1966 (4) TMI 19 - SC - Wealth-tax

Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the reassessment proceedings under section 17(b) of the Wealth-tax Act were not validly initiated and in setting aside the same ? Held that - In the present case the Wealth-tax Officer issued notices before that decision was known to him and the question is whether in the circumstances in view of the later decisions of the High Courts to which we have referred a question of law arose or not. The language of section 17(b) of the Act is pari materia with the language of section 34(1)(b) of the Income-tax Act and therefore the decisions under section 34(1)(b) ibid. would be relevant in construing the scope and effect of section 17(b) of the Act. There does appear to be divergence of opinion among the High Courts as to the meaning of the word information in section 34(1)(b) of the Income-tax Act and in view of that divergence we are of opinion that a question of law did arise in the present case as to the interpretation of the word information in section 17(b) of the Act and should have been referred by the Tribunal. We therefore allow the appeals set aside the order of the High Court and direct the Tribunal to state a case referring the question of law arising in these cases in the form suggested by the appellant. The Tribunal will be free to decide whether to refer the matter to the High Court under section 27(1) or to this court under section 27(3A) of the Act

Summary

Issues:
1. Validity of reassessment proceedings under section 17(b) of the Wealth-tax Act.
2. Interpretation of the term "information" in section 17(b) of the Act.
3. Divergence of opinion among High Courts on the meaning of "information" in tax laws.

Analysis:
The judgment by the Supreme Court dealt with two appeals arising from applications to the Income-tax Appellate Tribunal for reference to the High Court regarding the validity of reassessment proceedings under section 17(b) of the Wealth-tax Act. The main issue was whether the reassessment proceedings were validly initiated based on the term "information" in the Act. The respondent contended that the reassessment was invalid as it was a mere change of opinion by the Wealth-tax Officer without new information leading to the belief that taxable wealth had escaped assessment. The Tribunal accepted this argument, leading to an appeal by the appellant. The appellant argued that there was a divergence of opinion among High Courts on the interpretation of "information" in tax laws, citing various cases to support their position.

The appellant relied on the decision in Maharajkumar Kamal Singh v. Commissioner of Income-tax, where the term "information" was interpreted broadly to include knowledge of relevant judicial decisions. They also highlighted conflicting views among High Courts on whether a mere change of opinion without new factual information justifies reassessment under tax laws. The appellant argued that the precise question left undecided by the court in Maharaj Kumar Kamal Singh's case was relevant to the present case, indicating a legal issue that should have been referred to the High Court for clarification.

In response, the judgment referenced past decisions by various High Courts on the interpretation of "information" in tax laws. The Bombay High Court held that a mere change of opinion or discovery of a mistake of law is not sufficient information for reassessment. Similarly, the Nagpur High Court emphasized that a mere change of opinion by the Income-tax Officer is not grounds for reassessment. However, recent cases from High Courts like Madras and Mysore indicated a broader interpretation of "information," including mistakes apparent on the face of the original assessment or failure to understand legal implications.

Ultimately, the Supreme Court found a divergence of opinion among High Courts on the meaning of "information" in tax laws, leading to the conclusion that a legal question did arise in the present case regarding the interpretation of "information" in section 17(b) of the Wealth-tax Act. As a result, the Court allowed the appeals, set aside the High Court's order, and directed the Tribunal to refer the question of law to clarify the interpretation of "information" in tax reassessment proceedings.