R. S. PATHAK J. - The assessee is a registered firm carrying on business in piece-goods and commission agents. If had its head office at Kanpur and a branch at Farrukhabad. It consisted of two partners, Gurbux Rai and Harbux Rai, with equal shares, and each of the partners represented his own Hindu undivided family. The Hindu undivided family of which Gurbux Rai was a member was subsequently partitioned. The assessees branch business at Farrukhabad was transferred to a partnership, Messrs. Pussalal Jagganlal, consisting of Harbux Rai and the divided members of Gurbux Rais erstwhile Hindu undivided family, the shares of the partners being Harbux Rai 8 annas, Chameli Devi 4 annas and Gopaldas 4 annas. This business was taken over by the partnership on July 4, 1943.
The original assessment under section 14 of the Excess Profits Tax Act was made upon the assessee on January 29, 1947, for the chargeable accounting periods ending June 21, 1944, and July 10, 1945. The assessee represented that the Farrukhabad business no longer belonged to it. This was also pointed out in the income-tax assessment for the previous year 1943-44, relevant to the assessment year 1944-45. The Income-tax Officer, however, made an assessment order on November 22, 1946, holding that there had been no partition in the family of Gurbux Rai and that the Farrukhabad business had not been transferred by the assessee, and, therefore, included the income from the Farrukhabad business in the total income of the assessee. The excess profits tax assessment for the chargeable accounting period ending June 21, 1944, was also made accordingly. Against the assessment order made by the Income-tax Officer the assessee filed an appeal, and the Appellate Assistant Commissioner while disposing of the appeal held that the family of Gurbux Rai had indeed partitioned its movable property somewhere near Asadh Samvat 2000, and that from that date the Farrukhabad business was continued by a separate from consisting of Harbux Rai, Smt. Chameli and Gopaldas. The income-tax assessments were consequently modified, in view of the observations of the Appellate Assistant Commissioner, for the assessment years 1944-45 and 1945-46. Effect was also given to these observations in the excess profits tax assessments. The result was that the profits from the Farrukhabad business were excluded from the total income of the assessee.
On February 3, 1951, the Excess Profits Officer initiated proceedings under section 15 of the Excess Profits Tax Act in respect of the chargeable accounting periods ending June 21, 1944, and July 10, 1945. He also issued two notices under section 10A of that Act, one relating to each of the chargeable accounting periods, and on February 21, 1951, he made and order under section 10A in respect of each period, holding that the main purpose of the partition of the family business of Gurbux Rai was the avoidance of excess profits tax liability. Upon that order, the Excess Profits Tax Officer made an order under section 15 modifying the original excess profits tax assessment and including the profits of the Farrukhabad business in the total profits of the assessee for the purpose of excess profits tax assessment. In appeal before the Appellate Assistant Commissioner, the assessee contended that the provisions of section 15 could not be invoked as the Excess Profits Tax Officer had no definite information coming into his possession enabling him to discover that any profits of the chargeable accounting period had escaped assessment. It was urged that all the material was before the Excess Profits Tax Officer when he made the original assessment and there was no new information before him. The further contention raised by the assessee was that merely in order to reassess the assessee under section 15, the Excess Profits Tax Officer had no jurisdiction to make an order under section 10A. These contentions did not find favour with the Appellate Assistant Commissioner who accordingly dismissed the appeal. The assessee then appealed to the Income-tax Appellate Tribunal, but again without success. The Appellate Tribunal held that the order of the Appellate Assistant Commissioner holding that the family of Gurbux Rai had been partially partitioned constituted definite information regarding the state of the law which justified the Excess Profits Tax Officer reopening the assessment under section 15, and also held that the Excess Profits Tax Officer was competent to pass an order under section 10A.
At the instance of the assessee, the Appellate Tribunal has referred the following two questions by this referenc :
'(1) Whether, on the facts and in the circumstances of this case, there was any definite information within the meaning of section 15 by virtue of which the Excess Profits Tax Officer was competent to reopen the excess profits tax assessment ?
