Reopening of assessment requires objective material showing escaped income; sufficiency of evidence can raise a referable legal question.

Reopening of assessment under section 34 of the Income-tax Act is valid only where the Income-tax Officer has objective material giving rise to a reason to believe that income has escaped assessment; mere suspicion, satisfaction, or rumour is insufficient. On the facts discussed, no additional material was shown to justify the reopening, so the point was treated as a question of law fit for reference. The further challenge to the addition of assessable income was also treated as a legal question because it turned on whether there was material evidence to support the further sum and whether the later action was merely a review of the original assessment on the same material. The Tribunal was directed to state the case and refer both questions.

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Issues: (i) Whether the reopening of the assessment under section 34 of the Income-tax Act was in accordance with law; (ii) Whether there was material evidence to sustain the addition of Rs. 50,000 to the assessable income.

Issue (i): Whether the reopening of the assessment under section 34 of the Income-tax Act was in accordance with law.

Analysis: The power to reopen under section 34 arises only when the Income-tax Officer has reason to believe that income, profits or gains have escaped assessment. Reason to believe requires more than mere satisfaction, suspicion, or rumour, and must rest on reasonable grounds. The existence of such material was challenged as a question of law, and no additional material justifying reopening was indicated in the order or shown to the Court.

Conclusion: The issue was held to raise a question of law requiring a statement of case by the Tribunal.

Issue (ii): Whether there was material evidence to sustain the addition of Rs. 50,000 to the assessable income.

Analysis: The challenge was that the black-marketing element had already been considered in the original assessment, so the later action amounted to a review on the same material rather than taxation of escaped income. It was further contended that there was no material on record to justify sustaining the additional sum beyond the amount already assessed. This also involved a legal question concerning the evidentiary basis for the addition.

Conclusion: The issue was held to raise a question of law requiring reference to the Court.

Final Conclusion: The petition succeeded and the Tribunal was directed to state the case and refer both questions for decision.

Ratio Decidendi: Reopening under section 34 requires objective material giving rise to a reason to believe that income has escaped assessment, and the existence or sufficiency of such material may itself raise a referable question of law.

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