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Issues Involved:
1. Initiation of reassessment proceedings under Section 147 of the Income-tax Act. 2. Assessment of excess sales tax collected by the assessee. Issue-wise Detailed Analysis: 1. Initiation of Reassessment Proceedings under Section 147: Majority Opinion: The majority held that the reassessment proceedings under Section 147 were not validly initiated. The key points were: - The assessee had disclosed all material facts necessary for the assessment during the original proceedings. - The duty of the assessee is to make a full and true disclosure of all material facts necessary for assessment. The assessee is not required to inform the Assessing Officer as to what legal inference should be drawn from the facts disclosed by him nor to advise him on questions of law. - The material fact for bringing such income to tax is the factum of receipt of sales tax by the assessee, which was already disclosed. - The Supreme Court in Calcutta Discount Co. Ltd v. ITO and Gemini Leather Stores v. ITO established that omission or failure to disclose material facts must be on the part of the assessee for Section 147 to be invoked. - The entire sales tax collection was disclosed, and it was the Assessing Officer's responsibility to assess the taxable amount after allowing for liabilities. - The reopening of assessment was not justified as it was based on the Assessing Officer's oversight and not on any failure or omission by the assessee. Dissenting Opinion: The dissenting member argued that the reassessment proceedings were justified. The key points were: - The assessee did not disclose the fact that a substantial part of the sales tax collection was not payable to the sales tax department. - The assessee's response to the Assessing Officer's specific queries was misleading and incomplete. - The Assessing Officer was precluded from making further inquiries due to the incomplete and misleading information provided by the assessee. - The Supreme Court in Phool Chand Bajrang Lal v. ITO held that if a transaction is found to be bogus based on subsequent information, the mere disclosure of that transaction at the time of original assessment does not constitute true and full disclosure. - The Delhi High Court in Nawabganj Sugar Mills Co. Ltd. v. CIT and Basti Sugar Mills Co. Ltd. v. CIT held that if basic material facts are falsely stated, reassessment proceedings are justified. Third Member Opinion: The third member agreed with the dissenting opinion, concluding that: - The excess sales tax collected constituted income for the years concerned. - The specific information required by the Assessing Officer was not provided by the assessee, and the information given was misleading. - The reopening of assessment under Section 147(a) was justified due to the non-disclosure of true facts regarding the sales tax liability. 2. Assessment of Excess Sales Tax Collected by the Assessee: Majority Opinion: - The majority did not specifically address the merits of assessing the excess sales tax collected as income, focusing instead on the procedural validity of the reassessment proceedings. Dissenting Opinion: - The dissenting member held that the excess sales tax collected by the assessee without a corresponding liability was income and, therefore, liable to tax. - The assessee admitted that no amount had been refunded to customers, reinforcing the position that the excess sales tax collected was income. Third Member Opinion: - The third member concurred with the dissenting opinion that the excess sales tax collected constituted income for the relevant assessment years. - The sales tax collected formed part of the trading receipts, and without a corresponding liability, it was taxable as income. Conclusion: The final decision, based on the majority and third member opinions, was that the reassessment proceedings under Section 147(a) were justified, and the excess sales tax collected by the assessee constituted taxable income for the assessment years 1978-79 and 1979-80. The appeals were dismissed, and the reassessment orders were upheld.
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