(2) Whether, in the circumstances of this case, the Excess Profits Tax Officer was competent to apply the provisions of section 10A and make necessary adjustments in pursuance thereto in the revised assessment under section 1 ?'
Section 15 of the Excess Profits Tax Act, 1940, provide :
'If, in consequence of definite information which has come into his possession, the Excess Profits Tax Officer discovers that profits of any chargeable accounting period chargeable to excess profits tax have escaped assessment, or have been under-assessed, or have been the subject of excessive relief, he may at any time....serve on the person liable to such tax a notice containing all or any of the requirements which may be included in a notice under section 13, and may proceed to assess or reassess the amount of such profits liable to excess profits and the provisions of this Act shall, so far as may be, apply as if the notice were a notice issued under that section.'
These provisions are almost identical in language with those of section 34(1) of the Indian-tax Act, before its amendment in 1948. The provisions of section 34(1) then rea :
'34. (1) 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...'
It will be apparent that there must be 'definite information' which has subsequently come into the possession of the Excess Profits Tax Officer consequent to which he discovers that the profits have escaped assessment. It is not disputed that the process leading from the decision of the Appellate Assistant Commissioner holding that the Farrukhabad business was no longer owned by the assessee to the initiation of proceedings under section was a process of 'discovery', and indeed if there could have been any doubt as to the meaning of the word 'discovers' in section 15 of the Excess Profits Tax Act, such doubts has been dispelled by the Supreme Court in India United Mills Ltd. v. Commissioner of Excess Profits Tax, where it was held that 'the word discovers in section 15 of the Act is of sufficient amplitude to take in subsequent events which have a material bearing on the facts and circumstances on which assessment had been made or relief granted...' The question which falls for consideration is whether the decision of the Appellate Assistant Commissioner could be said to be 'definite information' within the meaning of section 15. The question was raised before the Supreme Court on behalf of the assessee in Chatturam Horilram Ltd. v. Commissioner of Income-tax and a decision was invited on the point whether the words 'definite information' could be applied to subjective facts, such as change of opinion consequent on a correct appreciation of the law by the very same or another or higher officer, but the Supreme Court declined to enter upon that question and left it open. There have been a number of decisions turning upon the language of section 34(1) of the Indian Income-tax Act, which has been set out above, and the consensus of opinion appears to be that the subjective decision of the same or higher or another authority cannot constitute 'definite information' for the purpose of re-opening proceedings under section 34(1). Some of these decisions are Commissioner of Income-tax v. Mahomed Yusuf Ismail, Fazal Dhala v. Commissioner of Income-tax, Raghavalu Naidu and Sons v. Commissioner of Income-tax, L. Shubhkaran Seksaria v. Commissioner of Income-tax, Commissioner of Income-tax v. Janab S. Khaderwalli Sahib, Chunilal Nayyar v. Commissioner of Income-tax, New Victoria Mills Co. Ltd. v. Commissioner of Income-tax, Ananthalakshmi Ammal v. Commissioner of Income-tax and T. Manavedan Tirumalpad v. Commissioner of Income-tax. All these are to the effect that the Income-tax Officer is not seized of 'definite information' if it comprises of a change of opinion on his own part or that change of opinion flows from the decision of a higher authority. The basis of these decisions is that a mere change of opinion based on the same facts which were present to the mind of the Income-tax Officer at the time of the original assessment cannot constitute definite information. The Income-tax Officer cannot be said to proceed on the basis of definite information if he comes to realise that his original assessment is erroneous and the realisation of such error results from the opinion of an appellate or other higher authority or upon a re-consideration of the matter by the Income-tax Officer without anything more. The case-law appears to indicate that it is only an objective fact of which he has become conscious subsequent to the original assessment, which can be said to constitute definite information which has come into the hands of the Income-tax Officer. The consciousness must be of a tangible, real fact, in the objective sense, not of the opinion in that case of a higher authority or of himself which emerges out of the subjective processes of thought. If the opinion of the higher authority or the reconsidered opinion of the Income-tax Officer proceeds upon material which was already before the Income-tax Officer at the time of the original assessment and to which he had applied his mind and come to an earlier opinion, and the change of opinion does not spring from any further material determining the liability of the assessee, it is not a case of the Income-tax Officer coming into possession of 'definite information'.
