Reopening on later realization of existing material upheld where reassessment was based on information, not mere change of opinion.

Reassessment under section 34(1)(b) of the Indian Income-tax Act, 1922 is competent where the Income-tax Officer acquires information from later proceedings showing the significance of material already on record, provided the case is not a mere change of opinion on fully appreciated facts. The original return and balance-sheet did not clearly reveal that borrowed funds were being diverted for partners' interest-free advances, but later assessment proceedings brought that effect into focus. The HC held that such later realisation could constitute "information" for reopening, so the reassessment was valid and the reference was answered against the assessee.

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Issues: Whether the reassessment initiated under section 34(1)(b) of the Indian Income-tax Act, 1922 was competent on the basis of information said to have emerged from later assessment proceedings.

Analysis: Section 34(1)(b) requires the Income-tax Officer to have in his possession, in consequence of information, reason to believe that income has escaped assessment or been under-assessed. The expression "information" is not confined to wholly new facts unavailable earlier; it may include knowledge derived from later realisation of the effect of materials already on record, provided the officer did not merely change his opinion on the same fully appreciated material. Here, the original return and balance-sheet did not, on their face, make it manifest that the borrowed funds were being diverted for partners' interest-free advances. The later assessment proceedings brought home the significance of the figures in a manner that was not fully apparent earlier. The reassessment was therefore not invalid merely because the basic materials had been on record at the original assessment stage.

Conclusion: The reassessment under section 34(1)(b) was competent and the reference was answered against the assessee.

Ratio Decidendi: Information for reopening assessment may arise from the later realisation of the significance of material already on record, and reassessment is not barred unless the case is merely one of a change of opinion on fully appreciated facts.

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