TaxTMI 
TaxTMI 
1967 (1) TMI 75
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....00 each and 75,750 preference shares of ₹ 100 each, out of which Navinchandra owned 2,150 ordinary shares and 9,050 preference shares. Navinchandra had, some time prior to his death, gifted away some part of his share capital to various persons and at the time of his death he only held 975 ordinary shares and 9,050 preference shares of the company. We are primarily concerned in this petition with the valuation of the 2,150 ordinary shares. 2. On 28th March, 1956, after the return was filed, the Assistant Controller of Estate Duty asked the petitioner a number of questions which were replied to and along with the reply was also filed a valuation report dated 10th December, 1956. The replies to the questions were given on 13th February, 1959. The petitioner has also alleged that in the meanwhile a number of hearings took place at which several questions were discussed in connection with the return. On 22nd March, 1960, the then Deputy Controller of Estate Duty, Mr. Jhala, made an assessment order which is at exhibit F. In the order the Deputy Controller has stated that there were several points arising out of the return submitted by the accountable person but all except one of....
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....64, the respondent wrote to the chartered accountants of the petitioner a letter in which he disclosed his own computation of the value of the ordinary shares of the company which the deceased held and informed the petitioner that the various contentions which he had put forward were being considered. Meanwhile he offered his own valuation of the ordinary shares "on the assets basis as at the date of death of the deceased" and called upon the petitioner to let him have his views regarding the same. It may be stated here that in the assessment order dated 22nd March, 1960, the computation of the value of those shares was made at ₹ 1,250 per share whereas in the computation now made by the deputy controller of Estate Duty the value of each share was assessed at ₹ 2,800, i.e., more then twice the original value of the shares. Though the petitioner has stated that on the date of his death the deceased owned 975 ordinary shares, it is now not in dispute that the date of his death the deceased owned 975 ordinary shares, it is now not in dispute that the assessment has to be made on the basis that the deceased owned 2,150 ordinary shares, for the transfer which is by....
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.... the possession of the controller of Estate duty and that there was no such information in his possession when he issued the notice on 23rd January, 1963. On behalf of the department a number of facts and circumstances have been alleged which according to them constituted the necessary information entitling them to act under the provisions of section 59. We shall refer to these various allegations when we come to consider the individual points under each one of the provisions of law. 7. Now before we turn to discuss the points raised it is necessary to say a word about the history of the legislation. 8. The Estate Duty Act of 1953 (Act No. 34 of 1953), was amended by the Estate Duty (Amendment) Act, 1958 (Act No. 33 of 1958), which came into force from 1st July, 1960, by virtue of a notification in the Gazette of India. Inter alia, the Amending Act substituted by section 53 thereof a number of sections in the Estate Duty Act of 1953. These were section 56 to 65 and at the same time repealed several sections of the old Act. We are only concerned with the legislative change brought about so far as section 62 of the unamended Act was concerned. Section 62 as it stood prior to amendm....
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....otherwise, or (b) has, in consequence of any information in his possession, reason to believe notwithstanding that there has not been such omission or failure as is referred to in clause (a) that any property chargeable to estate duty has escaped assessment, whether by reason of under-valuation of the property included in the account or of omission to include therein any property which ought to have been included, or of assessment at too low a rate or otherwise, he may at any time, subject to the provisions of section 73A, require the person accountable to submit an account as required under section 53 and may proceed to assess or reassess such property as if the provisions of section 58 applied thereto." 10. Section 61 merely provides that at any time within five years from the date of any order passed by him, the Controller may, on his own motion, rectify any mistake apparent from the record and shall, within a like period rectify any such mistake which has been brought to the notice of the Controller, by the person accountable. The proviso says that no rectification can take place unless the person accountable has been given a reasonable opportunity of being heard in the ....
