1. This is an appeal against a judgment of Bharucha J., making absolute the writ petition aforesaid filed by the respondents herein who were the petitioners before Bharucha J., in the aforesaid writ petition. The appellants before us are the respondents to the original writ petition.
2. The appeal is on the Board before us for admission. As the matter has been argued for some time before us, we propose to set out briefly our reasons for the order which we propose to pass.
3. The facts : One Hemant B. Mafatlal died on August 16, 1971. On March 28, 1974, an assessment of his estate was made for the purpose of estate duty. The matter was carried in appeal to the Appellate Controller of Estate Duty who disposed it of by an order dated March 17, 1975. Thereafter an appeal was preferred to the Appellate Tribunal which passed its order thereon on August 26, 1977. We are not concerned with this order of the Tribunal. However, on November 5, 1976, that is, after the order of the Appellate Controller and before the order of the Tribunal, appellant No. 2, First Assistant Controller of Estate Duty, issued a notice to the respondents under section 59(b) of the Estate Duty Act, 1953 (referred to hereafter as 'the Estate Duty Act'), stating that he had reason to believe that property chargeable to estate duty had escaped assessment and had been underassessed. By the said notice, he required the respondents to deliver to him within a stipulated time an account of all property in respect of which estate duty was payable. Pursuant to an objection by the chartered accountants of the respondents and their demand for reasons, appellant No. 2 by his letter dated September 18, 1978, informed the said chartered accountants that the assessment was sought to be reopened, as the office of the Controller and Auditor-General which had scrutinised the assessment had pointed out certain errors in the valuation of certain shares of Mafatlal Gagalbhai & Co. Private Limited, Bombay, and Surat Cotton Co. Private Ltd., Bombay. By the said letter, appellant No. 2 stated that the said shares should have been correctly valued according to the provisions of section 37 of the Estate Duty Act, as the said section applied to all cases of valuation of shares of private limited companies where transfer of shares was restricted. The said letter also pointed out some other errors in the order of assessment. However, before us, it is the agreed position that the reopening sought is only on the basis of the statements made in the said letter dated September 18, 1978, regarding the applicability of section 37. This notice of reassessment was challenged in the petition. The learned trial judge took the view that the opinion of an internal auditor of the Income-tax Department on a point of law could not be regarded as information within the meaning of section 147(b) of the Income-tax Act, 1961. He took the view that the same was the position under section 59(b) of the Estate Duty Act, and, in view of this, he came to the conclusion that there was no valid justification for reopening the assessment. In the result, Bharucha J. quashed the said notice dated November 5, 1976, issued by the appellant No. 2 under section 59(b) of the Estate Duty Act and restrained the appellants from taking any proceedings to enforce the same. It is the correctness of this decision of the learned trial judge which is disputed in this appeal.
4. The contention of Mr. Dhanuka, learned counsel for the appellants, was that an audit note may contain information as well as an opinion and, in so far as the audit note contained information, it could constitute a valid basis for the reopening of the assessment under section 59(b) of the Estate Duty Act or section 147(b) of the Income-tax Act. In support of this contention, Mr. Dhanuka relied on the decision of the Supreme Court in Indian and Eastern Newspaper Society v. CIT : 119ITR996(SC) . In that case, it has been held by the Supreme Court that the opinion of the audit party on a point of law could not be regarded as 'information' enabling the Income-tax Officer to initiate assessment proceedings under section 147(b) of the Income-tax Act. The relevant observations of the Supreme Court in that connection which find place at pages 1003 and 1004 of the said report run as follows :
'But although an audit party does not possess the power to so pronounce on the law, it nevertheless may draw the attention of the Income-tax Officer to it. Law is one thing, and its communication another. If the distinction between the source of the law and the communicator of the law is carefully maintained, the confusion which often results in applying section 147(b) may be avoided. While the law may be enacted or laid down only by a person or body with authority in that behalf, the knowledge or awareness of the law may be communicated by anyone. No authority is required for the purpose.
In the present case, an internal audit party of the Income-tax Department expressed the view that the receipts from the occupation of the conference hall and rooms did not attract section 10 of the Act and that the assessment should have been made under section 9. While sections 9 and 10 can be described as law, the opinion of the audit party in regard to their application is not law.'
5. This decision lays down that a note of an audit party or an auditor which conveys information as to certain provisions of law can be regarded as information within the meaning of section 147(b) of the Income-tax Act, but in so far as the audit note contains an opinion on the interpretation of certain provisions of law or their applicability, it cannot constitute 'information' as contemplated within the aforesaid provisions.
