Civil Appeal No 522 of 1971
Appeal by special leave from the judgment and order dated the 26th April 1968 of the Calcutta High Court in I T Reference No 50 of 1965
N N Goswamy and Arvind Minocha for the Appellant
B B Ahuja and section P Nayar for the Respondent
The Judgment of the Court was delivered by FAZAL ALI J
This appeal by special leave involves the interpretation of the scope extent and ambit of section 341 b of the Income tax Act 1922 with particular reference to the connotation and import of the word information  used in section 341 b
Although the question appears to have been settled in one form or the other by the decisions of this Court the changing and diverse society such as ours  dealing in complex commercial activities continues to produce multifarious facts of taxable income which has escaped assessment cloaked under difficult propositions and knotty legal problems
It is the onerous task of this Court to dispel the doubts and resolve and reconcile the differing views taken by the High Courts in various situations which every time poses a new problem
The points involved in the instant case have baffled many a legal brain so much so that the High Court also appears to have been in two minds whether to place the information in the instant case as based on the materials already on the record of the original assessment of 1956 57 revealed by closer circumspection or to the information derived from subsequent or fresh facts
Before however examining the legal incidents of section 34 of the Income tax Act 1922 it may be necessary for us to travel into the domain of the facts of the present case which are short and simple
969 The assessee appellant Ms Kalyanji Mavji  Company is a registered partnership firm dealing in various commercial activities
The said firm filed its return for the year 1956 57 corresponding to the accounting Gujarati Diwali Year 2001 showing a total income of Rs 744551 after claiming a deduction of a sum of Rs 43116 being the amount of interest paid by the assessee on the debts incurred for the partnership business
The Income tax officer accepted the return but on appeal to the Appellate Assistant Commissioner the assessment was reduced by a sum of Rs 9200 by his order dated July 3 1958
For the assessment year 1957 58 the assessee showed the same income and the deduction claimed was allowed
The next year 1958 59 however presented quite a different complexion
While the assessee filed his return in the year 1958 59 the Income tax officer concerned suspected the correctness of the return particularly the deduction of interest and found that as the amount of the deduction claimed was utilised for giving interest free loans to the partners for clearing up their income tax dues it could not be said to be a loan incurred for the expenses of the partnership business and he accordingly disallowed the deduction claimed by the appellant
This discovery led the Income tax officer to issue notice to the appellant under section 341 b of the Income tax Act 1922 hereinafter referred to as the Act  for reopening the assessment of the year 1956 57 hereafter to be referred to as the original assessment  on the ground that the deduction having been wrongly allowed taxable income and escaped assessment
After hearing the appellant the Income tax officer completed the assessment and included the sum of Rs 43116 to the total income shown by the assessee
Thereafter the appellant filed an appeal before the Appellate Assistant Commissioner against the order of the Income tax officer but the appeal was dismissed by the Appellate authority which confirmed the order of the Income tax officer
It may be pertinent to note here that in his order the Appellate Assistant Commissioner pointed out that in the assessment years 1958 59 and 1959 60 the Income tax officer found that the appellant had no evidence with him to show that the funds borrowed on which the interest was paid were utilised for the purpose of the business and not diverted to the partners
Thereafter the appellant filed a second appeal to the Income tax Appellate Tribunal B Bench Calcutta
The Tribunal after having accepted the facts culminating in the order of the Appellate Assistant Commissioner was of the opinion that the information of the Income tax officer resulting in the notice under section 341 b of the Act to the assessee was not based on any fresh facts but was derived from the materials on the records of the original assessment
The Tribunal further found that if the Income tax officer while completing the original assessment would have been careful enough to scrutinise the balance sheet he would have at once detected the infirmity on the basis of which the subsequent Income tax officer issued the notice under section 341 b of the Act to the appellant
The Tribunal further was of the opinion that the subsequent Income tax officer merely changed his opinion on the basis of the very materials that were before him when the original assessment was made and that was not sufficient to attract the provisions of section 341 b of the Act
The Tribunal accordingly allowed the appeal and set aside the order of the Income tax officer issuing notice to the assessee under section 341 b 970 for reopening the original assessment
