Reopening on definite factual information fails where the basis is only a prior mistake in applying the income-clubbing rule.

Under section 34(1)(b) of the Indian Income-tax Act, 1922, reopening required the Income-tax Officer to possess definite information of a factual nature giving reason to believe that income had escaped assessment. A mere oversight, mistaken view, or omission in applying section 16(3)(a)(i) and (ii) was not such information, because it concerned a legal error rather than new factual material. The Nagpur HC therefore held that a prior mistake of law could not be treated as fresh information for reopening, and the notice issued under section 34(1)(b) was invalid and could not sustain the reassessment.

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Issues: Whether a notice issued under section 34(1)(b) of the Indian Income-tax Act, 1922 was valid when the alleged basis for reopening was only that the earlier Income-tax Officer had overlooked the application of section 16(3)(a)(i) and (ii).

Analysis: Section 34(1)(b), as amended, required the Income-tax Officer to have reason to believe, based on definite information in his possession, that income had escaped assessment. The information contemplated by the provision had to relate to facts, not merely to a mistaken view or omission as to the law. A mere oversight in applying the statutory provisions governing clubbing of income was therefore not definite information within the meaning of the section. The reopening could not be justified by treating a prior mistake of law as fresh information, and the proceedings were examined only on the footing that they had been initiated under clause (b).

Conclusion: The notice under section 34(1)(b) was invalid and could not sustain the reassessment.

Final Conclusion: The reference was answered against the Revenue and in favour of the assessee on the validity of the reopening notice.

Ratio Decidendi: For reopening an assessment under section 34(1)(b) of the Indian Income-tax Act, 1922, the Income-tax Officer must possess definite information of a factual nature; a mere mistake or omission in applying the law is not sufficient.

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