Reassessment based on later appreciation of recorded material and taxation of unexplained jewellery as undisclosed income upheld.

Reassessment may be validly initiated when material already on record later acquires legal significance, even if the notice was originally framed under a different clause, and the reopening can be sustained on the clause supported by that material. Here, reconciliation of the balance sheet, disclosure certificate, and wealth-tax records provided information for reopening, so the reassessment was upheld. Unexplained jewellery not covered by the disclosure certificate and not supported by satisfactory evidence of acquisition or source may be treated as income from undisclosed sources under section 69A, and the addition was sustained for the balance jewellery.

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Issues: (i) Whether the reassessment was validly initiated on the basis of information emerging from the records and, if the notice was issued under one clause, it could be supported under the other clause. (ii) Whether the value of the jewellery not covered by the disclosure certificate was rightly brought to tax as income from undisclosed sources under section 69A.

Issue (i): Whether the reassessment was validly initiated on the basis of information emerging from the records and, if the notice was issued under one clause, it could be supported under the other clause.

Analysis: The assessee had filed the balance sheet and the disclosure certificate before the original assessment. The recorded facts showed that the Income-tax Officer later reconciled the balance sheet with the disclosure certificate during wealth-tax proceedings and then realised that the jewellery shown in the wealth-tax return was not covered by the certificate. That later awareness constituted information for reopening. The reassessment was therefore sustainable even though it had been styled under section 147(a), because the material supported reopening on the basis of section 147(b).

Conclusion: The reassessment was held to be valid and the challenge to reopening failed.

Issue (ii): Whether the value of the jewellery not covered by the disclosure certificate was rightly brought to tax as income from undisclosed sources under section 69A.

Analysis: The disclosed marriage jewellery was accepted only to the limited extent supported by the explanation and valuation. For the balance jewellery, the assessee failed to produce satisfactory evidence of acquisition or source. In those circumstances, the unexplained value was treated as the assessee's income from undisclosed sources.

Conclusion: The addition under section 69A was upheld and was against the assessee.

Final Conclusion: The reassessment and the addition for unexplained jewellery were both sustained, so the assessee obtained no relief in the appeal.

Ratio Decidendi: Material already on record may amount to information for reopening when its legal significance is later appreciated during assessment proceedings, and unexplained jewellery lacking a satisfactory source can be assessed as income from undisclosed sources.

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