TaxTMI 
TaxTMI 
1977 (6) TMI 23
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment was sought to be reopened under section 9(b) of the Super Profits Tax Act, 1963, on the ground that certain reserve created for specific purposes and the excess of the development reserve were considered for the purpose of capital computation for determining the standard deduction under rule 1 of the Second Schedule to the Super Profits Tax Act, 1963, hereinafter referred to as " the S.P.T. Act ". The assessee's contention that there was no information to warrant the reopening of the assessment under section 9(b) as there was a case of mere change of opinion. That contention had been accepted by the Appellate Assistant Commissioner and the Tribunal had also as per the settled legal position in Kasthurbhai Lalbhai's case [1971] 80 ITR 188 (Guj) agreed with that view and, therefore, the revenue has come in this reference. The second question arises for the assessment years 1965-66 and 1966-67 as the Tribunal had as per the settled legal position disposed of this question in favour of the assessee. Therefore, the revenue has come in this reference even on the second question. The relevant section 9(b) of the Super Profits Tax Act., 1963, provides as under : " If--... ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1 (SC) has been consistently followed. Thus, elaborating this concept of information as per the settled legal position, my learned brother P. D. Desai J., speaking for the Division Bench, in Bai Aimai Gustadji Karaka v. Gift-tax Officer [1975] 99 ITR 257 (Guj) referring to identical two conditions under section 16(1)(b) of the Gift-tax Act, 1958, held that, (i) the Gift-tax Officer should receive information after original assessment, and (ii) in consequence of such information he should reasonably believe that taxable gift has escaped assessment. Elucidating the term " information " my learned brother rightly pointed out that " information " means instructive knowledge concerning a matter bearing on the assessment received from an external source after the completion of the original assessment. The external source was emphasised in contradistinction to a mere change of opinion on the part of the officer concerned, which would never constitute requisite information. It was, therefore, held at page 262 that the " information " may be as to the correct state of facts or of law relating to the taxable gift and it must be capable of arousing or suggesting ideas or notions not before ex....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 191, following the Raman [1968] 67 ITR 11 (SC) ratio, it was held that " information " in the context in which it occurred in section 147(b), must mean " instruction or knowledge derived from au external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment ". Mere change of opinion on the part of the Income-tax Officer cannot constitute " information " so as to entitle the officer to initiate proceedings under section 147(b). Thereafter distinction was made between " information " which may be as to facts or particulars or as to the correct state of law. But in both the cases, it was held as per the binding Raman [1968] 67 ITR 11 (SC) ratio, that it must be from external source as distinguished from a mere change of opinion. If the " information " was as to any facts, it may be received from any person who knows the facts. It could not be limited to any particular person, body or authority, since such fact may be within the knowledge or in the possession of anyone and it may be received by the Income-tax Officer from any source. But so far as information as to correct state of the law is concerned, the external source from which i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the information is derived from an external source of any kind, such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment; (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law." If these conditions are satisfied then the Income-tax Officer would have complete jurisdiction to reopen the original assessment. It is obvious that where the Income-tax Officer gets no subsequent information, but merely proceeds to reopen the original assessment without any fresh facts or materials or without any enquiry into the materials which form part of the original assessment, section 34(1)(b) would have no application. Therefore, this decision only clarifies the Raman [1968] 67 ITR 11 (SC) ratio that the information may come from external source or even from materials already on the record or may be obtained from discovery of new and important matters or knowledge or may include from relevant judicial decision either....
X X X X Extracts X X X X
X X X X Extracts X X X X
....this settled line of decisions as a vehement attempt was made by the learned standing counsel to persuade us that Kalyanji Mavji's case [1976] 102 ITR 287 (SC) has overruled the decision in Kasturbhai Lalbhai's case [1971] 80 ITR 188 (Guj). This contention is based on a complete misapprehension of the aforesaid settled legal position. If the " information " is understood as definite information which informs the mind of the officer concerned for the first time as explained by my learned brother in Karaka's case [1975] 99 ITR 257(Guj), it is obvious that while applying the Raman [1968] 67 ITR 11(SC) ratio this distinction of external source when applied to matters of facts or particulars and matters as to the correct state of law would have a great bearing to distinguish the case of the mere change of opinion. The concerned officer is not entitled to proceed on mere second thoughts on the same materials when he had already applied his mind and he does not rely on any subsequent information falling within the aforesaid test. When information is relied upon for invoking this power for reopening assessment which is a separate special power in addition to the power of revision or rectif....
X X X X Extracts X X X X
X X X X Extracts X X X X
....riginal assessment, the Wealth-tax Officer had not applied his mind to the relevant clauses and was not at all aware of the right of the concerned assessee being only a right limited to half of the corpus and that too on fulfilment of certain conditions and not to the whole of the corpus. Therefore, when this subsequent information came to light, the mind of the Wealth-tax Officer was informed or he was made aware or there was enlightenment for the first time of this relevant aspect on the basis of which rational belief could be formed on that part of the net wealth having escaped assessment. This was not a case of mere change of opinion but a case falling clearly on the aforesaid ratio. It is true that the learned Chief Justice has widely observed that the Supreme Court in Kalyanji Mavji's case [1976] 102 ITR 287 (SC), although did not refer to Kasturbhai Lalbhai's case [1971] 80 ITR 188 (Guj), was not of the view that the Income-tax Officer should receive information from external source after original assessment as held by Bhagwati C.J. He, therefore, observed that it was manifest from what the Supreme Court has ruled in Kalyanji Mavji's case [1976] 102 ITR 287 (SC) that it was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me-tax Officer had made a mistake in computing the working of the capital computation in the course of the original assessment. This mistake was detected as a result of the audit inspection and the Income-tax Officer had set right the said mistake by taking recourse to the provisions of section 9(b) of the Act." The learned standing counsel mentioned that this was not a true statement of facts. No such grievance was ever made and no such question of wrong assumption of facts was raised and this being the contention of the revenue itself as set out by the Tribunal, the revenue is precluded from going behind the statement of facts. The whole attempt of the standing counsel on this behalf is because that aspect was completely concluded by Kasturbhai Lalbhai's case [1971] 80 ITR 188 (Guj), that on such mere audit note the officer concerned could not on mere change of opinion initiate this proceeding of reassessment. But even apart from that, the standing counsel, in view of the very order of the Income-tax Officer is unable to point out any case of subsequent information. This was admittedly not a case of the correct, state of law being not known to the concerned officer. No new inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal provision was held to be of the taxation reserve where amount was set apart for the liability known to exist at the date of the balance-sheet, which could not be treated as reserve. On the other hand, so far as the proposed dividend amount was concerned, the amount standing in the proposed dividend account on December 31, 1961, was held to be a reserve, includible in computing the capital base of the company, even though the directors had merely made a recommendation and the authority for the reserve came subsequently by resolution of the general board which would take back effect for creation of this reserve. The whole law has been exhaustively dealt with and the decisions of the various High Courts were examined, including those in the context of doubtful debts reserves and gratuity provisions. So far as the present case is concerned, regarding all these reserves, the aforesaid ratio clearly concludes the question that these reserves were includible in the computation of capital base. So far as the rehabilitation reserve is concerned, the Tribunal has in terms found that it was a part and parcel of the general reserve which was given only a different name and was not intended....