Full and true disclosure bars reassessment when dividend income facts were already before the assessing authority.

Reassessment under section 34(1)(a) of the Indian Income-tax Act, 1922 was unavailable where the assessee had already disclosed the primary facts relating to dividend income and the Income-tax Officer knew the accounting method adopted at the original assessment. The omission to show that income in the relevant year's return did not amount to failure to disclose fully and truly all material facts, because any escapement arose from the authority's legal inference from disclosed facts, not from nondisclosure by the assessee. On those facts, reassessment could not be sustained.

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Issues: Whether the reassessment provisions under section 34(1)(a) of the Indian Income-tax Act, 1922 were attracted on the ground that dividend income assessable in the relevant year had not been shown in that year's return, although the same income had been disclosed in the return for the succeeding year.

Analysis: The material facts relating to the dividend income were already before the assessing authority. The assessee had consistently followed the same method of accounting for dividend income, namely, return on receipt basis, and that method was known to the Income-tax Officer at the time of the original assessment. On those facts, the omission to include the income in the relevant year's return did not amount to failure to disclose fully and truly all material facts necessary for assessment. The escapement, if any, arose from the assessing authority's conclusion on the legal effect of the disclosed facts and from the accounting method adopted, not from nondisclosure by the assessee.

Conclusion: Section 34(1)(a) of the Indian Income-tax Act, 1922 was not attracted, and the answer was in favour of the assessee.

Final Conclusion: Reassessment could not be sustained because the assessee had disclosed the primary facts and the case did not involve any failure to make a full and true disclosure of material facts.

Ratio Decidendi: Reassessment for escapement of income is not justified where all primary facts are already disclosed to the assessing authority and the alleged escapement results from the authority's own legal inference rather than from any failure by the assessee to disclose material facts fully and truly.

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