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Issues:
1. Reopening of assessment under section 147(a) of the Income-tax Act, 1961. 2. Interpretation of section 297(2)(b) and section 297(2)(d)(ii) regarding the assessment of income as dividends. Analysis: The case involved a reference under section 256(1) of the Income-tax Act, 1961, regarding the reopening of assessment for the assessment year 1955-56. The primary issue was whether the assessment could be reopened under section 147(a) of the Act. The Income Tax Officer (ITO) had reopened the assessment and added Rs. 12,26,206 as dividends, claiming that the amount outstanding was deemed dividends under section 12(1B) of the Indian I.T. Act, 1922. The Commissioner of Income-tax supported this view based on the facts that the assessee firm held shares of a company and received an amount on behalf of the company, which included accumulated profits. The Appellate Tribunal, however, held that all necessary facts were disclosed to the revenue authorities initially, and the ITO did not act on the legal inferences that could be drawn from the disclosed facts. The Tribunal concluded that section 147(a) was not attracted, as all basic facts were disclosed by the assessee, and the ITO made a new legal inference later. The High Court agreed with the Tribunal's view, emphasizing that the assessee's obligation is to disclose basic material facts, not legal inferences. The Court upheld the Tribunal's decision on the first issue, ruling in favor of the assessee. Moving to the second issue regarding the interpretation of section 297(2)(b) and section 297(2)(d)(ii), the Tribunal had held that under the new Act, there was no provision similar to section 12(1B) of the 1922 Act, so the amount could not be treated as dividends. The High Court referred to the Supreme Court's observations in Govinddas v. ITO, emphasizing that the provisions of the new Act applied to the machinery of assessment, not substantive provisions creating rights or liabilities. Therefore, the substantive law governing tax liability must be under the old Act for relevant assessment years. Although the High Court indicated it would answer the second question in the negative in favor of the revenue, it noted that the issue was academic as the first question's resolution rendered the second question moot. Consequently, the High Court did not provide a definitive answer to the second question due to its academic nature. The judgment was concluded without costs, as the assessee did not appear. In summary, the High Court upheld the Tribunal's decision that the assessment could not be reopened under section 147(a) of the Income-tax Act, 1961, as all basic facts were disclosed by the assessee initially. The Court also discussed the application of provisions under the new Act and the substantive law governing tax liability, although the second issue was deemed academic and not definitively answered.
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