Summarize the following court judgment. Civil Appeal No. 570 of 1976. Appeal by Certificate from the Judgment and Order dated 9.2.1976 of the Madras High Court in Tax Case No. 104 of 1969. T.A. Ramachandran	 P.N. Ramaligam and A.T.M. Sampath for the Appellant. 628 V.Gauri Shanker	 Manoj Arora	 section Rajappa and Ms. A.Subhashini for the Respondent. The Judgment of the Court was delivered by RANGANATHAN	 J. This is the assessee 's appeal form a judgment of the Madras High Court dated 10.1.1975 answering three questions referred to it by the Income tax Appellate Tribunal in favour of the Revenue and against the assessee. The reference related to the assessment year 1961 62	 the previous year in respect of which commenced on 13.4.1960. The judgment of the High Court is reported as (1976) 102 I.T.R.622. The appellant assessee is a partnership firm. Since 1949	 it was carrying on	 in Malaya	 a money lending business and	 as part of and incidental to the said business	 a business in the purchase and sale of house properties	 gardens and estates. It had been reconstituted under a deed dated 26.3.1960. The firm 's accounts for the year 1960 61	 which commenced on 13.4.60	 would normally have come to a close on or about the 13th April	 1961. However	 the firm closed its accounts as on 13.3.1961 with effect from which date it was dissolved. Along with its income tax return for the assessment year 1961 62 filed on 10th April 1962	 the assessee filed a profit and loss account and certain other statements. In the profit and loss account	 a sum of $ 1	01	248 was shown as "difference on revaluation of estates	 gardens and house properties" on the dissolution of the firm on 13.3.61	 such difference being $ 70	500 in respect of "house properties" and $ 30	748 in respect of estates and gardens. In the memo of adjustment for income tax purposes	 however	 the above sum was deducted on the ground that it was not assessable either as revenue or capital. A statement was also made before the officer that partner Ramanathan Chettiar	 forming one group and the other partners forming another group	 were carrying on business separately with the assets and liabilities that fell to their shares on the dissolution of the firm. The Income tax Officer (I.T.O.) issued a notice under section 23(2) on the same day (10.4.1962) posting the hearing for the same day and completed the assessment also on the same day	 after making a petty addition of Rs. 2083 paid as property tax in Malaya	 and recording the following note: "Audit assessment Lakshmanan appears return filed I.T. 86 acknowledged in list of books scrutinised order dictated". 629 For the subsequent assessment year 1962 63	 the assessee filed a return showing nil income along with a letter pointing out that the firm had been dissolved on 13.3.1961. Thereafter	 on 3.9.63	 the I.T.O. wrote a letter to the assessee to the effect that the revaluation difference of $ 1	01	248 should have been brought to tax in the assessment year 1961 62 in view of the decision of the Madras High Court in Ramachari & Co. vs C.I.T.	 He called for the basis for the valuation and also for the assessee 's objections. The assessee sent a reply stating that no profit or loss could be assessed on a revaluation of assets. Relying on a circular of the Central Board of Revenue dated 21.6.1956	 it was urged that the assessee was gradually winding up its business in Malaya and that therefore	 the surplus would only be capital gains. It was urged that the revaluation had been at a market price prevalent since 1.1.1954 and that	 therefore	 no capital gains were chargeable to tax. The I.T.O. followed up his letter by a notice under section 148 read with section 147(b). The assessee objected to the reassessment on two grounds: (1) that the circumstances did not justify the initiation of proceedings under section 147(b); and (2) that no assessable profits arose to the firm on the revaluation of assets on the eve of the dissolution of the firm. Overruling these objections	 the I.T.O. completed a reassessment on the firm after adding back the sum of Rs.1	58	057 (the equivalent of $ 1	01	248) to the previously assessed income. The assessee 's successive appeals to the Appellate Assistant Commissioner and the Appellate Tribunal and reference	 at its instance	 to the High Court having failed	the assessee is before us. Three questions of law were referred to the High Court by the Tribunal. These were: "1. Whether	 on the facts and circumstances of the case	 the reassessment made on the assessee firm for the assessment year 1961 62 under section 147 of the Income tax Act is valid in Law? 2. Whether	 on the facts and circumstances of the case	 assessment of the sum of $ 1	01	248 as revenue profit of the assessee firm chargeable to tax for the assessment year 1961 62 is justified in law? 3. Whether	 on the facts	 and circumstances of the case	 the Appellate Tribunal is right in law in sustaining the assessment of the sum of $ 1	01	348 after having found that the Department Officers are bound by the Circular of the Central Board of Revenue?" 630 We may deal at the outset with the third question. Though the High Court has dealt with this question at some length	 we do not think any answer to this question can or need be furnished by us for the following reasons. First	 the assessee has not been able to place before us the circular of the Board on which reliance is placed. It is not clear whether it is a circular or a communication of some other nature. Second	 the circular	 to judge from its purport set out in the High Court 's judgment	 seems to have been to the effect that the surplus arising from the sale of properties acquired by a money lender in the course of his business would be in the nature of capital gains and not of income. Obviously such a proposition could not have been intended as a broad or general proposition of law	 for the nature of the surplus on sale of assets would depend on the nature of the asset sold and this	 in turn	 would depend on the facts and circumstances of each case. In this case	 no material was placed at any stage to show that the assets in question constituted the capital assets of the firm and not its stock in trade. Third	 the plea of the assessee which was in issue all through was that there was no sale of assets by the firm when its assets are distributed among its partners and that no profits whether capital or revenue could be said to arise to the firm merely because	 at the time of the dissolution	 the firm revalued its assets on the basis of market value or any other basis	 for adjusting the mutual rights and liabilities of the partners on the dissolution of the firm. The terms of the circular	 as set out in the order of the High Court	 cannot therefore be of any assistance to the assessee in answering the issues in this case. We	 therefore	 do not answer the third