Learned counsel for the Commissioner relied upon the decision of this court in Jawaharlal Maniram v. Commissioner of Income-tax but in that case it was expressly found that the provision which applied was section 34(1)(b), as amended in 1948, when it rea :
'If, notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income, profits or gains chargeable to income-tax have escaped assessment....' Moreover, in that case the information consequent to which the reassessment proceedings were initiated was an order of the Appellate Tribunal in the case of another assessee and not in the case of the assessee against whom he now sought to proceed. It will be noted that the word 'definite' was dropped by the legislature from section 34(1)(b) when referring to the information upon which the Income-tax Officer was empowered to reopen the assessment proceedings. Reference was also made to Raja Mohan Raja Bahadur v. Commissioner of Income-tax, but in that case the court proceeded upon the basis that it was section 34(1)(a) which applied. It considered the applicability of section 34(1)(b) merely because the point had been argued before it, but even the provisions of section 34(1)(b) considered were those which had been inserted in the Act after the amendment of section 34 in 1948.
Inasmuch as in the instant case the Excess Profits Tax Officer purported to reopen the assessment under section 15 of the Excess Profits Tax Act only because of the order of the Appellate Assistant Commissioner holding that the Farrukhabad business was no longer the business of the assessee and that the family of Gurbux Rai had indeed partitioned its movable property, all of which proceeded upon material which was already initially before the Excess Profits Tax Officer and to which he had applied his mind when he made the original assessment, it seems to me that it is not a case where the Excess Profits Tax Officer can be said to have discovered, in consequence of definite information which had come into his possession, that profits chargeable to excess profits tax had escaped assessment. I, therefore, answer the first question in the negative.
If, as I have held, the Excess Profits Tax Officer was not competent to take proceedings under section 15 of the Excess Profits Tax Act, it was not open to him to apply the provisions of section 10A in the proceedings upon reopening the assessment under section 15. An order under section 10A can be passed only where the Excess Profits Tax Officer is seized of jurisdiction in a pending assessment proceeding. As the proceedings initiated by him under section 15 were void, there was no power in him to make an order under section 10A in those proceedings. The second question must, therefore, be answered in the negative.
A copy of this judgment under the seal of the court and the signature of the Registrar shall be sent to the Appellate Tribunal. The assessee is entitled to its costs, which I assess at Rs. 200. Counsels fee is also assessed at Rs. 200.
M. C. DESAI C.J. - I agree. The essential fact in the reference are that the Excess Profits Tax Officer following an assessment order made by him as Income-tax Officer assessed a partnership firm to excess profits tax after rejecting its contention that the joint family of one of the partners had ceased to exist and that it had transferred one of its business to a partnership, that on appeal from the assessment order under the Income-tax Act the Appellate Assistant Commissioner held that the joint family had partitioned its movable property and that the business was carried on by the partnership, that consequently the order assessing the excess profits tax was modified by exclusion of the profits of the business from the total income of the assessee, that proceedings under section 15 of the Excess Profits Tax Act in respect of the same chargeable accounting period were started by the Excess Profits Tax Officer and that the Excess Profits Tax Officer after annulling the partition of the movable property under section 10A of the Act assessed the assessee-firm after including the profits of the business in its total income.
Section 15 of the Excess Profits Tax Act is similar to section 34 of the Income-tax Act as it stood in 1939-1948. It applied when all of the following circumstances exis :
Firstly, there was escape of profits of any chargeable accounting period chargeable to excess profits tax,
secondly, the Excess Profits Tax Officer received certain definite information, and
thirdly, in consequence of the information, he discovered the escape.
