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Issues Involved:
1. Validity of the assessment under section 34(1)(a) of the Income-tax Act, 1922. 2. Justification for initiating the second proceeding under section 34(1)(a). 3. Whether the Tribunal's findings were based on evidence or were perverse. Detailed Analysis: 1. Validity of the assessment under section 34(1)(a) of the Income-tax Act, 1922: The primary legal question addressed was whether the assessment of the assessee under section 34(1)(a) was in accordance with law. The court examined the original assessment made on November 30, 1950, where the assessee declared an income of Rs. 30,000 based on an estimated turnover of Rs. 4,00,000. This assessment was made after the assessee claimed to have no business accounts. The Income-tax Officer (ITO) conducted an enquiry and, in the absence of supporting evidence, assessed the income under section 23(3). The court noted that the Appellate Assistant Commissioner (AAC) upheld this assessment, confirming the estimated profit at 7.5% on the turnover. The second assessment was initiated after the assessee made a voluntary disclosure under the Tyagi Scheme in December 1951, revealing additional income. The ITO sought to reopen the assessment under section 34, citing nondisclosure of material facts, specifically a significant transaction with a Bombay party. The court found that the ITO had reasonable grounds to believe that the assessee's income was under-assessed due to nondisclosure of material facts, justifying the initiation of proceedings under section 34(1)(a). 2. Justification for initiating the second proceeding under section 34(1)(a): The court addressed the assessee's contention that the second reassessment was uncalled for after the voluntary disclosure. The assessee argued that the original assessment was based on an estimate without any basis, and subsequent assessments showed lower profit margins, challenging the 7.5% profit estimate. The AAC found that the original assessment was based on a significantly lower turnover than the actual transactions, indicating under-assessment. The Tribunal upheld this finding, noting that the assessee failed to disclose the Bombay transaction and kept silent about it even during the voluntary disclosure. The court agreed with the Tribunal's conclusion that the assessee's nondisclosure warranted the application of section 34(1)(a). The court also rejected the argument that the use of the term "information" by the ITO indicated a proceeding under section 34(1)(b), which would be time-barred. The court clarified that the term was used in the context of nondisclosure under section 34(1)(a), and the initiation of the second proceeding was justified. 3. Whether the Tribunal's findings were based on evidence or were perverse: The assessee challenged the Tribunal's findings on several grounds, including the alleged default in filing the return under section 22(2), misleading the department about bank accounts and dealings, and the nature of the Bombay transaction. The court noted that the assessee did not challenge the Tribunal's findings of fact in the application under section 66(1) and failed to move the court under section 66(2) for a direction to refer those questions. The court emphasized that its advisory jurisdiction did not allow it to interfere with the Tribunal's findings of fact unless there was no evidence or the findings were perverse. The court found no grounds to reverse the Tribunal's findings, as the assessee did not take the necessary procedural steps to challenge them. Conclusion: The court concluded that the ITO was justified in initiating the proceeding under section 34(1)(a) and that the second proceeding was within the period of limitation. The Tribunal's findings were based on evidence, and there was no scope for reversing them in the absence of specific questions challenging the findings. The court answered the question in the affirmative, upholding the validity of the assessment under section 34(1)(a). The applicant was ordered to pay costs to the respondent.
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