question posed by the Tribunal. Turning now to the first question	 the relevant facts have already been noticed. The following relevant and material facts viz. (i) the dissolution of the firm	 (ii) the revaluation of its assets	 (iii) the distribution thereof among two groups of its partners	 and (iv) the division and crediting of the surplus on revaluation to the partner 's accounts were not only reflected in the balance sheet	 the profit and loss account and the profit and loss adjustment account but were also mentioned in the statement filed before the I.T.O. along with the return. Clearly	 action u/s 148 read with clause (a) of s.147 could not be initiated in these circumstances but is action under clause (b) of that section also impermissible? That is the question. We may now set out the provisions of clause (b) of section 147 for purposes of easy reference. This clause which corresponds to section 34(1)(b) of the Indian Income tax Act	 1922 (`the 1922 Act ') permits initiation of reassessment of proceedings	 "notwithstanding 631 that there has been no omission or failure as mentioned in clause (a) on the part of the assessee" provided "the Income tax Officer has	 in consequence of information in his possession	 reason to believe that income chargeable to tax has escaped assessment". In the present case	 on the information already on record and in view of the decision in Ramachari & Co. vs C.I.T.	 	 there can be no doubt that the I.T.O. could reasonably come to the conclusion that income	 profits and gains assessable for the assessment year 1961 62 had escaped assessment. But is that belief reached "in consequence of information in his posession"? The assessee 's counsel says "no"	 for	 says he	 it is settled law that the "information" referred to in clause (b) above	 should be "information" received by the I.T.O. after he had completed the original assessment. Here it is pointed out that all the relevant facts as well as the decision in Ramachari (supra) had been available when the original assessment was completed on 10.4.1962. Action cannot be taken under this clause merely because the I.T.O.	 who originally considered the surplus to be not assessable	 has on the same facts and the same case law which had been available to him when he completed the assessment originally	 changed his opinion and now thinks that the surplus should have been charged to tax. The validity of the assessee 's argument has to be tested in the light of the decisions of this Court which have interpreted section 147(b) of the 1961 Act or its predecessor section 34(1)(b) of the 1922 Act and expounded its parameters. We may start with the decision in Maharaj Kumar Kamal Singh vs I.T.O.	 S.C. In this case it was held that the word "information" would include information as to the true and correct state of the law and would also cover information as to relevant judicial decisions. In that case the I.T.O. had re opened the assessment on the basis of a subsequent decision of the Privy Council and this was upheld. Referring to the use of the word "escape" in the section	 the Court observed. "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 asessable 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 34(1)(b) cannot	 therefore	 succeed." (underlining ours) 632 The meaning of the word "information" was again explained thus in C.I.T. vs A. Raman & Co.	 [1968] 67 I.T.R. 11 SC: "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	 or 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 assessment	 but 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." (underlining ours) We may next refer to Kalyanji Mavji & Co. vs C.I.T.	 [1976 102] I.T.R. 287. It is unnecessary to set out the facts of this case. It is sufficient to refer to the enunciation of the law regarding the scope of section 34(1)(b) as culled out from the earlier decisions of this Court on the subject. At page 296 the Court observed: "On a combined review of the decisions of this Court the following tests and principles would apply to determine the applicability of section 34(1)(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	 inadvertence or a mistake committed by the Income tax Officer. This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority; 633 (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." Before applying the above principles to the facts of the present case	 we may refer to two earlier decisions of the Madras High Court which have been followed in the judgment under appeal. In Salem Provident Fund Society Ltd. vs C.I.T.	 	 the Income tax officer	 in calculating the annual profits of an insurance company	 had	 under the statute to work out the difference between the deficiencies as shown in the actuarial valuation of the company in respect of two successive valuation periods. At the time of original assessment	 the Income tax Officer	 by mistake	 added the two deficiencies instead of subtracting one from the another. This mistake he committed not in one assessment year but in two assessment years. Subsequently	 he discovered his mistake and initiated proceedings under section 34(1)(b). The contention urged on behalf of the assessee was that all the statements	 on the basis of which the re assessment proceedings were taken	 were already on record and that	 in such a case	 there was no `information ' which would justify the reassessment. An argument was also raised that the rectification	 if any	 could have been carried out only under section 35 and not under section 34. These contentions were repelled. In regard to the former objection	 the High Court pointed out: "We are unable to accept the extreme proposition that nothing that can be found in the record of the assessment	 which itself would show escape of assessment or under assessment	 can be viewed as information which led to the belief that there has been escape from assessment or under assessment. Suppose a mistake in the original order of assessment is not discovered by the Income tax Officer himself on further scrutiny but it is brought to this notice by another assessee or even by a subordinate or a superior officer	 that would appear to be information disclosed to the Income tax Officer. if the mistake itself is not extraneous 634 to the record and the informant gathered the information from the record	 the immediate source of information to the Income tax Officer in such circumstances is in one sense extraneous to the record. It is difficult to accept the position that while what is seen by another in the record is `information ' what is seen by the Income tax Officer himself is not information to him. In the latter case he just informs himself. It will be information in his possession within the meaning of section 34. In such cases of obvious mistakes apparent on the face of the record of assessment that record itself can be a source of information	 if