Under section 4 of the Act there must in respect of any business to which the Act applies be charged, levied and paid on the amount of the profits exceeding the standard profits a tax called excess profits tax at a certain rate. Section 5 states the businesses to which the Act applies and 'profits' and 'standard profits' are defined in sub-sections (19) and (20) of section 2. Chargeability of excess profits tax on a business is a subjective fact, and not an objective fact which can be perceived by any of the senses; it has to be ascertained by a mental process. The assessing authority has first to determine whether the business is one to which the Act applies, then to ascertain its profits and standard profits and then to apply to the balance the prescribed rate of tax. Whether the business is one to which the Act applies and what are its profits and standard profits depend upon facts and law. By wrongly appraising the evidence to prove the facts or by applying wrong law to them or by wrongly interpreting the law applicable to them the assessing authority may wrongly decide that no tax is chargeable on the business though according to the facts and the law applicable to them tax is chargeable on it. If he decides that no tax is chargeable on the business even though it is chargeable according to the facts and the law there results escape of profits of the chargeable accounting period chargeable to excess profits tax within the meaning of section 15.
It must be noted that the escape results without being noticed by the assessing authority; he does not charge the profits to tax but he does not know that the profits have escaped tax inasmuch as he labours under the misunderstanding that they are not chargeable to tax at all. It is immaterial why he thinks that the profits are not chargeable, whether on a wrong appreciation of the facts or on a wrong application of the law to the facts. Action under section 15 is to be taken by him only on discovery of the escape; the escape takes place first and subsequently it is discovered. This confirms that when it takes place the fact that it takes place is not known. Since the escape can take place even if all the facts are known (because wrong law or wrongly interpreted law is applied to them) it cannot be said that there is no escape when all the facts were known to him. Further, facts must be distinguished from materials; he has only materials before him and from them he has to ascertain the facts about the business being one to which the Act applies and about its profits and standard profits; by wrongly appraising the materials he may come to a wrong finding about the facts resulting in escape. In some cases such as those of Fazal Dhala, Khaderwalli Sahib, Chuni Lal Nayyar, New Victoria Mills Co. Ltd. and Haji Ahmad Haji Esak & Co. v. Commissioner of Income-tax, it was stated that action under section 15 of the Excess Profits Tax Act or section 34 of the Income-tax Act cannot be taken if the facts were within the knowledge of the assessing authority in the first instance. Really, certain materials were before the assessing authority and not the relevant facts which had to be deduced from the materials. Further in some of the cases there were materials on the record but the assessing authoritys attention was not specifically drawn to them and, therefore, as far as he was concerned they simply did not exist. The judgment in the case of Fazal Dhala is not full and it is not explained how the income of the Madras branch escaped assessment in the first instance, how the mistake was discovered by the Income-tax Officer and whether the discovery resulted from any information received by him or not. There is no discussion of the facts or the law in the judgment and I do not think any assistance can be derived from it. In the case of Haji Ahmad Haji Esak & Co., Chagla C.J. and Tendolkar J. observe : 'The officer cannot act under this section even though assessment has escaped if he is acting on an information which was already in his possession. It must be an information which was not in his possession at the time when the original assessment was made, but an information which has subsequently come into his possession'. With great respect I cannot agree. The learned judges have identified materials on the record with information of fact, i.e., with fact itself. There may be materials on the record but the relevant fact which would be deduced from them may not be deduced by the officer on account of wrong appraisement of the materials or wrong application of the law relating to circumstantial evidence. The learned judges themselves subsequently correctly stated the position by saying that it is not enough that the officer had in the first instance the materials before him and that section 15 or section 34 does not require that if information could have come into the possession by due diligence it must be deemed to have come into possession even though in fact it did not. Unfortunately they made these observations with regard to the meaning of information. As I shall show subsequently, information contemplated by section 15 or section 34 is information of facts indicating that there was escape; in other words, it has to be about escape. In the case of Khaderwalli Sahib all that the Income-tax Officer knew in the first instance was that there was unconcealed income of a certain amount. He first