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TMI Blog1970 (11) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... on the ground that the amount was not actually realised by the assessee during the relevant accounting year. The Appellate Assistant Commissioner accepted the contention of the assessee and held that the said amount did not represent the profits of the assessee for the assessment year 1954-55. The Income-tax Officer thereupon started making enquiries regarding the said amount of Rs. 5,61,397. According to the revenue, these enquiries could not be completed before the assessment for the year 1957-58 was made on July 31, 1961. These enquiries again, according to the revenue, were completed some time in November, 1961, and, as a result of these enquiries, the Income-tax Officer was of the view that the series of transactions concerned in the amalgamation had resulted in a net surplus of Rs. 2,62,276-10-8 and that this amount had been realized by the assessee during the accounting year relevant to the assessment year 1957-58. The Income-tax Officer, therefore, re-opened the assessment for the year 1957-58 under section 34(1)(b) of the Income-tax Act, 1922 (hereinafter referred to as " the Act "), and after issuing a notice to the assessee and after hearing its objections, he included t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he amount should be assessed in the year 1955-56 and was, therefore, making further enquiries to find out when the profits were realised. The Tribunal further held that, even assuming that all the relevant information was available on record prior to the date of the original assessment for 1957-58, it was still open to the Income-tax Officer to reopen the assessment under section 34(1)(b) of the Act. The Tribunal, therefore, allowed the departmental appeal and directed the Appellate Assistant Commissioner to pass a fresh order according to law on the merits of the case. But, at the instance of the assessee, the Tribunal has referred the following question to this court under section 66(1) of the Act : " Whether, on the facts and in the circumstances of the case, the reassessment under section 34(1)(b) on August 30, 1962, for the assessment year 1957-58 is valid in law ? " There is divergence of opinion among the High Courts on the question as to what constitutes information for the purpose of section 34(1)(b) of the Act and it is interesting to note that these divergent views seek support from the same decision of the Supreme Court, viz., in Maharaj Kumar Kamal Singh v. Commiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent ways. The Madras High Court appears to have construed the word " information " appearing in section 34(1)(b) in very wide terms. We may refer only to three judgments of that court : (1) In Salem Provident Fund Society Ltd. v. Commissioner of Income-tax, it was held that : " 'Information' for the purposes of section 34 need not be wholly extraneous to the record of the original assessment. A mistake apparent on the face of the order of assessment would itself constitute 'information' ; whether some one else gave that information to the Income-tax Officer or whether he informed himself was immaterial. " (2) In Family of V.A.M. Sankaralinga Nadar v. Commissioner of Income-tax, it was held that : " income which escapes assessment as a result of the lack of vigilance of the Income-tax Officer or due to inadvertence or negligence or to the perfunctory performance of his duties without due care and caution, can well be within the ambit of section 34(1)(b), provided the requirements of that section are satisfied. " (3) In Commissioner of Income-tax v. Rathinasabapathy Mudaliar, the High Court went a step further and held that : " Even inadvertence or error in the making of as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Income-tax, the Madhya Pradesh High Court, following an earlier decision of the same court in Income-tax Appellate Tribunal v. B.P. Bramji and Co., held that an Income-tax Officer cannot take any action under section 34 merely because he intended to change his view or to hold an opinion different from that of his predecessor on the same set of facts and that, if the predecessor of the Income-tax Officer did not apply his mind to the question of deduction of the interest amount and his successor did, that does not mean that the successor of the Income-tax Officer came into possession of information justifying reopening of assessment under section 34(1)(b). In Arvind N. Mafatlal v. Deputy Controller of Estate Duty, the Bombay High Court had occasion to consider the scope of section 59(b) of the Estate Duty (Amendment) Act, 1958, which is analogous to section 34(1)(b) of the Act. Following the earlier decisions of the same court in K. T. Kubal Co. Pvt. Ltd. v. Commissioner of Income-tax and Dr. M. R. Dalal v. Commissioner of Income-tax, it was held that, if all the documents were placed before the assessing officer, and he had considered them, he could not upon the same documen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o their respective Hindu undivided families and had tried to " evade proper taxation " and on that ground he called upon the assessees to submit their objections, if any, to the reopening of the assessments for the years 1959-60, 1960-61 and 1961-62. The assessees in reply contended that the Income-tax Officer had no jurisdiction to reopen the assessments since the Hindu undivided families of the two partners and the assessees had submitted " correct and complete returns of income supported by their books of accounts, etc., and had given all material facts and relevant information necessary for assessment at the time of each assessment ". The reopening of the assessment was challenged before the High Court by a petition under article 226 of the Constitution and the High Court quashed the reassessment proceedings. The matter was taken before the Supreme Court by the revenue. The Supreme Court, while holding that the reopening of the assessment under section 34(1)(b) of the Act was valid, made the following observations : " The expression 'information' in the context in which it occurs must mean instruction or knowledge derived from an external source concerning facts or particular ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s replies thereon were placed in the records of the assessment year 1955-56. The reason apparently was that the Income-tax Officer who was proceeding with the assessment did not see the relevance of the reply dated June 22, 1961, for the simple reason that this reply was in a different assessment record, viz., assessment year 1955-56, as stated above. " Then in paragraph 11, the Tribunal proceeds to state as follows : " All that could be said is that these transactions were beyond the comprehension of the Income-tax Officer and he did not quite know what to do with it. In any case, there was evidently some desire on his part to make it assessable in the assessment year 1955-56 and he was evidently proceeding on those lines. Perhaps, it is because of this that he completed the assessment for the year 1957-58 on July 31, 1961, even though he had the letter of June 22, 1961, with him though placed in the assessment records of the year 1955-56. " Again in paragraph 12(c) of the appellate order this is what is stated : " The Income-tax Officer somehow was of the opinion that the profit would be assessable in the year 1955-56. Perhaps he was led to this belief because there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplex nature of these facts he could not comprehend their significance or arrive at a definite conclusion on the question whether the amount of Rs. 2,62,277 was assessable in the year 1955-56 or in the year 1957-58. As he could not make up his mind, he completed the assessment for 1957-58 without including the said amount in the assessment of that year. Subsequently, after reconsidering the facts and consulting his superiors he was of the view that this amount was includible in the assessment for the year 1957-58. In our view, this does not amount to a change of opinion on the part of the Income-tax Officer as the assessee's counsel would have us believe. The Income-tax Officer had not formed any definite opinion at the stage of the original assessment which, it may be said, was changed by him subsequently. Under these circumstances we hold that the reopening of the assessment was permissible under section 34(1)(b) of the Act. The question referred to us is answered in the affirmative, i.e., in favour of the Revenue and against the assessee. The assessee will bear the costs of the reference proceedings. Counsel's fee is fixed at Rs. 250. Question answered in the affirmative. - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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