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TMI Blog1998 (1) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... eli, (the ITO), which revealed that in the case of another newspaper, Dina Malar, published from Tirunelveli, the wastage claim of that assessee was 4.4 per cent. for the assessment year 1973-74 and 5.5 per cent. for the assessment year 1974-75. The assessee disclosed shortage of 9. 9 per cent. for the assessment year 1973-74 and 8.77 per cent. for the assessment year 1974-75. It was also found that the assessee had not been properly accounting for the sale of waste. On the basis of specific data gathered, it was found that there was substantial understatement, of sale of waste. The assessee has not thus accounted for the sale of waste properly and fully. In the assessment year 1975-76, it was found that the assessee diverted borrowed monies for making interest-free advances to concerns in which the managing director and his close relatives were interested and, consequently, the interest attributable to such advances was to be disallowed. In the accounting year relevant to the assessment year 1973-74, the assessee also sought interest-free loans and no such interest was charged by the assessee, although interest payment to the extent of Rs. 41,441 was claimed. The sales to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year, to which that notice relates and mere change of opinion from this own record would not justify reopening of the completed assessments. Mr. S. V. Subramaniam, learned senior standing counsel for income-tax cases, representing the Revenue, would, however, strike a discordant note and further submit that the assessments for the relevant assessment years were valid in law, as, the information, on the basis of which the Income-tax Officer sought to reopen the assessment was based on subsequent facts, as also on the materials of the original assessments revealed by a more careful and closer investigation and that apart, he would say the facts discovered during the assessment proceedings of a subsequent year would constitute "information" within the meaning of section 147(b) of the Income-tax Act and reassessment proceedings based on such information are valid. The tenability or otherwise of the rival submissions of either counsel may now fall for consideration in the arena of discussion. It is not as if the vexed or moot question as to what would constitute "information" within section 147(b) of the Act, which would enable the Assessing Officer to reopen the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the Bombay High Court was as to whether information within the meaning of section 34(1)(b) of the Indian Income-tax Act, 1922 (comparable to the provisions of section 147(b) of the Income-tax Act, 1961) may be obtained by the Income-tax Officer from his own record for reopening of the assessment. In order to understand the implications of the question so posed, better it is, we rather feel to relate the facts in an incisive and sharp fashion. In the assessments of the assessee for the assessment years 1957-58 and 1959-60, the Income-tax Officer had accepted, as in previous years, the assessee's case that he held the shares of the company L T as investment and that the profits arising from the sales of the shares of that company were capital gains. The very same Income-tax Officer, in his assessment proceedings of the assessee for the assessment years 1959-60 and 1960-61, reviewed the entire course of transactions from the year 1946 and held that, though the assessee was an investor till March 31, 1954, he had converted his investment shares into stock-in-trade after April 1, 1954, and had become a dealer in shares, and brought to tax the profit made by the assessee by the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopened the assessment for the year 1956-57, under section 34(1)(b) of the Indian Income-tax Act, 1922, and disallowed the interest paid. The Appellate Tribunal held that the Income-tax Officer had merely changed his opinion on the basis of the very materials that were before him when the original assessment was made and that was not sufficient to attract section 34(1)(b). On a reference, the High Court held that the reassessment was valid in law as the information on the basis of which the officer sought to re-open the assessment was based on subsequent facts as also on the materials of the original assessment revealed by a more careful and closer investigation. On appeal, the Supreme Court held, affirming the decision of the High Court, that the reassessment under section 34(1)(b) was valid in law inasmuch as the Income-tax Officer proceeded on the basis of information which came to him after the original assessment by fresh facts revealed in the assessment proceedings for the year 1958-59. The word "information" in section 34(1)(b) is of the widest amplitude and comprehends a variety of factors. Nevertheless, the power under section 34(1)(b), however wide it may be, is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the internal audit party expressed the view that the money realised by the assessee on account of the occupation of its conference hall and rooms should have been assessed as "income from property" and not as "business income". Treating the contents of the audit report as "information", the Income-tax Officer initiated proceedings for reassessment for those four years under section 147(b) of the Income-tax Act. On appeal, the Appellate Assistant Commissioner held that it could not in law be said that the Income-tax Officer had any "information" in his possession enabling him to take action under section 147(b). But, on further appeal, the Tribunal, after noticing a difference of opinion between the High Courts, followed the decision of the Delhi High Court in the case of Smt. Chand Kanwarji [1972] 84 ITR 584 and held that the internal audit report should be regarded as "information". On a direct reference, the Supreme Court held that the opinion of the audit party, on a point of law, could not be regarded as "information" enabling the Income-tax Officer to initiate reassessment proceedings under section 147(b). The Income-tax Officer had, when he made the original assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned in the audit note and whether in consequence of the law which has now come to his notice he can reasonably believe that income has escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the purpose of such belief, add to or colour the significance of such law. The true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income-tax Officer. In every case, a declaration or exposition to be law, must be a creation by a formal source, either legislative or judicial authority. A statement by a person or body not competent to create or define the law cannot be regarded as law. The suggested interpretation of enacted legislation and the elaboration of legal principles in text-books and journals do not enjoy the status of law. They are merely opinions and, at best, evidence in regard to the state of law and in themselves possess no binding effect as law. The forensic submissions of professional lawyers and the seminal activities of legal academics enjoy no higher status. In Virudhunagar Co-operative Milk Supply Society Ltd. v. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the basis for reason to believe, may be obtained from his own record or from an external source, not only relatable to the assessment year in question ; but also relatable to subsequent assessment years. Reverting to the facts of the instant case, the information, which furnished the reason to believe that the income assessable to tax for the relevant assessment years in question 1973-74 and 1974-75 had escaped assessment was procured by the Assessing Officer not only from the materials available on record, during the course of assessment proceedings for the assessment year 1975-76, but also from an external source in the shape of the Income-tax Officer, Tirunelveli, furnishing the necessary and requisite information relatable to wastage of newspaper in the process of printing, pertaining to other newspaper concern, namely, Dina Malar. The internal information available to the Assessing Officer, in the course of the assessment proceedings for the assessment year 1975-76 was none else than the stock book (RG 16 Register) maintained to comply with the Central Excise Regulations. It is not as if the modus operandi of the business changed from year to year and the sordid fact i ..... 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