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.... believe...... that any property chargeable to estate duty has escaped assessment, whether by reason of under-valuation of the property included in the account or of omission to include therein any property which ought to have been included, or of assessment at too low a rate or otherwise..." This ground for action under section 59(b) is nowhere to be found referred to in the old section 62. To that extent the Amending Act brought about a radical departure in the powers conferred upon the Controller. Clause (b) of section 59 prescribes that if any property chargeable to estate duty has escaped assessment, the Controller "may proceed to assess or reassess such property as if the provisions of section 58 applied thereto." The provisions of section 58 also introduced by the amending Act relate to initial assessments. This if the grounds prescribed in clause (b) of section 59 exist then the Controller has power to assess or reassess as if the provisions of section 58 applied thereto, that is to say, as if the first assessments were to be made. This is a completely new power conferred upon the Controller and it is comparable to the power conferred by section 34 of the Ind....
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....panies) Rules, 1953, and that, therefore, action could be taken in spite of the amending Act or alternatively that action could be taken under 15 read with section 62 of the old Act, and therefore, no immunity was acquired. 13. Now it is the general principle which is well-settled that retrospectivity of a statute is not to be presumed and the general principle is thus quoted at page 388 in Craies on Statute Law, "Philosophical writers have, it is true, denied that any legislature ought to have such a power, and it is indisputable that to exercise it under ordinary circumstances must work great injustice. But before giving such a construction to an Act of Parliament one would require that it should either appear very clearly in terms of the Act or arise by necessary and distinct interpretation. And perhaps no rule of construction is more firmly established than this - that a retrospective operation is not to be given to a statute so as to impair an existing right or obligation otherwise than as regards matter of procedure, unless that effect cannot be avoided doing violence to the language of the enactment. If the enactment is expressed in language which is fairly capable of ....
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....ngs may be taken by way of appeal and cause further delay. Until all such questions are determined and all such proceedings have come to an end, there can be no final assessment. But when once a final assessment is arrived at, it cannot in their Lordships opinion be reopened except in the circumstances detailed in sections 34 and 35 of the Act (to which reference is made hereafter) and within the time limited by those sections." 15. In Delhi Cloth and General Mills Co. Ltd. v. Income-tax Commissioner Delhi, again a case under the Indian Income-tax Act - (section 66A was there being considered) - the principle was thus stated by Lord Blanesburgh at page 425 : "The principle which their Lordships must apply in dealing with this matter had been authoritatively enunciated by the Board in the Colonial Sugar Refining Co. v. Irving, where it is in effect laid down that, while provisions of a statute dealing merely with matters of procedure may properly, unless that construction be textually inadmissible, have retrospective effect attributed to them, provisions which touch a right in existence at the passing of the statute are not to be applied retrospectively in the absence of....
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....ent. We may first of all dispose of a point which Mr. Joshi made on behalf of the department that the order was not final, because the assessee had preferred an appeal. In the first place the plea is not to be found stated in any part of the affidavits filed on behalf of the department, but it is also not disputed that that appeal was filed at the instance of the assessee claiming a reduction of tax and nothing further, and in regard to minor item. We do not think that in a case where the assessee claims that he is not liable to tax it can possibly be urged that the department's right to assess or reassess was kept alive. In fact, even on that occasion the department could not have claimed that the assessee was liable to a higher rate of taxation or to a higher amount of tax. Therefore, the mere fact that an appeal on behalf of the assessee was pending would not, in our opinion, affect the question whether the order passed on 22nd March, 1960, was final and completed order or not. That order was a completed and final order. 18. We have already said that the provisions of section 59 are substantially similar to the provisions of section 34 of the Indian Income-tax Act and, whil....
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....ny particular assessment year may be assessed, then on the expiry of that period the department cannot make an assessment. Where no period is prescribed the assessment can be completed at any time but once completed it is final. Once a final assessment has been made, it can only be reopened to rectify a mistake apparent from the record (section 35) or to reassess where there has been an escapement of assessment of income for one reason or another (section 34)." As regards the provisions of section 18 of the Finance Act, 1956, the Supreme Court held at page 240 : "The legislature has given to section 18 of the Finance Act, 1956, only a limited retrospective operation, i.e. up to April 1, 1956, only. That provision must be read subject to the rule that in the absence of an express provisions or clear implication, the legislature does not intend to attribute to the amending provision a greater retrospectivity than is expressly mentioned, nor to authorize the Income-tax officer to commence proceedings which before the new Act came into force had by the expiry of the period provided become barred." 19. A similar question came up for decision before this court in S. C. Pr....
