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Issues:
- Interpretation of Section 34 of the Income Tax Act regarding the discovery of evasion of income tax. - Determining whether the figures received from Ahmedabad constitute a definite piece of information for justifying the issue of a notice under Section 34. Analysis: The judgment by the High Court of Punjab involved a reference by the Income Tax Appellate Tribunal under Section 66(1) of the Income Tax Act, focusing on the interpretation of Section 34 concerning the discovery of evasion of income tax. The core issue was whether the figures received from Ahmedabad could be considered a definite piece of information justifying the issuance of a notice under Section 34. The case revolved around a firm dealing in cloth and owning multiple businesses, including partnerships in various cities. The firm's income declaration for a specific year omitted the income from one of the partnership firms in Ahmedabad. The Income Tax Officer, Amritsar, subsequently realized the omission and issued a notice under Section 34 to revise the assessment by including the Ahmedabad income. The assessees contended that the case did not fall under Section 34 as the Income Tax Officer had not discovered the evasion based on new information received after the original assessment was completed. The assessees argued that the Income Tax Officer was already aware of their share in the Ahmedabad firm as declared in the original returns, and the subsequent receipt of information from Ahmedabad did not constitute a new piece of information. They claimed that the assessment was complete and could not be revised under Section 34 without fresh information leading to the discovery of evasion. On the other hand, the Commissioner of Income Tax argued that the figures received from Ahmedabad constituted a definite piece of information as required by Section 34, leading to the belief that income had escaped assessment. The Commissioner emphasized that Section 34 did not specify the information as new or fresh, but rather emphasized the need for definite information triggering the reassessment process. The judgment referred to various reported cases highlighting the necessity for the Income Tax Officer to act on definite information rather than vague suspicions or incorrect legal views. The court emphasized that the discovery of evasion must result from fresh and definite information received after the original assessment, and a mistake in the original assessment did not qualify as such information. The court cited precedents where the failure to include known income during the original assessment did not warrant reassessment under Section 34 without new information triggering the discovery of evasion. Ultimately, the court concluded that the figures received from Ahmedabad did not constitute fresh information as they were in response to a query initiated based on the assessees' own declaration. Therefore, the court answered the question in the negative, denying the reassessment under Section 34 and awarding costs to the assessees.
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