Reassessment for non-disclosure of a material primary fact was upheld where the sale date affected capital gains taxability.

Reassessment under section 147(a) was upheld because the assessee failed to disclose a primary material fact, namely the actual date of sale of a capital asset. The disclosure of cost, written down value, and sale price was insufficient, as the date of transfer was essential to determine whether capital gains were taxable under the relevant cut-off date. The omission was treated as a failure to make full and true disclosure of all material facts necessary for assessment, and the resulting escapement of income sustained jurisdiction for reopening. The legal principle applied is that non-disclosure of a material primary fact, rather than a mere legal inference, is enough to justify reassessment.

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Issues: Whether the reassessment proceedings under section 147(a) of the Income-tax Act, 1961, were validly initiated on the ground that the assessee had omitted to disclose the actual date of sale of a capital asset, resulting in escapement of capital gains from assessment.

Analysis: For reassessment beyond four years, the statutory preconditions are that the Income-tax Officer must have reason to believe that income has escaped assessment and that such escapement occurred because of the assessee's omission or failure to disclose fully and truly all material facts necessary for assessment. The assessee had disclosed the cost, written down value, and sale price of the machine, but did not disclose the actual date of sale. That date was material because capital gains under section 12B of the Indian Income-tax Act, 1922, were taxable only if the transfer took place after 31 March 1956. The machinery account merely showed a sale during Samvat year 2012 and did not reveal whether the sale occurred before or after that cut-off date. The non-disclosure concerned a primary fact, not a legal inference. On the record, the escapement of capital gains was attributable to that omission.

Conclusion: The reassessment was validly initiated under section 147(a), and the question was answered in the affirmative, in favour of the Revenue.

Ratio Decidendi: For reopening under section 147(a), failure to disclose a primary fact that is material to taxability and that leads to escapement of income is sufficient to sustain jurisdiction; disclosure of secondary facts or legal inferences does not meet the statutory requirement of full and true disclosure.

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