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....T. Desai) and by the Division Bench in appeal that the remedy available to the Income-tax Officer had already become barred under section 34 before amendment in 1953 and that gave rise to a vested right to the assessee which could not be affected excepted by clear and express terms used by the legislature. By the amending Act of 1953, the legislature had expressed its intention not to give any retrospective operation to the section further than 1st April, 1952. The remedy and the right of the officer to reassess was, therefore, lost before 1st April, 1952, and therefore, the notice was invalid. 20. The principle was thus stated by Chief Justice Chagla at page 890 : "Therefore, on the validity of the notice, the very short question that we have to consider is whether, if the remedy or the right to issue a notice under section 34 was already barred at the date when the amending legislation came into force, the amending legislation could revive the remedy by providing an extended period of limitation. The amending Act came into force on 1st April, 1952, and on that date the period of eight years from 31st March, 1943, had already expire. Therefore, the remedy available to the I....
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....ive such right in the absence of express words or necessary intendment. The decision of the Bombay High Court was of course taken in appeal and was reversed by the Supreme Court, but on this point, out of five judges, two judges expressed one view, two judges expressed another view and the fifth judge did not express any opinion at all with the result that the decision of the Bombay High Court stands so far as this point is concerned." 22. In Commissioner of Income-tax v. Shantilal Punjabji the effect of the Supreme Court decision upon the view taken by the Division taken by the Division Bench of this court in Prashar v. Vasantsen Dwarkadas was considered and at page 73 it reopen an assessment which is barred under section 34 and no subsequent enlargement of time can revive such right by section 31 of the Amendment Act of 1953, as we have pointed out in Mathurdas Govinddas v. G. N. Gadgil, the Bombay decision in Prashar v. Vasantsen Dwarkadas still holds good and is binding upon us as on this point. Out of the five learned judges, two took the view, two a contrary view and the fifth judge, Sarkar J., did not express any opinion at all and, therefore, as held by the Bombay Hig....
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....n 34 was mere procedure." That point was answered against the department at page 489 as follows : "From one point of view, a vested right claimed in such circumstances would seem to be a right not to pay the tax legally due or a right worthy of little respect and indeed not a right at all." 24. It seems to us that the latter observation of the Chief Justice in Calcutta Discount Co's. case is directly in conflict with the decision of the Supreme court in S. S. Gadgil v. Lal and Co., to which we have already referred, but the point which the learned Chief justice made, that the provisions of Act 48 of 1948 did not introduce a new provision at all, but only brought about a variation in the old provision, was thus put by him at page 489 : "As I have already pointed out, the section introduced by Act XLVIII of 1948 is not a new provision altogether, but a variant of an old provision which it replaced. In my opinion, so far at least as initiation of proceedings is concerned, there is no substantial difference between the two from the point of view of the assessee's rights. The new section authorises, as the old section did, initiation of proceedings within ....
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....e demanded section would not have had retrospective effect if it had attempted to revive a remedy which had already been barred. At page 490 the learned Chief Justice says : '... and since the time-limits for so proceeding were the same, the new section affects no rights previously unaffected'." 27. And at the bottom of that page : '... It is true that if time is enlarged by a new enactment, but at the date when the enactment comes into force, no proceeding can any longer be commenced in a particular case under the previous law, the new enactment will not apply to such a case.' 28. And lower down on page 491 : '... As to time, none has a vested right in a period of limitation and a change of the period which does not altogether take away a right of action subsisting at the date of change or revive a right, then already barred under the old law, can always be made and the period applicable thereafter will be the new period, whether enlarged or abridged'." 29. The same comment was made as regards the Calcutta Discount Co.'s case by the Supreme Court in S. S. Gadgil v. Lal and Co., at page 240 as follows : "Therefore, the view that eve....
