1. In this reference the following question of law has been referred to us under s. 66(2) of the I.T. Act, 1922 :
'Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the proceedings initiated under s. 34(1)(b) for the assessment year 1957-58 were bad in law ?'
2. The assessee is an individual who was formerly doing share business as a partner of a firm and was also a member of the stock exchange. He was being assessed by the ITO, A Ward, Bombay, within whose jurisdiction the business address fell. Later on, the assessee discontinued his business activities and from 1941-42 onwards his assessment was done by the ITO, D-1 Ward, to whom the case records were transferred by the ITO, A-1 Ward; this was done on August 24, 1943. The jurisdiction of the ITO, D-1 Ward, was based on the residence of the assessee.
3. In 1937, the assessee had created a trust for the benefit of himself and Miss Pilloo K. Shroff, whom he married a few months later on. It was mentioned in the trust deed that the settlement was effected in anticipation of the assessee's marriage with the said Miss Shroff. The assessee, his future wife and any children as might be born of the union were all beneficiaries of the trust. The trust properties originally consisted of certain shares in the joint stock companies and insurance policies on the life of the assessee. The assessee was one of the original trustees, but he resigned the office on July 10, 1940. The remaining trustees were the Mercantile Bank of India Ltd. and the assessee's wife. A copy of the deed of settlement dated January 20, 1937, forms part of the statement of case as annexure A.
4. In the income-tax return for 1938-39, the assessee had not shown in the appropriate column that he was functioning as the trustee of any deed of trust. The ITO included the income from the trust properties in the assessee's individual assessment and the appeal against such inclusion was unsuccessful. The record shows that the appeal was dismissed by the AAC because the assessee failed to produce the trust deed before the AAC. In the next return, i.e., for 1939-40, the assessee did indicate that he was a trustee of D. S. Bottlewala Trust. However, his individual assessments for 1939-40 and 1940-41 made in A-Ward and thereafter from 1941-42 to 1960-61 in D-1 Ward do not mention anything about the trust or the trust income. The ITO, A-Ward, however, started a separate file on July 5, 1940, for the trust in the name of Mercantile Bank of India Ltd. and D. S. Bottlewala, trustees of the trust of the D. S. Bottlewala. At this stage, the assessment of both D. S. Bottlewala, individual, as well as of the trust were in the hands of the same ITO, A-Ward. From 1939-40 to 1961-62 (both years inclusive), the trustees have been assessed in A-Ward, though after 1942-43, the assessments were handled in Section IV of A-Ward. In all these assessments the trustees have assessed at the maximum rate under the provisions contained in the first proviso to s. 41(1). Copies of the assessment orders relating to the trustees of D. S. Bottlewala trust for the assessment years 1939-40, 1940-41 and 1957-58 form part of the statement of case and have been collectively marked as annexure B. Copies of the assessment orders relating to the individual for these very three years have also been annexed as annexure C to the statement of case.
5. In March, 1962, the ITO, D-1 Ward, in-charge of the assessee's case, reopened his assessments for 1953-54 under s. 34(1)(a) and for the assessment year 1957-58 under s. 34(1)(b) of the Act on the ground that on a proper construction of the provisions in the trust deed the settlement was revocable and consequently the trust income was liable to be assessed in the settlor's hand sunder s. 16(1)(c). In the reference, we are only concerned with the assessment for 1957-58, reopened under s. 34(1)(b). This is because the Tribunal has concluded that the assessee had not been guilty of any failure or omission within the meaning of s. 34(1)(a) and there is no reference before us pertaining to this finding of the Tribunal.
6. The action of the ITO in reopening the assessment under s. 34(1)(b) for the assessment year 1957-58 was objected to by the assessee, but the objections were rejected by the ITO initially and in appeal by the AAC for the reasons given in their respective orders. The assessee then carried the matter to the Tribunal. The Tribunal observed that the ITO who issued the notice under s. 34(1)(b) to the assessee was not the same ITO who issued the original assessment for the relevant year and that there was not indication on the record whether the latter before finalising the assessment referred to the trust deed and deliberately refrained from including the trust income in the assessment. However, after considering the various authorities citied before it and laying emphasis on the fact that in the earlier years the ITO of A-Ward had decided the cases both of the assessee and of the D. S. Bottlewala trust, the Tribunal observed that what was proposed to be done was on the basis of a change of opinion and there was no information which had come into the possession of the ITO in 1961 which would warrant the reopening of the assessment for the assessment year 1957-58. It is this conclusion of the Tribunal and the basis thereof which have been questioned by the Commissioner in this reference before us.
