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of <h1>Court validates Section 34 notice for 1940-41 assessment year based on specific information</h1> <h3>Gaya Ram Gabbu Lal Versus Commissioner of Income-Tax, U.P. and Ajmer Merwara</h3> Gaya Ram Gabbu Lal Versus Commissioner of Income-Tax, U.P. and Ajmer Merwara - [1951] 19 ITR 114 Issues:1. Validity of notice issued under Section 34 for the assessment year 1940-41.2. Whether the action taken under Section 34 was based on the discovery of definite information.3. Authority of the IVth Additional Income-tax Officer to make assessment without issuing fresh notices under Sections 22(4) and 23(2) of the Act.Analysis:Issue 1: Validity of notice under Section 34 for 1940-41The case involved a reference under Section 66(1) of the Indian Income-tax Act regarding assessments for the years 1940-41, 1941-42, and 1942-43. The Income-tax Officer issued a notice under Section 34 for the assessment year 1940-41 based on the discovery of specific information. The court held that the Income-tax Officer cannot issue a notice under Section 34 on mere suspicion but only when definite information leads to a reasonable belief that income has escaped assessment. The court found that the information in the possession of the Income-tax Officer justified the notice under Section 34, as the rates of purchases and fictitious deposits indicated a potential escape of income.Issue 2: Action based on discovery of definite informationThe court examined whether the Income-tax Officer's actions under Section 34 were justified based on the discovery of specific information. It was found that the Officer had sufficient grounds to believe that income had escaped assessment due to inflated purchase prices and fictitious deposits. The court emphasized that the Officer must be reasonably satisfied that income has escaped assessment before issuing a notice under Section 34, and in this case, the specific information available justified the action taken.Issue 3: Authority of the IVth Additional Income-tax OfficerThe question arose regarding the authority of the IVth Additional Income-tax Officer to make assessments without issuing fresh notices under relevant sections of the Act. The court referred to Section 5(7A) of the Indian Income-tax Act, which allows for the transfer of cases between officers without the need for re-issuing notices. The court concluded that fresh notices were not necessary in this case, as per the provisions of Section 5(7A). The court also noted that the officer in question had the authority to make assessment orders under the Excess Profits Tax Act, in addition to Income-tax duties.In conclusion, the court answered all three questions in favor of the department, upholding the validity of the notice issued under Section 34, the action taken based on definite information, and the authority of the IVth Additional Income-tax Officer to make assessments without fresh notices under the specified sections of the Act. The department was awarded costs amounting to &8377; 400.
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