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Issues: Validity of notice under section 148 of the Income Tax Act for reassessment for the year 1969-70 based on non-disclosure of income items.
Analysis: The petitioner challenged the notice dated March 31, 1976, issued under section 148 of the Income Tax Act, contending that the Income Tax Officer (ITO) had no justification for issuing the notice as the assessment order for the relevant year had been passed after thorough scrutiny. The petitioner claimed that the ITO lacked material to support the notice under section 148. The respondents, however, argued that the notice was valid as the petitioner had not fully disclosed income liable to tax, leading to the escapement of income. The respondents provided reasons for reopening the case, citing various income items like deferred guarantee commission, start-up expenses, development rebate, exchange loss, construction expenses, and training expenses. In a previous writ petition, the court had already analyzed certain income items like deferred guarantee commission, start-up expenses, and development rebate, and found that the notice under section 148 was justified for these items due to non-disclosure by the petitioner. The court noted that the escapement was not due to the petitioner's failure to disclose but rather to the ITO's incorrect interpretation of the law. However, in the case of exchange loss and construction expenses, the court concluded that the escapement was not due to non-disclosure by the petitioner but to the ITO's misunderstanding of the law. Regarding the training expenses item, the court found that the escapement was indeed due to the non-disclosure of correct factual information by the assessee to the ITO. The court emphasized that merely producing account books and evidence before the ITO does not equate to full disclosure of necessary facts for assessment. Citing legal precedent, the court held that the petitioner's failure to disclose material facts led to the allowance of training expenses as a deduction in the assessment year, justifying the notice under section 148. Ultimately, the court allowed the writ petition in part, directing the ITO not to proceed with reassessment based on certain items like deferred guarantee commission, exchange loss, and construction expenses. The ITO was permitted to proceed with the assessment for other items mentioned in the notice under section 148. Each party was ordered to bear their own costs in the matter.
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