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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 ..... m 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 earned by it from the business with H. Manory Ltd. The Income-tax Officer accepted the return filed by the assessee and included in computing the total income for the assessment year 1949-50, Rs. 87,937 only as the profit ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... istant 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 profit and loss account that the amount paid to Ratiram Tansukhrai was the share of the latter in the partnership, whereas no such share was payable to Ratiram Tainsukhrai. In appeal against the order of the Appellate Assistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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 such income, profits or gains....." The Income-tax Officer had, in consequence of information in his possession that the agreement with Ratiram Tansukhrai was a sham transaction, reason to believe that income chargeable to tax had esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al 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 evidence from which material facts could with due diligence have been discovered does not necessarily amount to disclosure within the meaning of section 34(1), but where on the evidence and the materials produced the Income-tax Officer could ..... X X X X Extracts X X X X X X X X Extracts X X X X
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