1971 (8) TMI 58 - HC - Income Tax

Income-tax Officer lacked jurisdiction to re-open assessments based on a change of opinion

The court held that the Income-tax Officer lacked jurisdiction to re-open assessments for the years 1957-58 and 1958-59 under section 34(1)(b) of the ... Whether the Income-tax Officer had jurisdiction to re-open the assessment proceedings under section 34(1) (b) of the Act – held that mere change of opinion on same facts in the subsequent year cannot justify the reopening of completed assessment Issues Involved:1. Jurisdiction of the Income-tax Officer to re-open assessment proceedings under section 34(1)(b) of the Income-tax Act, 1922.2. Whether the Income-tax Officer had 'information' in his possession justifying the re-opening of assessments for the years 1957-58 and 1958-59.Detailed Analysis:1. Jurisdiction of the Income-tax Officer to Re-open Assessment Proceedings:The primary issue was whether the Income-tax Officer had the jurisdiction to re-open the assessment proceedings for the assessment years 1957-58 and 1958-59 under section 34(1)(b) of the Income-tax Act, 1922. The relevant provision allows re-opening if the officer has reason to believe that income has escaped assessment or has been under-assessed due to information in his possession.The court emphasized that two conditions must be satisfied for invoking section 34(1)(b):1. The officer must have reason to believe that income has escaped assessment or been under-assessed.2. This belief must be in consequence of information in his possession.The court found that although the Income-tax Officer had reason to believe that income had escaped assessment, this belief was not based on any new information. The officer's reason for re-opening the assessments was his own subsequent finding in later assessment years that the assessee was a dealer in shares, which does not constitute 'information' under section 34(1)(b).2. Whether the Income-tax Officer had 'Information' in His Possession:The court scrutinized whether the officer had any new information that justified re-opening the assessments. It was established that all relevant facts were already before the officer during the original assessments for 1957-58 and 1958-59. The officer had consciously applied his mind to these facts and concluded that the assessee was an investor, not a dealer.The court cited Commissioner of Income-tax v. A. Raman and Co., where it was held that the jurisdiction to reassess arises if the officer has information that income chargeable to tax has escaped assessment. This information must have come into possession after the previous assessment.The court noted that the officer's subsequent decision in later years did not yield any new facts or legal principles. It was merely a different interpretation of the same facts, which does not qualify as 'information' under section 34(1)(b). The court also referenced Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, which confirmed that information must be obtained after the original assessment.The court reviewed various High Court decisions, noting a divergence of opinion on whether information must come from an external source. However, it concluded that regardless of the source, the information must be obtained after the original assessment. In this case, no such subsequent information was obtained.The court distinguished between a mere change of opinion and a change of opinion based on new information. The former does not justify re-opening assessments, while the latter does. Here, the officer's action was based on a mere change of opinion, not on new information.Conclusion:The court concluded that the Income-tax Officer did not have jurisdiction to re-open the assessments for the years 1957-58 and 1958-59 under section 34(1)(b) as there was no new information in his possession. The re-opening was based on a mere change of opinion, which is impermissible. The question was answered in the negative, and the Commissioner was ordered to pay the costs of the reference to the assessee.