False disclosure of primary facts can justify reassessment; change of opinion does not bar reopening where material facts were untrue.

Reassessment under section 34(1)(a) of the Indian Income-tax Act, 1922 was held permissible where the assessee had disclosed commission payments as made for services rendered, but the later material showed that no such services were in fact rendered. The court distinguished between a full and true disclosure of primary facts, which merely leaves inferences to the assessing officer, and an untrue disclosure of a basic fact, which can justify reopening. Because the disclosure itself was false, the case was not treated as a mere change of opinion, and the prior assessments did not bar reopening.

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Issues: Whether reassessment under section 34(1)(a) of the Indian Income-tax Act, 1922 was valid where the assessee had stated that commission was paid to a selling agent for services rendered, but the later finding was that no such services had in fact been rendered.

Analysis: Section 34(1)(a) permits reopening where income has escaped assessment because of omission or failure to disclose fully and truly all material facts necessary for assessment. The controlling distinction is between a case where the assessee has made a full and true disclosure of primary facts, leaving the officer to draw inferences, and a case where the very material fact disclosed is false. On the facts accepted as concluded by the taxing authorities, the assessees had represented that the commission payments were for services rendered by the selling agent, whereas the later material showed that no such services were in fact rendered. In such a situation, the matter is not a mere change of opinion on the same true facts; the reassessment is founded on untrue disclosure of a basic fact. The prior original assessments, even though they contained enquiries, did not record any formed opinion so as to bar reopening where the disclosure itself was false.

Conclusion: Reassessment under section 34(1)(a) was rightly invoked, and the answer was against the assessee and in favour of the Revenue.

Final Conclusion: The references were answered by upholding the validity of the reopening and sustaining the reassessment jurisdiction on the footing of failure to make a full and true disclosure of material facts.

Ratio Decidendi: Where the assessee's disclosure of a primary fact is found to be untrue, reassessment is permissible under section 34(1)(a) of the Indian Income-tax Act, 1922, and the bar against mere change of opinion does not apply.

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