that information leads to a discovery or belief that there has been an escape of assessment or under assessment. A similar question arose in CIT vs Rathinasabapathy Mudaliar	 In that case the assessee	 who was a partner in a firm	 did not include in his return the income of his minor son admitted to the benefits of the partnership as required by section 16(3) of the 1922 Act. The minor son submitted a separate return and was assessed on this income. Subsequently	 the Income tax Officer "discovered" his error in not assessing the father thereon and started re assessment proceedings. The re assessment was upheld by the Madras High Court on the same logic as had been applied in Salem Provident Fund Society Ltd. case (supra). The above line of thinking has not only held the field for about thirty years now but has also received approval in Anandji Haridas and Co. (P) Ltd. vs S.P. Kushare	 Sales Tax Officer	 [1968] 21 S.T.C. 326. This issue has further been considered in the decision of this Court in the case of Indian and Eastern Newspaper Society vs C.I.T. (the IENS case	 for short) [1979] I.T.R. 996. In this case the income of the assessee derived by letting out certain portions of the building owned by it to its members as well as to outsiders was being assessed as business income. In the course of audit	 an internal audit party expressed the view that the money realised by the assessee on account of the occupation of its conference hall and rooms should have been assessed under the head "income from property" and not as business income. The Income tax Officer thereupon initiated re assessment proceedings and this was upheld by the Tribunal. On a direct reference under s.257 of the Act	 this Court held that the opinion of the audit party on a point of law could not be regarded as "information" and that the initiation of the reassessment proceedings was not justified. It was contended for the Revenue	 that the reassessment proceedings would 635 be valid even on this premise. Dealing with this argument	 the Court observed: "Now	 in the case before us	 the ITO had	 when he made the original assessment	 considered the provisions of sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The revenue contends that it is open to him to do so	 and on that basis to reopen the assessment under section 147(b). Reliance is placed on Kalyanji Mavji & Co. vs CIT	 	 where a Bench of two learned	 Judges of this Court observed that a case where income had escaped assessment due to the "oversight	 inadvertence or mistake" of the ITO must fall within section 34(1)(b) of the Indian Income Tax Act	 1922. It appears to us	 with respect	 that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if	 on re appraising the material considered by him during the original assessment	 the ITO discovers that he has committed an error inconsequence of which income has escaped assessment	 it is open to him to reopen the assessment. In our opinion	 an error discovere on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this Court in Maharaj Kumar Kamal Singh vs CIT	 [1959] 35 I.T.R. 1; CIT vs A. Raman & Co.	 and Bankipur Club Ltd. vs CIT and we do not believe that the law has since taken a different course. Any observation in Kalyanji Mavji & Co. vs CIT	 suggesting the contrary do not	 we say with respect	 lay down the correct law." (underlining ours) The Court proceeded further to observe: "A further submission raised by the revenue on section 147(b) of the Act may be considered at this stage. It is urged that the expression "information" in section 147(b) refers to the realisation by the ITO that he has committed an error when making the original assessment. It is said that	 when upon receipt of the audit note the ITO discovers or realizes that a mistake has been committed in the original 636 assessment	 the discovery of the mistake would be "information" within the meaning of section 147(b). The submission appears to us inconsistent with the terms of section 147(b) Plainly	 the statutory provision envisages that the ITO must first have information in his possession	 and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words "reason to believe"	 and it follows from the "information" received by the ITO. The information is not the realisation	 the information gives birth to the realisation. " Sri Ramachandran submits that these decisions support his contention that reassessment proceeding can be validly initiated only if there is some information received by the I.T.O. from an external source after the completion of the original assessment but not in a case like the present where there is nothing more before the I.T.O. than what was available to him when the original assessment was completed. He also submits that the observations in the IENS case have cast doubts on the propositions enunciated in Kalyanji Mavji 's case (supra) and reiterates the proposition that reassessment proceedings cannot be availed of to revise	 on the same material	 the opinion formed or conclusion arrived at earlier in favour of the assessee. On the other hand	 Dr. Gaurisankar	 appearing for the Revenue	 mentioned that the decision in the IENS case holding that the opinion of an audit party would not constitute `information ' and qualifying the principles enunciated in Kalyanji Mavji is pending consideration by a larger Bench of this Court. He	 however	 submitted that the reassessment in this case would be valid even on the strength of the observations in the IENS case. We shall proceed to consider the correctness of this submission. We have pointed out earlier that Kalyanji Mavji (supra) outlines four situations in which action under S.34(1)(b) can be validly initiated. The IENS case has only indicated that proposition (2) outlined in this case and extracted earlier may have been somewhat widely stated; it has not cast any doubt on the other three propositions set out in Kalyanji Mavji 's case. The facts of the present case squarely fall within the scope of propositions 2 and 4 enunciated in Kalyanji Mavji 's case. Proposition (2) may be briefly summarised as permitting action even on a "mere change of opinion". This is what has been doubted in the IENS case (supra) and we shall discuss its application to this case a 637 little later. But	 even leaving this out of consideration	 there can be no doubt that the present case is squarely covered by proposition (4) set out in Kalyanji Mavji & Co. (supra). This proposition clearly envisages a formation of opinion by the Income tax Officer on the basis of material already on record provided the formation of such opinion is consequent on "information" in the shape of some light thrown on aspects of facts or law which the I.T.O. had not earlier been conscious of. To give a couple of illustrations	 suppose an I.T.O.	 in the original assessment	 which is a voluminous one involving several contentions	 accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently he finds	 in the forest of papers filed in connection with the assessment	 several instances of earlier sales of house property by the assessee. That would be a case where the I.T.O. derives information from the record on an investigation or enquiry into facts not originally undertaken. Again	 suppose if I.T.O. accepts the plea of an assessee that a particular receipt is not income liable to tax. But	 on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under s.147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later. What then	 is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji (supra)? The difference	 if one keeps in mind the trend of the judicial decisions	 is this. Proposition (4) refers to a case where the I.T.O. initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier	 for e.g.	 as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the I.T.O.	 having considered all the facts and law	 arrives at a particular conclusion	 but reinitiates proceedings because	 on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier	 he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. In other words	 as pointed out in IENS case	 it also 638 ropes in cases of a "bare or mere change of opinion" where the I.T.O. (very often a successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or	 more often	 by a predecessor I.T.O.) was	 in his opinion	 incorrect. Judicial decisions had consistently held that this could not be done and the IENS case (supra) has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji (supra). The second paragraph from the judgment in the IENS case earlier extracted has also reference only to this situation and insists upon the necessity of some information which make the ITO realise that he has committed an error in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas	 [1986] 21 S.T.C. 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji	 the position as summarised by the High Court in the following words represents	 in our view	 the correct position in law: "The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material	 on the basis of which the reassessment proceedings are sought to be initiated	 came to the notice of the Income tax Officer subsequent to the original assessment. If the Income tax Officer had considered and formed an opinion on the said material in the original assessment itself	 then he would be powerless to start the proceedings for the reassessment. Where	 however	 the Income tax Officer had not considered the material and subsequently come by the material from the record itself	 then such a case would fall within the scope of section 147(b) of the Act. " Let us now examine the position in the present case keeping in mind the narrow but real distinction pointed out above. On behalf of the assessee	 it is emphasised (a) that the amount of surplus is a very substantial amount	(b) that full details of the manner in which it had resulted had been disclosed	 (c) that the profit and loss account	 the profit and loss adjustment account and statement made before the I.T.O. had brought into focus the question of taxability of the surplus and (d) that decision in Ramachari 's case had been reported by 10.4.1962. No Income tax Officer can be presumed to have completed the assessment without looking at all this material and the said decision. No doubt	 some doubt had been thrown as to whether a statement had been given at the time of original assessment that the amount 639 of surplus was not taxable as an income or a capital gain but the case has proceeded on the footing that such a statement was there before the officer. This	 therefore	 is nothing but a case of "change of opinion". On the other hand	 the authorities and the Tribunal have drawn attention to the fact that the return	 the section 143(2) notice and assessment were all on the same day and counsel for the Revenue urged that obviously	 in his haste	 the I.T.O. had not looked into the facts at all. It is urged that no Income tax Officer who had looked into the facts and the law could have failed to bring the surplus to tax in view of then recent pronouncement in Ramachari 's case. Dr. Gaurishankar submitted that the Tribunal has found that the I.T.O. "had acted mechanically in accepting the return without bringing his mind to play upon the entry in the statement with reference to the distribution of the assets". He pointed out that there is no evidence of any enquiry with reference to this aspect and that	 the amount involved being sufficiently large	 the I.T.O.	 if he had been aware of the existence of the entry would certainly have discussed it. He urged that the question whether the I.T.O. had considered this matter at the time of the original assessment or not is purely a question of fact and the Tribunal 's conclusion thereon having been endorsed by the High Court	 there is no justification to interfere with it at this stage. We think there is force in the argument on behalf of the assessee that	 in the face of all the details and statement placed before the I.T.O. at the time of the original assessment	 it is difficult to take the view that the Income tax Officer had not at all applied his mind to the question whether the surplus is taxable or not. It is true that the return was filed and the assessment was completed on the same date. Nevertheless	 it is opposed to normal human conduct that an officer would complete the assessment without looking at the material placed before him. It is not as if the assessment record contained a large number of documents or the case raised complicated issues rendering it probable that the I.T.O. had missed these facts. It is a case where there is only one contention raised before the I.T.O. and it is	 we think	 impossible to hold that the Income tax Officer did not at all look at the return filed by the assessee or the statements accompanying it. The more reasonable view to take would	 in our opinion	 be that the Income tax Officer looked at the facts and accepted the assessee 's contention that the surplus was not taxable. But	 in doing so	 he obviously missed to take note of the law laid down in Ramachari which there is nothing to show	 had been brought to his notice. When he subsequently became aware of the decision	 he initiated proceedings under section 147(b). The material which constituted information and on 640 the basis of which the assessment was reopened was the decision in Ramachari. This material was not considered at the time of the original assessment. Though it was a decision of 1961 and the I.T.O. could have known of it had he been diligent	 the obvious fact is that he was not aware of the existence of the decision then and	 when he came to know about it	 he rightly initiated proceedings for assessment. We may point out that the position here is more