. 4. Onus of Proof for Exemption: The court emphasized that the onus was on the assessee to prove the facts entitling them to exemption. The Income-tax Officer found no satisfactory evidence that the petitioner had planted and grown trees, as required to claim the exemption. The petitioner failed to provide adequate proof of any basic agricultural operations, such as tilling, watering, or planting, which would qualify the income as agricultural. The court concluded that since the petitioner did not sufficiently prove the change in facts, the reopening of the assessment was justified. Conclusion: The court dismissed the petition, upholding the reassessment order. It ruled that the change in law provided sufficient grounds for the Income-tax Officer to reopen the assessment under Section 34(1)(b). The petitioner failed to prove that the income derived from the tendu leaves was from basic agricultural operations, thus not qualifying for the exemption. The rule was discharged, and the interim order was vacated, with no order as to costs. The operation of the order was stayed for six weeks to allow for an appeal.
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