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....pective operation. Reference was made to section 73A which was also introduced into the Estate Duty Act by the same amending Act, 33 of 1958. Section 73A provides as follows : "No proceedings for the levy of any estate duty under this Act shall commenced - (a) in the case of a first assessment, after the expiration of five years from the date of death of the deceased in respect of whose property estate duty became payable; and (b) in the case of a reassessment, after the expiration of tree years from the date of assessment of such property to estate duty under this Act." 33. Clause (a) of the section is obviously inapplicable here, because this is not a case of a first assessment. This is undoubtedly an attempt at reassessment and to that extent clause (b) would be attracted provided it has the necessary application to the present case. There is nothing in clause (b) of section 73A to suggest a retrospective operation. No doubt, clause (b) says "in the case of a reassessment, after the expiration of three years from the date of assessment of such property to estate duty under this Act," but it does not say that the date of assessment must be a date prior to ....
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....59 does not at all deal with any case of mistake. In fact, in the Estate Duty Act as amended, the question of rectification of mistake is relegated to the new section 61 and that section has not been invoked by the department at any stage. Secondly, the action that could be taken under section 62 was only two-fold. If the assessee applied, he could be refunded the excess duty, if any, paid by him or so far as the department is concerned, the only action that could be taken was to determine the additional duty payable on the property. In no case could an assessment made be reopened under the old section 62. In other words, the assessee could not be called upon to render a fresh account or to submit a fresh return which under section 59 the department is expressly authorised to do. The words in section 59 are decisive in this respect, "may.... require the person accountable to submit an account as required under section 53 and may proceed to assessee or reassess such property as if the provisions of section 58 applied thereto." Section 53 requires that every person accountable for estate duty shall, within six months of the death of the deceased, deliver to the Controller a....
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....ilable to the department in the present case. He merely relied upon the other two grounds "mistake apparent from the record" and "mistake in the valuation of the property". As regards the former, Mr. Joshi emphasised that the words are "mistake apparent from the face of the recore." In reinforcing this distinction he relied upon the decision of the Supreme Court in Income-tax Officer v. Asok Textiles Ltd. In that case a company, which fell within the ambit of section 18A of the Finance Act, was assessed for its accounting period ending December 31, 1951, in its first assessment year 1952-53, and its net assessable income was determined at a certain figure. Later it was found that the company had declared a much larger dividend and it was liable to pay additional income-tax with respect to the excess dividends under the Finance Act, 1952, but this fact had been overlooked by the Income-tax Officer in the original assessment. The Income-tax Officer, therefore, first made an order of rectification under section 35 and imposed an additional Income-tax on the assessee, but later discovered that even that was erroneous and made a second order of rectificatio....
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....e and he should be allowed a reasonable opportunity of being heard." 39. Therefore, despite the distinction which was drawn between the words "apparent from the record" and "error apparent on the face of the record, the Supreme Court itself has indicated that even under the words "apparent from the record" the mistake contemplate is not one which is to be discovered as a result of an arguments, but it must be a mistake which becomes apparent from the examination of the record. We fail to see upon that view how section 62 of the unamended Act will not apply to the facts of the case. The words of section 35 of the Income-tax Act are to that extent in pari materia with the words of section 62. We may also mention here that it was urged by Mr. Palkhivala that the very provisions of the law which fell to be considered in Asok Textiles Ltd. case namely Schedule I, Part I, Item B, proviso (ii), of the Finance Act (23 of 1951) were declared not to levy a charge of income-tax at all and to that extent offended against section 3 of the Indian Income-tax Act. See Commissioner of Income-tax v. Khatau Makhanji Spg. & Wvg. Co. Ltd., and that, therefore, the questio....
