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TMI Blog1982 (7) TMI 38X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee is an individual deriving income from salary, property, share from two managing agency firms and other sources such as dividend, interest, etc. The original assessment for the assessment year 1961-62 was completed on January 1, 1963. The ITO proposed to reopen the assessment under s. 147(b) of the Act as he found that in the original assessment a larger interest was allowed as a deduction from the income assessed under the head " Other sources ". The assessee filed a return in response to a notice under s. 148. The assessee had claimed in the original assessment deduction of the interest amounting to Rs. 54,577 under the bead "Other sources" and a sum of Rs. 41,627 was allowed and the balance was disallowed. The original disallowance was made on the ground that on his borrowings to whose interest had been paid has not only gone for the purchase of shares which brought in the dividend income but also to his other personal requirements and, therefore, the interest payments, so far as they related to borrowings made for his personal expenditure, should be disallowed. After reopening, the ITO presumed that the entire shareholding of the assessee were acquired by utilising th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing a different method, and that (3) even on facts the reopening was not called for." In that view, all the assessee's appeals were allowed by the AAC. The Revenue took the matter in appeal to the Income-tax Appellate Tribunal and the Tribunal found that the assessments were reopened on the basis of " information " received by the ITO after he completed the original assessment for these three years, that the said information was contained in the inspection notes of the IAC and that, therefore, s. 147(b) of the Act has rightly been invoked by the ITO. On the merits of the assessment, the Tribunal took the view that the assessee was not able to show any correlation between the interest payments and the investments and that in the absence of any such correlation the allowance now made by the ITO is reasonable and the disallowance was justified. Aggrieved by the order of the Tribunal, the assessee sought for and obtained a reference under s. 256(2) of the Act on the questions referred to above. The first question referred involves the scope and ambit of the expression " information " occurring in s. 147(b). Though the expression " information " came up for interpretation in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts stated above, it will be clear that even at the original assessment the ITO was aware of the fact that out of the borrowings, part of it has gone to the assessee's personal expenses and the other part has gone towards acquisition of shares and it is only on that basis interest payments were apportioned as Partly relating to the personal expenses and partly for the acquisition of shares, and adopting an estimate, he allowed a portion of the interest payments as allowable expenditure and the balance as not allowable. The instructions given by the IAC merely indicated that there has been excessive allowance of interest, and that cannot be taken as " information " as contemplated by s. 147(b). It merely means a change of opinion on the part of the ITO on the same materials and a fresh application of mind on the same set of facts. In fact, even after reopening, the ITO adopted, in the absence of a proper correlation, a rough and ready-method of apportioning of interest payments partly to personal expenses and partly to investments. In a case where the ITO was at the time of original assessment fully aware of the facts and consciously adopted an estimate to determine what portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under a wrong head and when that was pointed out, the ITO, after reopening, assessed the income under the proper head and that is not the case here. Musasons Pvt. Ltd. v. CIT [1978] 111 ITR 47 (Mad), is a case where the original assessment of the assessee was completed by adopting the sum assessable under the head " Dividends " at the gross amount of intercorporate dividend received by the assessee and the audit party which went into the file of the assessee informed the officer that as part of the loans borrowed by the assessee went towards investment in shares, the interest payments should be apportioned between dividend income and business income instead of accepting the assessee's claim for deduction of the entire interest payment against business income alone. On the basis of this information furnished by the audit party, the assessment was reopened under s. 147(b) of the Act and the amount of dividend income assessable was reduced by certain amounts, while the business income was enhanced by similar amounts. When, the matter came up before this court it specifically found that the ITO did not have knowledge when he completed the assessment of the diversion of only a portion o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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