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TMI Blog1979 (8) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... o outsiders. Certain other services are also provided to the members. The income from that source was assessed to tax all along as income from business. It was so assessed for the years 1960-61, 1961-62, 1962-63 and 1963-64 also. The income-tax department includes an internal audit organisation whose function it is to examine income-tax records and check mistakes made therein with a view ultimately to improve the quality of assessments. In the course of auditing the income-tax records pertaining to the assessee for the assessment years 1960-61 to 1963-64, the internal audit party expressed the view that the money realised by the assessee on account of the occupation of its conference hall and rooms should not have been assessed as income from business. It said that an assessment should have been made under the head " Income from property ". The ITO treated the contents of the report as " information " in his possession for the purpose of s. 147(b) of the I.T. Act, 1961, and reassessed the income on that basis. The ACC allowed the appeals filed by the assessee holding, inter alia, that in law it could not be said that the ITO had any " information " in his possession enabling him t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned ......... . In cases falling under section 147(b), the expression " information prescribes one of the conditions upon which a concluded assessment may be reopened under that provision. It is an indispensable ingredient which much exist before the section can be availed of. What does " information " in s. 147(b) connote ? In Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC) this court, construing the corresponding s. 34(1)(b) of the Indian I.T. Act, 1922, held the word "information" to mean not only facts or factual material but to include also information as to the tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t books and journals do not enjoy the status of law. They are merely opinions and, at best, evidence in regard to the state of the law and in themselves possess nonbinding effect as law. The forensic submissions of professional lawyers and the seminal activities of legal academics enjoy no higher status. Perhaps the only exception is provided by the writings of publicists in international law, for in the law of nations the distinction between formal and material sources is difficult to maintain. In that view, therefore, when s. 147(b) of the I.T. Act is read as referring to " information " as to law, what is contemplated is information as to the law created by a formal source. It is law, we must remember, which, because it issues from a competent legislature or a competent judicial or quasi-judicial authority, influences the course of the assessment and decides any one or more of those matters which determine the assessee's tax liability. In determining the status of an internal audit report, it is necessary to consider the nature and scope of the functions of an internal audit party. The internal audit organisation of the income-tax department was set up primarily for imposing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not intended that the purpose of audit should go any further. Our attention has been invited to certain provisions of the Internal Audit Manual more specifically defining the functions of internal audit in the income-tax department. While they speak of the need to check all assessments and refunds in the light of the relevant tax laws, the orders of the Commissioners of Income-tax and the instructions of the Central Board of Direct Taxes, nothing contained therein can be construed as conferring on the contents of an internal audit report the status of a declaration of law binding on the ITO. Whether it is the internal audit party of the income-tax department or an audit party of the Comptroller and Auditor-General, they perform essentially administrative or executive functions and cannot be, attributed the powers of judicial supervision over the quasi-judicial acts of income-tax authorities. The I.T. Act does not contemplate such power in any internal audit organisation of the income-tax department ; it recognises it in those authorities only which are specifically authorised to exercise adjudicatory functions. Nor does s. 16 of the Comptroller and Auditor-General's (Duties, P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The revenue contends that it is open to him to do so, and on that basis to reopen the assessment under s. 147(b). Reliance is placed on Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287 (SC), where a Bench of two learned judges of this court observed that a case where income had escaped assessment due to the " oversight, inadvertence or mistake " of the ITO must fall within s. 34(1)(b) of the Indian I.T. Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), CIT v. A. Raman and Co. [1968] 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of two learned judges of this court, although endorsing the principle enunciated by the High Court, said that the audit department was the proper machinery to scrutinise assessments made by the ITO and to point out errors of law contained therein, and the High Court had erred in taking the strict view which it did. The court rested its decision on Asst. CED v. Nawab Sir Mir Osman Ali Khan Bahadur [1969] 72 ITR 376 (SC), CIT v. H. H. Smt. Chand Kanwarji [1972] 84 ITR 584 (Delhi), CIT v. Kelukutty [1972] 85 ITR 102 (Ker) and Vashist Bhargava v. ITO [1975] 99 ITR 148 (Delhi). In Asst. CED v. Nawab Sir Mir Osman Ali Khan Bahadur [1969] 72 ITR 376 (SC), this court held the opinion of the Central Board of Revenue as regards the correct valuation of securities for the purpose of estate duty to be " information " within the meaning of s. 59 of the E.D. Act, 1953, on the basis of which the CED was held entitled to entertain a reasonable belief that property assessed to estate duty had been under-valued. The circumstance that the opinion of the Board was rendered in an appeal filed before it under the E.D. Act against the assessment made by the Asst. CED was apparently not brought to the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. It seems to us that the considerations on which the Delhi High Court rested its judgment are not correct. But the decision of the case can be supported on the ground that the basic information warranting the reopening of the assessment was the fact that the payment of interest was made to the provident fund account of the assessee himself. That the money so paid did not vest in the Government was a conclusion which followed automatically upon that fact, and no controversy in law could possibly arise on that point. On the considerations prevailing with us, we are of opinion that the view taken by the Delhi High Court and the Kerala High Court in the aforementioned cases is wrong and we must, with great respect, hold that this court was in error in the conclusion reached by it in R. K. Malhotra, ITO v. Kasturbhai Lalbhai [1977] 109 ITR 537 (SC). Our attention has been drawn to the further decision of the Kerala High Court in Muthukrishna Reddiar v. CIT [1973] 90 ITR 503 and the decisions of the Allahabad High Court in Raj Kumar Shrawan Kumar v. CBDT [1977] 107 ITR 570 and Elgin Mills Co. Ltd. v. ITO [1978] 111 ITR 287. The Kerala High Court merely followed its earlier judgment i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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