Reassessment jurisdiction requires non-disclosure of primary facts; disputed inferences from disclosed facts do not justify notice.

Reassessment under section 34(1)(a) of the Income-tax Act, 1922 after four years required the Income-tax Officer to have reason to believe both that income had escaped or been under-assessed and that this resulted from failure to disclose fully and truly all primary material facts. The assessee's duty extended to disclosure of primary facts, including material facts embedded in books or documents not fairly brought to the officer's attention, but it did not extend to stating legal inferences or conclusions drawn from those facts. On the material discussed, the alleged non-disclosure was only a disputed inference, not suppression of a primary fact, so the notices lacked jurisdiction and relief under article 226 was available.

---

---

Issues: Whether the notices issued under section 34(1)(a) of the Income-tax Act, 1922 were without jurisdiction for want of the necessary conditions precedent, namely a reason to believe that income had been under-assessed by reason of failure to disclose fully and truly all material facts necessary for assessment.

Analysis: The statutory scheme made the existence of two conditions essential before reassessment could be initiated after four years: the Income-tax Officer must have reason to believe both that income had escaped assessment or been under-assessed and that such under-assessment resulted from omission or failure to disclose fully and truly all material primary facts. The duty of the assessee extended to disclosure of primary relevant facts, including facts embedded in books or documents that were not fairly brought to the assessing authority's attention, but it did not extend to stating the inferences or legal conclusions to be drawn from those facts. On the materials relied upon, the alleged non-disclosure that the company was not a dealer in shares or that its sales were casual transactions amounted only to a contested inference from disclosed facts, not suppression of a material primary fact. The record did not establish any material non-disclosure that could found jurisdiction under section 34(1)(a).

Conclusion: The notices were issued without jurisdiction because the statutory conditions precedent were not satisfied, and the assessee was entitled to relief under article 226.

Ratio Decidendi: For reassessment beyond the shorter limitation period, the assessee must have failed to disclose primary material facts necessary for assessment; a failure to state the inference or legal characterization of disclosed facts is not, by itself, a failure to disclose material facts, and cannot confer jurisdiction under section 34(1)(a).

---