Thereafter the respondent namely the Commissioner of Income tax approached the Tribunal for making a reference to the High Court under section 661 of the Act as a result of which the Tribunal referred the case to the High Court at Calcutta after framing the following question Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the re assessment made by the Income tax officer under section 341 b of the Indian Income tax Act 1922 was incompetent  The High Court after hearing the parties differed from the view taken by the Tribunal and held that the present case squarely fell within the ambit of section 341 b of the Act inasmuch as the information on the basis of which the Income tax officer sought to re open the original assessment was based on subsequent facts as also on the materials of the original assessment revealed by more careful and closer circumspection of those materials
The High Court referred to a number of decisions of this Court as also to the decisions of the Calcutta High Court
The appellant sought leave to appeal to this Court against the order of the High Court which having been refused the appellant obtained special leave from this Court and hence this appeal
In support of the appeal it was contended by Mr Banerjee that the view taken by the High Court is legally erroneous inasmuch as the admitted facts of this case would disclose that the information relied upon by the Income tax officer in order to re open the original assessment was not derive from external sources but amounted to a mere change of opinion on the very facts and materials that were present on the record of the original assessment
It was also submitted that it was not open to the Income tax officer to have re opened the original assessment merely because he took a different view of the matter in the assessment year 1958 59
Lastly it was argued that the High Court had not correctly applied the ratio laid down by this Court in Commissioner of Income tax Gujarat vs A Raman and Company1
Mr Ahuja appearing for the Revenue submitted that the order of the Income tax officer was fully justified and the High Court had taken the correct view of the law
In order to appreciate the contentions advanced by counsel for the parties it is necessary to make a brief survey of the provisions of section 341 of the Income tax Act 1922
The section runs thus 34
1 If a the Income tax officer has reason to believe that by reason of the omission or failure on the part of an assessee to make a return of his income under section 22 for any year or to disclose fully and truly all material facts necessary for his assessment for that year income profits or gains chargeable to income tax have escaped assessment for that year or have been under assessed or assessed at too low a rate or 971 have been made the subject of excessive relief under the Act or excessive loss or depreciation allowance has been computed or b notwithstanding that there has been no omission or failure as mentioned in clause a on the part of the assessee the Income tax officer has in consequence of information in his possession reason to believe that income profits or gains chargeable to income tax have escaped assessment for any year or have been under assessed or assessed at too low a rate or have been made the subject of excessive relief under this Act or that excessive loss or depreciation allowance has been computed he may in cases falling under clause a at any time and in cases falling under clause b at any time within four years of the end of that year serve on the assessee or if the assessee is a company on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub section 2 of section 22 and may proceed to assess or reassess such income profits or gains or recompute the loss or depreciation allowance and the provisions of this Act shall so far as may be apply accordingly as if the notice were a notice issued under that sub section Provided     It would be seen that section 341 contemplates two categories of cases for re opening the previous assessment 1 where there has been an omission or failure on the part of the assessee to make a return of his income under section 22 or to disclose fully and truly all material facts necessary for his assessment and 2 where there has been no such omission on the part of the assessee but the Income tax officer on the basis of information in his possession finds that income chargeable to tax has escaped assessment for any year
It is therefore manifest that the first category deals with cases where an assessee is himself in default and the second category deals with cases where there is no fault on the part of an assessee but where the income chargeable to tax has actually escaped assessment for one reason or the other and the Income tax officer comes to know about the same
In the instant case however we are concerned with clause b of section 341 extracted supra
Before however proceeding to interpret the ambit and import of section 341 b it may be necessary to consider the history of section 34 of the Act which appears to have passed through different phases with amendments and additions made to the section from time to time
Section 34 as it stood in 1922 was as follows 34
If for any reason income profits or gains chargeable to income tax has escaped assessment in any year or has been assessed at too low a rate the Income tax officer may at any time within one year of the end of that year serve on 972 the person liable to pay tax on such income profits or gains or in the case of a company on the principal officer thereof a notice containing all or any of the requirements which may be included in a notice under sub section 2 of section 22 and may proceed to assess or reassess such income profits or gains and the provisions of this Act shall so far as may be apply accordingly as if the notice were a notice issued under that sub section Provided that the tax shall be charged at the rates at which it would have been charged had the income profits or gains not escaped assessment or full assessment as the case may be
