Reopening assessment, unexplained credits, and rectification powers were upheld where statutory conditions and evidentiary support were established.

The text explains that reopening of assessment is conditional on the Department showing the statutory basis for escaped income, while the assessee need not first disprove it. It also states that unexplained credits in the names of close relatives may be treated as the assessee's taxable income when the explanations are rejected and the inference is supported by material, without perversity in the Tribunal's findings. Finally, it notes that the Tribunal may rectify its mistake under section 35 when the statutory requirements for correction are met and jurisdiction exists.

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Issues: (i) Whether proceedings under section 34 were validly initiated and whether the Department bore the burden of showing that income had escaped assessment; (ii) whether unexplained credits standing in the names of the assessee's mother and sister could be treated as the assessee's income and whether the Tribunal's findings on undisclosed income were supported by material; (iii) whether the Tribunal had jurisdiction to correct its mistake under section 35 at the Department's instance.

Issue (i): Whether proceedings under section 34 were validly initiated and whether the Department bore the burden of showing that income had escaped assessment.

Analysis: The power to reopen an assessment is conditional and the authority invoking it must establish the facts that attract the statutory power. The assessee is not required in the first instance to prove the negative. The material must show that income had escaped assessment and that the statutory conditions for reopening were satisfied.

Conclusion: The burden lay on the Department to justify reopening, and the initiation of proceedings was upheld on the facts found.

Issue (ii): Whether unexplained credits standing in the names of the assessee's mother and sister could be treated as the assessee's income and whether the Tribunal's findings on undisclosed income were supported by material.

Analysis: Once the explanations offered for the credits were rejected as unsatisfactory, the authorities were entitled to draw an inference that the amounts represented taxable income of the assessee. That inference was not confined to entries appearing in the assessee's own name; it could also be drawn where the entries stood in the names of close relations, unless the conclusion was perverse or unsupported by evidence. The Tribunal's findings were based on material and were not shown to be perverse.

Conclusion: The credits were rightly treated as the assessee's undisclosed income, and the findings were sustained.

Issue (iii): Whether the Tribunal had jurisdiction to correct its mistake under section 35 at the Department's instance.

Analysis: The Tribunal possessed jurisdiction to rectify the mistake pointed out by the Department. The correction was competent in law, and the challenge to the rectification failed.

Conclusion: The rectification under section 35 was valid and within jurisdiction.

Final Conclusion: The references were answered against the assessee and in favour of the Revenue on all material questions decided, including reassessment, treatment of unexplained credits as taxable income, and rectification of the Tribunal's order.

Ratio Decidendi: Where an explanation for credits in the account books is rejected as unsatisfactory, the taxing authority may draw an inference that the amounts represent the assessee's taxable income, and the power to reopen or rectify may be exercised when the statutory conditions are established and jurisdiction exists.

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