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....rly late stage of the proceedings in the present petition. In fact, the petitioner had written several letters asking for the grounds upon which the assessment was being reopened and, particularly, if as the department had alleged they had some information what that information was, but in reply to none of these letters was any information vouchsafed. They are the letters dated 9th October, 1963, 14th November, 1963, and 16th January, 1964. Even in the reply which the department made to the several queries made on behalf of the petitioner by his chartered accountants, namely, letter dated 16th March, 1964 (exhibit N), the ground upon which the department was claiming to reopen the assessment was not stated beyond mentioning "reassessment under section 59". At any rate, rule 15 was nowhere adverted to. Therefore, the petitioner cannot be blamed for not raising any issue as regards non-applicability of rule 15 in the petition. It was only when it was disclosed for the first time in the return supported by the affidavit of Mr. Ramesh L. Butani, the 2nd Assistant Controller of Estate Duty, that the petitioner became aware that "the information" in the possession of ....
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....125 of the company under which the powers of the board were delegated did not amount to 'control' within the meaning of rule 15. All the facts relating to 'control' within the meaning of the rules were disclosed in the course of assessment proceedings". Besides these pleadings there is absolutely nothing before us to show whether rule 15 was considered or not. In these circumstances, we can see no reason why we should not accept the affidavit of the petitioner that rule 15 was considered by the original assessing officer. There is no denial of this on the part of the original assessing officer, who was still available. So far as the affidavits of Butani and Gopalakrishnan are concerned, they are admitted to have been made only from the record. 44. Another circumstance that also must be taken into account is the fact that, when the original assessment was made, several meetings took place between the petitioner and his representatives and the assessing officer. This is clear from the correspondence between the parties and from the letter dated 28th March, 1956 (exhibit E), from the Assistant Controller to the chartered accountants of the petitioner and their re....
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....l assets of the company which must be made in the first instance and, then, if that valuation is not ascertainable then only the market value has to be resorted t. Though rule 15 purports to have been made under the rule-making power contained in section 20(e), we have no doubt that it makes detailed provisions for computation of the valuation of shares on the basis of the total assets of the company in terms of the provisions of section 37. If then it is an admitted position that section 37 was considered by the officer who made the original assessment, there can be hardly any doubt that he must have applied his mind to both the alternative principles of valuation mentioned in section 37 and that can only mean that rule 15 must have been considered by him. At any rate, section 37 indicates two methods of valuation, (1) on the basis of the total assets of the company, and (2) on the basis of the market value. The first is under section 37 preferred to the second and it is only in the event that the first principle cannot apply that the second principle is made applicable. Now if the assessing officer makes the assessment on the basis of the second principle, namely, that of market ....
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....ded a majority of the votes capable of being exercised thereon; or (b) the capacity to exercise, or to control the exercise, of any of the following powers, that is to say, the powers of a board of directors or of a governing director of the company, power to nominate a majority of directors or a governing director thereof, power to veto the appointment of a director thereof, or powers of a like nature; or if he could have obtained such control or capacity by an exercise at that time of a power exercisable by him or with his consent." 51. Sub-rule (4) is not relevant for our purposes, because it deals with the valuation of shares or debentures of a class, viz., a class to which permission to deal has been granted by a recognised stock exchange, which is not the case here. Sub-rule (5) provided that "control of a company which a person had in a fiduciary capacity shall be disregarded for the purpose of this rule." Sub-rule (6) provides, "In this rule references to the assets of a company shall be construed as references to the assets that it had at the death of the deceased." 52. The principal argument for the department has been that the deceased had or....
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....alf of the department in paragraph 5 of the affidavit of Mr. Butani. Obviously, if that was the total number of shares held by the deceased, he could not be said to have a controlling interest in the share capital of the company, but then other facts were alleged in paragraph 12 of Mr. Butani's affidavit which require to be considered and which may be stated in his own words as follows : "I say that the deceased was the managing director of the company at the relevant time, and that the deceased had authority to exercise all the powers, authorities and discretions expressed to be vested in the directors generally. He was also the chairman of the company. I submit that the deceased had the capacity to exercise the powers of the board of directors of the company, or of a governing director of the company. I further submit that the deceased had also the capacity to control the exercise of the powers of the board of directors of the company. I submit that the deceased had control or must be deemed to have had control of the company as contemplated by the said rule." 55. Now in these pleadings three further facts are alleged : (1) that the deceased was the managing direc....
