Income Tax Appellate Tribunal - Nagpur
Income-Tax Appellate Tribunal, Bombay vs B. P. Byramji And Co. on 23 March, 1945
Equivalent citations: [1946]14ITR174(NAG)
JUDGMENT
On being asked by us to state a case, the Income-tax Appellate Tribunal, Bombay, has referred the following questions :-
"(1) Whether, in the circumstances of the case, the Income-tax Officer who re-opened the assessment had definite information within the meaning of Section 34 of the Indian Income-tax Act, 1939, that the assessee had been assessed to super-tax at too low a rate ?
(2) Whether the second Income-tax Officer was by virtue of the provisions of Section 56 of the Act precluded from re-opening the assessment only for the purposes of super-tax, the assessment made by the first Income-tax Officer having become final for the purposes of income-tax ?"
The second question was not argued, and it was agreed that the question there posed would stand or fall by the decision on the first question.
The point is a simple one. The income of the assessee firm for the charge year 1939-40 was computed at Rs. 54,024 for the purposes of income-tax and super-tax. The officer who made the original assessment came to the conclusion that the rate at which super-tax should be charged by virtue of the provisions of Section 6(4)(v) of the Finance Act of 1939 should be the rate prescribed by the Finance Act of the year before, namely 1938, and the assessment was accordingly so made on March 16, 1940. In the following July, the successor in office of the assessing officer informed the assessee that he proposed to re-assess the income in consequence of definite information that had come into his possession. It is admitted that the "definite information" consisted only of his view of the law as to whether the rates of the Finance Act of 1938 or 1939 were applicable and that in his view, the rates in the latter Act should have been applied. It is not now disputed, as the matter has been finally decided, that in fact the view of the second officer of the law is correct. The question then is whether he had the right, under Section 34, to re-open the assessment.
In its judgment (Ex. T-C) the Income-tax Appellate Tribunal, Bombay, held that the Income-tax Officer could legally re-open the assessment made by his predecessor simply on the ground that the first Income-tax Officer had committed a mistake of law in determining the amount of tax. The Tribunal based its decision briefly on the decision in Commissioner of Income-tax, Bombay v. D.R. Naik, and they referred to a series of English decisions based on Williams v. Grundy in support of the view that it was not necessary for the Income-tax Officer to possess himself of any outside information. The Bombay decision is based on Section 34 of the Income-tax Act as it stood before the amendment of the year 1939, and it is not disputed before us that it is the amended section, as it now stands, that applies. The pertinent part of that section, before the amendment of 1939, read as follows :-
"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 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 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."
As it now stands after amendment, it is a follows :-
"If in consequence of definite information which has come into his possession the Income-tax Officer discovers that income, profits or 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 had concealed the particulars of his income or deliberately furnished inaccurate particulars 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 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 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."
It is obvious that by the amendment, the Income-tax Officer has no power to re-open an assessment unless he acts in consequence of definite information which has come into his possession. Now, while a mistake of law might have been permissible a ground for reopening an assessment before the amendment of 1939, we are satisfied that that cannot be the case now. It is urged on behalf of the Commissioner of Income-tax that definite information can be obtained from a book, and that information on which action was taken was derived from a more careful reading of the Act than that made by the first assessing officer, This is not definite information at all. It amounts to nothing more than a change of opinion on the part of the authority making the assessment. The second opinion might be right or it might be wrong, and the fact that the second opinion has, in the event, been held to be right is irrelevant. On the argument put before us, there was nothing to prevent a third assessing officer, assuming that the incumbency of the post had changed once more, from re-opening the case yet again and coming to yet another conclusion on a matter of opinion. A fact discovered in consequence of definite information need not necessarily be a concrete fact as to a certain amount of income undiscovered. A discovered fact might also be a decision of a Court of law which was not available at the time of the first assessment or a provision of statute enacted since the first assessment. It might even conceivably arise in (we do not say that it does) a case where a statute had escaped the notice of the earlier assessing officer. This obviously cannot be the case here as both officers acted on the same Act, namely, the Finance Act of 1939.
There has been a consensus of judicial opinion that since the amendment of 1939, a mistake of law will not permit the re-opening of an assessment under Section 34 of the Act. We would refer in particular to Commissioner of Income-tax, Bombay v. Sir Mohamed Yusuf where the case of Commissioner of Income-tax, Bombay v. D.R. Naik, was cited and not followed. The reason is clearly that the amended Act had caused that decision to be invalid, and it is pertinent to note that Beaumont, C.J., was a party to both decisions. The principles is also stated by the Madras High Court in Raghavalu Naidu & Sons v. Commissioner of Income-tax, Madras, and that decision is affirmed by a later case in the same Court in Commissioner of Income-tax, Madras v. Lakshmana Iyer.
Reliance has been placed on behalf of the Commissioner on a Privy Council decision in Commissioner of Income-tax Bengal v. Mahaliram Ramjidas, for the proposition that the provisions of the Income-tax Act should be so interpreted as to make the machinery workable. No difficulty of this nature arises in the case before us since the only point at issue is the interpretation of the words "definite information". Finally it is contended that the cases we have cited are not good law and that the English decisions based on Williams v. Grundy should be followed in interpreting even the revised Section 34, This argument can be of no avail. The corresponding provision in the English Act begins with the words, "If the surveyor discovers that......have been omitted from the first assessment, etc." and the English decisions are based on the interpretation of the word "discovers". There is, in the English Act, no such restriction as is raised in the opening words of Section 34, "If in consequence of definite information which has come into his possession," and we may also add that on the very narrow point before us, namely, the mere discovery of the fact of under-assessment, the decision of Williams v. Grundy, was doubted by the Court of Appeal in British Sugar Manufacturers Ltd. v. Harris, as pointed out by Beaumont, C.J., in Commissioner of Income-tax, Bombay v. Sir Mohamed Yusuf.
The view of the Income-tax Officer who re-opened the assessment, even if correct, was not based on any definite information coming into his possession and he only corrected a mistaken view of the law applicable, setting his own opinion against that of his predecessor. This is not a sufficient ground for re-opening an assessment. We answer the question in the negative and the result is that the claim succeeds, The Commissioner of Income-tax will pay the costs of the applicant which we assets at Rs. 75, and the applicant is also entitled to a refund of the reference fee of Rs. 100.
Reference answered in the negative.