Full disclosure of primary facts governs reassessment, and corrected residential status can render foreign funds taxable in India.

Reassessment under section 34 of the Indian Income-tax Act, 1922 is valid where the assessee fails to make a full and true disclosure of primary facts, including correct residential status, and such non-disclosure gives the Income-tax Officer prima facie grounds to believe income has escaped assessment. On that basis, the assessee's status was treated as resident but not ordinarily resident. The sum brought from East Africa was then assessable in the relevant assessment year under section 4(1)(b)(iii), because once that residential status was fixed, the amount brought into India became chargeable on the facts found.

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Issues: (i) Whether reassessment could be initiated under section 34 of the Indian Income-tax Act, 1922 on the ground that the assessee had not fully and truly disclosed all material facts, including his correct residential status; (ii) whether the sum of Rs. 40,000 brought from East Africa in January 1946 was assessable in the assessment year 1946-47 under section 4(1)(b)(iii) of the Indian Income-tax Act, 1922.

Issue (i): Whether reassessment could be initiated under section 34 of the Indian Income-tax Act, 1922 on the ground that the assessee had not fully and truly disclosed all material facts, including his correct residential status.

Analysis: The decisive question was whether there had been a failure to disclose primary facts necessary for assessment. The Court held that the assessee had omitted to disclose material facts relating to substantial investments and also wrongly described his residential status. Such non-disclosure could validly found reassessment jurisdiction, because the duty of the assessee was to disclose all primary facts fully and truly, and the Income-tax Officer was entitled to act where there were prima facie grounds for believing that material facts had been withheld.

Conclusion: The reassessment under section 34 was valid and the finding that the assessee's correct status was resident but not ordinarily resident was upheld, against the assessee.

Issue (ii): Whether the sum of Rs. 40,000 brought from East Africa in January 1946 was assessable in the assessment year 1946-47 under section 4(1)(b)(iii) of the Indian Income-tax Act, 1922.

Analysis: Once the assessee was held to be resident but not ordinarily resident, the amount brought into India became chargeable in the relevant assessment year. The Court also held that the conclusion was supported by the surrounding facts showing that the assessee had settled in India and had no intention of returning to Africa, and that the reassessment could rely on facts existing during the accounting period.

Conclusion: The amount of Rs. 40,000 was rightly held assessable, against the assessee.

Final Conclusion: Both reference questions were answered in favour of the Revenue, and the assessee's challenge to the reassessment and the inclusion of Rs. 40,000 failed.

Ratio Decidendi: Reassessment is valid where the assessee has failed to make a full and true disclosure of primary facts, and a correct finding on residential status may be reached in reassessment proceedings if the non-disclosure has resulted in escapement of income.

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