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....Now in the first place, though no doubt the resolution read along with article 125 does give the managing director the powers of the board of directors as are vested in the board of directors by the articles, all that one can say is that the managing director was given plenary powers of management of the company. But we fail to see how powers of management can be approximated with control of the company such as is required by rule 15. We have already indicated that in respect of his shareholdings, the deceased did not have a controlling interest in the company, that is to say, at least more than 50% of the share capital of the company. Therefore, looked at from the point of view of his real control over the company, there was none so far as the deceased was concerned. He could at a general meeting have been always outvoted by the other shareholders and it is well known that the real control of a company lies in the fact that a person or persons hold a majority of the shares in a company and on whether they can control the general meetings of the company. That the deceased had no power to do in the present case. 60. Even so far as the management of the company so vested in the dece....
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....cumstances of the present case, we may stress here that we are not directly called upon to do that. We embarked upon the enquiry because of the protracted arguments that were addressed to us on that point by both the parties and because the point arises in an ancillary way. The real question in issue before us is whether ignoring or overlooking of rule 15 constituted either "a mistake apparent from the record" or "a mistake in the valuation of any property" within the meaning of section 62 of the Estate Duty Act, 1953, or whether the realisation of the fact that rule 15 was not considered by the Deputy Controller (and here we assume that it was not considered), while making the original assessment, constituted information in the possession of the succeeding Deputy Controller who wishes to reopen the assessment with a view to reassessing the estate of the deceased under section 59(b) as amended. 63. So far as the clauses invoked in favour of the department, "mistake apparent from the record" or "any mistake in the valuation of any property" are concerned, we may point out that what must be made to appear is a mistake. In this respect, we have....
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....ied his mind to the question of rectifying the alleged mistake, there can be no doubt that he had to read the principal Act as containing the inserted proviso as from April 1, 1952. If that be the true position then the order which he made giving credit to the respondent for ₹ 50,603-15-0 is plainly and obviously inconsistent with a specific and clear provision of the statute and that must inevitably be treated as a mistake of law apparent from the record. If a mistake of fact apparent from the record of the assessment order can be rectified under section 35, we see no reason why a mistake of law which is glaring and obvious cannot be similarly rectifies." 64. In the present case, we are quite unable to find any mistake, much less a mistake which is "glaring and obvious" or which "is plainly and obviously inconsistent with a specific and clear provision of the state". The department, it appears, merely reconsidered the provisions of section 62 read with rule 15 and changed its opinion, though there was no mistake apparent from the record. 65. Having considered the question of the applicability of rule 15, in so far as its alleged non-application cou....
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...., power to the department to assessee or reassess. 68. Now, the conditions which have to be fulfilled, before a new assessment or reassessment can take place according to the section, are that the Controller : (a) must have in his possession "information", (b) that he must in consequence of such information (c) have reason to believe that (d) any property chargeable to estate duty has escaped assessment. What is challenged on behalf of the assessee is that there was any information whatever in the possession of the Controller or that it was in consequence of that information that he was proceeding to reassess the petitioner. Now these provisions we have said are analogous to the provisions of section 34 (1) (b) and though there is no reported decision directly upon the provisions of section 59, for it is very recent, several cases were brought to our notice on the provisions of section 59, for it is very recent, several cases were brought to our notice on the provisions of section 34 (1) (b) as to what constitutes "information". In Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, the Supreme Court pointed out that "information" included not on....
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....t a certain trust was irrevocable for a period of 7 years. The trust deed was filed before the assessing officer and on that basis the assessment orders were passed. Subsequently, the Income-tax Officer noticed that the period of 7 years in which the trust was irrevocable had expired and that the trust had become revocable and, therefore, the entire income from the trust was liable to be assessed in the hands of the assessee himself. He, therefore, attempted to reopen the assessment. The Division Bench held at page 501 : "The documents clearly establish that the information that the trust has become revocable since 1946 was available on the record, and, therefore, it cannot be said that any fresh information was received by the Income-tax Officer as a result of the communication received by him from the Income-tax Officer, A-IV Ward, Bombay... The material question is whether that officer, i.e., who made the assessment on January 27, 1954, knew that the trust had become revocable or not, and on that aspect of the case, there is no finding by either the income-tax authorities or the Tribunal that Income-tax Officer had no knowledge that the trust had become revocable. The mere ....
