Judgment

HEGDE, J.: This is an appeal by certificate under section 66A (2) of the Indian Income-tax Act, 1922 (to be hereinafter referred to as the Act ). The assessee is a Private Limited Co. The assessment year with which we are concerned in this case is 1952-53, the relevant accounting year ending on March 31, 1952. The assessment for that year was completed by the Income-tax Officer on August 4, 1953. He determined the assessee s business profits of the year ended on March 31, 1952 at Rs. 33,096/- subject to the assessee s claim of unabsorbed depreciation brought forward to the extent of Rs. 42,000/- and odd. After setting off the unabsorbed depreciation to the extent of Rs. 33,096/-, he determined the assessee s total income for the assessment year 1952-53 at Nil. In the course of the assessment proceedings, the assessee company informed the Income-tax Officer by its letter of July 2, 1953 about the sale of the assessee company to the Amalgamated Electricity Co. (Belgaum) Ltd. (to be hereinafter referred to as the "Belgaum Co."). It also brought to the notice of the Income-tax Officer, the following documents :

(a) Appropriate extract from the minutes of the meeting of the Board of Directors of the Belgaum Company held on 16-4-1951 agreeing to purchase the assets of the assessee company;

(b) Resolution passed on 19-9-1951 by the Board of Directors for the assessee Company deciding to sell the concern to the Belgaum Company;

(c) Agreement dated 19-9-1951 between the said two companies;

2. Later on in response to a letter from the Income-tax Officer, the assessee company informed him the manner in which the sale price of Rs. 9,35,246/15/8 was determined. It also submitted a statement of unabsorbed depreciation. That statement set out the depreciation accrued as well as that allowed. The entire consideration for the sale was paid in cash on October 4, 1951 and the profits earned by the assessee for the period of six months ended on September 30, 1951 were paid over to the Belgaum Company. In completing the original assessment, the Income-tax Officer observed :

"On going through these documents and the copies of the Resolution passed by the shareholders of the Amalgamated Electricity Co., it is seen that no adjustment is necessary in the matter. The position of the company s total income is determined as under ..."

3. We may mention at this stage that the consideration received by the assessee company for the sale of its assets was much more than their written down value. Yet the assessee company did not show in its return any profits under Section 10 (2) (vii) of the Act nor did it show the price received in excess of the written down value of the assets sold in Part I of Section D of the Return.

4. Sometime later the Income-tax Officer found out that the profits deemed to have been earned by the assessee Company under Section 10 (2) (vii) had not been assessed. Hence after obtaining the sanction of the Commissioner, he commenced proceedings under Section 34 (1) (a). After hearing the assessee, the Income-tax Officer re-assessed the assessee on August 26, 1957 determining its total income for the assessment year in question at Rupees 4,48,893 on the basis that the profits earned by the assessee under Section 10 (2) (vii) were Rupees 4,988,386. He rejected the contention of the assessee that the notice issued by him under Section 34 (1) (a) was invalid inasmuch as it had placed before him all the primary facts necessary for the assessment. The assessee unsuccessfully contended that there was no basis for his conclusion that there was any failure on its part to disclose fully and truly all material facts necessary for its assessment. The Income-tax Officer opined that the failure of the assessee to disclose its profits under S. 10 (2) (vii) brought the case within the scope of S. 34 (1) (a). In appeal the Appellate Assistant Commissioner concurred with the view taken by the Income-tax Officer. he held that the assessee had a statu