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Issues Involved:
1. Whether there were materials for the Tribunals to hold that the dates of delivery on the agreements with G. L. Roche and M. S. Srinivasan and Mahadeva Ayyar were within the previous year for the assessment year 1946-47. 2. Whether the reassessment under section 34(1)(a) is valid. Issue-wise Detailed Analysis: 1. Whether there were materials for the Tribunals to hold that the dates of delivery on the agreements with G. L. Roche and M. S. Srinivasan and Mahadeva Ayyar were within the previous year for the assessment year 1946-47: The Tribunal's finding was based on the fact that the assessee, Modern Theatres Ltd., entered into several contracts with distributors and exhibitors, receiving consideration for these agreements within the previous year relevant to the assessment year 1946-47. The Income Tax Officer (ITO) believed that the assessee had not fully disclosed the entirety of the consideration received and had spread out the receipts over several years. The ITO's report indicated that the distribution rights of two new pictures, Rajarajeswari and Burma Rani, had been sold outright, but only a portion of the consideration was taxed. The Tribunal found that the assessee failed to declare the full income that should have been declared, leading to the invocation of section 34(1)(a) for reassessment. 2. Whether the reassessment under section 34(1)(a) is valid: The principal basis for reassessment was the alleged non-disclosure of the full consideration received by the assessee. The ITO argued that the relevant agreements were not produced during the original assessment, leading to the suppression of income. The Appellate Assistant Commissioner and the Tribunal supported this view, stating that the agreements were necessary for computing the appellant's income and were not produced initially. However, the Tribunal later conceded that the agreements were indeed produced during the original assessment. The court examined whether the ITO, during the original assessment, had called for and scrutinized the agreements, which would imply that the assessee had disclosed all material facts. The court concluded that the ITO had indeed scrutinized the agreements and that the reassessment was based on a change of opinion rather than a failure to disclose material facts. The court referred to the Supreme Court's decision in Calcutta Discount Co. Ltd. v. Income Tax Officer, which emphasized that the duty to disclose does not extend to stating conclusions that could be drawn from primary facts. The court also examined specific agreements, such as those with Ganga Films Co., V. L. Narasu, and Balu & Co., where the assessee received advance payments. The court found that these agreements stipulated payments over several years, and the assessee had accounted for these payments according to the mercantile system of accounting. The court held that the mere receipt of advance payments did not constitute income for the year unless the legal right to receive the amount had accrued. The court concluded that there was no failure on the part of the assessee to disclose material facts, and the reassessment under section 34(1)(a) was not justified. The court answered both questions in favor of the assessee, stating that the reassessment could not be supported and awarded costs to the assessee, with counsel's fees of Rs. 250. Conclusion: The judgment concluded that the reassessment proceedings under section 34(1)(a) were not valid as the assessee had disclosed all material facts during the original assessment. The court emphasized that the reassessment was based on a change of opinion rather than any failure to disclose material facts. Both questions were answered in favor of the assessee.
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