COMMISSIONER OF INCOME TAX Vs. JYOTI LIMITED

JUDGEMENT

(1.) THE Tribunal has posed the following questions in the present reference : I. Assessment year 1963 -64 (R. A. No. 276 (AHD) /73/74) :

(2.) FOR the assessment year 1963 -64 the assessment was sought to be reopened under section 9(b) of the Super Profits Tax Act, 1963 on the ground that certain reserve created for specific purposes and the excess of the development reserve were considered for the purpose of capital computation for determining the standard deduction under the rule 1 of Second Schedule to the Super Profits Tax Act, 1963, hereinafter referred to as the 'S. P. T. Act'. The assessee's contention that there was no information to warrant the reopening of the assessment under section 9(b) as there was a case of mere change of opinion. That contention had been accepted by the Appellate Assistant Commissioner and the Tribunal had also as per the settled legal position in Kasturbhai Lalbhai's case : [1971]80ITR188(Guj) agreed with that view and, therefore, the revenue has come in this reference. The second question arises for the assessment years 1965 -66 and 1966 -67 as the Tribunal had as per the settled legal position disposed of the question in favour assessee. Therefore, the revenue has come in this reference even on the second question.

(3.) THE relevant provision is in pari materia with the same language as it is in other corresponding provisions providing for reopening of assessment in cases of such escaped income. The relevant two conditions precedent for the application of section 9(b) have been laid down by way of safeguards when the high power of reopening the final assessment is conferred. That is why the legal position is well settled as to the connotation of this term 'information'. In Commissioner of Income -tax v. A. Raman and Co. : [1968]67ITR11(SC) , the expression 'information' in the context was held to mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. Their Lordships held that jurisdiction of the Income -tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information must, it is true, have come into the possession of the Income -tax Officer after the previous assessment, but even if the information be such that it 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 enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income -tax Officer is not affected. This decision in Raman's case : [1968]67ITR11(SC) has been consistently followed. Thus, elaborating this concept of information as per the settled legal position, my learned brother P. D. Desai J., speaking for the Division Bench, in Bai Aimai Gustadji Karaka v. Gift -tax Officer : [1975]99ITR257(Guj) referring to identical two conditions under section 16(1)(b) of the Gift -tax Act, 1958, held that, (i) the Gift -tax Officer should receive information after original assessment, and (ii) in consequence of such information he should reasonably believe that taxable gift has escaped assessment. Elucidating the term 'information' my learned brother rightly pointed out that 'information' means instructive knowledge concerning a matter bearing on the assessment received from an external source after the completion of the original assessment. The external source was emphasised in contradistinction to a mere change of opinion on the part of the officer concerned, which would never constitute requisite information. It was, therefore, held at page 262 that the 'information' may be as to the correct state of facts or law relating to the taxable gift and it must capable of arousing or suggesting ideas or notions not before existent in the mind of the recipient. In other words, it must be of such a nature as to acquaint, enlighten or instruct the mind of the officer for the first time concerning the matter pertaining to the taxable gift so that he could form a reasonable belief that there has been as escapement of tax which requires to be set right by taking steps for reopening the assessment. The aspect of the definiteness of the information was emphasised by observing that 'information' must be derived from a source which has some authenticity and it must be precise and certain and must have relation or nexus with the taxable gift which was alleged to have escaped assessment. That is why any wayside gossip, any inference or surmise drawn by a person from certain facts assumed to exist and not supported by any data or any general opinion expressed by a person not qualified, experienced or acquainted with the subject -matter was held to amount to 'information' on which the officer might act for reopening a completed assessment. This view was taken because otherwise the salutary safeguards would be rendered illusory and the action of reassessment would result in considerable anxiety and harassment to the assessee, if these conditions precedent were not strictly complied with. That is why even the bare opinion of the Inspecting Assistant Commissioner based on generalisation was held not to constitute 'information' as it would not amount to instructive knowledge concerning the taxable gift on the basis of which only requisite belief could be formed. This decision, therefore, clearly settles the question as to the connotation of the term 'information' which in its essential nature must be such as to enlighten or instruct the mind of the officer concerned for the first time. The officer by having second thoughts on the same material could never be said to have any information as envisaged by this salutary provision for the simple reason that it would not be information which enlightens his mind for the first time. In the decision in Kasturbhai Lalbhai v. R. K. Malhotra, Income -tax Officer : [1971]80ITR188(Guj) , Bhagwati C.J. (as he then was) speaking for the Division Bench elaborately examined this question in the light of the binding Raman : [1968]67ITR11(SC) ratio in the context of a case where assessment was sought to be reopened as a result of the audit note. At page 191, following the Raman : [1968]67ITR11(SC) ratio, it was held that 'information' in the context in which it occured in section 147(b), must mean 'instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment'. Mere change of opinion on the part of the Income -tax Officer cannot constitute 'information' so as to entitle the officer to initiate proceedings under section 147(b).