took it to be the unconcealed income of the firm, assessed it accordingly and then assessed a partner on his share in the firm income. Subsequently, the appellate authority held that the concealed income was of the partner himself and not of the firm, reduced its tax and left it to the Income-tax Officer to reopen the partners assessment. Satyanarayana Rao and Viswanatha Sastri JJ. held that the Income-tax Officer could not reopen the assessment because '......facts and figures......were present to the mind of the Income-tax Officer at the time of the original assessment......' What was present before the Income-tax Officer in the first instance was the objective fact of Rs. 16,000 being the income. The finding that it was the firms income and not of the partners was a subjective finding based upon inferences. He came to one subjective finding and the appellate authority came to the other subjective finding. The result of the other subjective finding was that the amount could have been taxed in the hands of the assessee. It may be said that there was no information of a fact which was received by the Income-tax Officer; what he was told of was only a subjective finding given by the appellate authority. It could be said that the subjective finding did not amount to information and he could not reopen the assessment. The decision of the learned judges could be justified thus, but not on the ground that the materials on which the appellate authority based its decision were present before him in the first instance or that there was no discovery. Chuni Lal Nayyars case is a case in which the Income-tax Officer admittedly certainly did not have information before him. Khosla and Harnam Singh JJ. stated that there must be a fresh piece of definite information and that the Income-tax Officer cannot act on the same data. The information that is required under section 15 or section 34 is about escape and not about new facts relating to assessability. There was escape and it was discovered subsequently and information was required simply to connect the escape with the discovery. In the case of New Victoria Mills Co., Malik C.J. and V. Bhargava J. stressed the fact that no new facts were brought to the knowledge of the Income-tax Officer. The facts were similar to those in the case of Kaderwalli Sahib, and the decision could be justified on the ground that the subjective finding of the appellate authority that a certain expenditure was business expenditure did not amount to information and that it could not be said that in fact there was escape. If the decision of the appellate authority was incorrect there was no escape. Before the Income-tax Officer there was only the decision that it was a business expenditure; it could not be treated as a fact. The Income-tax Officer could not say on its basis that in fact it was a business expenditure. As was pointed out in the case of Haji Ahmad Haji Esak & Co., a fact is to be distinguished from opinion and a decision is nothing but an opinion. When a court or a tribunal decides a question of fact what it decides is that the fact is proved to exist or not to exist or is not proved to exist or not to exist. That it gives a certain decision is certainly a fact but the contents of the decision are not a fact, being merely its judgment or opinion. The decision depends upon the evidence produced before it and even though the fact exists false evidence may be produced to prove that it does not exist or the true evidence produced to prove its existence may be disbelieved. Consequently there is no identity between the existence of a fact and the decision about its existence; in other words, the decision that a fact exists does not mean that the fact actually exists. When a court or a tribunal decides a question of bare law, the position may be different and it may be said that a decision that such and such is the law means that such and such is the law. A decision on a question of law does not depend upon evidence and is always a matter of argument and reasoning. Consequently, the contradiction that may exist in respect of a question of fact between the actual fact and the decision about its existence does not exist in regard to a question of law. In a decision on a question of bare law there is no distinction between the decision about the existence of the particular law and the existence itself. A decision on a question of bare law may, therefore, be treated as a fact though a decision a question of fact or on a mixed question of fact and law may not be. In Maharaj Kumar Kamal Singh v. Commissioner of Income-tax, the Income-tax Officer knew about the income and held on the basis of a certain decision that it was not assessable and the Supreme Court observed that it was a case of escape because it was assessable. Gajendragadkar J. said at page J. said at page :
'We see no justification for holding that cases of income escaping assessment must always be cases where income has not been assessed owing to inadvertence or oversight or owing to the fact that no return has been submitted.....if the Income-tax Officer erroneously fails to tax a part of assessable income, it is a case where the said part of the income has escaped assessment.'
In Dharam Vir Virmani v. Commissioner of Income-tax, Falshaw and Tek Chand JJ. applied section 34 even though no new materials were placed before the Income-tax Officer.
