Appeals Nos 1062 and 1063 of 1966
Appeals by special leave from the judgment and order dated February 15 1965 of the Calcutta High Court in matters Nos 231 in 232 of 1964
R M Hazarnavis K D Karkhanis R H Dhebar and R N Sachthey for the appellant
A K Sen T A Rancachandran J B Dadachanji O C Mathur and Ravinder Narain for the respondent
The judgment of the Court was delivered by Wanchoo J
These two appeals by special leave arise out of two applications by the appellant to the Income tax Appellate 175 Tribunal for reference to the High Court of a question of law which was formulated as follows Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the reassessment proceedings under section 17b of the Wealth Tax Act were not validly initiated and in setting aside the same
 The facts which led to the applications for reference are briefly these
The respondent submitted wealth tax returns for the years 1957 58 and 1958 59
For the year 1957 58 the respondent claimed that an amount of Rs 51 lakhs and odd being provision for taxation and another amount of Rs 37 lakhs and odd being provision for contingencies being ascertained liability should be allowed as deduction from the total wealth
For the year 1958 59 the respondent claimed Rs 31 lakhs and odd being provision for contingencies as ascertained liability as deduction from the total wealth
Assessment for the year 1957 58 was completed on December 30 1957 and the Wealth tax Officer accepted the contention of the respondent and allowed the claim for deduction
Subsequently the Commissioner of Wealth tax by his order dated December 29 1958 passed under section 252 of the Wealth Tax Act No XXXVII of 1957 hereinafter referred to as the Act disallowed the deduction of Rs 51 lakhs and odd being the provision for taxation for the assessment year 1957 58
The order of the Wealth tax Officer allowing deduction for contingencies for the assessment year 1957 58 however stood
The assessment for the year 1958 59 was completed on December 9 1958 and deduction was allowed for contingencies only
It may be added that we are not concerned in the present appeals so far as deduction for provision for taxa tion is concerned
On March 22 1960 the Wealth tax Officer completed the assessment of the respondent for the year 1959 60 and disallowed the claim for deduction of the provision for contingencies
On June 2 1960 the Wealth tax Officer issued two notices under section 17b of the Act for reassessment of net wealth for the years 1957 58 and 1958 59
On September 24 1961 orders of reassessment under section 163 read with section 17b of the Act were passed in respect of the assessment years 1957 58 and 1958 59 and by these orders the amounts which had been formerly allowed as deduction with respect to contingencies were included in the total wealth of the respondent
The respondent then went in appeal against the two reassessment orders and the Appellate Assistant Commissioner sustained the decision of the Wealth tax Officer with respect to the reassessments in question
The case of the respondent was that the Wealth tax Officer had no information on the basis of which he could proceed to reassess the net wealth of the respondent and in this connection reliance was placed on the words in consequence of any information in his possession appearing in section 17b of the Act
176 The respondent then went in appeal to the Appellate Tribunal and his contention there was that the issue of notices under section 17b of the Act was invalid as it was based on a mere change of opinion on the part of the Wealth tax Officer as at that time there was no information in the possession of the Wealth tax Officer which could lead him to believe that the net wealth chargeable to tax had escaped assessment
It was contended that such information must be information which came into possession of the Wealth tax Officer subsequent to the making of the original assessment and that the information must lead him to believe that income chargeable to tax had escaped assessment
The Tribunal accepted this contention of the respondent
It may be pointed out that the assessment made by the Wealth tax Officer for the year 1959 60 was taken in appeal to the Appellate Assistant Commissioner by the respondent and the respondent s appeal was dismissed in November 1960
The Tribunal pointed out that if the Wealth tax Officer had waited till after the decision of the Appellate Assistant Commissioner about the assessment for the year 1959 60 and then issued notices there would have been sufficient information for the purpose of section 17b with the Wealth tax Officer to authorise him to issue notice thereunder  but as the Wealth tax Officer issued the notices in June 1960 before that appeal was decided it was only a case of change of opinion by the Wealth tax Officer which did not justify issue of notices under section 17b
The Tribunal also pointed out that the departmental representative was specifically asked what the information was upon which the Wealth tax Officer came to the conclusion that taxable wealth had escaped assessment
The departmental representative was unable to point to any specific information which came into the possession of the Wealth tax Officer and which could lead him to issue the notices in question
