TMI Blog1979 (8) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... e present cases have been referred by the Income-tax Appellate Tribunal under s. 257 of the Act. The assessee, Messrs. Indian and Eastern Newspaper Society, is a society registered under the Indian Companies Act. It is a professional association of newspapers established with the principal object of promoting the welfare and interest of all newspapers. The assessee owns a building in which a conference hall and rooms are let out on rent to its members as well as to 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and rectification are proceedings in which the finality may be questioned. The assessment may also be reopened under s. 147 of the Act. It is a proceeding for assessing income which has escaped assessment ". Section 147 reads : " 147. If-- (a) the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or exposition is ordinarily set forth in the judgment of a court or the order of a tribunal. Such declaration or exposition in itself bears the character of law. In every case, therefore, to be law it must be a creation by a formal source, either legislative or judicial authority. A statement by a person or body not competent to create or define the law cannot be regarded as law. The suggested interpretation of enacted legislation and the elaboration of legal principles in text 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, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n judging the effectiveness of assessment procedure ... It is, however, to forming a general judgment rather than to, the detection of individual errors of assessment, etc., that the audit enquiries should be directed. The detection of individual errors is an incident rather than the object of audit." Other provisions stress that the primary function of audit in relation to assessments and refunds is the consideration whether the internal procedures are adequate and sufficient. It 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. In short, the true evaluation of the law in its bearing on, the assessment must be made directly and solely by the ITO. Now, in the case before us, the ITO had, when he made the original assessment, considered the provisions of ss. 9 and 10. Any different view 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 do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upied house properties. The assessee contended that the report did not constitute " information " within the meaning of s. 147(b) of the Act, and the Gujarat High Court accepted the plea in the view that information as to law would consist of a statement by a person, body or authority competent and authorised to pronounce upon the law and invested with the authority to do so, and that the audit department was not such competent or authorised authority. On appeal by the revenue, a Bench 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... est as expenditure made by the assessee. The Delhi High Court upheld the reassessment on the finding that the note of the revenue audit and the Ministry of Law had to be taken into account by the! ITO, because in his executive capacity he had to be guided by the advice rendered by the Ministry of Law and he had to pay due regard to the note of the revenue audit because the officers of the audit department were experts empowered to examine and check upon the work of the Income-tax Officers. 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, wit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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