 It would be seen that in the section as it stood in 1922 the word information  was not there at all and the section merely empowered the Income tax officer to reopen the assessment of any year where income chargeable to tax had escaped assessment
No conditions or limitations on the power of the Income tax officer were at all laid down under the section
It appears that the appropriate Legislature in its wisdom thought that this would be too wide a power to be given to the Income tax officer and may not be workable
In these circumstances by the Indian Income tax Amendment Act 1939 this section was recast as under 34 1 If in consequence of definite information which has come into his possession the Income tax Officer discovers that income profits and gains chargeable to income tax have escaped assessment in any year or have been under assessed or have been assessed at too low a rate or have been the subject of excessive relief under this Act the Income tax officer may in any case in which he has reason to believe that the assessee has concealed the particulars of his income or deliberately furnished inaccurate particulars 1 thereof at any time within eight years and in any other case at any time within four years of the end of that year serve on the person liable to pay tax on such income profits or gains or in the case of a company on the principle officer thereof a notice containing all or any of the requirements which may be included in a notice under sub section 2 of section 22 and may proceed to assess or re assess such income profits or gains and the provisions of this Act shall so far as may be apply accordingly as if the notice were a notice issued under that sub section Provided     It may be pertinent to note that by virtue of this amendment the concept of the Income tax officer deriving definite information was introduced for the first time
The word information  was qualified by definite  and an additional condition was incorporated namely that the Income tax officer discovers that income chargeable to tax had 973 escaped assessment
This provision led the Courts to approach the provisions of the section with greater circumspection and stricter scrutiny as a result of which many cases of escaped assessments had to be set at naught by some decisions of the Courts
This led the Parliament to take a fresh view of the situation
Accordingly by the Income tax and Business Profits Tax Amendment Act 1948 the section was re cast in the present form as quoted above
There were further amendments in 1954 and 1956 with which we are not concerned
Ultimately by the Income tax Act 1961 the section underwent a complete transformation and even the setting of the section was changed which now forms section 147a  b of the Income tax 1961
We are now concerned in this case only with section 341 b as it stood after the amendment of 1948
Another pertinent fact which may be mentioned here is that although section 34 was the subject of several amendments yet the word information  which was introduced in 1939 has not been defined at all
Since the word information  has not been defined it is difficult to lay down any rule of universal application
At the same time it cannot be disputed that the object of the Act was to see that the tax collecting machinery is made as perfect and effective as possible so that the tax payer is not allowed to get away with escaped Income tax
The fact that the adjective definite  qualified the word information  and the word discovers  which were introduced in the Income tax Amendment Act 1939 were deleted by the Amendment Act of 1948 would lead to the irresistible inference that the word information  is of the widest amplitude and comprehends a variety of factors
Nevertheless the power under section 341 b however wide it may be is not plenary because the discretion of the Income tax officer is controlled by the word reason to believe
It was so held by this Court in Bhimraj Pannalal vs Commissioner of Income tax Bihar and Orissa1 while affirming the decision of the Patna High Court in Bhimraj Panna Lal vs Commissioner of Income tax Bihar and Orissa1
This legal proposition however is not disputed
It therefore follows that information may come from external sources or even from materials already on the record or may be derived from the discovery of new and important matter or fresh facts
The word information will also include true and correct state of the law derived from relevant judicial decisions either of the Income tax authorities or other courts of law which decide income tax matters
Where the ground on which the original assessment is based is held to be erroneous by a superior court in some other case that will also amount to a fresh information which comes into existence subsequent to the original assessment
A subsequent Privy Council decision is also included in the word information 
Thus it is very difficult to lay down any hard and fast rule
But this Court has in two leading cases laid down some objective tests and principles to determine the applicability of section 341 b of the Act which we shall now discuss
974 In Maharaj Kumar Kamal Singh vs The Commissioner of Income tax Bihar  Orissa1 the word information fell for interpretation by this Court where it was observed thus We would accordingly hold that the word information in section 341 b includes information as to the true and correct state of the law and so would cover information as to relevant judicial decisions