7. Joshi on behalf of the Commissioner has pointed out that the Tribunal had given its decision principally on the basis of the decisions in D. R. Dhanwatay v. CIT and Dr. M. B. Dalal v. CIT : 49ITR492(Bom) . He submitted that these decisions given by the Nagpur and the Bombay High Courts, respectively, were no longer good law by reason of the decision of the Supreme Court in Kalyanji Mavji & Co. v. CIT : 102ITR287(SC) , which case had been subsequently considered by a Division Bench of this High Court in CIT v. T. C. Dolwani : 111ITR650(Bom) . According to his submission, it would become necessary to consider the correctness of the conclusions of the Tribunal by applying the law as laid down by the Supreme Court in Kalyanji Mavji & Co., s case : 102ITR287(SC) and by this court in Dolwani's case : 111ITR650(Bom) .
8. In Kalyanji Mavji & Co., s case : 102ITR287(SC) Murtaza Fazal Ali J., speaking for the Supreme Court, referred to a number of decisions of that court ending with A. Raman & Co, s case : 67ITR11(SC) and observed (page 296) :
'On a combined review of the decisions of this court the following tests and principle would apply to determine the applicability of s. 34(1)(b) to the following categories of cases :
(1) where the information is as to 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 ITO. 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.
(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, the ITO would have complete jurisdiction to reopen the original assessment. It is obvious that where the ITO 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 form part of the original assessment s. 34(1)(b) would have no application.'
9. Joshi submitted that propositions (2) and (4) above would be applicable to the facts of the case before us and would justify the reopening of the assessments for the year 1957-58. It was submitted that there was no warrant for the Tribunal observing that there was alleged misconstruction of the trust deed which was the ground for reopening, inasmuch as there was no material to show that the relevant provisions of the trust deed had been originally construed in the year 1957-58 for the purpose of determining the question of the revocability of the trust within the meaning of the same indicated by s. 16 of the I.T. Act.
10. Joshi on behalf of the Commissioner submitted that this High Court earlier in CIT v. Holck Larsen : 85ITR467(Bom) had laid down that a mere change of opinion, a desire to adopt a different approach than the one earlier adopted, would not permit reopening within the meaning of s. 34(1)(b). It was, however, submitted that there was nothing on the record of this case to suggest that a definite opinion had been earlier held for the assessment year 1957-58 or even in earlier years and that all that was done when the notice to reopen was issued to the assessee was on the basis of a change in the opinion or a desire to adopt a different approach than the one earlier adopted.
11. The Tribunal has dealt with the factual aspects and given its findings thereon in para 11 of its order dated December 4, 1964. It observed that there was no copy of the trust deed on the assessee's file. It was also found that in the assessment records of the individual (as distinguished from the tax recovery file) there is no mention of the trust deed except for the information in the return filed by the assessee for the year 1939-40 that he was a trustee of D. S. Bottlewala Trust. The position, even so far as the tax recovery section is concerned, was that the examination of the trust deed was prior to 1950 when Sheth, ITO of D-1 Ward, who made the assessment in 1957-58, was not holding that charge. However, all these aspects were considered irrelevant by reason of the fact that in the years 1935-36 to 1940-41 the assessee's individual assessments were being handled by the A-Ward ITOs, and it is these officers who opened the file of the assessment for the trust who must have come to the conclusion that the trust was to be assessed separately and, therefore (though the Tribunal does not expressly say so) must be deemed to have formed an opinion as regards the nature of the trust.
