Case: Commissioner Of Wealth Tax West Bengal Vs. Imperial Tobacco Co. Of India Ltd

2. 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.3. 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 S. 25 (2) 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 taxation 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 S. 17 (b) of the Act for re-assessment of net wealth for the years 1957-58 and 1958-59. On September 24, 2961 orders of re-assessment under C 16 (3) read with S. 17 (b) 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 re-assessment orders and the Appellate Assistant Commissioner sustained the decision of the Wealth-tax Officer with respect to the re-assessment 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 mod in this connection reliance was placed on the words "in consequence of any information in his possession appearing in S. 17 (b) of the Act.4. The respondent then went in appeal to the Appellate Tribunal and his contention there was that the issue of notices under S. 17 (b) 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 respondents 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 S. 17 (b) 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 S. 17 (b). 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 re-assessment proceedings under S. 17 (b) 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 S. 27 (1) of the Act. The Tribunal rejected the applications. The appellant then applied to the High Court under S. 27 (3) 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.

Reasoning: 13. It does appeal that some High Courts at any rate are taking the view that a change of opinion by the Income-tax Officer in certain circumstance will be sufficient for the purpose of S. 34 (1) (b) and will justify the issue of a notice thereunder. It may be added that after the decision of this Court in Kamal Singhs case, (1959) Supp 1 SCR 10 : 1959-35 1TR 1: (AIR 1959 SCR 257), it is now settled that information in S. 34 (1) (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 S. 34 (1) (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. To that extent the decision of the Bombay High Court in Mohamed Yusuf Ismali, 1944-12 ITR 8  : (AIR 1944 Bom 160  ), has been overruled. That is why the Appellate Tribunal stated if its decision that if the notices in the present case had been issued after the decisions 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 S. 17 (b) 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 their 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 S. 17 (b) of the Act is pari materia with the language of Section 34 (1) (b) of the Income-tax Act and therefore the decisions under S.34 (1) (b) ibid would be relevant in construing the scope and effect of S. 17 (b) 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 34 (1) (b) 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 S. 17 (b) of the Act and should have been referred by the Tribunal.