If that be the true position the argument that the Income tax officer was not justified in treating the Privy Council decision in question as information within section 34 1 b cannot be accepted
     In our opinion even in a case where a return has been submitted if the Income tax officer erroneously fails to tax a part of assessable income it is a case where the said part of the income has escaped assessment
The appellant s attempt to put a very narrow and artificial limitation on the meaning of the word escape in section 341b cannot therefore succeed
 It will be seen that this Court was in favour of placing not a narrow but a liberal interpretation on the provisions of section 341 b of the Act
This decision was considered by this Court in Commissioner of Wealth Tax West Bengal vs Imperial Tobacco Company of India Ltd2 where Wanchoo J speaking for this Court observed as follows It may be added that after the decision of this Court in Maharaj Kumar Kamal Singh s case it is now settled that information in section 341 b 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 341 b 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
 Similarly in Commissioner of Income tax Excess Profits Tax Hyderabad Andhra Pradesh vs V Jagan Mohan Rao and ors3 while following the decision of this Court in Maharaj Kumar Kamal Singh s case supra it was observed as follows In these circumstances it was held by this Court firstly that the word information in section 341 b included information as to the true and correct state of the law and so would cover information as to relevant judicial decisions secondly that escape  in section 341 was not confined to cases where no return had been submitted by the assessee or where income had not been assessed owing to inadvertence or oversight or other lacuna attributable to the assessing authorities
But even in a case where a return had been submitted if the Income tax officer had erroneously failed to tax a part of the assessa 975 ble income it was a case where that part of the income had escaped assessment
The decision of the Privy Council therefore was held to be information within the meaning of section 341b and the proceedings for re assessment were validly initiated
 The matter was again fully considered by this Court in A Raman and Company s case supra where Shah J speaking for the Court extended the connotation of the word information  to two different categories of cases and observed as follows The expression information in the context in which it occurs must in our judgment mean instruction or knowledge derived from an external source concerning facts or particulars as to law relating to a matter bearing on the assessment
     Jurisdiction of the Income tax officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment
That information must it is true have come into the possession of the Income tax officer after the previous assessmentbut even if the information be such that it could have been obtained during the previous 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 but was not in fact obtained the jurisdiction of the Income tax officer is not affected
 An analysis of this case would clearly show that the information as contained in section 341 b must fulfil the following conditions 1 The information may be derived from an external source concerning facts or particulars as to law relating to matter bearing on the assessment 2 That the information must come after the previous or the original assessment was made
In fact the words in consequence of information as used in section 341 b clearly postulate that the information must be subsequent to the original assessment sought to be reopened and 3 That the information may be obtained even on the basis of the record of the previous 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
These categories are in addition to the categories laid down by this Court in Maharaj Kumar Kamal Singh s case which has been consistently followed in several decisions of this Court as shown above
976 On a combined review of the decisions of this Court the following tests and principles would apply to determine the applicability of section 341 b to the following categories of cases 1 Where the information is as to the true and correct state of the law derived from relevant judicial decisions 2 Where in the original assessment the income liable to tax has escaped assessment due to oversight in advertence or a mistake committed by the Income tax officer
This is obviously based on the principle that the tax payer would not be allowed to take advantage of an oversight or mistake committed by the Taxing Authority 3 Where 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 re open the original assessment
It is obvious that where the Income tax officer gets no subsequent information but merely proceeds to re open the original assessment without any fresh facts or materials or without any enquiry into the materials which form part of the original assessment section 341 b would have no application
Learned counsel for the appellant heavily relied on the decision of this Court in Bankipur Club Ltd vs Commissioner of Income tax Bihar and Orissa1 in support of the proposition that in the instant case the Income tax officer has proceeded to re open the assessment on the basis of the very materials which formed the subject of the original assessment
