1. This is a departmental appeal questioning the finding of the Commissioner (Appeals) that the reopening of assessment on the facts and in the circumstances of the present case was bad. The facts giving rise to the controversy are in a narrow compass and may be noted.
2. The assessee is a company. Its accounting period for the assessment year 1962-63 ended on 31-3-1962. The original assessment in respect of the above assessment year was completed on 30-6-1964 on a total income of Rs. 83,960. Thereafter the ITO reopened the assessment in respect of the aforesaid assessment year in terms of Clause (a) of Section 147 of the Income-tax Act, 1961 ('the Act') on the ground that the loan of Rs. 50,000 allegedly taken by the assessee from Shri Chandi Prasad Patodia was not genuine. The aforesaid sum was accordingly brought to tax in the assessee's hands along with interest of Rs. 647 credited to the account of the said Shri Patodia vide reassessment order dated 27-2-1975. The reopening of the assessment was challenged by the assessee before the AAC. The AAC set it aside on 26-7-1975. The department thereupon took the matter to the Tribunal who held vide their order dated 25-9-1976 that the provisions of Clause (a) of Section 147 did not apply to the facts of the case because there was no material on record which could form the basis for entertaining the belief by the ITO that the assessee's income had escaped assessment.
The reopening was, thus, quashed by the Tribunal. Thereafter the ITO summoned Shri Patodia under Section 131 of the Act on 20-7-1977 and enquired of him whether he had given any loan to East India Rubber Works (P.) Ltd. in the accounting period corresponding to the assessment year 1962-63. Shri Patodia deposed on oath that he had never advanced Rs. 50,000 to East India Rubber Works (P.) Ltd. at any time and that he had merely lent his name to the said company in consideration of a commission of 2 per cent per annum in respect of the sum of Rs. 50,000 for lending his name to the said loan. On the basis of the aforesaid statement on oath of Shri Patodia, the ITO came to hold the belief that the assessee's income for the aforesaid assessment year had escaped assessment to the extent of Rs. 50,647. Accordingly, he proposed to the Board the reopening of the case on the facts and in the circumstances stated above. After receiving approval of the Board for reopening the assessment in question, the notice under Section 148 of the Act read with Section 147(a) was issued to the assessee resulting in the present assessment.
3. The assessee again challenged the reopening of the assessment under Section 147(a) and urged before the Commissioner (Appeals) that the ITO could not have reopened the assessment on the basis of the alleged fishing investigation and that the reopening of the assessee on similar facts had been held bad by the Tribunal relying upon the decision of the Supreme Court in the case of ITO v. Lakhmani Mewal Das  103 ITR 437 and that the said order of the Tribunal was allowed to become final by the ITO and that by taking recourse to the provisions of Section 147 on the same material once again the ITO was seeking to by-pass the finding of the Tribunal which in law he could not do. The aforesaid reasoning went home with the Commissioner (Appeals) who, accordingly, struck down the proceedings under Section 147 as void ab initio with the following observations : It is true that the Income-tax Officer recorded statement from Shri Chandi Prasad Patodia dated 20-7-1977 in which the person denied having advanced any loan to the appellant but this was done after the Income-tax Appellate Tribunal had struck down initiation of proceedings itself under Section 147(a) and held that Section 147(a) could have been applied. This finding was accepted by the department with its eyes wide open and no reference application to the High Court was made against this order. Therefore, the ITO's present effort to reopen the proceedings is a case of barring the stable door after the horse had bolted. Having accepted that Section 147(a) did not lie at all, there was no question of taking the Board's approval for further proceeding under Section 147(a). I agree that initiation of the preceding itself was void and since valid initiation under Section 147 is a condition precedent to assumption of jurisdiction, I have to hold that the present assessment is without justification and assessment cannot be sustained. The assessment is quashed.
4. The department is now in appeal against the above finding of the Commissioner (Appeals). It was contended on behalf of the revenue by the learned departmental representative that the ITO could have initiated action for reassessment in the assessee's case within the prescribed time limit more than once. He relied on the following decisions in support of it--Jugmohan Goenka v. K.D. Banerjee  26 ITR 637 (Cal.) and Gurdayal Berlia v. CIT  62 ITR 494 (Cal.).
