Reassessment on prior information fails where the material pre-dates the under-assessment and cannot justify reopening.

Reassessment under section 34(1)(b) of the Indian Income-tax Act, 1922 could not be founded on information already in the Income-tax Officer's possession before the assessment became under-assessed through rectification under section 35. The statutory condition required information in consequence of which the officer had reason to believe income had escaped assessment or been assessed too low, and that information had to be subsequent to the under-assessment sought to be reopened. Because the relevant facts were known earlier, the rectification order could not convert prior information into valid reopening material. Reopening was therefore unjustified and the question was answered in favour of the assessee.

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Issues: Whether reassessment under section 34(1)(b) of the Indian Income-tax Act, 1922 could be validly initiated on the basis of information already in the Income-tax Officer's possession before the assessment stood rectified under section 35.

Analysis: Section 34(1)(b) required the Income-tax Officer to have, in consequence of information in his possession, reason to believe that income had escaped assessment, been under-assessed, or assessed at too low a rate. On the facts, the relevant information showing that a part of the assessee's income was taxable at Indian Union rates was already available before the rectification order under section 35. The under-assessment, if any, arose only because of the rectification order itself. Information that existed before the under-assessment came into existence could not satisfy the statutory condition for reopening under section 34(1)(b). The rectification order did not create a basis for treating prior information as subsequent information for the purpose of reassessment.

Conclusion: Reassessment under section 34(1)(b) was not justified; the question was answered in the negative in favour of the assessee.

Ratio Decidendi: Information relied upon for reopening under section 34(1)(b) must be subsequent to the under-assessment sought to be corrected and must come into possession of the Income-tax Officer after the assessment has become under-assessed.

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