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Reopening of assessments under section 34(1)(a) of the Indian Income-tax Act, 1922. Analysis: The High Court of Delhi considered the common question of law referred by the Income-tax Appellate Tribunal regarding the justification of reopening assessments under section 34(1)(a) of the Indian Income-tax Act, 1922 for the assessment years 1949-50 and 1950-51. The assessee claimed to have paid selling agency commission to two companies, and the Income Tax Officer (ITO) reopened the assessments based on the disallowance of similar claims in the assessment of another company in the group. The ITO issued notices under section 34 of the Act and disallowed the claim regarding payments to selling agents. The court noted that the primary facts disclosed by the assessee were not sufficient as the ITO found that the selling agents had rendered no service, similar to the findings in the assessment of another company in the group. The court distinguished between the falsity of disclosed facts and erroneous inferences drawn by the ITO. Referring to a previous decision, the court upheld the ITO's actions as legally sound, emphasizing the requirement of full and true disclosure of material facts by the assessee. The court rejected the assessee's reliance on previous judgments, clarifying that the power to reassess is valid if the facts disclosed earlier are later found to be false, provided there is a positive ground for belief based on primary facts. The court highlighted the distinction between cases where the assessee fully disclosed material facts and cases where such disclosure was inadequate. In this case, the court found that the facts and circumstances warranted the reopening of assessments under section 34(1)(a) of the Act. In conclusion, the High Court of Delhi answered the reference in favor of the Revenue, affirming the legality of the ITO's actions in reopening the assessments and disallowing the claim for selling agency commission.
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