5. It is pointed out by the learned departmental representative that the material on which, the ITO formed his belief this time and initiated action under Section 147 (a) was different from what was available to him at the time when he had originally reopened the case under Section 147. At that time the ITO might not have had material on record which could form the live link for the entertainment of the belief of escapement of income, but the same could not be said this time. The ITO has recorded statement on oath of the alleged creditor Shri Patodia who has categorically reposed on oath that he never gave the advance of Rs. 50,000 to the assessee-company. This statement on oath could not be equated with a fishing enquiry as stated by the assessee before the Commissioner (Appeals). There was nothing in law which prevented the ITO from bringing on record material which convinced him that there was, prima fade, escapement of income. Maybe the creditor was the same but earlier the ITO held the belief that he was a bogus creditor on suspicion ; this time his belief is based not on suspicion but on the positive statement on oath of Shri Patodia. To say, therefore, that the material this time is the same as was earlier would be wrong. Once the material as was available to the ITO in the present case was available on record, the Court had merely to see whether it could form the live link for the formation of his belief and if the answer was in the positive, the action of the ITO had to be upheld. There was no question of the ITO trying to by-pass the finding of the Tribunal.
In law he could not do so and in fact he has not done so. The said finding was based on the material then available on the record of the ITO. The said finding of the Tribunal was accepted by the department because it was correct. But that did not bar the ITO from making further enquiry in the matter. If such enquiries revealed material, which could form the basis for the formation of the belief, the ITO could in law form the belief, and reopen the assessment. To bar the ITO from doing this would not be correct and in any case the finding of the Commissioner (Appeals) was based more on emotions than on law. He has not cited one authority which might suggest that the ITO could not undertake enquiries in the circumstances stated above before reopening the assessment. On the other hand, there are decided cases which authorise the ITO to make enquiries before reopening the assessment.
The assessee cannot, however, be compelled to co-operate in such enquiries but the ITO was not barred from making enquiries.
6. The aforesaid submissions of the revenue were opposed by the learned Counsel for the assessee. He relied on the decision of the learned Commissioner (Appeals) and submitted that the attempt of the department to reopen the assessment on the same subject-matter was against law.
The department could not, according to the learned Counsel for the assessee, go on harassing the assessee endlessly in respect of the same subject-matter and that some finality should be given to the findings of the Tribunal in such matters.
7. We have given careful consideration to the facts of the case and the rival submissions. The question of the finality of the assessment as a result of appellate orders was considered by their Lordships of the Supreme Court in the case of CIT v. Rao Thakur Narayan Singh  56 ITR 234 and it was observed by their Lordships in that case that 'the finding of the Tribunal, even though by mistake, that the officer could not initiate reassessment proceedings in respect of the interest income also, was binding on the Income-tax Officer and he could not reopen the assessment over again to include the interest income'. 'If that were not the legal position' pointed out their Lordships, 'it would result in placing an unrestricted power of review in the hands of the Income-tax Officer to go behind the findings given by a hierarchy of Tribunals and even those of the High Court and the Supreme Court with his changing moods'. In the aforesaid case the ITO had made reassessment for the assessment year 1942-43 bringing to tax certain forest income and interest income. The assesee preferred an appeal to the Tribunal objecting to the ITO's jurisdiction to initiate reassessment proceedings in respect of the forest income on the ground that he had knowledge of such income when the original assessment was made. The Tribunal upheld his contention but by mistake set aside the entire reassessment order and restored the original assessment order.
No steps were taken under Section 35 of the Indian Income-tax Act, 1922 ('the 1922 Act') to rectify the mistake ; nor was there any reference sought against the order of the Tribunal. Thereafter in 1950 the ITO initiated fresh reassessment proceedings under Section 34 of the 1922 Act with respect to the interest income and made the reassessment order for the year 1942-43 to include interest income.
8. It was in the setting of the aforesaid facts that their Lordships made the observations extracted by us above, namely, that the ITO could not allow the order of the Tribunal to become final without taking steps to get it rectified under Section 35 and then try to by-pass it by initiating action under Section 34 in respect of the interest income 'on identical facts'.
