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Issues:
1. Jurisdiction of the Income Tax Officer to initiate proceedings under section 147(b) of the Income-tax Act, 1961. Detailed Analysis: The High Court of Madhya Pradesh was presented with a reference under section 256(1) of the Income-tax Act, 1961, by the Income-tax Appellate Tribunal, Indore Bench, regarding the question of whether a particular case falls within the scope of section 147(b) of the Act. The case revolved around an assessee who was a partner in a firm and had constructed a house during the assessment year 1971-72. The Income Tax Officer (ITO) initiated proceedings under section 147(b) after receiving information about possible tax evasion by some partners of the firm. The ITO concluded that the cost of construction of the house was higher than initially disclosed by the assessee, leading to the inclusion of additional income from undisclosed sources in the total income of the assessee. The assessee contended that the reassessment proceedings under section 147(b) were invalid, arguing that the ITO lacked jurisdiction as all relevant material was already available during the original assessment. The counsel for the assessee relied on the decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996, emphasizing that the ITO cannot reopen an assessment based solely on a reappraisal of existing material. The court analyzed the provisions of section 147(b) of the Act, highlighting the conditions that must be met for the ITO to take action under this section. It was noted that the ITO must have a reason to believe that income has escaped assessment and that such belief should arise from information received after the original assessment. Referring to the Supreme Court's decision in CIT v. A. Ramanand Co. [1968] 67 ITR 11, the court clarified that even if the information could have been obtained earlier but was not, the ITO's jurisdiction is not affected. The court further discussed the meaning of "information" in the context of section 147(b), emphasizing that it must be derived from an external source and relate to facts or law relevant to the assessment. While acknowledging the limitations on reopening assessments based on the same material, the court found that in the present case, the ITO acted on new information regarding tax evasion by the firm's partners, justifying the initiation of proceedings under section 147(b). Consequently, the court held that the proceedings against the assessee were valid, ruling in favor of the Income Tax Department. In conclusion, the court answered the question referred to them in the affirmative, stating that the proceedings under section 147(b) were valid in the given circumstances. The parties were directed to bear their own costs in relation to the reference.
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