The Tribunal therefore held that the reassessment proceedings under section 17b for the years 1957 58 and 1958 59 were not validly initiated and set them aside
Thereupon the appellant applied to the Tribunal for making references under section 271 of the Act
The Tribunal rejected the applications
The appellant then applied to the High Court under section 273 of the Act for direction to the Tribunal to state a case
The High Court however rejected the applications summarily
Thereupon the appellant applied to this Court for special leave which was granted and that is how the matter has come before us
The main contention that has been urged on behalf of the appellant before us is that there is divergence of opinion among the High Courts on the question as to what constitutes information for the purpose of section 341b of the Indian Income tax Act
No IT of 1922 hereinafter referred to as the Income tax Act
That section is in pari materia with section 17b of the Act and therefore a question of law did arise which should have been referred to the 177 High Court for its decision on the question raised by the appellant
Reliance in this connection is placed on the decision of this Court in Maharajkumar Kamal Singh vs Commissioner of Income tax Bihar1 where this Court held that the word information  in section 341b included information as to the true and correct state of the law and so would cover information as to relevant judicial decisions
A further question was raised in that case namely whether it would be open to the Income tax Officer to take action under section 341 on the ground that he thinks that his original decision in making the order of assessment was wrong without any fresh information from an external source or whether the successor of the Income tax Officer can act under section 34 on the ground that the order of assessment passed by his predecessor was erroneous
That question was not decided by this Court in that case though this Court pointed out that in construing the scope and effect of section 34 the High Courts had expressed divergent views on the point
It is urged on behalf of the appellant that the precise question left undecided by this Court in Maharajkumar Kamalsingh s case1 arises in the present case and as there are divergent views taken by the High Courts on that question a question of law did arise on the order of the Appellate Tribunal and therefore the Tribunal should have made a reference
In Commissioner of Income tax Bombay vs Sir Mohomed Yusuf Ismail1 it was held by the Bombay High Court as far back as 1943 that under section 34 a mere change of opinion on the same facts or on a question of law or the mere discovery of a mistake of law is not sufficient information within the meaning of section 34 and that in order to take action under section 34 there must be some information as a fact which leads the Income tax Officer to discover that income has escaped or has been under assessed
The same view was taken in a later case by the Nagpur High Court in Income tax Appellate Tribunal Bombay vs B P Byramji  Co1 where it was again emphasised that a mere change of opinion by the Income tax Officer is no ground for taking action under section 34 Further in Bhimraj Pannalal vs Commissioner of Income tax Bihar1 it was held by the Patna High Court that an order of assessment made after investigation by a particular officer should Jr not at his sweet will and pleasure be allowed to be revised merely because he changed his opinion and that there must exist something either suppressed by the assessee or a fact or a point of law which was inadvertently or otherwise omitted to be considered by the Income tax Officer before he can proceed to act under section 34 and a mere change of opinion on the same facts and law is not covered by that section 1 1959 supp
1 SCR 10 2 1944 12 TTR section 3 4 178 The appellant on the other hand relies on some recent deci sions which show that there is some divergence of opinion in the High Courts on this question
In Salem Provident Fund Society Limited vs Commissioner of Income tax Madras1 the Madras High Court held that information for the purpose of section 34 need not be wholly extraneous to the record of the original assessment
A mistake apparent on the face of the order of assessment would itself constitute information  whether someone else gave that information to the Income tax Officer or whether he informed himself was immaterial
 In Commissioner of Income tax vs Rathinasabhapathy Muda liar1 the Madras High Court again held that the discovery of the Income tax Officer after he had made the assessments that he had committed an error in not including the minor s income in the father s assessment was information  obtained after the assessment and even though all the facts were in the original records the case was covered by section 341b of the Income tax Act and the reassessment was not invalid and this was not a case of mere change of opinion on the same facts but a case of getting information that income had escaped assessment
