B.K. Mehta, J.
1. The short question which arises in this reference is as to what should be the information on the basis of which the Income-tax Officer can initiate proceedings under section 147 of the Income-tax Act, 1961. Shortly stated, the facts leading to this reference are as under :
The original assessment for the assessment year 1964-65 was completed on the total income of Rs. 5,42,583 including dividend income of Rs. 1,75,646. The Income-tax Officer found that the interest payment, which was allowed as a deduction in computing the business income, should have, in fact, been allowed as a deduction in computing income from dividend. He, therefore, reached the conclusion that an account of different rates of taxation for business income and dividend income, the income chargeable to tax had been under assessed or assessed at a low rate. He, therefore, initiated proceedings under section 147 of the Income-tax Act. The Income-tax Officer, since such expenses were allowed; in the view of the Income-tax Officer, since such expenses were not allowable, the income to that extent had escaped assessment. Therefore, he, accordingly, disallowed the amount of Rs. 19,024 on this count. Similarly, for the assessment year 1965-66, the Income-tax Officer initiated proceedings under section 147 to allow interest of Rs. 2,05,651 against dividend income and correspondingly increased the business expenditure of Rs. 1,56,668 on account of entertainment expenses. The assessee, being aggrieved with this order of reassessment, went in appeal to the Appellate Assistant Commissioner, who was of the opinion that at the time of regular assessment, the Income-tax Officer had all the information in his possession on the basis of which he subsequently initiated reassessment proceedings. The particulars of dividends, interest, borrowings, investment, etc. were, according to the Appellate Assistant Commissioner, all before the Income-tax Officer and it was on the full appreciation of all theses facts that the Income-tax Officer had allowed the interest from the business income as claimed by the assessee. Similarly, the details of the guest house expenses were also available with the Income-tax Officer at that time to which the officer applied his mind and after careful comparison with the preceding assessment, he completed the original assessment for the aforesaid assessment year. There was no additional information whatsoever with the Income-tax Officer so as to make him to treat the guest house expenses entirely as entertainment expenses. The Appellate Assistant Commissioner, therefore, allowed the appeal of the assessee and held that this was a case of change of opinion on the part of the Income-tax Officer concerned. The revenue, therefore, took the matter in appeal before the Tribunal, which confirmed the order of the Appellate Assistant Commissioner. At the instance of the Commissioner therefore, the following question has been referred to us for our opinion : 'Whether, on the facts and in the circumstances of the case, the Income-tax Officer was justified in law in reopening the assessments for the years 1964-65 and 1965-66 under section 147 of the Income-tax Act, read with Explanation 1 thereto ?'
2. What meaning should be ascribed to the expression, 'information in his possession', which could empower the Income-tax Officer to initiate reassessment proceedings under section 147 is a pertinent question, which has been raised by the learned advocate on behalf of the revenue. Should it be information received by the Income-tax Officer from an external source. or can it be information contained in the record of his case before him This question has often come for the consideration by courts on various occasions and there are two important schools of opinion in this respect. One trend is the the information which would enable the Income-tax Officer to initiate proceedings for reassessment under section 147 is the information which he could get from external source. In other words, that information must not be the information which is available to him from the record of the case, but it must have been received by him from some external source that is de hours the record of the case. Another trend is that that information need not be received from external source, but it may, in given case, be information while is available in the record of the case but which might not have come to the knowledge of the Income-tax Officer. The meaning of the expression, 'information' in the context in which it occurs in section 147(b) of the Income-tax Act, 1961, has been considered by the Supreme Court in Commissioner of Income-tax v. A. Raman & Co. That was an appeal arising from the decision of this court where this court exercising the jurisdiction under article 226 of the Constitution of India, set aside a notice under section 147(b) of the Income-tax Act. The facts in that case were that the assessee-firm which dealt in mill goods, etc., started business in 1942, and was supplying goods to, among others, two firms S and A, which were Hindu undivided family firms, the respective kartas whereof were the two partners of the assessee-firm. The two Hindu undecided family firms were started in the account year 1958-59. For the assessment years 1959-60 to 1961-62, the assessee-firm, the two Hindu undivided family firms and the partners as individuals were assessed by different Income-tax Officers, but for the assessment year 1962-63, one common officer took up the assessment for all of them and issued three notices on March 26,1964, to the assessee-firm to show cause why he should not reassess the assessee-firm on the ground that the firm had escaped assessment by resorting to evasion of tax by first selling highly profitable items to the Hindu undivided family firms or its partners, who could in turn sell them at very high profits. The assessee-firm challenged these notices by moving this court under article 226 of the Constitution. This court held that to infer from a solitary transaction in the assessment year 1962-63, in which goods sold by the petitioner to the Hindu undivided family firm were sold for a much higher price, by the Hindu undivided family, that the sales in the previous years were also made with the object of diverting profits would amount to a mere surmise or conjecture. It also held that the information got by the Income-tax Officer that the assessee-firm had effected sales to the Hindu undivided family firms of imported goods at lower rates would not constitute new information or information of which the former Income-tax Officer was not aware, because the sales in the previous years had all been disclosed to the former Income-tax Officer before whom the entire books of the assessee-firm were produced. This court also found that as the Income-tax Officer issuing reassessment notices did not scrutinies the accounts of the earlier years, he could not to say that the former Income-tax Officer failed to see the result of the sales to the Hindu undivided family firms or that such sales were made fictional to divert profits. The notices for reassessment, thereof, were quashed and set aside. In appeal before the Supreme Court filed, on behalf of the revenue, Mr. Justice Shah, as he then was, speaking for the court, observed that there are two conditions which are to be satisfied before the Income-tax Officer could initiate proceedings under section 147. He set out those conditions as (1) that the Income-tax Officer has reason to believe that the income chargeable to tax has escaped assessment, and (2) that it is in consequence of the information which he has in his possession that he has reason to so believe. As to what is the meaning to be ascribed to the term, 'information', Mr. Justice Shah said as under.
