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TMI Blog1967 (3) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... -tax Officer had information in his possession in consequence of which he could have reason to believe that income, profits or gains in the sum of Rs. 20,762 has escaped assessment ? " The instant reference has been made at the instance of the department. The assessee is a limited liability company styled as M/s. India Reconstruction Corporation Ltd., Kanpur (hereinafter referred to as the assessee). The assessee filed its return for the assessment year 1948-49, declaring a total income of Rs. 48,487. In Part VII of the return, the assessee had disclosed that it had made a profit of Rs. 20,762 as capital gains on the sales of certain securities. The Income-tax Officer did not accept the case of the assessee that the sum of Rs. 20,762 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llenged the validity of the proceedings started under section 34 of the Act. It was contended that no new facts had come to the knowledge of the Income-tax Officer on the basis of which he could take action under section 34 of the Act. The Appellate Assistant Commissioner upheld the order of the Income-tax Officer passed under section 12(b) of the Act and dismissed the appeal. The assessee then filed a second appeal before the Tribunal and, repeated before it the submission that was made before the Appellate Assistant Commissioner. On May 16, 1957, the Tribunal allowed the appeal of the assessee and while doing so, observed as follows : " The question which we have to consider is whether the assessment proceedings were legal and valid an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 10 was not applicable, the amount could have been included under section 12(b). These facts clearly show that there were no laches on the part of the assessee. The Income-tax Officer had known all the information that was requisite for the making of a proper assessment. Section 34 is not, therefore, applicable in this case." Admittedly the case cannot fall under section 34(1)(a) of the Act. The case of the department is that it falls under clause (b) of that provision. That provision so far as relevant for our purposes reads: " 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Income-tax as also Maharajdhiraj Sir Kameshwar Singh v. State of Bihar. In the first case Gajendragadkar J., who spoke for the Supreme Court while dealing with the scope of section 34, observed : " It is not disputed that, according to its strict literal meaning, the word "information" may include knowledge even about a state of the law or a decision on a point of law .... If the word "information" used in any other provision of the Act denotes information as to facts or particulars, that would not necessarily determine the meaning of the said word in section 34(1)(b). The denotation of the said word would naturally depend on the context of the particular provisions in which it is used . . . . If the word "information" in its plain grammat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gument is that the information was received by the Income-tax Officer when the assessee filed his return and the Income-tax Officer did not act on that information to assess the sum of Rs. 20,762 as capital gains because he did not consider it as capital gains. The submission is that now the Income-tax Officer has changed his opinion and wants to tax the aforesaid sum as capital gains though originally he had taxed it as business receipt. In support of his contention the learned counsel has placed reliance upon Bhimraj Panna Lal v. Commissioner of Income-tax. The decision was recorded before Maharaj Kumar Kamal Singh v. Commissioner of Income-tax. We are of opinion that it is not a case of change of opinion on the part of the Income-tax Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by this firm for deduction of this sum of Rs. 5,10,788 on the ground that it was interest paid to the partners but the Appellate Tribunal held that the assessee was a different firm altogether and as the payment was made to the assessee-firm and not to its partners, the amount should be deducted in assessing the second firm. This led to proceedings under section 34(1)(b) of the Act against the assessee-firm for the assessment of this sum of Rs. 5,10,788. The assessee's contention was that merely because the Tribunal sitting in judgment over the assessment of the second firm altered the order of the income-tax authorities below and held that the amount of Rs. 5,10,788 was paid not to the partners but to the assessee-firm, it did not amount ..... X X X X Extracts X X X X X X X X Extracts X X X X
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