 In Canara Industrial and Banking Syndicate Limited vs Com missioner of Income tax Mysore1 the Mysore High Court held that if income had escaped assessment owing to the failure of the Income tax Officer to understand the true implication of a notification and the Income tax Officer later on finds that on a correct interpretation of the notification the income was liable to be assessed he can take proceedings under section 34 for assessment of such income the word information  in section 34 is wide enough to apply to such a case The last case to which reference is made is Asghar Ali Mohammad Ali vs Commissioner of Income tax1 wherein the Allahabad High Court held that the word information  used in the provision covers all kinds of information received from any person whatsoever or in any manner whatsoever all that is required is that the Income tax Officer should learn something ie he should know something which he did not know previously
 It was further held that if there is information leading to the belief that income has escaped assessment the mere fact that this information has resulted in a change of opinion will not make section 34 inapplicable
A change of opinion is not sufficient for initiating proceedings under section 34 only when such change of opinion is the result of a different method of reasoning and not based on information  1 2 3 4 179 It does appear that some High Courts at any rate are taking the view that a change of opinion by the Income tax Officer in certain circumstances will be sufficient for the purpose of section 341 b and will justify the issue of a notice thereunder
It may be added that after the decision of this Court in Maharajkumar Kamal Sigh s case1 it is now settled that information in section 341b included information as to the true and correct state of law and so would cover information as to relevant judicial decisions and that such information for the purpose of section 341b of the Income tax Act need not be confined only to cases where the Income tax Officer discovers as a fact that income has escaped assessment
To that extent the decision of the Bombay High Court in Sir Mohanmed Yusuf Ismail1 has been overruled
That is why the Appellate Tribunal stated in its decision that if the notices in the present case had been issued after the decision of the Appellate Assistant Commissioner in the appeal from the assessment for the year 1959 60 there would have been information in possession of the Wealth tax Officer to justify him in issuing notices under section 17b of the Act
But in the present case the Wealth tax Officer issued notices before that decision was known to him and the question is whether in the circumstances in view of the later decisions of the High Courts to which we have referred a question of law arose or not
The language of section 17b of the Act is in pari materia with the language of section 341b of the Income tax Act and therefore the decisions under section 341b of the latter Act would be relevant in construing the scope and effect of section 17b of the Act
There does appear to be divergence of opinion among the High Courts as to the meaning of the word information in section 341b of the Income tax Act and in view of that divergence we are of opinion that a question of law did arise in the present case as to the interpretation of the word information in section 17b of the Act and should have been referred by the Tribunal
We therefore allow the appeals set aside the order of the High Court and direct the Tribunal to state a case referring the question of law arising in these cases in the form suggested by the appellant
The Tribunal will be free to decide whether to refer the matter to the High Court under section 271 or to this Court under section 27 3A of the Act
Costs of this Court will abide the result of the reference
Appeals allowed
1 1959 Supp 1 SCR 10


Summary:
Orders of reassessment under section 163 read with section 17b of the Wealth Tax Act were passed by the Wealth Tax Officer in respect of two assessment years and by those orders amounts which had been formerly allowed as deduction were included in the total wealth of the respondent
The orders were set aside by the Tribunal on the ground that the reassessment was based on a mere change or opinion on the part of the Officer because there was no information in his Possession as required by section 17b which could lead him to believe that chargeable wealth of the respondent had escaped assessment
The appellant s applications to the Tribunal and the High Court for a reference to the High Court were dismissed
In appeal to this Court HELD The Tribunal should be directed to make a reference either to the High Court under section 271 or to this Court under section 27 3A of the Wealth Tax Act
179 G
There is a divergence of opinion among the High Courts as to the meaning of the word information in
section 341 b of the Income tax Act and some High Courts have taken the view that a change of opinion by the Income tax Officer in certain circumstances will justify the issue of notice under section 34 1b of the Income tax Act
Since that section is in pari materia with section 17b of the Wealth Tax Act a question of law did irises a to the interpretation of the word information in section 17b of the Wealth Tax Act and it should have been referred by the Tribunal to the High Court
179 E