favorable to the Revenue than that which prevailed in the Madras cases referred to earlier. There	 what the I.T.O. had missed earlier was the true purport of the relevant statutory provisions. It seems somewhat difficult to believe that the I.T.O. could have failed to read properly the statutory provisions applicable directly to facts before him (though that is what seems to have happened). Perhaps an equally plausible view	 on the facts	 could have been taken that he had considered them and decided	 in one case	 not to apply them and	 in the other	 on a wrong construction thereof. In the present case	 on the other hand	 the material on which the I.T.O. has taken action is a judicial decision. This had been pronounced just a few months earlier to the original assessment and it is not difficult to see that the I.T.O. must have missed it or else he could not have completed the assessment as he did. Indeed it has not been suggested that he was aware of it and yet chose not to apply it. It is therefore much easier to see that the initiation of reassessment proceedings here is based on definite material not considered at the time of the original assessment. In the above view of the matter	 we uphold the High Court 's view on the first question. The second question raises a more difficult problem. There can be no doubt that the decision of the Madras High Court in Ramachari squarely covers the situation. Ramachari holds that the principle of valuing the closing stock of a business at cost or market at the option of the assessee is a principle that would hold good only so long as there is a continuing business and that where a business is discontinued	 whether on account of dissolution or closure or otherwise	 by the assessee	 then the profits cannot be ascertained except by taking the closing stock at market value. Ramachari has subsequently been followed by the Kerala High Court in Popular Workshops vs Commissioner of Income Tax	 and in Popular Automobiles vs Commissioner of Income Tax	 Shri Ramachandran contends that the decision in Ramachari 641 does not lay down the correct law. He submits than	 while it is no doubt true that the closing stock has to be valued	 the well settled principle is that it should be valued	 at cost or market whichever is lower and there is no justification for laying down a different principle for valuation of the closing stock at the point of discontinuance of business unless the goods are actually sold by the assessee at the time of discontinuance. Further	 it has been held by a series of decisions of this Court that when a firm is dissolved and the assets are distributed among the partners	 there is no sale or transfer of the assets of the firm to the various partners: vide	 Addanki Narayanppa vs Bhaskara Krishnappa	 ; ; CIT vs Dewas Cine Corporation	 ; CIT vs 2Bankey Lal Vaidya	 ; Malabar Fisheries Co. vs C.I.T.	 and in Sunil Siddharthbhai vs C.I.T.	 He submits that	 in logical sequence	 dissolution comes first and distribution of assets comes later. Therefore	 revaluation of the assets of a firm	 which is only for the division of the assets among the partners on a real and not a notional basis	 is part of the division of the assets and therefore logically	 in point of time	 subsequent to the dissolution of the firm. Since the revaluation takes place after the dissolution no profits can be said to have accrued to the firm by the process of revaluation. The revaluation of the assets is not in the course of business and is not an activity which can partake of the nature of trade. Assuming but not conceding that it is possible to have a revaluation of the assets	 for example	 stock in trade before dissolution	 any excess which arises on the revaluation is only an imaginary or notional profit and cannot be brought to tax for the following reasons: (i) As a result of such revaluation	 there can be no profit	 because the firm cannot make a profit out of itself: Vide Kikabhai Premchand vs C.I.T.	 (ii) The process of revaluation of stock by itself cannot bring in any real profits: vide C.I.T. vs K.A.R.K. Firm	 [1934]2 I.T.R. 183; Chainrup Sampatram vs C.I.T.	 [1953) and C.I.T. V. Hind Construction ltd.	 [1972] 83 I.T.R. 211; and (iii) It is well settled that what is taxable under the income tax law is only real income vide C.I.T. vs M/s Shoorji Vallabhdas and Co.	 [1962] 46 I.T.R. 144 and C.I.T. vs Birla Gwalior (P) Ltd.	 There is	 therefor	 no principle by which the stock in trade can be valued at market price so as to bring to tax the notional profits which might in future be realised as a result of the sale of the stock in trade. 642 The question posed before us is a difficult one. We think	 however	 that the High Court was right in pointing out that the several decisions relied upon for the assessee as to the nature of the transaction by which a firm	 on dissolution	 distributes its assets among its partners	 have no relevance in the present case. As the High Court rightly observed	 those cases relate to what happens after or in consequence of the dissolution of a firm whereas we are here concerned with a question that arises before or at the time of dissolution. What we have to decide is the basis on which	 in making up the accounts of a firm upto the date of dissolution	 the closing stock with the firm as at a point of time immediately prior to the dissolution is to be valued. It is this principle that has been decided in Ramachari and the High Court decisions following it (including the one under appeal) and the question is whether they lay down the correct law. In the first place	 it is settled law that the true trading results of a business for an accounting period cannot be ascertained without taking into account the value of the stock in trade remaining at the end of the period. Though	 as pointed out by this Court in Chainrup Sempatram vs C.I.T.	 it is a misconception to think that any profit arises out of the valuation of closing stock	 it is equally true that such valuation is a necessary element in the process of determining the trading results of the period. This is true in respect of any method of accounting and in C.I.T. vs Krishnaswamy Mudaliar	 this Court pointed out that	 even where the assessee is following the cash system of accounting	 the valuation of closing stock cannot be dispensed with. In this decision	 this Court quoted with approval the following observations in C.I.R. vs Cock	 Russel & Co. Ltd. "There is no word in the statutes or rules which deals with this question of valuing stock in trade. There is nothing in the relevant legislation which indicates that in computing the profits and gains of a commercial concern the stock in trade at the start of the accounting period should be taken in and that the amount of the stock in trade at the end of the period should also be taken in. It would be fantastic not to do it: it would be utterly