1991 (2) TMI 163 - AT - Income Tax

Summary

Issues:
1. Justification of reopening under section 147(a) for assessment year 1964-65.
2. Merits of the addition made by the Income-tax Officer in the reassessment order.

Analysis:

1. The judgment pertains to an appeal by the assessee for assessment year 1964-65, where the original assessment was reopened by the Income-tax Officer under section 147(a) based on undisclosed facts regarding payments received for spare parts not delivered to State Transport Corporation (STC). The reassessment was made in 1977 after it was found that the assessee had omitted to disclose material facts, leading to income escapement. The assessee contested the reopening, arguing that the reasons were destroyed in a fire in the ITO's office. However, the Tribunal held that since reasons were reproduced in the reassessment order and the assessee did not disclose the crucial facts initially, reopening was justified. The Tribunal cited the duty of the assessee to disclose primary facts, emphasizing that non-disclosure, whether deliberate or inadvertent, justifies reopening under section 147(a).

2. On the merits of the addition made by the Income-tax Officer, it was established that the assessee had received payments for goods not delivered to STC, indicating sales outside the books. The Tribunal affirmed that such receipts constituted trading income, and the amounts were liable to be added to the income. The assessee's argument of corresponding liability to return the amount received was rejected, as the legal obligation to refund arose from a subsequent court decree. As there was no deductible liability in the relevant accounting year, the addition made by the ITO was upheld. The Tribunal dismissed the appeal, confirming the addition in question for assessment year 1964-65.

In conclusion, the judgment addressed the justification of reopening the assessment under section 147(a) for non-disclosure of material facts by the assessee, and upheld the addition made by the Income-tax Officer based on payments received for undelivered goods. The Tribunal emphasized the duty of the assessee to disclose primary facts and rejected the argument of corresponding liability, affirming the addition as justified for the relevant accounting year.