It was submitted that in the original assessment the assessee had claimed a deduction and had produced the balance sheet and these very factors were also present when the Income tax officer sought to make the assessment for the year 1958 59 and 1959 60 and since no fresh facts were brought to his notice it was not open to him to re open the original assessment
The facts of the case relied upon by the appellant are clearly distinguishable from the facts of the present case
In Bankipur Club Ltd s1 case it appears that the Club had in its return placed all the materials with full details
The facts placed before the Income tax officer were self evident and no calculation or scrutiny was necessary to find out the effect of the materials 977 placed before the Income tax officer
In view of this peculiar situation Hegde J speaking for the Court observed The fact that the club had received certain amounts as guests charges from its members had been placed before the Income tax officer
It is not the case of the Income tax officer that he did not come to know all the relevant facts when he made the original orders of assessment
It is also not his case that at the time he made those orders he was not aware of the true legal position
It was for the Income tax officer to show that he had received some information subsequent to his passing the original orders of assessment
No such material was placed before the Tribunal
That being so the Tribunal in our opinion was right in holding that the Income tax officer was incompetent to initiate proceedings under section 341 b
 In the instant case it would appear that three additional facts had come into existence after the original assessment for the year 1956 57 was made by the Income tax officer
These were i that for the assessment year 1958 59 the Income tax officer did not accept the assessee s plea that he should be allowed deduction for a sum of Rs 43116  2 that the Income tax officer came to a finding that the assessee had not proved that the amount of deduction claimed was really in connection with the partnership business but held that this was on account of interest free advance to the partners to pay their income tax dues and 3 the conduct of the appellant in not clearing the doubts of the Income tax officer when the appellant was given the notice to contest the assessment merely on the question of law also spoke volumes against the assessee and was also an additional factor which weighed with the Income tax officer
It would be seen that the Income tax officer in his order which is Annexure A to the statement of case filed by the Tribunal observed as follows In the course of the assessment proceedings for 1958 59 however it was discovered that the assessee s claim of payment of interest on money borrowed was not proper
Inasmuch as the entire money borrowed had been utilised not for the purpose of business but in giving interest free advance to the partners of the firm    
In fact no argument as regards the allowance or disallowance of the interest amount in question was placed but the entire argument of the representative proceeded on the basis that the action us 34 itself was illegal    
There is no doubt that there has been under assessment in this case and there is also no doubt that the fact of under assessment has been brought to the notice of the Income tax officer only in the course of the income tax proceedings for 1958 59
 Similarly the appellate Assistant Commissioner in his order which is Annexure B to the statement of the case observed as follows At the time of the original assessment the appellant claimed an interest of Rs 43116 which was allowed by 978 the ITO in full
However later on while making the assessment for the assessment years 1958 59 and 1959 60 the ITO found that the appellant had no evidence with him to show that the funds borrowed on which the interest was paid in fact were utilised for the purpose of the business and not diverted to the partners
 These findings by the two authorities have been clearly mentioned in the order of the Tribunal which while narrating the facts observed as follows Subsequently however when the Income tax officer was making the assessment for the assessment year 1958 59 he discovered that the assessee did not utilise the borrowed money for the purpose of the business but for giving interest free advances to its partners
The Income tax officer therefore had reasons to believe that income to the extent of Rs 43116 had been under assessed and he issued notice under section 34 Thus in view of the findings given by the Income tax authorities the following facts emerge 1 that at the time of the original assessment the appellant had filed his return claiming a deduction of Rs 43116 and filed the balance sheet in support of his plea 2 that the balance sheet showed that the capital of the firm was Rs 870000  total drawings by the partners stood at Rs 2931998 and the loans were Rs 663292 The Income tax officer who completed the original assessment appears to have accepted the claim of the appellant because the balance sheet without any further scrutiny and a close calculation would not have revealed that the amount of deduction claimed was really in the nature of interest free loans given to the partners to meet their income tax liabilities 3 that in 1958 59 the Income tax officer discovered that the deduction claimed by the appellant was not correct and he accordingly called upon it to prove its plea but the appellant led no evidence before the Income tax officer
From this the Income tax officer concluded that the amount sought to be claimed as deduction was not incurred for the purpose of the partnership business