impossible accurately to assess profits and gains merely on a statement of receipts and payments or on the basis of turnover. It has long been recognised that the right method of assessing profits and gains is to take into account the value of the stock in trade at the beginning and the value of the stock in trade at the 643 end as two of the items in the computation. I need not cite authority for the general proposition	 which is admitted at the Bar	 that for the purposes of ascertaining profits and gains the ordinary principles of commercial accounting should be applied	 so long as they do not conflict with any express provision of the relevant statutes. " Next the principles as to the method of valuation of the closing stock are equally well settled. Lord President Clyde set these out in Whimster & Co. vs C.I.R.	 in the following words: "In computing the balance of profits and gains for the purposes of income tax	. two general and fundamental commonplaces have always to be kept in mind. In the first place	 the profits of any particular year or accounting period must be taken to consist of the difference between the receipts from the trade or business during such year or accounting period and the expenditure laid out to earn those receipts. In the second place	 the account of profit and loss to be made up for the purpose of ascertaining that difference must be framed consistently with the ordinary principles of commercial accounting	 so far as applicable	 and in conformity with the rules of the Income tax Act	 or of that Act as modified by the provisions and schedules of the Acts regulating excess profits duty	 as the case may be. For example	 the ordinary principles of commercial accounting require that in the profit and loss account of a merchant 's manufacturer 's business the values of the stock in trade at the beginning and at the end of the period covered by the account should be entered at cost or market price	 whichever is the lower; although there is nothing about this in the taxing statutes. " The principle behind permitting the assessee to value the stock at cost is very simple. In the words of Bose	 J. In Kikabhai Premchand vs C.I.T.	 [1953] 24 I.T.R. 506 S.C. it is this: "The appellant 's method of book keeping reflects the true position. As he makes his purchases he enters his stock at the cost price on one side of the accounts. At the close of the year he enters the value of any unsold stock at cost on the other side of the accounts thus cancelling out the entries relating to the sum unsold stock earlier in the 644 accounts; and then that is carried forward as the opening balance in the next year 's account. This cancelling out of the unsold stock from both sides of the accounts leaves only the transactions on which there have been actual sales and gives the true and actual profit or loss on his year 's dealings. " As against this	 the valuation of the closing stock at market value invariably will create a problem. For if the market value is higher than cost	 the accounts will reflect notional profits not actually realised. On the other hand	 if the market value is less	 the assessee will get the benefit of a notional loss he has not incurred. Nevertheless	 as mentioned earlier	 the ordinary principles of commercial accounting permit valuation "at cost or market	 whichever is the lower". The rationale behind this has been explained by Patanjali Sastri	 C.J. in Chainrup Sampatram vs C.I.T.	 	 S.C. where an attempt was made to value the closing stock at a market value higher than cost. The learned Chief Justice observed: "It is wrong to assume that the valuation of the closing stock at market rate has	 for its object	 the bringing into charge any appreciation in the value of such stock. The true purpose of crediting the value of unsold stock is to balance the cost of those goods entered on the other side of the account at the time of their purchase	 so that the cancelling out of the entries relating to the same stock from both sides of the account would leave only the transactions on which there have been actual sales in the course of the year showing the profit or loss actually realised on the year 's trading. As pointed out in paragraph 8 of the Report of the Committee on Financial Risks attaching to the holding of Trading Stocks	 1919	 "As the entry for stock which appears in a trading account is merely intended to cancel the charge for the goods purchased which have not been sold	 it should necessarily represent the cost of the goods. If it is more or less than the cost	 then the effect is to state the profit on the goods which actually have been sold at the incorrect figure. . From this rigid doctrine one exception is very generally recognised on prudential grounds and is now fully sanctioned by custom	 viz.	 the adoption of market value at the date of making up accounts	 if that value is less	 than cost. It is of course an anticipation of the loss that may be made on those goods in 645 the following year	 and may even have the effect	 if prices rise again	 of attributing to the following year 's results a greater amount of profit than the difference between the actual sale price and the actual cost price of the goods in question" (extracted in paragraph 281 of the Report of the Committee on the Taxation of Trading Profits presented to British Parliament in April 1951). While anticipated loss is thus taken into account	 anticipated profit in the shape of appreciated value of the closing stock is not brought into the account	 as no prudent trader would care to show increased profit before its actual realisation. This is the theory underlying the rule that the closing stock is to be valued at cost or market price whichever is the lower	 and it is now generally accepted as an established rule of commercial practice and accountancy. " From the above passage	 it will be seen that the proper practice is to value the closing stock at cost. That will eliminate entries relating to the same stock from both sides of the account. To this rule custom recognises only one exception and that is to value the stock at market value if that is lower. But on no principle can one justify the valuation of the closing stock at a market value higher than cost as that will result in the taxation of notional profits the assessee has not realised. The High Court in Ramachari has	 however	 outlined another exception and seems to have rested this on two considerations. The first is the observation of Lord Buckmaster in C.I.T. vs Ahmedabad New Cotton Mills Co. Ltd.	 [1930] L.R. 57 I.A. 21 to the following effect: "The method of introducing stock into each side of a profit and loss account for the purpose of determining the annual profits is a method well understood in commercial circles and does not necessarily depend upon exact trade valuations being given to each article of stock that is so introduced. The one thing that is essential is that there should be a definite method of valuation adopted which should be carried through from year to year	 so that in case of any division from strict market values in the entry of the stock at the close of one year it will be rectified by the accounts in the next year. " From these observations	 the High Court inferred: "It is obvious from the above that the privilege of valuing 646 the opening and closing stock in a consistent manner is available only to continuing business and that it cannot be adopted where the business comes to an end and the stock in trade has to be the disposed of in order to determine the exact position of the business on the date of closure. " The second consideration which prevailed with the High Court is reflected in the following passage from the judgment: "It seems to us that none of these cases has any application to the facts of the present case . There is no authority directly in point dealing with this question	 where a partnership concern dissolves its business in the course of the accounting year	 what is the basis on which the stock in trade has to be valued as on the date of dissolution. We have accordingly to deal with the matter on first principles. The case of a firm which goes into liquidation forms a close parallel to the present case. In such a case all the stock in trade and other assets of the business will have to be sold and their value realised. It cannot be controverted that it is only by doing so that the true state of the profits or losses of the business can be arrived at. The position is not very different when the partnership ceases to exist in the course of the accounting year. The fact that Ramachari	 one of the ex partners	 took over the entire stock and continued to run the business on his own	 is not relevant at all	 when we consider the profits or losses of the partnership ' which has come to an end. It should	 therefore	 follow that in order to arrive at the correct picture of the trading results of the partnership on the date when it ceases to function	 the valuation of the stock in hand should be made on the basis of the prevailing market price. " We are not quite sure that the first of the considerations that prevailed with the High Court is relevant in the present case. Even in a continuing business	 the valuation at market value is permissible only when it is less than cost; it is not quite certain whether the rules permit an assessee if he so desires to value closing stock at market value where it is higher than cost. But	 in either event	 it is allowed to be done because its effect can be offset over a period of time. But here	 where the business comes to a close	 no future adjustment of an over 647 or under valuation is possible	 In this context	 it is difficult to see how valuation	 at other than cost	 can be justified on the principle of Ahmedabad Advance Mills case (supra). We	 however	 find substance in the second consideration that prevailed with the High Court. The decision in Muhammad Hussain Sahib vs Abdul Gaffor Sahib	 [1950] 1 M.L.J.81 correctly sets out the mode of taking accounts regarding the assets of a firm. While the valuation of assets during the subsistence of the partnership would be immaterial and could even be notional	 the position at the point of dissolution is totally different: "But the situation is totally different when the firm is dissolved or when a partner retires. The settlement of his account must be not on a notional basis but on a real basis	 that is every asset of the partnership should be converted into money and the account of each partner settled on that basis. . The assets have to be valued	 of course	 on the basis of the market value on the date of the dissolution . " This applies equally well to assets which constitute stock in trade. There can be no manner of doubt that	 in taking accounts for purposes of dissolution	 the firm and the partners	 being commercial man	 would value the assets only on a real basis and not at cost or at their other value appearing in the books. A short passage from Pickles on Accountancy (Third Edn)	 p. 650 will make this clear: "In the event of the accounts being drawn up to the date of death or retirement	 no departure from the normal procedure arises	 but it will be necessary to see that every revaluation required by the terms of the partnership agreement is made. It has been laid down judicially that	 in the absence of contrary agreement	 all assets and liabilities must be taken at a "fair value	 not merely a book value" basis	 thus involving recording entries for both appreciation and depreciation of assets and liabilities. This rule is applicable	 notwithstanding the omission of a particular item from the books	 e.g. investments	 goodwill (Cruikshank vs Sutherland). Obviously	 the net effect of the revaluation will be a profit or loss divisible in the agreed profit or loss sharing ratios. " 648 The real rights of the partners cannot be mutually adjusted on any other basis. This is what happened in Ramachari. Indeed	 this is exactly what the partners in this case have done and	 having done so	 it is untenable for them to contend that the valuation should be on some other basis. Once this principle is applied and the stock in trade is valued at market price	 the surplus	 if any	 has to get reflected as the profits of the firm and has to be charged to tax. The view taken by the High Court has held the field for about thirty years now and we see no reason to disagree even if a different view were possible. For these reasons	 we agree with the answer given by the High Court to the second question as well. The appeal fails and is dismissed. But we would make no order regarding costs. R.N.J. Appeal dismissed.

The Appellant Assessee	 a partnership firm was engaged mainly	 in Malaya	 in money lending business since 1949 and incidental to this business was also doing the business of sale and purchase of house properties	 gardens and estates. It was reconstituted under a deed dated 26.3.1960. The firm was dissolved on 13.3.1961 and closed its accounts with effect from that date. In its income tax return filed on 10.4.1962 for the assessment year 1961 62 it had filed a profit and loss account wherein amount of $.1	01	248 equivalent of Rs.1	58	057 was shown as "difference on revaluation of the estates	 gardens and house properties" on the dissolution of the firm. In the memo of adjustment for income tax purposes this amount was deducted as being not assessable either as revenue or capital. The Income Tax Officer issued notice under section 23(2) of the Act on that very day and completed the assessment also on the same day after making a petty addition of Rs.2088 paid as property tax in Malaya. When for the subsequent year 1962 63	 the assessee filed its return showing nil income stating in the forwarding