1973 (5) TMI 22 - HC - Income Tax

Initially Income-tax Officer allowed the loss on the basis of the decision of tribunal for earlier year that the particular transaction was not speculative. Whether he can subsequently reopen the assessment in view of the later opinion of the Tribunal in other cases that such transaction was speculative - Whether the order of the Tribunal in annexures C-1 and C-2 constitute information within the meaning of section 34(1)(b) so as to justify the assessment in this case being reopened ? - In the premises, the question referred to this court must be answered in the affirmative and in favour of the revenue

Issues Involved:

1. Whether the order of the Tribunal in annexures "C-1" and "C-2" constitutes 'information' within the meaning of section 34(1)(b) of the Indian Income-tax Act, 1922, justifying the reopening of the assessment.

Detailed Analysis:

1. Tribunal's Orders as 'Information':

The primary issue examined was whether the Tribunal's orders in annexures "C-1" and "C-2" could be considered 'information' under section 34(1)(b) of the Indian Income-tax Act, 1922, thereby justifying the reopening of the assessment. The assessee, an individual engaged in the hessian business, had shown a net loss of Rs. 88,857 for the assessment year 1956-57. The Income-tax Officer initially allowed this loss but later reopened the assessment, asserting that the loss was from speculative transactions, not from ready business.

The Tribunal had previously allowed a similar loss for the assessment year 1954-55, considering the passing of delivery orders as equivalent to actual delivery. However, subsequent Tribunal decisions held that transactions where only P.D.Os. passed without actual physical delivery were speculative. This change in the Tribunal's stance led the Income-tax Officer to reopen the assessment for 1956-57.

2. Change of Opinion vs. New Information:

The core question was whether this subsequent change in the Tribunal's view constituted 'information' or merely a change of opinion. The Tribunal opined that the new interpretation on the same set of facts did not constitute 'information' under section 34(1)(b) but was a change of opinion. The assessee's counsel argued that the Tribunal's different view on the same facts was not new information but a change of opinion, referencing the Bombay High Court's decision in K. T. Kubal & Co. Private Ltd. v. Commissioner of Income-tax.

In that case, the Bombay High Court held that a mere change of opinion by the Tribunal did not amount to new information, and thus, the Income-tax Officer could not reopen the assessment based on the Tribunal's later view. The Supreme Court had also considered this decision in R. B. Bansilal Abirchand Firm v. Commissioner of Income-tax, distinguishing it on the basis that no new information had come to the Income-tax Officer's possession.

3. Supreme Court's Interpretation of 'Information':

The Supreme Court has clarified in various decisions that 'information' for reopening an assessment must come from an external source and can be either factual or legal. In Assistant Controller of Estate Duty v. Nawab Sir Osman Ali Khan Bahadur, H.E.H. The Nizam of Hyderabad, the Supreme Court held that an opinion from the Central Board of Revenue could be considered 'information' under a similar provision in the Estate Duty Act.

In the present case, the Tribunal's later decision provided the Income-tax Officer with new knowledge about the legal character of the transactions involving pucca delivery orders. This new interpretation was considered sufficient 'information' under section 34(1)(b) to justify reopening the assessment.

Conclusion:

The High Court concluded that the subsequent view taken by the Tribunal constituted 'information' under section 34(1)(b), enabling the Income-tax Officer to reopen the assessment. The facts of the case differed from those in the Bombay High Court decision, as the legal character of the transactions was a mixed question of law and fact, not merely a factual determination. The High Court, therefore, answered the question in the affirmative, in favor of the revenue, and directed the Tribunal to dispose of the matter in accordance with the law.

Final Judgment:

The question referred to the court was answered affirmatively, supporting the revenue's position. The Tribunal was instructed to proceed in line with this judgment, with no order as to costs.

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