Reassessment notice invalid where primary facts were disclosed and only the revenue's inference on commission deduction was omitted.

An assessee satisfies the duty of disclosure under section 147(a) by placing all primary facts before the assessing authority; it is not obliged to supply the legal inference that the revenue should draw from those facts. Here, the assessee disclosed the commission claim and supporting books of account, so whether the payment was allowable required investigation by the Income-tax Officer. The failure to volunteer that the deduction was inadmissible was not a failure to disclose material facts. The Calcutta HC therefore held the reassessment notices under section 147(a) invalid and quashed the reassessment proceedings.

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Issues: Whether the reassessment notices issued under section 147(a) of the Income-tax Act, 1961 were valid when the assessee had disclosed the claim and supporting accounts but had not stated that the payee had rendered no services.

Analysis: The governing principle was that the assessee must disclose fully and truly all primary facts necessary for assessment, but is not bound to draw or supply the inference that the revenue authority itself must draw from those facts. Once the assessee placed before the assessing authority the claim for commission and the relevant books of account, the question whether the payment was allowable required investigation and inference by the Income-tax Officer. The omission to volunteer that the deduction was not admissible was not a failure to disclose material facts within the meaning of section 147(a).

Conclusion: The notices could not be sustained under section 147(a) and were invalid.

Final Conclusion: The reassessment proceedings founded on the impugned notices were quashed, and the writ application succeeded.

Ratio Decidendi: For reopening under section 147(a), the revenue must show failure to disclose primary material facts; an assessee is not required to disclose the legal inference that those facts do not support the claimed deduction.

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