TMI Blog1972 (7) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... y by name Machungal Purayidom belonged originally to the assessee's wife, Ratnammal. She died on October 21, 1954, leaving a will whereby the property was bequeathed to her 4 daughters, Nagammal, Maya Devi, Rajeswari and Visalakshi in equal shares. Nagammal and Maya Devi sold their interest in the property to the assessee on January 30, 1958, for Rs. 10,000. Thus, one-half of the entire property devolved on the assessee. He then sold this one-half interest in the property to his daughter, Rajeswari, on September 5, 1961, for Rs. 40,000. In the reassessment the capital gains sought to be assessed was the difference between the selling price of Rs. 40,000 and the purchase price of Rs. 10,000, namely, Rs. 30,000. At the time of the original assessment it was contended before the Income-tax Officer that in the estate duty proceedings following the death of assessee's wife, the property had been valued at Rs. 42,680. So, the value of the one-half share which the assessee had purchased was Rs. 21,340. On this basis the capital gains arising in the transaction was treated as Rs. 18,660 (Rs. 40,000-21,340). It was also alleged that the assessee had put up a building worth Rs. 10,000 in 195 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to tax has escaped assessment. Information, in the present case, is a communication from the audit party pointing out under the relevant provisions of the Act that it was wrong to have allowed the market value of the property, namely, Rs. 21,340, to be substituted for the consideration of Rs. 10,000 paid and that the application of section 52(2) was not justified as the assessee neither possessed the property before January 1, 1954, nor received it as a gift from one who possessed it before January 1, 1954. It was also pointed out that the property having been purchased by the assessee in 1958, cost of improvements, if any, effected thereafter, alone could be deducted and the alleged improvements had been effected in 1957, when the assessee had no rights over the property. It was on this information, according to the revenue, that the Income-tax Officer entertained the plea that the income had escaped assessment. The Supreme Court has observed in Commissioner of Income-tax v. A. Raman Co. : ". . . . that 'information' in the context it occurs in section 147(b) must mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 52 to be deducted towards municipal tax in determining the annual value of the properties under section 23(2) for computing the income of the properties under income from house property. Assessment was made in March, 1966. In July, 1969, the Income-tax Officer addressed a letter calling upon the petitioner to show cause why the amount of municipal tax allowed as deduction should not be added back on the ground that it was wrongly allowed. The assessee questioned the competency of the officer to reopen the assessment under section 147. The Income-tax Officer pointed out that income-tax assessments are subjected to audit by the office of the Comptroller and Auditor-General of India, and while auditing the assessment of the petitioner for assessment year 1965-66, the audit department had pointed out that on a true interpretation of section 23(2) the deduction of municipal tax in respect of self-occupied properties was not admissible. This information, according to him, constituted information under section 147(b). The court held that opinion as to the state of the law by any and every person cannot constitute information, so as to entitle the Income-tax Officer to reopen an assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taff, pointed out what he considered to be the errors committed by the Income-tax Officer in the original assessments. We think that this decision reflects the correct view and has to be accepted in preference to the other view expressed by the Gujarat High Court referred to above. The Supreme Court, it must be remembered, did not pin-point or limit "external source " in A. Raman Co.'s case to judgments of a particular court or authority. On the other hand, the Supreme Court has widened the scope and ambit of "external source" as is evident from the following observation in the judgment : "Jurisdiction of the Income-tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. 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 could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby, or from other inquiry or research into facts or law, but was not in fact obtained, the jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Division Bench of this court, to which one of us was party, in United Mercantile Co. Ltd. v. Commissioner of Income-tax , where it was held that to "inform " means to impart knowledge and a detail available to the Income-tax Officer in the papers filed before him does not by its mere availability become an item of information". It is transmuted into an item of information in his possession only if and when its existence is realised and its implications recognized. Applying that test to the case before them, the court held that the awareness of the Income-tax Officer for the first time after the assessment order of November, 1957, that the bonus shares were issued not out of premiums received in cash and the consequent result in the light of the Finance Act, 1957, was information within the meaning that expression is used in section 34(1) of the Indian Income-tax Act of 1922, and, consequently, the reopening of the assessment under that provision was not illegal. These two decisions, Salem Provident Fund Society Ltd. v. Commissioner of Income-tax and United Mercantile Co. Ltd. v. Commissioner of Income-tax, are quoted with approval by the Supreme Court in Anandji Haridas Co. v. S. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer can act. The note put up by the audit to the effect that the assessment ought to have been made on the reconstituted firm for the entire income of the two periods, and, therefore, the Income-tax Officer committed an error, was instruction or knowledge derived from an external source and so it would constitute 'information' within the meaning of the term in section 147(b) ............. The Income-tax Officer was, therefore, perfectly competent to initiate proceedings under section 147(b)." To sum up, the position thus is that "information", whether factual or as regards the state of the law, should be extraneous, extraneous in the sense that it should suggest itself to the Income-tax Officer otherwise than by his own subsequent re-thinking. A change of opinion on his own reappraisal of the facts already before him cannot constitute "information" for the purpose of the section. But a mistake apparent on the face of the order of assessment would constitute "information" whether someone else supplied that information to the Income-tax Officer or whether he informed himself. An item of information available in the papers filed before the Income-tax Officer will become "informa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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