The escape that was not noticed when it took place must be discovered before the Excess Profits Tax Officer proceeds under section 15. Once it is understood how escape takes place it should not be difficult to understand how it can be discovered. Escape may take place because certain materials were not placed before the officer or because he misunderstood them or wrongly disbelieved them or believed false evidence or applied wrong law or mis-interpreted the law applicable or did a combination of two or more of these acts. He discovers the escape when he finds that the profits of the business should have been charged. He discovers the chargeability of the profits when he is told that the reason on account of which he held them not to be chargeable was wrong or did not exist. For instance, if he did not charge them in the first instance because certain materials were not placed before him or because he wrongly acted or refused to act on the materials placed before him he discovers the escape when the materials are placed before him or if he is informed that the materials placed before him previously were false or were true. If he had refused to charge them because he applied a wrong law he discovers the escape when he is informed of the correct law to be applied. If he had refused to charge them because he misinterpreted the law he discovers the escape when he is informed of the correct interpretation of it. The Supreme Court said in the case of India United Mills Ltd., that 'discover' means 'the finding out or bringing to light that which was previously unknown.' There is no difficulty in understanding what is meant by discovery of escape but unfortunately confusion has been created by courts mixing up the questions whether there was information and whether the escape was discovered as a consequence of it. For instance, in Anderton and Halstead Ltd. v. Birrell, Rowlatt J. said that 'the word discover does not.........include a mere change of opinion on the same facts and figures upon the same question of accountancy, being a question of opinion.' (This observation was overruled in Commercial Structures Ltd. v. R. A. Briggs. In the case of Raghavalu Naidu Leach C.J. and Patanjali Sastri J. followed the observation of Rowlatt J. In In re Badar Shoe Stores, Braund and Malik JJ. said that the word 'discover' must necessarily always involve a measure merely of belief, and, provided that that belief is the belief of an honest and reasonable person based upon reasonable grounds, we have difficulty in seeing what further fulfilment of the word discover there can be', and that a mere change of opinion based on the same facts and figures does not amount to a discovery. Similarly, in the case of Khaderwalli Sahib the learned judges said at page 213 that a mere change of opinion does not amount to discovery and that it must be the result of the new information.
The discovery of escape, i.e., acquiring knowledge of the chargeability of the profits, must result from a definite information. There must be causal connection between the information and the acquisition of knowledge that the profits were chargeable, as was pointed out in the case of L. Shubhkaran Seksaria. The provision regarding definite information requires that the information must be specific and certain and not vague. The adjective 'definite' qualifies the noun 'information'. I respectfully agree with the statement of Braund and Malik JJ. in Badar Shoe Stores that the requirement of the information being definite is for protection of the subject against an assault by an Income-tax Officer based upon mere suspicion and that it must be more than a mere gossip or rumour.
What is meant by 'information' is the real question that arises in such cases. An Excess Profits Tax Officer must be informed, but of wha It is universally agreed that he must be informed of facts and that existence of law or interpretation of law or decision of a court or tribunal is a fac : see Raghavalu Naidu & Sons; Haji Ahmad Haji Esak & Co.; Maharaj Kumar Kamal Singh; Chatturam Horilram Ltd.; Ananthalaksmi Ammal; T. Manavedan Tirumalpad; Jawahar Lal Mani Ram and Seth Kishori Lal Babu Lal v. Commissioner of Income-tax. The source of information or the manner of receiving it is immaterial; all that is required is that there must be information of some fact. A person can receive information of a fact from another person or from a document such as a judgment but not from his own self. It must come from outside; recogitating the matter in the mind resulting in change of opinion either about the effect of the materials previously examined or about the law applicable to the facts does not amount to being informed. If an Excess Profits Tax Officer on reconsideration of the matter in his mind and without getting any light on the question from another person or from any writing thinks that he had committed a mistake in not charging the profits it is not a case of his receiving definite information. The information must not only relate to a fact but also relate to a fact that was not known previously. The very meaning of the word 'information' is that a fact not known to him previously was made known to him. A person cannot be informed of a fact of which he was already aware. The fact of which information is given must be a fact relevant to the question of chargeability of the profits. The information of it must result in the Excess Profits Tax Officers knowing that the profits which he thought to be not chargeable were chargeable. The nature of the fact brought to his notice is irrelevant so long as information of it makes him know that the profits were chargeable. A judgment of the appellate authority or of the High Court or of the Supreme Court can inform him of the fact that such and such law is applicable to the case or that such and such is the interpretation of the law applicable to the case or that such and such is the interpretation of the