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TMI Blog1962 (3) TMI 128X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings may be reopened under section 34(1)(b) when the Income-tax Officer on the basis of information believes that income has escaped assessment, is only a caution provision and not one going to the root of the Income-tax Officers jurisdiction. It is the object behind the Act that income which could legally be assessed to tax must be assessed and it could never have been within the contemplation of the Legislature that if income by mistake of the Income-tax Officer escaped assessment and the mistake was discovered later, the assessment was reopened under section 34 by the issue of a notice contemplated by the section and income was assessed to tax, still the assessment order should be quashed because of some imaginary defect such as that the reopening was not done on the basis of any information. What the Legislature obviously contemplated by saying that the reopening of assessment proceedings should be done when the Income-tax Officer on the basis of information believes that income has escaped assessment is that he should act not on mere suspicion or surmise that income might have escaped assessment or simply with a view to re-examine the matter and to find whether it had esc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the reopening of the proceedings was illegal. It cannot be assumed that the reopening was done without any belief formed in the mind of the Income-tax Officer that income had escaped assessment; if any presumption is to be made it must be as I said above, that the reopening was done on the basis of the belief. Then there remains the last and troublesome question of how the belief was formed. This again is a question of fact, to be answered by the Income-tax Officer, who alone knows how he believed that income had escaped assessment. No question of fact can be dealt with by this court in a reference under section 66. No question of fact can be referred at all by the Appellate Tribunal to this court and even if some question of fact is illegally referred, it would be entitled to refuse to answer it. Therefore, this court should not go into the question how the Income-tax Officer formed the belief. It is appears from the record that he formed the belief on the basis of a certain thing, a question of law arises whether it amounts to the forming of the belief on the basis of information in his possession or not. But no such question will arise if the record does not disclose how or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he may reopen the proceedings in respect of the income without change of opinion but when he had himself refrained from assessing it initially there must be a change opinion on his part if he is to act under section 34(1)(b). Thus change of opinion, instead of being a bar, is a requisite condition in such circumstances. If a change of opinion is brought about by information not only is it not a bar but also it is exactly what the Legislature expects in such cases. Information which makes the Income-tax Officer change his opinion does not cease to be information because of this result; if it is there, all that is required by section 34(1)(b) is there and he has jurisdiction to reopen the proceedings. The word information means knowledge communicated concerning some particular fact, subject or event; that of which one is apprised or told; intelligence, news (see Murrays Dictionary). It should be noticed that neither the source nor the manner of acquisition enters into the meaning of information. Whether what one has is information or not does not depend upon either the source or the manner. If one has learnt or has been told about something, one is informed, no matter how or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntries that the receipts were of dividends or of revenue income; on the other hand, the entries were so worded as to suggest that the receipts were of capital income. Anyhow the Income-tax Officer thought that the receipts were not assessable income and did not include them in the total income. Later he learnt that they were dividend income and, therefore, assessable and reopened the proceedings under section 34. It has not been disclosed on the record from whom or how he learnt this, but there is no doubt that he learnt it because otherwise it is not understood how he reopened the assessment. His learning that the receipts were dividend income amounted to his having information in his possession within the meaning of section 34(1)(b). In R. G. S. Naidu Co. v. Commissioner of Income-tax, an assessment or reassessment made under section 34 was upheld even though there was no evidence of any information having been received by the Income-tax Officer to justify the reopening of assessment. The scope of section 34(1)(b) has been made wider now; previously the requirement was that the Income-tax Officer must have definite information in his possession; now any information which mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed March 19, 1955, the assessee was assessed to Income-tax in the status of an individual on a total income of ₹ 19,517. In this total income, the income from property was ₹ 200 and interest income was ₹ 19,317. During the course of examination of the account books of the assessee the Income-tax Officer looked into the capital account and initialled it. In this capital account there were two entries of two sums of monies, viz., ₹ 26,834 and ₹ 24,425. The narration against these entries was as follows : Received towards final payment at eleven per cent. on 24,395 shares of Rama Commercial Co. and Received towards final payment at nine per cent. on 25,715 shares from Rama Investment Corporation Ltd. Having regard to the account in which the entries occurred, namely, the capital account, and having regard to the narration in those entries, prima facie the two sums of monies represented receipt of capital as the word dividend nowhere occurred in the narration. Actually, however, these two sums represented distribution by the two companies of the accumulated profits and were received by the assessee on December 1, 1953, in the accounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icates were in similar terms and may be reproduced by giving alternative figures for the two years in question respectively : It is hereby certified that this company has already paid income-tax at full Indian rates on the disbursement of surplus funds of the company made at the time of final winding up to shareholders on December 1, 1953, at 11%/9% of the face vas receiving a salary. In these circumstances, it is not possible for us to hold that there was no material before the Tribunal for arriving at the finding which the Tribunal did. It may be that on that material two opinions might have been possible. As we have stated earlier, the question that arose was essentially a question of fact to be decided on the facts and circumstances found. While we find that there was material for arriving at the view which the Tribunal did, it is not possible for us to set aside the finding recorded by the Tribunal. We may, in this connection, refer to a decision of this court in Commissioner of Income-tax v. I. D. Varshani where, in similar circumstances, it was held by this court that a finding having been recorded that certain income was salary was a finding of fact on the material and, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income was sought to be charged as income of the Hindu undivided family. It seems that, from the very first stage when the proceedings started before the Income-tax Officer, the case was dealt with on the basis that both parties admitted that the remuneration being paid to the Government Treasurer on appointment as such was income being received by the assessee family and not income received by Seth Lal Chand in his individual capacity. Some confusion, however, appears to have occurred in the statement of the case wherein the Tribunal proceeded to mention that Seth Lal Chand was appointed as Government Treasurer. But in these proceedings for assessing the Hindu undivided family, the question could only arise on the basis that the appointment as Treasurer was really that of the Hindu undivided family. It was for this reason that the President of the Tribunal in his appellate order clearly stated that the family was appointed Government Treasurer, Ajmer-Merwara. At this stage when the case has already proceeded up to its decision by the Income-tax Appellate Tribunal in proceedings for assessment of the assessee on the basis that the family was appointed as Government Treasurer, thoug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntment of a servant to a post. The principle laid down in that case was approved by the Supreme Court in Lakshminarayan Ram Gopal and Son Ltd. v. The Government of Hyderabad. The Supreme Court laid down the principle in the following words : When a partnership firm comes into existence, it can be predicated of it that it carries on a business, because partnership according to section 4 of the Indian Partnership Act is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. After laying down this principle their Lordships of the Supreme Court referred to the case of Inderchand Hari Ram v. Commissioner of Income-tax cited above by us. In the present case also it is, therefore, a relevant consideration to see whether when a contract for accepting appointment as treasurer is entered into by the karta on behalf of a Hindu undivided family, it can be held that the family accepted a contract of service and was not entering into a contract of business to work as an independent contractor. As we have said earlier, a Hindu undivided family, which may consist of numerous persons cannot as a whole become a serva ..... X X X X Extracts X X X X X X X X Extracts X X X X
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