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Issues: Whether the Income-tax Officer had, in consequence of information in his possession, reason to believe that the sum of Rs. 20,762 had escaped assessment so as to justify action under section 34(1)(b) of the Income-tax Act, 1922.
Analysis: The assessee had disclosed the receipt of Rs. 20,762 in the return, but the amount had initially been assessed as business income under section 10 of the Income-tax Act, 1922. The Tribunal later held that the amount was not taxable as business income and that it was in the nature of capital gains. The expression "information in his possession" in section 34(1)(b) is wide enough to include information of law as well as fact, and extends to information received through a judicial decision. The later appellate determination therefore supplied the Income-tax Officer with the necessary legal information that the amount should be assessed as capital gains. The case was not one of mere change of opinion, but one where subsequent legal information justified reopening under section 34(1)(b).
Conclusion: The reference was answered in the affirmative, holding that the Income-tax Officer had sufficient information to invoke section 34(1)(b), in favour of the Revenue and against the assessee.
Ratio Decidendi: For purposes of section 34(1)(b) of the Income-tax Act, 1922, "information" includes not only factual material but also information as to the true state of the law, including information derived from judicial decisions.
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