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....he assessee in Mafatlal Gagalbhai & Co. Private Limited. In the petition, the petitioner has stated that the respondent had no information in his possession within the meaning of section 59(b) of the Act on the basis of which he could have started reassessment proceedings (vide para. 9 (2)). In reply to this, in the affidavit of Mr. Butani, rule 15 was invoked and it was stated : "I say that it was, therefore, mandatory that the shares should have been valued on the assets basis, as provided in the said rule 15", and that constituted "information". Another circumstance which constituted information was stated to be, "I say that the Appellate Assistant Commissioner, however, by an order made subsequent to the said original assessment held the company was not a dealer in shares and that this constitutes information within the meaning of the said section 59(b) of the said Act." This was further clarified in the affidavit of Mr. Gopalakrishanan in paragraph 15 of his affidavit where it is state, "I repeat that the then My. Controller of Estate Duty, who issued the impugned notice, discovered that the officer making the original assessment (a) had eith....
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....is now sought to be invoked, do not carry the matter any further in favour of the department. All the information necessary to come to a conclusion as to the valuation of the shares was in the possession of the department. There was no information received by them subsequent to the order of assessment. Therefore, there was no jurisdiction to proceed to repent the assessment. 74. Some cases, which took more or less the view that, so long as income has escaped assessment, there is a power to repent proceedings under section 34 (1) (b) of the Indian Income-tax Act, were referred to. They are : Saraswati Devi Lohia v. Commissioner of Income-tax and Asghar Ali Mohammed Ali v. Commissioner of Income-tax and the decision of the Madras High Court in Commissioner of Income-tax v. Rathinasabapathi Mudaliar. All these cases take the view that the "information" relevant to section 34 (1) (b) need not be wholly extraneous to the record of the assessment itself, as for instance, an error or inadvertence in assessment by which income had escaped assessment, is discovered after the assessment. In Asghar Ali Mohammad Ali v. Commissioner of Income-tax, Chief Justice Desai held that "....
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....we agree with the remarks of the Division Bench of this court and normally its decision is also binding is also binding on us. 76. We may also say that the decision in the case just cited of the Malegaon Electricity Co. Private Ltd. directly covers the point raised in the present case. In that case, the facts were simple. In the course of the accounting year the assessee-company had sold its undertaking to another company on 19th September, 1951, but the assessee-company did not disclose in its return the excess of the sale price of building, plant and machinery over the written down value either in sections in the form of the return relating to the total income or in section D claiming that it was not taxable under any other provision of the Act. During the course of the assessment, however, the assessee had sent a letter to the Income-tax Officer stating that the assessee was enclosing the documents relating to the sale and the break-up of the sale price along with the directors' resolution in that behalf. Nevertheless, the assessment was made without reference to the excess sale price. Some time after the assessment was completed, the Income-tax Officer realised that the pr....
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....he Income-tax Officer subsequent to the completion of the original assessment and that would, in our opinion, amount to information within the meaning of section 34 (1) (b)." 77. Mr. Joshi relied on this passage to urge that even in the present case the correct position has been ascertained only after the correlation of all the facts and, therefore, the principle of the Malegaon Electricity Co.'s case should apply here. The passage just quoted is immediately followed by a further clarification as follows : "A distinction has to be made between facts, which are clearly or patently on the record and facts, which could be gathered or could have been gathered with due diligence by elaborately correlating the various facts on the record. As regards the former, it can, without hesitation, be said that the information as to the facts, which are patently or clearly on the record was within the possession of the Income-tax Officer at the time of the original assessment. The same cannot be said of the latter because the correct factual position emerges only after the Income-tax Officer has correlated the various facts and ascertained what the resulting position is. Knowledge ....