Accrual of income under section 41(2) and reopening for nondisclosure were upheld on ascertainment and disclosure principles.

Income under section 41(2) was held to accrue when the amount payable for the acquired undertaking became finally ascertained and enforceable by civil court decree, not merely on the date of acquisition or actual receipt. Pendency of an appeal against the decree did not prevent accrual because taxability depends on accrual, not receipt. The Court also held that reassessment under section 147(a) was valid where the assessee's return and balance-sheet did not disclose the decree, the decretal amount, or other primary facts necessary to determine taxability under section 41(2). On both issues, the Revenue's position was upheld.

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Issues: (i) Whether the amount payable for the acquired undertaking accrued as income under section 41(2) of the Income-tax Act, 1961 in the assessment year in question. (ii) Whether reassessment under section 147(a) of the Income-tax Act, 1961 was justified for want of full and true disclosure of material facts.

Issue (i): Whether the amount payable for the acquired undertaking accrued as income under section 41(2) of the Income-tax Act, 1961 in the assessment year in question.

Analysis: The amount payable on acquisition became payable on the date of acquisition, but in the facts of the case it became due for payment only when the civil court passed a decree in terms of the award. The award itself, having been filed in court after Court-directed arbitration, was not enforceable until the court made it a rule of the court. Pendency of an appeal against the decree did not prevent accrual, because taxability under the Act depends on accrual of income and not on actual receipt. Once the amount was quantified by the decree, the income became ascertainable and taxable in the relevant assessment year.

Conclusion: The amount accrued as income under section 41(2) in the assessment year in question, and the Tribunal was not justified in holding otherwise. This issue was decided in favour of Revenue.

Issue (ii): Whether reassessment under section 147(a) of the Income-tax Act, 1961 was justified for want of full and true disclosure of material facts.

Analysis: The return showed nil income and the balance-sheet did not disclose the decree, the decretal amount, or the facts necessary to determine the taxability and quantum of income under section 41(2). Disclosure of some related facts in the balance-sheet or in correspondence did not amount to full and true disclosure of all primary material facts necessary for assessment. Since the Assessing Officer was not informed of the decisive facts giving rise to taxability, the escaped income could validly be brought to reassessment under section 147(a).

Conclusion: Reassessment under section 147(a) was justified. This issue was decided in favour of Revenue.

Final Conclusion: Both referred questions were answered against the assessee, sustaining taxability of the amount and the reopening of assessment.

Ratio Decidendi: For section 41(2), income accrues when the amount payable becomes finally ascertained and due for enforcement, and where material facts necessary to determine such taxability are not fully disclosed, reassessment under section 147(a) is permissible.

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