1978 (6) TMI 35 - HC - Income Tax

Summary

Issues Involved:
1. Validity of reassessment under Section 147(b) of the I.T. Act, 1961.
2. Definition of "information" under Section 147(b) of the I.T. Act, 1961.
3. Whether the reassessment was based on new information or merely a change of opinion.

Issue-wise Detailed Analysis:

1. Validity of Reassessment under Section 147(b) of the I.T. Act, 1961
The primary issue was whether the reassessment for the assessment year 1967-68 under Section 147(b) of the I.T. Act, 1961, was valid. The court examined whether the Income-tax Officer (ITO) had acted on "information" in his possession that led him to believe that income had escaped assessment. The court concluded that the reassessment was valid as the ITO had new information from the appellate order for the assessment year 1970-71, which indicated that the expenses claimed by the assessee were not allowable deductions.

2. Definition of "Information" under Section 147(b) of the I.T. Act, 1961
The court analyzed the term "information" as used in Section 147(b). It referred to previous judicial interpretations, stating that "information" means "instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment." The court cited various judgments, including United Mercantile Co. Ltd. v. CIT and Imperial Tobacco Company's case, to support that information could come from appellate orders and need not be confined to judgments from higher courts.

3. Whether the Reassessment was Based on New Information or Merely a Change of Opinion
The court distinguished between a mere change of opinion and a reassessment based on new information. It noted that the original assessment was made in a routine fashion without a detailed discussion on the deductibility of the expenses. The subsequent ITO's decision, influenced by the appellate order for the year 1970-71, constituted new information. The court referred to Kalyanji Mavji & Co. v. CIT and R. B. Bansilal Abirchand Firm v. CIT to emphasize that reassessment is justified if the ITO had not applied his mind to the issue in the original assessment and later received new information.

Conclusion
The court answered all three questions in the negative, favoring the revenue and against the assessee. It held that the reassessment under Section 147(b) was valid, the appellate order constituted "information," and the reassessment was not merely a change of opinion but based on new information. The Tribunal was directed to rehear the appeal in light of these findings. No order as to costs was made.