Thus therefore the subsequent information was 1 the discovery by the Income tax officer that the deduction was wrongly claimed and his disallowance of that deduction and ii the conduct of the appellant itself in not adducing any evidence or materials to prove its stand that the deduction was validly claimed
979 We might mention that it was submitted by Mr Banerjee that in fact the amount sought to be deducted was paid towards the income tax liability of the partners and this was done to protect the business itself and to improve the credit of the partners
Even this specific plea does not appear to have been taken before the Income tax officer
We are however not concerned with this particular plea because we are given to understand by the counsel for the appellant that the appeals against the assessment orders for the years 1958 59 and 1959 60 are pending before the Income tax authorities
In these circumstances we are clearly of the opinion that the facts of the present case clearly fall within the tests and principles laid down by this Court in A Raman and Company s case supra inasmuch as the Income tax officer proceeded on the basis of the information which came to him after the original assessment by fresh facts revealed in the assessment for the year 1958 59 and consisted of the conduct of the appellant itself in not adducing any evidence to support its plea
We are therefore unable to agree with the view of the Tribunal that this was a case of a mere change of opinion by the Income tax officer on the materials which were already on the record
our attention was also drawn by the learned counsel for the appellant to the decision of the Bombay High Court in Commissioner of Income tax Bombay City II vs H Holck Larsen1
In this case Chandrachud J as he then was speaking for the Court after review of the authorities of this Court and other High Courts observed as follows What is obligatory in order to apply section 341b is that he must have information in his possession in consequence of which he has reason to believe that the income has escaped assessment or is under assessed etc
The distinction really consists in a change of opinion unsupported by subsequent information on the one hand and a change of opinion based on information subsequently obtained on the other
In the former class of cases the assessment proceedings are attempted to be re opened without the discovery of an error and without receiving any information as to fact or law    
Such a reopening is based on a mere change of opinion and is without jurisdiction  
In the latter class of cases the reopening is based on information leading to the requisite belief and is therefore within the jurisdiction of the officer
 This decision is really based on the question whether it is open to the Income tax officer to change his opinion subsequently on the same materials and reopen the original assessment
We are no doubt inclined to agree with the view expressed by Chandrachud J in the aforesaid case but as this question is not free from difficulty as there is some divergence of judicial opinion on the subject we would refrain from giving any definite decision on this point particularly when in 980 the view we take in the instant case this point does not really arise for determination in this case which is really based on another principle namely that the information was derived by the Income tax officer from fresh facts and is clearly covered by the principles laid down in A raman and Company s case supra
For the reasons given above we find ourselves in complete agreement with the view taken by the High Court
Accordingly the appeal fails and is dismissed but without any order as to costs
SR Appeal dismissed


Summary:
The appellant company a registered partnership firm filed its income tax returns for the years 1956 57 and also for 1957 58 respectively showing a total income of  Rs 744551  after claiming a deduction of a sum of Rs 43116  being the amount of interest paid by the assessee on the debts incurred for the partnership business along with the balance sheet in support of the said deductions
The Income Tax officer accepted the claim on the basis of the balance sheet
When the assessee filed his return for the year 1958 59 the Income Tax officer discovered that the deduction claimed by the appellant was not correct and called upon the assessee to prove its plea
But the assessee did not lead any evidence before him
The Income Tax officer finding that the deduction of interest claimed was utilised for giving interest free loans to the partners for clearing their income tax dues and as such it could not be said to be a loan incurred for the expenses of the partnership firm not only disallowed the deduction claimed for that assessment year but also issued a notice under section 34 1 b for the re opening of the original assessment of the previous years on the ground that the deduction having been wrongly allowed taxable income escaped assessment
Accordingly the Income Tax officer re assessed him by including Rs 43116 to the total income
The appeal to the Appellate Assistant Commissioner failed
However on second appeal the Income Tax Appellate Tribunal B Bench Calcutta set aside the order of the reassessment opining that the information resulting in the reassessment notice under section 341b was not based on any fresh facts but was derived from the materials on the record of the original assessment amounting to a change of opinion and as such was not sufficient to attract the provisions of section 341b
