TMI Blog1966 (8) TMI 11X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion: "Whether, on the facts and in the circumstances of the case, the reassessment on the assessee firm for 1955-56 assessment under section 34 is valid in law ? " There is some controversy as to the precise scope of this question to which we will refer in the proper place. We shall refer to certain further facts in order to appreciate the argument before us for the assessee. As on April 12, 1954, each of the lady partners was credited in the accounts of the firm with a sum of Rs. 15,000 which included a sum of Rs. 2,500. While making the original assessment, the Income-tax Officer noticed these credits and called upon the assessee to file written explanations as to the source of the sum of Rs. 2,500 in each case. This was on February 7, 1956. The explanation of the assessee dated February 24, 1956, was that the sum of Rs. 15,000 related to the share capital of each of the lady partners, of which Rs. 2,500 had been received from their mothers-in-law in each case in accordance with the wishes of her husband and that the balance was cash that remained with each since their drawal of the amounts from the savings bank account in the name of each lady about December, 1947. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 34 of the Act. This officer referred in his reassessment order dated March 25, 1960, to the earlier history relating to the sum of Rs. 2,500 in the case of each of the lady partners and stated that the old bank accounts in the ladies' names were produced to show that there were moneys in their names even in earlier years but it was considered that the wherewithal for the amounts credited in the ladies' folios was not satisfactorily established. In the circumstances, these credits were considered on the previous occasion, when the original assessment was made, to be some income from undisclosed sources. However, as appears from the reassessment order, the first Income-tax Officer making the initial assessment thought that these credits should be dealt with in the individual assessments of the respective partners and assessed as the undisclosed income of the partners. The Income-tax Officer, in exercise of his power under section 34, once again examined the matter and said: "This sum of Rs. 2,450 withdrawn from the bank is said to have been kept on hand by each lady herself and made available in 1954 for introduction as credit in her name. I have carefully considered the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... especially as an identical explanation has been considered and rejected in the other two cases which were considered." When the matter came up before this court in the first instance, it was thought that the statement of the case originally submitted by the Tribunal was inadequate to satisfactorily answer the question referred under section 66(1) and a supplementary statement of facts was therefore called for, especially with reference to the facts and circumstances relating to whether the firm had offered an explanation to the Income-tax Officer before he made the initial assessment and whether the explanation, if given in respect of the credits, was considered by the Income-tax Officer while making the assessment order. The supplementary statement has since been submitted and the facts we have related have been partly taken from that statement. It is clear from the facts on record, particularly the statement and supplementary statement of the case, that when making the initial order of assessment, the Income-tax Officer had before him the assessee's accounts, its explanation in regard to the credit entries of each of the lady partners, their relative savings bank pass books a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (1) of the section, if the Income-tax Officer has information in his possession in consequence of which he has reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, he can reopen the assessment. Two elements are essential for exercise of this power. One is information which obviously means something fresh or new which was not before the Income-tax Officer before and the information should also be such as to relate to income, profits or gains chargeable to income-tax having escaped assessment. The second is that, in consequence of such information, the Income-tax Officer has reason to believe that income, profits or gains chargeable to income-tax have escaped assessment. It is strenuously argued, and with some force, that the department while making the reassessment had no fresh material which could legitimately be described as information and that, if the Tribunal took a different view on the same materials as were before the Income-tax Officer initially, that meant only a change of opinion which will not be within the purview of information within the meaning of section 34(1)(b). The only additional material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e firm. It was thereafter on the basis and in the light of that finding of the Tribunal, the Income-tax Officer purported to reopen the assessment and added the sum of Rs. 16,000 to the income of the assessee. This court held that the requisites of section 34 were not satisfied and that the reassessment order was without jurisdiction. It seems to us that this court in that case was mainly concerned with the language that section 34 had employed at that time, particularly the word " discovery " and it was with reference to that the Court considered that the view of the Tribunal on the same facts represented no more than a change of opinion. Though this may appear to be in favour of the assessee in this case, we are of opinion that in the light of subsequent decisions and of the fact that the court in that case was mainly concerned with the section as it then read, we cannot share the view expressed in that case. We do not say that a mere change of opinion will by itself amount to information unless it represented a new fact or circumstance which had a bearing on any income, profit or gain having escaped tax. Several situations are possible which in a certain context may justifiably ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f changed his mind on the same set of facts this would amount to information was not decided by the Supreme Court in that case. We are, however, of opinion that on principle we can find no substantial or sensible difference between a different view of the law expressed by a higher forum and a different view on the facts found by such a forum. If a higer forum pointed out that an Income-tax Officer was wrong in law in excluding from assessment a certain income and that would be information which would justify the Income-tax Officer in re-opening the assessment so as to bring to tax such income, we do not see why the same result cannot logically follow when the error pointed out by a higher forum on the part of the Income-tax Officer was not one of law but an error in his factual conclusion. In essence both appear, as we think, to stand on the same basis from a jural point of view. If an error of law subsequently found by a higher forum is information, the error in factual conclusion found by such a forum is equally information within the meaning of section 34(1)(b). R. B. Bhansilal Abirchand Firm v. Commissioner of Income-tax, in our opinion, seems to be in support of this view we h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce but it seems to us that they do not take us further and it is unnecessary to consider them. On the view we take that an error found by a higher tribunal on the same facts in the factual conclusion of the Income-tax Officer at the initial stage can well be considered to be information within the meaning of section 34(1)(b) of the Act, the further question is whether the order of the Tribunal disposing of the appeals of two of the partners in their individual assessments amounts to such information. The effect of that order undoubtedly was to exclude from the individual assessment this sum of Rs. 2,500. We agree with the assessee in its contention that the further observation of the Tribunal in that order that it represented income that had been suppressed and had escaped assessment in the firm's assessment was unnecessary for the purpose of the disposal of that appeal and the observations are, therefore, to be taken to have been casually made. Even so, it is obvious that once the Tribunal took the view that the sum of Rs. 2,500 had to be excluded from the individual assessment, it impliedly followed that it had escaped in the hands of the firm, for it was nobody's case that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e possible in a tax matter, that which is in favour of the assessee should be preferred and that is what we do here. On that view we proceed to consider the other argument for the assessee as well. The Tribunal in its order set out the fact that two contentions were urged before it, one relating to jurisdiction and the other in its words " that in any event there is no warrant for the additions made in respect of two of the partners in which assessments the credits in question had not been added. " This question, while disposing of the appeal, was evidently lost sight of by the Tribunal. Nowhere in its order has it dealt with it. Learned counsel for the revenue could not legitimately urge, therefore, that the appeal was considered on the second contention. The order of the Tribunal is accordingly defective. The disposal of the appeal by the Tribunal without considering all the contentions urged before it cannot be said to be in accordance with law. The Tribunal being the final authority on facts it is necessary and it is the requisite of the law that, in disposing of an appeal, it clearly sets out the facts, the contentions for the assessee as well as the revenue and deals with e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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