law applicable in the case but cannot inform him of any fact. This is because, as I said earlier, a judgment only decides that a fact is proved or not proved to exist or not to exist and is not evidence of the existence or non-existence of the fact itself. That the fact is proved or not proved to exist or not to exist is only an opinion about the existence or non-existence of the fact. The only fact that is proved by a judgment is that a certain fact is proved or not proved to exist or not to exist but not that it exists or does not exist. Now whether a fact relevant to the question of chargeability of profits is proved or not proved to exist or not to exist before another person, howsoever high he may be placed, is irrelevant; an assessing authority is to proceed on the basis that it exists or does not exist and not on the basis that it is proved or not proved to exist or not to exist before another authority. The chargeability of profits may depend upon whether the fact exists or does not exist but cannot depend upon whether it is proved or not proved to exist or not to exist before another authority. The position is different when an assessing authoritys finding on a question of fact is reversed by the appellate authority resulting in the quashing of the assessment, i.e., escape. Since the assessing authority is bound by the judgment of the appellate authority it must take the appellate authoritys decision on the question of fact as the fact. Just as in regard to a question of law there is no distinction between the existence or non-existence of law and the finding that the law exists or does not exist, so also in regard to a question of fact there is no distinction between the appellate authoritys finding that the fact is proved or is not proved to exist or not to exist and the existence or non-existence of the fact, and the assessing authority must take the decision of the appellate authority, even though its opinion, as a fact. Hence, the finding of fact recording in a judgment of another authority (barring the authority exercising appellate jurisdiction against the assessing authoritys order) does not give him information of fact resulting in discovery of escape within the meaning of section 15.
In L. Subhkaran Seksaria v. Commissioner of Income-tax, an Income-tax Officer had to decide a question of fact, viz., how much commission had been received by the assessees. He decided it in first instance on the basis of an assessment order passed by an Excess Profits Tax Officer against the person who was to pay the commission that the reasonable amount of commission that he should have paid was a certain amount. Subsequently the Excess Profits Tax Officers assessment order was appellate authority which held that a large amount was the reasonable commission to be paid to the assessee and thereupon the Income-tax Officer reopened the assessment under section 34. A Bench of this court held that he could not do so because he was not concerned with the finding of the Excess Profits Tax Officer about the reasonable amount that should have been paid to the assessee; he was concerned only with the question of the amount received by him. The judgment of the appellate authority did not give the Income-tax Officer any information of a fact relevant to the question of the assessees income. In the case of Khaderwalli Sahib the question before an Income-tax Officer was of fact and an assessment order against another assessee could not give him any information about the fact. The learned judges said at page 21 :
'The mere fact that a different opinion on the same facts was taken by somebody else is not definite information leading to discovery on the part of the Income-tax Officer....'
The question before the Excess Profits Tax Officer in the instant case was of fact whether the Hindu undivided family had partitioned its movable property or not. The Excess Profits Tax Officer following the decision of another authority held that it had partitioned its movable property and that the business had ceased to belong to the assessee-firm and assessed the later after excluding the profits of the business. Subsequently, he reopened the assessment proceeding under section 15, annulled the partition and reassessed it after including the profits of the business in its income. There was no information received by him after assessing the assessee-firm and before reopening the assessment proceeding under section 15. It was on the basis of the judgment of the appellate authority in the income-tax matter that he excluded the profits of the business from the assessees income but thereafter he got no information at all and started proceedings under section 15. He had not charged the profits but they could not be charged at all so long at the partition stood. The partition had not been annulled under section 10A and so long as it had not been annulled the profits were profits of the partnership and could not be deemed to be profits of the assessee-firm. There was consequently no escape within the meaning of section 15 at all on the date on which the Excess Profits Tax Officer assessed the assessee-firm on the basis of the order of the appellate authority in the income-tax matter. As the profits were not chargeable at all, not charging them was not a case of escape and section 15 did not apply. It was after starting proceedings under section 15 that the Excess Profits Tax Officer issued notice for the annulment of the partition under section 10A. The profits became chargeable only after the partition was annulled, i.e., escape resulted after the partition was annulled. The effect of what the Excess Profits Tax Officer did was to bring about after starting proceedings under section 15, which was impossible under the law. After he brought about escape there was further information leading to the discovery. The proceeding started with the issue of notice under section 15 was, therefore, against law.