12. It is in the context of these observations that strong reliance was placed o behalf of the assessee on the case decided by this court in CIT v. T. C. Dolwani  111 ITR 650 (Bom), which is a decision given after the decision of the Supreme Court in Kalyanji Mavji & Co.'s case : 102ITR287(SC) . In Dolwani's case : 111ITR650(Bom) it has been observed that the position in Holck Larsen's case : 85ITR467(Bom) which was decided by Chandrachud J. (as he then was), in this court was very clear, as a clear finding could be given that at the time of the original assessment the ITO had consciously applied his mind to the facts which the assessee had made available and had come to a definite conclusion based on these facts. In Dolwani's case : 111ITR650(Bom) , although such a summarised and indicated at page 667 of the report, a conclusion was reached that at the time when the proceedings were sought to be reopened there was a mere change of opinion and not reopening as a result of any in advertence or error of the previous ITO as urged by the revenue.
13. If on the facts before us it is possible to take the view that in 1957-58 the ITO had clearly adopted one course or made certain findings on the basis of which the trust was separately assessed or had even done anything to suggest that separate assessment of the trust had been considered and approved by him, then perhaps the learned by this court in Dolwani's case : 111ITR650(Bom) must be the very conclusions to be arrived at in this case and that the ultimate decision of the Tribunal would be required to be confirmed. We are, however, afraid that the facts as found by the Tribunal before us are considerably different from the record as was available to this court in Dolwani's case : 111ITR650(Bom) . It is clear from the assessment order for the assessment of 1957-58 that this aspect of the matter was not at all present to the mind of Sheth. Sheth was also not concerned with the assessment of the trust, and the position in Dolwani's case : 111ITR650(Bom) was totally different where the very same officer, Bhagwat, was handling both the assessments of the individual as well as that of the firm. Further, it appears to us that there is no material to show that even earlier than 1957-58, a definite opinion has been taken either by any other officer D-Ward or even by the officers of A-Ward on the question of revocability or otherwise of the trust.
14. Our attention was drawn by counsel for the assessee to the copy of the assessment order relating to the trustees of D. S. Bottlewala Trust for the assessment year 1939-40, which order is dated March 18, 1944 (part of annexure B). The order which we have perused refers to various clauses of the trust deed and ultimately it is observed that after a close reading of the trust clauses, proviso 1 to s. 41(1) would be applicable. Similarly, our attention was also drawn to the order-sheet of the trust for the assessment year 1943-44 (annexure I), where under the date September 30, 1943, the following 'minute' occurs under column head 'Brief order' :
'The trust is irrevocable, the trust income is to be enjoyed by the settlor and his wife and children; assessments since 1939-40 are pending.' The question is : Is this material sufficient to warrant that a definite opinion was reached on the question or point which is the basis of the reopening of the assessment for 1957-58 To accept this submission of the counsel for the assessee would be reading much more than is warranted by the order or the 'minute'. It is true that in the order in which the conclusion has been reached to tax the trust income at the maximum rate, there is an observation that the aspect on the basis of which the assessment is sought to be reopened was totally missed on the earlier occasions and to that extent the case would be covered by the second and the fourth propositions laid down by the Supreme Court in Kalyanji Mavji & Co.'s case : 102ITR287(SC) , which we have extracted earlier in this judgment.
15. Dwarkadas on behalf of the assessee took us through the order of the Tribunal and commented that the Tribunal has not chosen to give any specific finding as to whether the ITO, Sheth, who completed the assessment in 1957-58, had construed the relevant provisions and come to any opinion or not. If the assessment order of the individual for the year is perused, it is quite clear that this aspect of the matter was not at all present to the mind of Sheth, and no useful purpose would be served in pursuing this branch of the enquiry any further.
16. Accordingly, it is clear that the reopening was sought to be done on the basis of the provisions of the trust deed which were being construed by the ITO in the assessment of the individual and would clearly come within the scope of 'information' as now interpreted by the Supreme Court in its several decisions which have been indicated and summarised in Kalyanji Mavji & Co. 's case : 102ITR287(SC) . This does not appear to be a case of the type contemplated in Holck Larsen's case : 85ITR467(Bom) , viz., by a change of opinion which would not justify reopening under s. 34(1)(b). In this view of the matter, we must hold that the conclusion of the Tribunal on this point are erroneous and answer the question referred to us accordingly.
17. In the result, the question referred to us is answered in the negative and in favour of the department.
18. The assessee will pay to the Commissioner the costs of this reference.