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Issues Involved:
1. Validity of reopening assessments under Section 147(a) of the Indian Income Tax Act, 1961. 2. Alleged failure of the assessee to disclose fully and truly all material facts. 3. Basis for allocation of London management expenses. 4. Sufficiency of evidence and material facts for reopening assessments. Detailed Analysis: 1. Validity of Reopening Assessments Under Section 147(a): The primary issue in these appeals is whether the reopening of the assessments of the assessee under Section 147(a) of the Indian Income Tax Act, 1961, was valid. The assessments in question pertain to the years 1957-58, 1958-59, and 1959-60. The reopening was initiated based on the belief that the assessee's income chargeable to tax had escaped assessment due to the failure to disclose fully and truly all material facts necessary for the assessment. 2. Alleged Failure of the Assessee to Disclose Fully and Truly All Material Facts: The assessee had claimed deductions for London management expenses incurred by the Burmah Oil Company Limited of London for management and secretarial work carried out on behalf of the assessee. The Income-tax Officer had requested details and certificates regarding these expenses, which the assessee failed to provide. The division bench of the High Court found that the assessee had not disclosed the system of certification by the auditor of the parent company, which fixed the percentage reasonable for debiting the assessee company in India. The High Court held that this non-disclosure amounted to a failure to disclose fully and truly all material facts. 3. Basis for Allocation of London Management Expenses: The assessee had explained that the London management expenses were allocated on a pro-rata basis among the subsidiary companies of the Burmah Oil Corporation Group. The expenses included salaries, office rents, and other administrative costs. The Income-tax Officer had raised doubts about the reasonableness of these expenses and had requested an auditor's certificate to substantiate the claims. The assessee's failure to provide this certificate was a key factor in the reopening of the assessments. 4. Sufficiency of Evidence and Material Facts for Reopening Assessments: The learned single judge of the High Court held that all relevant facts were disclosed by the assessee, and the underassessment, if any, was due to the laches of the revenue. The division bench, however, disagreed, stating that the non-disclosure of the auditor's certificate and other relevant correspondence amounted to a failure to disclose material facts. The Supreme Court, however, noted that the obligation of the assessee was to disclose basic facts but not to draw inferences from those facts. It was observed that the primary facts were disclosed, and the reasonableness of the expenses was an inferential fact, not a basic one. Conclusion: The Supreme Court concluded that the reopening of the assessments under Section 147(a) was not justified as there was no failure on the part of the assessee to disclose fully and truly all material facts. The learned trial judge's decision to quash the reopening notices was upheld, and the division bench's judgment was set aside. The appeals were allowed in favor of the assessee, and the costs of the appeals were awarded to the assessee.
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