One more fatal defect in the order passed by the Excess Profit Tax Officer was that there was no information received by him within the meaning of section 15. The only information of fact that was received by him was that it had been proved to the satisfaction of the Appellate Assistant Commissioner that the joint family had partitioned its movables and that the business was carried on by a certain partnership; this information was quite distinct from the information that the joint family had partitioned its movables and that the business was carried on by the partnership, which information could have resulted in discovery of escape. The fact of the partition and the business being carried on by the partnership could have resulted in discovery of escape, but not the fact that this was what was found by the Appellate Assistant Commissioner. What the Appellate Assistant Commissioner decided was a pure question of fact and his opinion on it was irrelevant the question whether the profits of the business had escaped assessment or not. Further, as I pointed out just above, whatever information was received by the Excess Profits Tax Officer was received by him before the profits escaped assessment. He had assessed them and on receipt of the information he set aside the assessment; so the escape followed the receipt of the information and was in spite of it.
* ` * *
It was held to be wrong also in the case of Chuni Lal Nayyar, but I do not rely upon that decision because in my opinion there was information leading to the discovery of escape within the meaning of section 34.
I now mention cases in which the reopening of a proceeding under section 34 or 15 was held to be valid. In In re Badar Shoe Stores there was information not of the fact leading to discovery of escape but of circumstances from which this fact could be inferred. There was only suspicion at the back of the reopening of the assessment and with great respect I doubt if it could have justified the reopening. In Haji Ahmad Esak & Companys case information that the income-tax was assessed on a higher income was treated as information of a relevant fact justifying the reopening of the assessment under the Excess Profits Tax Act. In the case of India United Mills Ltd. the information received was that the machinery which the assessee had said he would not use after the war was actually used by him and the Supreme Court held that it was sufficient information justifying the reopening of the assessment order under section 15. In the case of Chatturam Horilram Ltd. the information received was about the promulgation with retrospective effect of a regulation applying the Indian Finance Act to Chota Nagpur. The promulgation of the regulation was an objective fact and directly led to the discovery of escape. When the escape took place the regulation was not in force and consequently was not noticed. The subsequent promulgation of the regulation with retrospective effect brought the escape into existence simultaneously with the discovery of it. Maharaj Kumar Kamal Singhs case was governed by section 34 as it stood after its amendment in 1948. The assessing authority at first took one view and held that certain income was agricultural income and, therefore, not assessable to income-tax. Subsequently he received information of the Judicial Committee of the Privy Council to the effect that the income of that kind was not agricultural income. This was information within the meaning of section 34 and led to the discovery of escape. When the assessing authority did not assess the income at first even though it was assessable he did not know of the escape and thought that it was not assessable. He discovered the escape when he received information about the decision of the Judicial Committee showing that what he thought was wrong. The information received in the case of Dharam Vir Virmani was of the assessment of a partnership. On what income the partnership was assessed was a fact relevant to the assessment of its partners. The assessment of the partners depended upon the assessment of the partnership and consequently the information received was of a relevant fact leading to the discovery of escape. Raja Mohan Raja Bahadur v. Commissioner of Income-tax was governed by post-1948 section 34. In the case of Jawahar Lal Mani Ram the order resulting in escape of income was itself held to be wrong by the appellate and the decision that it was wrong was held to be information leading to the discovery of escape.
As the section 15 proceeding itself was illegal, the annulment of the partition under section 10A in that proceeding also was illegal and of no effect. Section 10A could not be used after an assessment order under the Excess Profits Tax Act was passed, unless a proceeding was taken under section 15 in respect of escaped profits. I, therefore, agree with answers in the negative given by my learned brother to the two questions and with the order proposed by him.
Questions answered in the negative.