Reassessment requires failure to disclose material facts, not merely a later inference from facts already known.

Proceedings for reassessment under section 34(1)(a) were invalid where the assessing officer already knew the primary facts before the original assessment, including the police raid, seizure of books, the alleged cash discovery and the assessee's explanation. The governing requirement is not merely escapement of income, but escapement caused by the assessee's failure to disclose fully and truly all material facts necessary for assessment. Once those primary facts are already before the authority from any source, no further disclosure by the assessee is required. The later reassessment was based only on a fresh inference from the same material, not on any new non-disclosure, and was therefore not in accordance with law.

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Issues: Whether proceedings under section 34(1)(a) of the Indian Income-tax Act, 1922, were validly initiated on the ground that the assessee had failed to disclose fully and truly all material facts necessary for assessment.

Analysis: The relevant facts concerning the alleged cash discovery were already within the Income-tax Officer's knowledge before completion of the original assessment, including the police raid, seizure of books, the alleged cash amount, and the explanation said to have been given. On those facts, the officer had the primary facts necessary to draw the appropriate inference at the original stage. For section 34(1)(a), the jurisdictional conditions require not only escapement of income but also escapement by reason of the assessee's omission or failure to make a full and true disclosure of material facts. Once the primary facts are already before the assessing authority from whatever source, no further disclosure by the assessee is required. The reassessment was therefore founded only on a later inference from the same material and not on any fresh non-disclosure by the assessee.

Conclusion: The initiation of proceedings under section 34(1)(a) was not in accordance with law and the question was answered in favour of the assessee.

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