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TMI Blog1991 (6) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... , as deposit, with interest thereon at bank rates for a period of five years ; in case sales tax had to be paid by Chunnilal, to the extent of the amount in deposit, the tax shall be paid out of the deposit ; if no sales tax was payable, the amount held in deposit shall be refunded to the assessee, after five years from the date of the year in which sale of cotton took place. Consequently, during the several assessment years, the sale price received by the assessee was equated to the actual amount received by the assessee (de hors the amount held in deposit by Chunnilal). On November 5, 1972, Chunnilal gave a credit note to the assessee for a sum of Rs. 3,24,065.55 out of which a sum of, Rs. 1,14,772 was attributable to the sales effected during the accounting year 1968-69. The entire amount of Rs. 3,24,056.55 was taxed by the Income-tax Officer during the assessment year 1973-74. The Commissioner (Appeals) deleted this addition holding that, in view of the terms of the agreement, these amounts relate to the periods 1967-68 and 1968-69, out of which Rs. 29,426.67 related to 1967-68. He further observed that since the refund has to be made by, Chunnilal five years after, the year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in question was brought to tax as income for the assessment year 1975-76 as cessation of liability. The Appellate Commissioner upheld this order by holding that, in the earlier order of the Appellate Commissioner, there is a clear finding that the receipt in question was taxable during the assessment year 1975-76 and, therefore, section 153(3) of the Act came into play. It is not clear whether this finding was in connection with the saving of limitation or as a direction given to the Income-tax Officer by the Appellate Commissioner. The Appellate Tribunal affirmed the application of section 153(3) to the reassessment order. Before considering other questions involved in this reference, we may straightaway reject the Revenue's reliance on section 153(3). The earlier order of the Appellate Commissioner was regarding the year 1973-74. While considering an appeal in respect of an assessment year, a direction regarding another assessment year does not fall within section 153(3). The purpose of section 153(3) is to lift the bar of limitation to make an effective order of assessment, consequent upon an appellate order. Section 153(3) does not create a new power or jurisdiction. Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 SC 203, during the two assessment years, the assessee's claim for deduction was allowed ; but during the third year, the Income-tax Officer held it as non-deductible ; the deduction claimed pertained to the interest paid on the borrowings. Consequently, the Income-tax Officer reopened the earlier two years' assessments. The assessee contended that the entire set of facts including the relevant documents were already before the Income-tax Officer when assessment orders were made by him earlier and, therefore, reopening of those orders was based on a mere change of opinion. The assessee's contention was rejected by the Supreme Court on the ground that three additional facts came into existence after the earlier two years' assessments, viz., (1) the claim for deduction was disallowed during the third year ; (2) the assessee failed to prove the borrowings as incurred for purposes of the business ; (3) the conduct of the assessee in not clearing the doubt of the Income-tax Officer when he was asked about the principle of law applicable. Basically, all these three facts flowed from the first fact itself, i.e., the refusal of the Income-tax Officer to accept the assessee's case during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Internal Audit Department were purely administrative and its opinion on the merits of a case cannot be " information ". An opinion pointing out the existence of the law relevant to the facts, it was held, will be information as to the law, but the meaning given to the statute and the opinion expressed as to the applicability of one of two sections of the statute, is not such information. At page 1963, the Supreme Court held (page 1001 of 119 ITR) : "In so far as the word 'information' means instruction or knowledge concerning facts or particulars, there is little difficulty. By its inherent nature, a fact has concrete existence. It influences the determination of an issue by the mere circumstance of its relevance. It requires no further authority to make it significant. Its quintessential value lies in its definitive vitality. " The difficulty is to find out when " instruction " or knowledge as to law becomes " information ". The Supreme Court proceeded to say (at page 1001 of 119 ITR): "When we speak of 'law', we ordinarily speak of norms or guiding principles having legal effect and legal consequences. To possess legal significance for that purpose, it must be enac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed on a reconsideration of the same material (and no more) does not give him that power." The words, " oversight, inadvertence or a mistake " are found in the second test laid down in Kalyanji Mavji's case [1976] 102 ITR 287 (SC) and this test was stated as too wide. Thereafter, while referring to the contention that any realisation of the mistake could give rise to an assessment under section 147(b), it was held at page 1966 (page 1005 of 119 ITR): "Plainly, the statutory provision envisages that the Income-tax Officer must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words 'reason to believe', and it follows from the 'information' received by the Income-tax Officer. The information is not the realisation, the information gives birth to the realisation." Sri Prasad contended that this decision of the Supreme Court squarely applies to the facts of the instant case because, here, on the same set of facts and on the same material, the Income-tax Officer has formed different opinion for which he had no " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC). The Supreme Court, at the outset, held that, assuming the assessee's contention is correct, even then, the case would fall within the fourth test laid down in Kalyanji Mavji's case [1976] 102 ITR 287 (SC). As to the fourth test, Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 said at page 16 of [1991] 2 JT 7 (page 297 of 189 ITR) : " This proposition clearly envisages a formation of opinion by the Income-tax Officer on the basis of material already on record provided the formation of such opinion is consequent on information in the shape of some light thrown on aspects of facts or law which the Income-tax Officer had not earlier been conscious of. To give a couple of illustrations, suppose an Income-tax Officer, in the original assessment, which is a voluminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently, he finds, in the forest of papers filed in connection with the assessment, several instances of earlier sales of house property b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorrect judicial decisions had consistently held that this could not be done and the Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji's case [1976] 102 ITR 287 (SC). The second paragraph from the judgment in the Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) earlier extracted has also reference only to this situation and insists upon the necessity of some information which makes the Income-tax Officer realise that he has committed an error in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas [1968] 21 STC 326 (SC). Even making allowance for this limitation placed on the observations in Kalyanji Mavji's case [1976] 102 ITR 287 (SC) ; the position as summarised by the High Court in the following words represents, in our view, the correct position in law (at page 629 of 102 ITR) : 'The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, in the facts and circumstances of the case, the purported exercise of the power under section 147(b) was clearly erroneous. The answer to the first question, therefore, is in the negative and against the Revenue. The second question becomes academic. However, we proceed to answer it on the assumption that the proceedings under section 147(b) was properly commenced. The amount in question was received by the assessee during the year ending Deepavali 1972, that is to say, during the accounting year 1971-72. The relevant assessment year will be 1973-74. However, in its previous order, the Appellate Tribunal held that this receipt was not taxable during the assessment year 1973-74. One of the reasons given by the Appellate Tribunal was that the amount in question was a trading receipt of the assessee relatable to the year 1968-69, since it was part of the sale price for which goods were sold by the assessee during the said year when Chunnilal retained the amount in deposit as per the agreement. This reasoning has been completely ignored by the Appellate Tribunal when it made, its present order leading to this reference. There is no dispute that the method of accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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