1981 (8) TMI 21 - HC - Income Tax

Summary

Issues:
1. Jurisdiction of notice under section 148 read with section 147(b) of the Income-tax Act, 1961.
2. Interpretation of the legal term "information" as per section 147(b) of the Income-tax Act, 1961.

Jurisdiction of Notice under Section 148 read with Section 147(b):
The case involved a reference under section 256(2) of the Income-tax Act, 1961, regarding the correctness of the notice issued by the Income-tax Officer (ITO) under section 148. The issue revolved around whether the condition precedent for issuing the notice was fulfilled, specifically if there was 'information' within the meaning of section 147(b) enabling the ITO to initiate reassessment proceedings. The facts revealed that the ITO initiated reassessment based on an audit objection regarding the allowance of export profit rebate to the assessee. The Assessing Officer's decision to reopen the assessment was challenged on the grounds of lack of fresh information and being a mere change of opinion. The Appellate Tribunal held that the reassessment was indeed a change of opinion and not based on new information, thereby dismissing the Revenue's appeal against the AAC's decision.

Interpretation of the Legal Term "Information" under Section 147(b):
The legal position concerning 'information' under section 147(b) was clarified by referring to the Supreme Court decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996. The Court emphasized that the opinion of an internal audit party on a point of law does not constitute 'information' for the purpose of reopening an assessment. It was highlighted that the ITO must determine the effect and consequence of the law mentioned in the audit note independently. In this case, the audit objection raised by the internal auditor regarding the incorrect allowance of export profit rebate was deemed as a change of opinion by the ITO rather than new information. The Court concluded that the ITO did not act on any 'information' as required by section 147(b) but rather on a change of opinion, thereby upholding the Tribunal's decision in favor of the assessee against the Revenue.

In summary, the judgment addressed the jurisdiction of the notice under section 148 read with section 147(b) of the Income-tax Act, 1961, and clarified the interpretation of the legal term 'information' in the context of reopening assessments. The decision emphasized the distinction between new information and a change of opinion, ultimately ruling in favor of the assessee based on the lack of fresh information justifying the reassessment.