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Issues Involved:
1. Validity of reassessment proceedings under section 147(a) of the Income-tax Act, 1961. 2. Omission or failure by the assessee to disclose material facts. 3. Escapement of income from assessment. Issue-wise Detailed Analysis: 1. Validity of reassessment proceedings under section 147(a) of the Income-tax Act, 1961: The primary question was whether the reassessment proceedings initiated by the revenue for the assessment year 1957-58 were valid under section 147(a). The court noted that for the Income-tax Officer to have jurisdiction to issue a notice for reassessment beyond four years from the end of the relevant year, two conditions must be satisfied: - The Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment. - Such escapement must be due to the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. 2. Omission or failure by the assessee to disclose material facts: The court examined whether the assessee had failed to disclose material facts necessary for its assessment. The assessee did not show the capital gain from the sale of a rotary machine in its return for the assessment year 1957-58. The return specified various heads of income, including capital gains, but the assessee made no entry under this head. Additionally, the machinery account submitted by the assessee did not show the date of the sale of the rotary machine, which was crucial to determine the taxability of the capital gain under section 12B. The court emphasized that the "material facts" required to be disclosed are primary facts necessary for the assessment. The assessee disclosed the cost price, written down value, and sale price of the rotary machine but failed to disclose the actual date of sale, which was a primary fact necessary to determine the taxability of the capital gain. 3. Escapement of income from assessment: The court considered whether the capital gain of Rs. 25,450 escaped assessment due to the assessee's omission or failure to disclose the actual date of sale. The court rejected the argument that the escapement was due to inadvertence on the part of the Income-tax Officer. The court found it reasonable to assume that the Income-tax Officer might have concluded that the sale occurred before 31st March, 1956, based on the blank entry under capital gains in the return and the "nil" entry in Part VII of the return. The court concluded that the capital gain escaped assessment due to the assessee's failure to disclose the actual date of sale. Conclusion: The court held that the conditions for initiating proceedings under section 147(a) were satisfied, and the reopening of the assessment for the assessment year 1957-58 was valid. The court answered the referred question in the affirmative and directed the assessee to pay the costs of the reference to the Commissioner.
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