Reassessment jurisdiction requires nondisclosure of primary facts; a later change in legal interpretation cannot justify reopening.

Reassessment under section 34(1)(a) of the Income-tax Act, 1922 requires escaped assessment to arise from the assessee's omission or failure to disclose fully and truly all primary material facts. Once those facts are disclosed, the assessee is not required to state the legal inference to be drawn from them. As the recorded reasons did not show any such failure and the reopening rested only on a later change in legal interpretation, the jurisdictional condition was not met and the notices were without jurisdiction.

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Issues: Whether the notices issued for reassessment under section 34(1)(a) of the Income-tax Act, 1922 were without jurisdiction because the income had escaped assessment not by reason of any omission or failure by the assessee to disclose fully and truly all material facts necessary for assessment.

Analysis: The precondition for action under section 34(1)(a) is that escaped assessment must result from the assessee's omission or failure to disclose fully and truly all primary and material facts. Once the primary facts are disclosed, the assessee is not bound to state the legal inferences to be drawn from them. On the material placed before the Income-tax Officer, the earlier assessments had proceeded on the basis that receipts from sales in British India were not taxable in the hands of a non-resident company under the then prevailing view of law. The recorded reasons for reopening did not show that the alleged under-assessment flowed from any failure by the assessee to disclose material facts, and the later change in legal position could not by itself supply jurisdiction under section 34(1)(a).

Conclusion: The notices under section 34(1)(a) were without jurisdiction and the proceedings based on them could not continue.

Ratio Decidendi: Reassessment under section 34(1)(a) cannot be initiated unless the escaped assessment is attributable to the assessee's failure to disclose fully and truly all primary material facts; a mere subsequent change in legal interpretation does not satisfy that jurisdictional requirement.

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