TMI Blog1978 (6) TMI 35X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the AAC appealed against by the assessee constitutes information within the meaning of s. 147 of the I. T. Act, 1961, such information being related to assessment year 1970-71, it cannot be said that the ITO had in consequence of information in his possession, reason to believe that income chargeable to tax has escaped assessment for the assessment year 1967-68 ? " The assessee is a Government owned company. The assessment year with which we are here concerned is 1967-68. The assessment was originally completed on November 22, 1967. Among other things, the assessee claimed that a grant given by it to the Labour and Industrial Bureau, was an allowable deduction under s. 37 of the I. T. Act, 1961, in the computation of the total income. That was not disputed by the ITO and as a matter of course or routine, he would appear to have allowed it. This is how the statement of facts has stated the position. The original assessment did not indicate any discussion as to why it was allowed as a deduction. Annexure A is a copy of the original assessment. Subsequently for the assessment year 1970-71 also the assessee made a similar claim for deduction. This was refused by the then ITO wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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 (hereafter in sections 148 to 153 referred to as the relevant assessment year). " (Explanations 1 and 2 omitted as unnecessary). The short but interesting question that has been debated before us at length in this reference is whether the ITO can be said to have acted oil information in his possession, which led him to believe that the income had escaped assessment ; or whether on identical facts which confronted him on the earlier occasion, there was a mere change of opinion on his part. It was agreed that if it was the former the reassessment proceedings will be valid, and if the latter, not. The dividing line between the two is rather thin, and while the principle of distinction is easy of exposition its practical a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the decision in Jawahar Lal Mani Ram v. CIT [1963] 48 ITR 837 at page 851--a judgement of the Allahabad High Court. After noticing the Supreme Court decision in Chatturam Horilram Ltd. v. CIT [1955] 27 ITR 709, the decision of the Madras High Court in Salem Provident Fund Society's case [1961] 42 ITR 547 and other cases, the court was of the view that there was no justification to confine the external sources of information for reassessment to the information derived from a judgment of the Privy Council or the Supreme Court or the High Court, and stated that the information can be derived properly from other sources, and such information will constitute information for the purpose of s. 33. It is not possible to exclude similar information from other sources, viz., the Tribunal or the AAC. At page 852, the court observed : " Apart from this, as already observed, the information derived from an order of the Income-tax Appellate Tribunal or of an Appellate Assistant Commissioner is as much information from an outside or extraneous source, vis-a-vis, the Income-tax Officer as that derived from the High Court or the Supreme Court or the Privy Council. " Counsel for the revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the order. On the question as to whether, on the actual facts, there was a mere change of opinion on the part of the ITO or a change of opinion as a result of information gathered by him, we should think that on the whole there should be little difficulty. Here again, counsel for the revenue has drawn our attention to two decisions, viz., R. B. Bansilal Abirchand Firm v. CIT [1968] 70 ITR 74 (SC) and Kalyanji Mavji Co. v. CIT [1976] 102 ITR 287 (SC). In the earlier of these decisions, the appellant before the Supreme Court was a firm of four major parties. The appellant financed another firm, Bisesar House, in which 8 annas share belonged to the four brothers. Bisesar House paid interest on advances made by the appellant. In proceedings for the assessment of the Bisesar House for the assessment year 1947-48, the ITO disallowed the interest paid as an expenditure on the ground that it was interest paid to a partner. In the assessment of the appellant-firm for the corresponding year, the interest received from Bisesar House was not treated as an income but was treated as share of income of the appellant-firm in the capacity of a partner in Bisesar House. The Tribunal on appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... materials had been placed before the ITO during 1967-68 that there had been no failure on the part of the assessee to truly and fully disclose the primary facts, and that what happened was really a change of opinion by the succeeding officer during the year 1969-70 and affirmation of that view by the AAC for the said year. This, it was argued, would not be sufficient to warrant action under s. 147(b). Attention was also called to the passage at page 900 of Kanga's Income Tax, seventh edition, Vol. 1. The position is thus stated : " Two conditions precedent must be satisfied before the ITO can take action under clause (b) : (i) he should have reason to believe that income has escaped assessment, and (ii) it should be in consequence of information received after the original assessment that he should have reason so to believe. If either condition is not satisfied, the ITO's action would be without jurisdiction. Commenting on the second condition, Shah J., speaking for the Supreme Court in CIT v. A. Raman Co. [1968] 67 ITR 11, 16 observed : ' That information, must, it is true, have come into the possession of the ITO after the previous assessment, but even if the informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. He also cited to us the decision of the Supreme Court in CIT v. Simon Carves Ltd. [1976] 105 ITR 212. There what happened was a recomputation of the income by the ITO in a way different from what he had done on the earlier occasion so as to be more beneficial to the revenue. The court observed that this cannot validly form the foundation of an order under s. 147(b) of the 1961 Act. The court expressly stated thus : "It has been argued on behalf of the appellant that reassessment under s. 147(b) would be justified where in the original assessment income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the ITO. The present, however, we find, is a case which does not fall in any of those categories." The decision has no application here. In CIT v. Dinesh Chandra H. Shah [1971] 82 ITR 367, it was stressed by the Supreme Court that a mere change of opinion cannot be a valid ground for reopening the assessment under s. 34(1)(b) of the Act. There can be no quarrel with the said proposition. At page 371, the court observed : " It is not disputed that the facts in the above case were altogether different from those of the present case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was aware that the properties were self occupied, nor the fact that he could have with diligence found that the respondent would not be entitled to the deduction of municipal taxes, would preclude the officer from using the audit note as fresh "information". The officer's action was held to be justified on facts. It would be worthwhile to quote the relevant passage from Shah J.'s judgment in Raman Co.'s case [1968] 67 ITR 11 (SC) : "The condition which invests the ITO with jurisdiction has two branches : (i) that the ITO 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. Since the learned judges of the High Court have concentrated their attention upon the second branch of the condition and have reached their conclusion in favour of the assessees on that branch, it would be appropriate to deal with the correctness of that approach. 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 m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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