Reassessment on later reliable information upheld where partnership income was left open at the original assessment.

After the 1948 amendment, reassessment under section 34(1)(b) was available where the Income-tax Officer, on information then in possession, had reason to believe income had escaped assessment or been under-assessed. The provision was not confined to discovery of wholly new facts unknown at the original assessment. Because the officer had not accepted the assessee's partnership-income figures and had left the matter open pending reliable information, later completion of the partnership assessments supplied the basis for reopening. The notice under section 34(1)(b) was therefore held valid, and section 23 did not prevent completion of the original assessment on the available material.

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Issues: Whether a notice issued under section 34(1)(b) was valid where the Income-tax Officer, at the original assessment, had not accepted the assessee's figures regarding partnership income and had left the matter to be adjusted later on receipt of reliable information.

Analysis: The relevant language of section 34(1)(b) after the 1948 amendment authorised reassessment where the Income-tax Officer, in consequence of information in his possession, had reason to believe that income had escaped assessment or been under-assessed. The earlier formulation, which depended on definite fresh information leading to discovery, had a narrower scope and the earlier authorities relied on by the assessee were based on that language. On the facts, the officer had not completed the assessment on the footing that the partnership income was nil or finally determined; he had expressly kept the matter open because he did not regard the figures as trustworthy. When the partnership assessments were later completed and reliable figures became available, the statutory condition for reopening was satisfied. Section 23 did not prevent the officer from completing the assessment on the available material, even if later reassessment might become necessary.

Conclusion: The notice under section 34(1)(b) was valid and legal, and the question was answered in the affirmative.

Final Conclusion: The reassessment machinery could be used on receipt of later reliable information where the original assessment had been made without accepting the disputed figures, and the reference was answered in favour of the Revenue.

Ratio Decidendi: After the 1948 amendment, section 34(1)(b) permits reopening when the Income-tax Officer, on the basis of information then in possession, has reason to believe that income has escaped assessment, and the provision is not confined to cases involving discovery of entirely new facts unknown at the original assessment.

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