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TMI Blog1971 (1) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... a profit and loss account disclosing in the relevant year of account Rs.1,75,875 as profit in a joint venture from H. Manory Ltd. and claimed that Rs. 87,937 being half the profit earned from H. Manory Ltd. was paid to Ratiram Tansukbrai under a partnership agreement. The assessee stated that on June 5, 1948, it had entered into an agreement with H. Manory Ltd. to do business in plywood chests and in consideration of financing the business the assessee was to receive 50% of the profits of the business. The assessee also claimed that it had entered into an agreement on October 7, 1948, with Ratiram Tansukhrai for financing the transactions of H. Manory Ltd. in the joint venture, and had agreed to pay to Ratiram Tansukhrai 50% of the profit e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot include the amount paid to Ratiram Tansukhrai. The Income-tax Officer reassessed the income under section 34(1)(a) and added Rs. 87,937 to the income returned by the assessee in the assessment year 1949-50. The Appellate Assistant Commissioner held that the Income-tax Officer was entitled to take action under section 34(1)(a) of the Income-tax Act, 1922, after the amendment in 1948, and to reopen the assessment if income had been under-assessed owing to the failure of the assessee to disclose fully and truly all material facts necessary for the assessment. He confirmed the order observing that the assessee had misled the Income-tax Officer into believing that there was a genuine arrangement with Ratiram Tansukhrai and had stated in the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or that year, or have been under-assessed .... or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed,..... he may in cases falling under clause (a) at any time within eight years and in cases falling under clause (b) at any time within four years of the end of that year, serve on the assessee,...... a notice containing all or any of the requirements which may be included in a notice under sub-section (2) of section 22 and may proceed to assess or reassess su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts disclosed, or otherwise, the assessing authority has to draw inferences as regards certain other facts ; and ultimately, from the primary facts and the further facts inferred from them, the authority has to draw the proper legal inferences, and ascertain on a correct interpretation of the taxing enactment, the proper tax leviable. " We are of the view that under section 34(1)(a) if the assessee has disclosed primary facts relevant to the assessment, he is under no obligation to instruct the Income-tax fficer about the inference which the Income-tax Officer may raise from those facts. The terms of the Explanation to section 34(1) also do not impose a more onerous obligation. Mere production of the books of account or other evide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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