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TMI Blog1971 (8) TMI 58X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-61. In those proceedings, he reviewed the entire course of transactions from the year 1946, and held that though the assessee was an investor till the 31st of March, 1954, he had converted his investment shares into stock-in-trade after the 1st of April, 1954, and had become a dealer in shares. Accordingly, the Income-tax Officer brought to tax the profits made by the assessee by the sale of shares, as a business profit. In the light of the finding recorded by him in the assessment years 1959-60 and 1960-61, the Income-tax Officer re-opened the assessments of the assessment years 1957-58 and 1958-59, under section 34(1)(b) of the Act. The assessee raised an objection to the jurisdiction of the officer to re-open the assessments but the objection was rejected and a decision was recorded that the assessee was a dealer in shares in the assessment years 1957-58 and 1958-59. The assessee filed appeals to the Appellate Assistant Commissioner against the assessment orders passed by the Income-tax Officer under section 34(1)(b). In the meanwhile, the Income-tax Officer had passed orders for the assessment years 1959-60 and 1960-61 and the assessee filed appeals against those orders als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment for any year, or have been under-assessed, or assessed at too low a rate, or have been made the subject of excessive relief under this Act, or that excessive loss or depreciation allowance has been computed, he may .... serve on the assessee .... a notice ..... and may proceed to assess or reassess such income, profits or gains ......" It is clear from a of this provision that two conditions which are in the nature of conditions precedent must be satisfied before the Income-tax Officer takes action under it: (1) He should have reason to believe that the income has escaped assessment or has been under-assessed, etc., and (2) it should be in consequence of information in his possession that he should have reason so to believe. If either of these conditions is not satisfied, the reopening of assessment would be invalid. Turning to the order of reassessment passed by the Income-tax Officer, after stating that the assessee had shown capital gains arising from the sale of shares on the footing that those shares were held by him as investment, the Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... our opinion, is no justification for re-opening the old assessments. The fact that the Income-tax Officer had recorded a different decision in the assessment proceedings of subsequent years cannot, in our opinion, constitute " information " within the meaning of section 34(1)(b), so as to give him jurisdiction to re-open the assessments. The Appellate Assistant Commissioner says in paragraph 11 of his order that it was not disputed by the department and the record bore it out that "the assessee had fully disclosed all the material particulars regarding the purchases and sales of shares " effected during the relevant accounting years. In paragraph 12, the Appellate Assistant Commissioner says that "all the facts were present to the mind of the Income-tax Officer when he framed the original assessments", but the Income-tax Officer held that the excess realised by the sale of shares was a gain on capital account. The Judicial Member of the Tribunal has likewise stated in paragraph 4 of his judgment that "all the facts which were placed in the assessment year 1959-60 were within the knowledge of the Income-tax Officer at the time of making the original assessments for the two assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter the completion of those proceedings but for the reason, merely, that he wanted to adopt a different approach to the same set of facts on an application of the self-same principles of law. The only subsequent "information" which the Income-tax Officer had was that in later assessments he had himself taken a different view of the same facts. Information as to the state of law and information regarding relevant judicial decisions is undoubtedly information within the meaning of section 34(1)(b) (See Maharaj Kumar Kamal Singh v. Commissioner of Income-tax), but informing oneself of one's own subsequent decision, a decision that has yielded no new facts, is based on no new law nor has revealed a new awareness of what already was law, is not receiving " information " such as would justify the re-opening of an assessment. There is a divergence of opinion among the High Courts as to the true meaning and content of the expression " information " occurring in section 34(1)(b). According to some, the information must come from an "external source". In this context, a mere change of opinion would appear to have been treated as something not emerging from an external source. Others take th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter stating that the condition which invests the Income-tax Officer with jurisdiction under section 147(b) had two branches: (i) that the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment, and (ii) that it is in consequence of information which he has in his possession that he has reason so to believe, Shah J., who delivered the judgment of the court, observed : "The expression 'information' in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars or as to law relating to a matter bearing on the assessment." Holding that the Income-tax Officer, on the materials on record, had no reason to believe that income chargeable to tax had escaped assessment, the Supreme Court confirmed the conclusion of the High Court that notices for reopening the assessments were without jurisdiction. The other decision of the Supreme Court is in Anandji Haridas & Co. v. S. P. Kushare, Sales Tax Officer, Nagpur. The main question involved in that case was as regards the constitutional validity of section 11(4)(a) of the C. P. and Berar Sales Tax Act, 1947, which in v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of section 34(1)(b), namely, that the information must be obtained after the original assessment is made, has not been satisfied in this case. It, however, appears to us that there is no real conflict between the two decisions of the Supreme Court. Though in Raman's case, it was said that "information" must mean "instruction or knowledge derived from an external source", it is clear that information obtained from the record itself was not considered as information not obtained from an external source. The view taken by the High Court was that the relevant information on the basis of which assessments were proposed to be reopened was available to the Income-tax Officer from the record itself and, therefore, it was not open to him to utilise that information for reopening the assessment proceedings. This view was specifically disapproved and the Supreme Court characterised that consideration as "irrelevant" (page 16 of the report). It observed : "That information, must, it is true, have come into the possession of the Income-tax Officer after the previous assessment, but even if the information be such that it culd have been obtained during the previous assessment from an inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt held, while construing the same provision, that a mere change of opinion was not information within the meaning of that section. In Bhimraj Panna Lal v. Commissioner of Income-tax, the High Court of Patna held that an order of assessment made after investigation by an Income-tax Officer should not at his sweet will and pleasure be allowed to be revised merely because he changed his opinion and that there must exist something, either suppressed by the assessee or a fact or a point of law which was inadvertently or otherwise omitted to be considered by the Income-tax Officer before he could proceed to act under section 34. "A mere change of opinion on the same facts and law is not covered by that section." In Asghar Ali Mohammad Ali v. Commissioner of Income-tax the Allahabad High Court held that though the word "information" covers all kinds of information received from any person or in any manner whatsoever and though all that was required was that the Income-tax Officer should learn something or know something which he did not know previously, a mere change of opinion was not sufficient to justify reopening of assessment proceedings under section 34. Such a change of opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. Commissioner of Income-tax and, Commissioner of Income-tax v. Rathinasabapathy Mudaliar, the decision of the Mysore High Court in Camara Industrial and Banking Syndicate Ltd. v. Commissioner of Income-tax and of the Kerala High Court in United Mercantile Co. Ltd. v. Commissioner of Income-tax. Broadly, these cases have taken the view that if an Income-tax Officer discovers an error committed by him in the original assessment proceedings, what is seen by him would be information to himself and such information would fall within section 34(1)(b). In Salem Provident Fund Society's cases, which has been cited with approval by the Supreme Court in Anandji Haridas's case, it was observed that: " In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or under-assessment. " The Kerala decision, it may be recalled, has also been cited with approval in Anandji Haridas's case. In the Mysore decision, a failure to understand the true implication of a notification at one stage and a correct understanding thereof ..... X X X X Extracts X X X X X X X X Extracts X X X X
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