Full disclosure and taxable receipts: reassessment upheld where payments were linked to services, not exempt gifts.

Reassessment was valid because the assessee had not fully and truly disclosed all primary facts material to assessment under section 34 of the Income-tax Act, 1922. The payments received from Princess Sita Devi were held taxable as income, not exempt gifts, because the record indicated they were referable to services rendered and the assessee produced no evidence to prove a genuine gift. The court stated that an assessee need not disclose legal inferences, but must disclose all material primary facts; where receipts are admitted, the burden lies on the assessee to establish exemption as a gift. Payments connected with employment or service are not exempt merely because they were voluntary.

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Issues: Whether the sums received by the assessee from Princess Sita Devi were taxable receipts or exempt gifts, and whether reassessment under section 34 of the Income-tax Act, 1922 was valid on the ground of full disclosure of material facts.

Analysis: The relevant test under section 34 was whether the assessee had fully and truly disclosed all primary facts necessary for assessment. The record showed that the assessee did not disclose the real relationship of master and servant between herself and Princess Sita Devi, and the department had material before it from enquiries and documents indicating that the payments were made in recognition of services rendered. The court held that an assessee is not required to state legal inferences, but must disclose all material primary facts. Once the receipts were admittedly received, the burden lay on the assessee to establish that they were gifts and therefore exempt under section 4(3)(vii); no evidence was produced to support that claim. The court further held that the payments were traceable to employment and not to personal esteem, and therefore the principle governing a genuine personal gift was inapplicable.

Conclusion: Reassessment under section 34 was justified, and the receipts were taxable as income and not exempt gifts.

Final Conclusion: The reference was answered against the assessee and in favour of the department, with costs awarded to the revenue side.

Ratio Decidendi: For reopening under section 34, the assessee must disclose all primary material facts truly and fully, and payments referable to services or employment are not exempt as gifts merely because they were made voluntarily.

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