TMI Blog1946 (5) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... January 28, 1941. He was assessed in respect of income from profession, property, interest and dividends. In the course of the assessment proceedings, it transpired that the assessee had purchased and sold shares in companies and suffered losses in the course of those transactions. Such losses were not allowed as deductions as, in the opinion of the Income-tax Officer, the assessee was not carrying on business in the sale and purchase of shares. The said officer observed :- Owing to war the assessee tried to dispose of his shares and purchase new ones. Purchasing and selling of shares is not his business. It appears that the officer who made the original assessment was transferred and was succeeded by another officer. On February 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the proceedings taken by the Income-tax Officer were justified by the provisions of Section 34. In other words, were the terms of Section 34 satisfied before the Income-tax Officer took action under that section ? Section 34, so far as it is material, is as follows:- If in consequence of definite information which has come into his possession the Income-tax Officer discovers that income, profits or gains chargeable to income-tax have escaped assessment in any year, or have been under-assessed, or have been assessed at too low a rate, or have been the subject of excessive relief under this Act, the Income-tax Officer may, in any case in which he has reason to believe that the assessee has concealed the particulars of his income or deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mere gossip or rumour, must lead to the discovery, or 'belief' as we have described it above. It was pointed out that a mere change of opinion based on the same facts and figures does not amount to discovery within the meaning of this section. In order to judge whether the requirements mentioned above of Section 34-which, in our opinion, are a condition precedent to the applicability of the section-are satisfied, it is always necessary to examine how the Income-tax Officer acted before proceeding to issue a notice under Section 34. It would have been helpful if it had been stated in the supplementary assessment order what was the definite information in consequence of which the discovery in question was made by the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied. The question of vital importance in this case is whether the discovery made by the Income-tax Officer was in consequence of such definite information as is contemplated by the section. As we have stated above, if discovery is the result of a further investigation or a closer study of the facts and circumstances of the case, such discovery would not be in consequence of definite information within the meaning of the section. We have quoted above the orders of the Income-tax Officer and the Appellate Assistant Commissioner and we do not find any trace of any definite information having come into the possession of the Income-tax Officer resulting in the discovery of under-assessment. We have, therefore, no option but to hold that the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the consequence. As I see it, the discovery itself is one thing, while the definite information in consequence of which it is made is an entirely different thing. The ultimate discovery is, of course, in any case, that income, profits or gains chargeable to tax have escaped assessment. But that discovery is itself a mere conclusion of law and must be based on the discovery of facts. And both these discoveries are required by the section to have been made in consequence of definite information which has come into the possession of the Income-tax Officer. In the present case, in my opinion, the whole trouble has arisen from a failure to distinguish between what was discovered and the definite information in consequence of which th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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