1969 (10) TMI 12 - HC - Income Tax

High Court: Change of opinion as 'information' under Income-tax Act. Tribunal to refer question of law.

The High Court concluded that a question of law arose regarding whether a change of opinion constituted 'information' under Section 34(1)(b) of the Indian ... ITO made the assessment of the respondent in which the income from the lease of the flour mill was treated as income from business. Next assessment year ITO treated the lease money of the flour mill as income from other sources and not as income from business - it was not open to the ITO to treat that income as income from other sources and not income from business - question of law as formulated by the petitioner does arise Issues Involved:1. Validity of Notice under Section 34(1)(b) of the Indian Income-tax Act, 1922.2. Whether the change of opinion by the Income-tax Officer constitutes 'information' under Section 34(1)(b).Detailed Analysis:1. Validity of Notice under Section 34(1)(b) of the Indian Income-tax Act, 1922:The respondent, a Hindu undivided family, had income from various sources, including a leased flour mill. For the assessment year 1955-56, the Income-tax Officer initially assessed the lease income as business income, which was later adjusted against business losses. However, for the assessment year 1957-58, the Income-tax Officer classified the lease income as income from other sources. This led to a reassessment notice under Section 34(1)(b) for the year 1955-56, where the lease income was again classified as income from other sources, disallowing the set-off of business losses.The respondent appealed, arguing that the Income-tax Officer had no new information to justify the reassessment notice under Section 34(1)(b). The Appellate Assistant Commissioner accepted this contention, stating that the notice was based on a mere change of opinion and thus invalid. The Tribunal upheld this decision, emphasizing that there was no new information in the possession of the Income-tax Officer to justify the reassessment notice.2. Whether the change of opinion by the Income-tax Officer constitutes 'information' under Section 34(1)(b):The Commissioner of Income-tax argued that the direction to file an appeal against the Appellate Assistant Commissioner's order for the assessment year 1957-58 constituted 'information' under Section 34(1)(b). The Commissioner relied on several Supreme Court judgments to support this argument:- Maharaj Kumar Kamal Singh v. Commissioner of Income-tax: Held that 'information' under Section 34(1)(b) includes information about the correct state of the law and relevant judicial decisions.- Salem Provident Fund Society Ltd. v. Commissioner of Income-tax: Held that a mistake apparent on the face of the order could constitute 'information,' and the availability of rectification powers under Section 35 did not bar recourse to Section 34.- Commissioner of Wealth-tax v. Imperial Tobacco Co. of India Ltd.: Discussed that a change of opinion could, in certain circumstances, constitute 'information' under Section 34(1)(b).However, the Tribunal found that the Income-tax Officer had no new information and that the reassessment was based solely on a change of opinion. The Tribunal's decision was challenged, leading to the present petition under Section 66(2) of the Act to refer the question of law to the High Court.The High Court observed that there was a conflict of judicial opinion on whether a change of opinion could be considered 'information.' The court cited Commissioner of Income-tax v. Rao Thakur Narayan Singh, which held that reopening assessments based on the same facts without new information was not permissible. The court emphasized that at this stage, it only needed to determine whether a question of law arose, not to answer it.Conclusion:The High Court concluded that a question of law did arise regarding whether a change of opinion constituted 'information' under Section 34(1)(b). Therefore, the Tribunal was directed to state the case and refer the question of law to the High Court for decision. No order as to costs was made.Separate Judgments:- MEHAR SINGH C.J.: Agreed with the decision to direct the Tribunal to state the case and refer the question of law to the High Court.Order accordingly.