9. The aforesaid decision of the Supreme Court came to be considered by the Hon'ble Madras High Court in the case of T.S. Santhanam v.Expenditure Tax Officer  87 ITR 582 after extracting the passage referred to above in this order. His Lordship explained it in the following words : Therefore, the essential principle as to the rule of finality is that the assessing officer cannot change his mood and try to reopen a closed state of affairs. But, if it is a case where the reopening is sought in consequence of information in his possession which leads to a reasonable belief that there has been an escapement and if that information is not the product of a change in his mood, but is attributable to concrete material noticed by him, then the principle in the above case may not apply ....
The above decision of the single judge was confirmed by the Division Bench of the same High Court in T.S. Santhanam v. Expenditure Tax Officer  104 ITR 355. While doing so their Lordships stated that the finality attached to the Tribunal's order would only ensure that the ITO cannot reopen the proceedings on the same facts as were considered earlier so that the finality would attach to the findings of the Tribunal on those facts.
10. Applying the above principles to the facts of the present case, we have to see whether the ITO was seeking to reopen the assessment in question by the presently impugned proceedings on the basis of the 'same material' as was available to him at the time of the initial reopening of the assessment. If the material is the same, obviously the reopening would be bad. But, if the material on the basis of which reopening has been done is different from what was available to him earlier, it would not be possible to say in law that the ITO initiated action on the basis of the same material. The proposition that the ITO can make enquiries before reopening the assessment is supported by the decision of the Calcutta High Court in the case of Prahladrai Agarwalla v. ITO  87 ITR 655. The ITO, therefore, did not act against law when he summoned Shri Patodia and recorded his statement on oath. The recording of the statement on oath of a person on a positive subject cannot be equated with the making of fishing enquiries by the ITO. The aforesaid enquiry was a positive one and the ITO acted only when he had with him the statement of Shri Patodia to the effect that he had not given the alleged loan of Rs. 50,000 to the assessee. The statement on oath of Shri Patodia was a new material which formed live link for the formation of the belief that the income of the assessee had escaped assessment and that such escapement had taken place on account of the untrue statement by the assessee earlier that the said loan was in fact taken from Shri Patodia when it had not so being taken. Earlier the ITO did not have this material and as the Tribunal pointed out, he was acting merely on surmises and conjectures on the basis of a general and sweeping statement made by Shri Patodia before the Commissioner. Shri Patodia had made a statement to the Commissioner that he had lent this name to various persons in consideration of 2 per cent commission. On the basis of this general information the ITO acted in the present case also. Obviously his action was not correct and was directly hit by the ratio of the case of Lakhmani Mewal Das (supra). After the reopening had been quashed in the aforesaid manner, the ITO undertook further enquiries. While undertaking them he was not violating any law. These enquiries provides him material noted above. This material, according to us, provides him legitimate basis for holding the belief that the assessee's income had escaped assessment. The reopening of the assessment, therefore, would be justified, unless otherwise prohibited in law.
11. The question before us, therefore, is shall we quash the present proceedings only on the ground that earlier the attempt of the ITO to rope in the aforesaid amount had not succeeded. Our opinion is that it would be wrong on our part to give such finding. The validity of the reopening has to be seen on the basis of the reasons recorded. If those reasons justify the reopening, it should be upheld. That earlier the ITO had no material which he has now and, therefore, had not succeeded in reopening the assessment, would not, in our opinion, constitute a bar in law to the ITO reopening the assessment when he has enough material to hold the belief. The ITO has not tried to by-pass the Tribunal as was alleged by the learned Counsel for the assessee. On the contrary, due regard was shown by the ITO to the finding of the Tribunal that at the time of the original reopening he did not have material. The ITO thereafter set himself to work to gather material in respect of the aforesaid sum of Rs. 50,000. Having got the necessary material, he reopened the assessment. This attempt at reopening cannot, according to us, be stopped merely on the ground that the earlier attempt of the ITO had misfired. The present action is neither mala fide, nor based on change of mood and so cannot be struck down.
12. For the reasons given above, we are unable to uphold the order of the Commissioner (Appeals). Accordingly, it is hereby reversed. It would, however, be in the interest of justice if the appeal is restored to the Commissioner (Appeals) for considering the correctness of the addition on merit. The Commissioner (Appeals) never went into this question as he struck down the reopening proceedings. Now as we have reversed his order on this account, it would be necessary and in the interest of justice that the assessee's grievance against the addition be gone into on merits.
13. Accordingly, we set aside the order of the Commissioner (Appeals) and restore the case to him for redetermining the appeal on merits in accordance with law.