letter that the Firm had been dissolved on 13.3.1961	 the I.T.O. wrote to the assessee that the revaluation difference of Rs.1	58	057 should have been brought to tax in the previous year. The assessee replied that no profit or loss could be assessed on a revaluation of assets	 that the assessee was gradually winding up its business in Malaya	 the surplus would be only capital 625 gains and that revalutation had been at the market price prevalent since 1954 and thus no capital gains were chargeable to tax. Not satisfied	 the I.T.O. issued a notice under section 148 read with Section 147(b) of the Income Tax Act	 1961. The assessee filed objections. Overruling all the objections	 the Income Tax Officer completed reassessment of the assessee Firm adding back the sum of Rs. 1	58	057 to the previously assessed income. Having failed right upto the High Court	 the assessee came in appeal before this Court. Dismissing the appeal	 affirming the decision of the High Court	 this Court. HELD: (1) The proceedings u/s 147(b) were validly initiated. The facts of this case squarely fall within the scope of propositions (2) and (4) enunciated in Kalyanji Mavji 's case. Proposition (2) may be briefly summarised as permitting action even on a "mere change of opinion". This is what has been doubted in the IENS case. But	 even leaving this out of consideration	 there can be no doubt that the present case is squarely covered by proposition (4) set out in Kalyanji 's case. This proposition clearly envisages a formation of opinion by the Income Tax Officer on the basis of material already on record provided the formation of such opinion is consequent on "information" in the shape of some light thrown on aspects of facts or law which the Income Tax Officer had not earlier been conscious of. [636G 637B] The difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji is this	 that proposition (4) refers to a case where the Income Tax Officer initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income Tax Officer	 having considered all the facts and law	 arrives at a particular conclusion	 but reinitiates proceedings because	 on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier	 he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. [637F H] It is true that the return was filed and the assessment was completed on the same date. Nevertheless	 it is opposed to normal human 626 conduct than an officer would complete the assessment without looking at the material placed before him. It is not as if the assessment record contained a large number of documents or the case raised complicated issues rendering it probable that the Income Tax Officer had missed these facts. It is a case where there is only one contention raised before the Income Tax Officer and it is	 we think	 impossible to hold that the Income Tax Officer did not at all look at the return filed by the assessee or the statements accompanying it. The more reasonable view to take would	 in our opinion	 be that the Income Tax Officer looked at the facts and accepted the assessee 's contention that the surplus was not taxable. But	 in doing so	 he obviously missed to take note of the law laid down in Ramachari which there is nothing to show	 had been brought to his notice. when he subsequently became aware of the decision	 he initiated proceedings under section 147(b). The material which constituted information and on the basis of which the assessment was reopened was the decision in Ramachari. this material was not considered at the time of the original assessment. Though it was a decision of 1961 and the Income Tax Officer could have known of it had he been diligent	 the obvious fact is that he was not aware of the existence of that decision then and	 when he came to know about it	 he rightly initiated proceedings for reassessment. [639E 640B] The material on which the Income Tax Officer has taken action is a judicial decision. This had been pronounced just a few months earlier to the original assessment and it is not difficult see that the Income Tax Officer must have missed it or else he could not have completed the assessment as he did. Indeed it has not been suggested that he was aware of it and yet chose not to apply it. It is therefore	 much easier to see that the initiation of reassement proceedings here is based on definite material not considered at the time of the original assessment. [640D E] (2) The stock in trade of a firm at the time of its disolution	 has to be assessed at a fair value. there can be no manner of doubt that	 in taking accounts for purposes of dissolution	 the firm and the partners	 being commercial men	 would value the assets only on a real basis and not at cost or at their other value appearing in the books. The real rights of the partners cannot be mutually adjusted on any other basis. This is what happened in Ramachari. Indeed	 this is exactly what the partners in this case have done and	 having done so	 it is untenable for them to contend that the valuation should be on some other basis. Once this principle is applied and the stock in trade is valued at market price	 the surplus	 if any	 has to get reflected as the profits of the firm 627 and has to be charged to tax. The view taken by the High Court has held the field for about thirty years now and we see no reason to disagree even if a different view was possible. [642B D	 647E	648A C] Popular Automobiles vs Commissioner of Income Tax	 ; Sunil Siddharthbhai vs Commissioner of Income Tax	 ; Pupular Workshops vs Commissioner of Income Tax ; Malabar Fisheries Co. vs Commissioner of Income Tax	 ; Indian & Eastern Newspaper Society vs Commissioner of Income Tax	 ; Kalyanji Mavji & Co. vs Commissioner of Income Tax	 [1976] 102 I.T.R. 287; M/s A.L.A. Firm vs The Commissioner of Income Tax	 Madras ; Commissioner of Income Tax vs Hind Construction Ltd.	 ; Commissioner of Income Tax vs Birla Gwalior (P) Ltd.	 ; Anandji Haridas & Co. (P) Ltd. vs S.P. Kushare	 Sales Tax Officer	 [1968] 21 S.T.C. 326; Commissioner of Income Tax vs Dewas Cine Corporation	 ; Ramachari & Co. vs Commissioner of Income Tax	 ; Maharaj Kumar Kamal Singh vs Income Tax Officer	 S.C.; Commissioner of Income Tax vs A Raman & Co.	 S.C.; Salem Provident Fund Society Ltd. vs Commissioner of Income Tax	 ; Commissioner of Income Tax vs Rathinasabapathy Mudaliar	 ; Addanki Narayanappa vs Bhaskara Krishnappa	 ; ; Commissioner of Income Tax vs Bankey Lal Vaidya ; Kikabhai Premchand vs Commissioner of Income Tax	 [1953] 24 I.T.R. 506 (S.C.); Commissioner of Income tax vs K.A.R.K. Firm	 ; Chainrup Sampathram vs Commissioner of Income Tax	 ; Commissioner of Income Tax vs M/s. Shoorji Vallabhadas & Co.	 	 Commissioner of Income Tax vs Krishnaswamy Muldaliar	 ; Commissioner of Income Tax vs Ahmedabad New Cotton Mills Co. Ltd.	 [1930] L.R. 57 I.A. 21; Muhammad Hussain Sahib vs Abdul Gaffor Sahib	 reffered to.