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Issues Involved:
1. Justification for reopening assessments under Section 147 of the Income-tax Act, 1961. 2. Definition and scope of "information in his possession" for the Income-tax Officer (ITO) under Section 147. 3. Whether the reassessment was based on new information or merely a change of opinion. Issue-wise Detailed Analysis: 1. Justification for Reopening Assessments under Section 147 The primary issue was whether the Income-tax Officer (ITO) was justified in reopening the assessments for the years 1964-65 and 1965-66 under Section 147 of the Income-tax Act, 1961, read with Explanation 1. The ITO initiated proceedings on the basis that interest payments allowed as deductions in computing business income should have been allowed in computing income from dividends, leading to under-assessment or assessment at a lower rate. Additionally, the ITO disallowed certain entertainment expenses previously allowed. The Appellate Assistant Commissioner (AAC) and the Tribunal both held that the ITO had all necessary information during the original assessment and that no new information had surfaced to justify reopening the assessments. They concluded that the ITO's actions were merely a change of opinion rather than based on new information. 2. Definition and Scope of "Information in his Possession" The court examined what constitutes "information in his possession" under Section 147. The term "information" has been interpreted in various ways by different courts. One school of thought is that the information must come from an external source, while another suggests that it can be derived from the record of the case itself, provided it was not previously known to the ITO. The Supreme Court in Commissioner of Income-tax v. A. Raman & Co. clarified that "information" must mean instruction or knowledge derived from an external source concerning facts or law related to the assessment. However, the court also noted that information could be something that the ITO could have obtained during the original assessment but did not, thus not necessarily requiring an external source. 3. New Information vs. Change of Opinion The court scrutinized whether the reassessment was based on new information or merely a change of opinion. The AAC and the Tribunal found that all relevant details, including particulars of dividends, interest, borrowings, and guest house expenses, were available to the ITO during the original assessment. The ITO had applied his mind to these details and completed the assessment after comparing them with preceding years' assessments. The court cited the Supreme Court's observation in Anandji Haridas and Co. (P) Ltd. v. S. P. Kushare, which held that "information" could be derived from the record itself if its implications were not previously recognized. However, in this case, the court found that the ITO had already considered all relevant information during the original assessment. Therefore, the reassessment was deemed a change of opinion rather than based on new information. Conclusion The court concluded that the ITO was not justified in reopening the assessments for the years 1964-65 and 1965-66 under Section 147. The reassessment was based on a change of opinion rather than new information. Consequently, the court answered the question in the negative and against the revenue, ordering the Commissioner of Income-tax to pay the costs of the reference to the assessee.
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