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TMI Blog1980 (2) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 147(b) of the Income-tax Act, 1961, was not on information from the Tribunal's order dated November 30, 1970, is perverse and unreasonable ? (3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that once the Appellate Assistant Commissioner has passed an order disposing of the appeal against the assessment it is not possible for the Income-tax Officer subsequently to reopen that assessment ? " The assessee is a limited company. The relevant accounting period is the year ended December 31, 1966, the assessment year being 1967-68. The original assessment of the company for the year was completed by the ITO, on April 29, 1968. In that assessment order the ITO had stated with reference to the claim put forward by the assessee for the grant of a deduction by way of rebate on export profit under s. 2(4)(a)(i) of the Finance (No. 2) Act, 1967, that such rebate will be given on production by the assessee of necessary particulars. Treating the assessee as an " industrial company " as defined in s. 2(7)(d) of the Finance (No.2) Act, 1967, the ITO in making the aforesaid assessment applied a concessional tax rate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as bad debts amounts advanced by the erstwhile firm which was succeeded by the, assessee. Allowance of debts incurred by the firm should not have been granted in computing the income of the company. This point was omitted to be considered. The assessee was granted deduction on account of interest paid on loan amounts. Proportionate interest on funds advanced to directors and firms in which they were partners was not disallowed. On account of the above omissions and mistakes have reason to believe that income escaped assessment. The assessment is reopened u/s. 147(b). Issue notice u/s. 148. sd ...... Income-tax Officer." The assessee filed objections contending, inter alia, that there was no valid ground whatever warranting the invocation of the power under s. 147(b) inasmuch as all the materials had been fully considered by the assessing authority (predecessor of the ITO who issued the notice under s. 148) and it was only after due application of mind to all such materials that the assessment had been finalised afresh by the order dated January 21, 1971, allowing the assessee's claim for rebate on export profits under s. 2(4)(a)(i) of the Finance (No. 2) Act, 1967, as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meaning of s. 147(b). The ITO completed the reassessment by withdrawing the export profit rebate and applying a rate of 55% by refusing to treat the assesseecompany as an industrial company. On appeal, the AAC confirmed the reassessment order passed by the ITO. The assessee carried the matter in second appeal before the Tribunal. The main contention urged by the assessee before the Tribunal was that the conditions laid down in s. 147(b) for invoking the power of reassessment therein referred to were not at all satisfied in the present case and that the reassessment had been made by the successor-ITO only on the basis of a mere change of opinion on his part on a consideration of the very same materials to which his predecessor had fully applied his mind while making the original order of assessment dated January 21, 1971. This objection was sought to be met by the departmental representative by contending that the reopening was on account of information received by the ITO from certain decisions rendered by the Tribunal in similar cases, wherein it had been held that profit on sale of import entitlements could not be considered as export profits. The said contention was attempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO should have in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for the concerned year. As to what would constitute " information " for the purpose of exercising the power under s. 147(b) is now well settled by the decisions of the Supreme Court and various High Courts in this country. Two conditions precedent must be satisfied before the ITO can take action under cl. (b)(i): he should have reason to believe that the income has escaped assessment, and (ii) it should be in consequence of information received after the original assessment that he should have reason so to believe. If either condition is not satisfied, the ITO will have no jurisdiction to resort to the power conferred under s. 147(b). As pointed out by Shah J. in CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC). the "information " may even be such that could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other inquiry or research into facts or law, but if it was not in fact obtained, it is legally open to the ITO to rely on such information for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alyanji Mavji Co. v. CIT [1976] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law. A further submission raised by the revenue on s. 147(b) of the Act may be considered at this stage. It is urged that the expression 'information' in s. 147(b) refers to the realisation by the ITO that he has committed an error when making the original assessment. It is said that, when upon receipt of the audit note, the ITO discovers or realises that a mistake has been committed in the original assessment, the discovery of the mistake would be 'information' within the meaning of s. 147(b). The submission appears to us inconsistent with the terms of s. 147(b). Plainly, the statutory provision envisages that the ITO 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 ITO. The information is not the realisation, the information gives birth to the realisation." Judged in the light of the legal position ..... X X X X Extracts X X X X X X X X Extracts X X X X
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