6. In CIT v. H. D. Dennis : 135ITR1(Bom) , it has been, inter alia, held by a Division Bench of this court that information within the meaning of section 147(b) of the Income-tax Act may consist of facts or of law. The information must be fresh or subsequent to the original assessment. The opinion expressed by the Department or by the Central Board of Direct Taxes is not law. Law is that which is laid down either by the Legislature or judicial decisions and it is a change in such law which constitutes a fresh or subsequent information.
7. In the present case, the show-cause notice issued by the First Assistant Controller of Estate Duty, which is dated September 18, 1978, shows that the ground for reopening given was that the shares of Mafatlal Gagalbhai & Co. Private Limited and Surat Cotton Co. Private Ltd. should have been correctly valued according to the provisions of section 37 of the Estate Duty Act, as that section applies to all cases of valuation of shares of private limited companies where alienation of shares is restricted. It is further stated in the said notice that the provisions of section 37 of the Estate Duty Act were not applied in the valuation of the said shares in the original assessment order and that had resulted in underassessment of the value of the shares of the said two companies. A perusal of the reasons given in the said letter for taking action under section 59(b) of the Estate Duty Act again shows that the reason given is that the said shares should have been rightly valued according to the provisions of section 37 of the Estate Duty Act. The reason No. 5 set out in the said letter contains a reference to instruction No. 771 dated October 29, 1974, issued by the Central Board of Direct Taxes, after consultation with the Ministry of Law, Government of India, on the scope of section 37 of the Estate Duty Act. It is nowhere set out in the said letter that the Assistant Controller of Estate Duty was not aware, at the time when the original assessment was made, of the provisions of section 37 of the Estate Duty Act. The audit note on the basis of which reopening of the assessment is sought to be justified has been produced before us and is a part of exhibit 1 on record. By the said audit note what is pointed out is that unquoted shares held by deceased in his individual capacity as also in the name of the Hindu undivided family No. II and M.H.B. Trust in the aforesaid companies were wrongly valued according to the provisions of rule 1D of the Wealth-tax Rules, 1957, and that the Central Board of Direct Taxes had revised its stand by its instruction No. 771 referred to earlier. A perusal of instruction No. 771, which is also part of exhibit 1, shows that by the said instruction, it is directed that Circular No. L-D /ED of 1968 dated March 26, 1968, issued by the Central Board did not apply to valuation of shares covered by section 37 of the Estate Duty Act and that valuation of such shares was governed by the Board's letters dated May 3, 1965, and July 5, 1965, respectively. It is clear from a perusal of this instruction that it is based on an opinion expressed by the Central Board and does not represent the decision of the Central Board in any matter referred to it by way of appeal or otherwise for determination. We may mention here that the letter dated July 5, 1965, referred to in the said instruction is a letter from the Secretary of the Central Board to the Controller of Estate Duty. According to the said letter, section 37 of the Estate Duty Act governs the mode of valuation of shares in a private limited company where articles of association contained restrictive provisions as to the alienation of shares. The circular dated March 26, 1968, being Circular No. L-D/ED of 1968, provides that the value of assets forming part of the dutiable estate of a deceased individual for the purposes of estate duty should be taken at the same value as was determined for the purpose of wealth-tax in the year referred to in the circular. It was as a result of this circular which operated at the time when the original assessment was made that the shares of the aforesaid companies were valued according to the provisions of rule 1D of the Wealth-tax Rules. The said circular pointed out that it was decided by the Board that the basis of valuing an asset for estate duty should be the same as the basis adopted for wealth-tax assessment in respect of the year immediately preceding the death of an individual, provided the accountable person agreed to this. A perusal of the documents clearly shows that the said instruction No. 771 of 1974 represents nothing more than a change of view on the part of the Central Board of Direct Taxes regarding the valuation of the type of shares referred to earlier.
8. In Asst. CED v. Nawab Sir Mir Osman Ali Khan Bahadur : 72ITR376(SC) , it has been held by the Supreme Court that the opinion of the the Central Board of Revenue regarding the correct valuation of securities for purposes of estate duty, expressed in an appeal preferred by the accountable person, is 'information' within the meaning of section 59(b) of the Estate Duty Act. In the present case, as we have already pointed out, the said instruction No. 771 of 1974 does not represent the decision of the Central Board of Direct Taxes on any appeal or other like proceedings but merely represents an opinion of the Central Board. In these circumstances, it is clear that there was, in the present case, no information on the basis of which a notice of reassessment could be given under section 59(b) of the Estate Duty Act and the said notice dated September 18 1978, is clearly bad in law. The learned trial judge was, in our view, with respect, justified in taking this view for the reasons which we have already indicated above.
9. In the result, the appeal fails and is dismissed. There will be no order as to costs.