Reassessment invalid where primary facts were disclosed and alleged escapement arose from the assessing officer's own oversight.

Reassessment under sections 147 and 148 of the Income-tax Act is not valid where all primary facts were already before the assessing authority and there was no failure by the assessee to disclose fully and truly all material facts. The reopening machinery cannot be used to correct an assessing officer's own oversight or failure to draw the proper legal inference from material already on record. Where the alleged escapement of income arises from such oversight rather than nondisclosure by the assessee, the notice for reassessment and the resulting proceedings are liable to be quashed.

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Issues: Whether the notice for reassessment under sections 147 and 148 of the Income-tax Act, 1961 was valid when the relevant primary facts were already before the assessing authority and there was no failure by the assessee to disclose fully and truly all material facts.

Analysis: The reopening provision could be invoked only if income had escaped assessment by reason of omission or failure on the part of the assessee to make a full and true disclosure of material facts. The earlier assessment had disclosed the drafts and the assessing authority had material before it to examine their nature and draw the necessary inferences. The omission, if any, was attributable to the assessing authority's own oversight in not making the proper inference on the facts already available, and not to any nondisclosure by the assessee. The reassessment machinery could not be used to correct an error arising from the original assessment officer's failure to draw the correct legal inference from facts already known.

Conclusion: The notice under section 148 and the consequential reassessment proceedings were invalid and liable to be quashed.

Ratio Decidendi: Reassessment cannot be sustained where all primary facts were already disclosed and the alleged escapement of income resulted from the assessing authority's own oversight rather than from the assessee's failure to disclose fully and truly all material facts.

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