On the application of the respondent Revenue the Tribunal made a reference under section 661 of the Act framing a question namely Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the reassessment made by the Income Tax officer under section 341b of the Indian Income Tax Act 1922 was incompetent  to the High Court which answered it in the negative and held that the case squarely fell within the ambit of section 341b of the Act inasmuch as the information on the basis of which the Income Tax officer sought to reopen the original assessment was based on subsequent facts  as also on the materials of the original assessment revealed by more careful and closer circumspection of these materials
Negativing the following three contentions of the assessee appellant namely i The information relied upon by the Income Tax officer not having been derived from external sources it amounted to a mere change of opinion on the very facts and materials that were present on the record of the original assessment not attracting the provisions of section 341b of the Act
967 ii It was not open to the Income Tax officer to have reopened the original assessment merely because he took a different view of the matter in the assessment year 1958 59
iii That the High Court has not appreciated the ratio laid down by the Supreme Court in Commissioner of Income tax Gujarat vs A Raman and Company  and dismissing the appeal by special leave the Court  HELD 1 section 341 contemplates two categories of cases for reopening the previous assessment 1 where there has been an omission or failure on the part of the assessee to make a return of his income under section 22 or to disclose fully and truly all materials facts necessary for his assessment and ii where there has been no such omission on the part of the assessee but the Income Tax officer on the basis of the information in his possession finds that income chargeable to tax has escaped assessment for any year
The first category deals with cases where an assessee is himself in default and the second category deals with cases where there is an default on the part of the assessee but where the income chargeable to tax has actually escaped assessment for one reason or the other and the Income Tax officer comes to know about the same1971 E F 2 The word information which has not been defined in the Act is of the widest amplitude and comprehends a variety of factors
Nevertheless the power under section 341b however wide it may be is not plenary because the discretion of the Income Tax officer is controlled by the words reason to believe
973 C  E Bhimraj Pannalal vs Commissioner of Income tax Bihar and Orissa an Bhimraj Panna Lal vs Commissioner of Income tax Bihar  Orissa  followed
3 Since the Income Tax officer was to see that the tax collecting machinery is made as perfect and effective as possible so that the tax payer is not allowed to get away with escaped income tax in view of the difficulty in laying down any rule of universal application the following tests and principles would apply to determine the applicability of section 341b to the following categories of cases i Where the information is as to the true and correct state of law derived from relevant judicial decisions ii Where in the original assessment the income liable to tax has escaped assessment duel to oversight inadvertence or a mistake committed by the Income Tax officer on the principle that the tax payer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority iii Where 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 and iv 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 of 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 from part of the original assessment section 341b would have no application
973 C D 976 A E Maharaj Kumar Kamal Singh vs The Commissioner of Income tax Bihar  orissa 1959 Supp
1 SCR 10 Commissioner of Wealth tax West Bengal vs Imperial Tobacco Company of India Ltd 1966 Supp
SCR 174 Commissioner of Income tax
Excess Profits Tax
Hyderabad Andhra Pradesh vs V Jagan Mohan Rao and ors
and Commissioner of Income tax Gujarat vs A Raman and Company  discussed
968 4 In the instant case the subsequent information was the discovery by the Income Tax officer the deduction was wrongly claimed and the consequent disallowance of that deduction and the conduct of the assessee itself in not adducing any evidence or materials to prove its stand that the claim was validly made which led to the issue of the notice under section 341b for reopening the assessment 978 H 5 The case really fell within the tests and principles laid down in A Raman Company s case and within the ambit of section 341b inasmuch as the Income Tax officer proceeded on the basis of the information which came to him after the original assessment by fresh facts revealed in the assessment for the year 1958 59 and consisted of the conduct of the assessee in not adducing any evidence to support its plea
It was not a case of a mere change of opinion by the Income Tax officer on the materials which were already on record
1979 B C Commissioner of Income tax Gujarat vs A Raman and Company  applied
Bankipur Club Ltd vs Commissioner of Income tax Bihar and Orissa  834 distinguished
On the question Whether it is open to the ITO to change his opinion subsequently on the same materials and reopen the original assessment which arose in the decision in Commissioner of Income Tax Bombay City 2 vs H Holck Larsen  479 relied on by the appellant assessee and also on the contention that in fact the amount sought to be deducted was paid towards the income tax liabilities of the partners the Court applied Non liquet