'The expression 'information' in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. If, as a result of information in his possession, the Income-tax Officer has reason to believe that income chargeable to tax had escaped assessment, the Income-tax Officer has jurisdiction to assess or reassess income under section 147(b) of the Income-tax Act, 1961. Information in his possession that income chargeable to tax has escaped assessment furnishes a starting point, for assessing or reassessing income. If he has that information, the Income-tax Officer may commence proceedings for assessment or reassessment. To commence the proceeding for reassessment it is not necessary that on the materials which came to the notice of the Income-tax Officer, the previous order of assessment was vitiated by some error of fact or law.'
3. The question naturally which arises from this observation of the court is, what is the external source the information received from which by the Income-tax Officer would invest him with a power and authority to initiate proceedings under section 147. Is it really de hors the record of the case before him or is it one which is, though within the record of the case, not to the knowledge of the Income-tax Officer The observation of Mr. Justice Shah in the later part of his judgment indicates that that information which would entitled the Income-tax Officer to initiate proceedings, or, in other words, give him jurisdiction under section 147, is not one which should necessarily be received from a source outside the record of the case. Mr. Justice Shah has then observed.
'That information must, it is true, have come into the possession of the Income-tax Officer after the previous assessment, but even if the information be such that it could have been obtained during the previous 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, but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected.'
4. The Supreme Court, however, rejected the appeal of the Commissioner on the ground that the materials placed before the High Court suffered from a serious infirmity on the first condition of the jurisdictional fact.
5. In Anandji Haridas and Co. (P) Ltd. v. S. P. Kushare the court was concerned with the constitutional validity of section 11(4)(a) of the C.P. and Berar Sales Tax Act, 1947, which was challenged in view of the provisions of section 11A(3) of that Act on the ground of being violative of article 14 of the Constitution. The constitutional validity of the provisions was upheld by the majority judgment which was delivered by Mr. Justice Hedge, as he then was. In the course of appeal, a question arose, whether the assessing authority could be said to have been satisfied about the escarpment of the assessment as a consequence of information which had come into the possession of the Sales-tax Officer. Section 11A which empowered the Sales-tax Officer to initiate proceedings for reassessment provided that if in consequence of any information which is in his possession the Sales Tax Officer was satisfied that if any turnover was under assessed or has escaped assessment, he may initiate proceedings for assessment or reassessment. This provision was found to be in pari mateira with section 34(1) of of the Indian-tax Act, 1922. The decisions under the said section of the Income-tax Act were considered by the Supreme Court and the decisions of the Madras High Court in Salem Provident Fund Society Ltd. v. Commissioner of Income-tax and of the Kerala High Court in United Mercantile Co. Ltd. v. Commissioner of Income-tax were approved. Rejecting the view that the relevant information on the basis of which the assessment were proposed to be reopened was available to the Sales Tax Officer from the record itself and, therefore, it was not open to the officer concerned to utilise that information for reopening the assessment proceedings. Mr. Justice Hegde, speaking for the court, observed in paragraph 11 as under :
'This takes us to the next question whether in the instant case the assessing authority can be said to have been satisfied about the escapement of the assessment as a consequence of any information which had come into his possession. From the notices issued in 1955 as well as later on it is clear that the assessing authorities were satisfied about the escapement of the assessment due from the appellants. But the real question is whether they were so satisfied 'in consequence of any information which had come into their possession'. The assessing authorities knew that the appellants had neither submitted their returns nor treasury challans in proof of the payment of the tax due from other. From that circumstance it is reasonable to hold that in consequence of the information that the appellations had not submitted their returns as well as the treasury challans the assessing authority should have been satisfied about the escapement of the assessment. It was urged on behalf of the revenue that 'information' contemplated by section 11A should be from some outside source and not something that could be gathered by the assessing authority from his own records. According to the revenue in the instant case there was no information from any outside source, therefore, it cannot be said that the assessing authority was satisfied about the escapement of tax in consequence of 'any information which has come into its possession'. In our view, this contention is untenable. In Maharaj Kumar Kamal Singh v. Commissioner of Income-tax this court held that the word 'information' in section 34(1)(b) of the Indian-tax Act, 1992, includes information as to the true and correct state of the law and so would cover information as to the relevant judicial decisions. It was laid down therein that the information need not be about any fact; it may be even as to the legal position. In other words, the term 'information' in section 34(10 (b) of the Indian-tax Act, 1922, really means knowledge.'
6. After quoting with approval from the judgment of the Madras High Court in Salem Provident Fund Society Ltd. v. Commissioner of Income-tax. Mr. Justice Hegde proceeded to observe :
'The meaning of the word 'information' came up again for consideration before a Division Bench of the Kerala High Court in United Mercantile Co. Ltd. v. Commissioner of Income-tax Their Lordships held that to 'inform' means to 'information'. It is transmuted into an item of information in his possession only if and when its existence is realised and its implications recognised.'
7. Mr. Kaji, the learned advocate on behalf of the revenue, was, therefore, right in his contention that the Tribunal wrongly confirmed the order of the Appellate Assistant Commissioner in its entirely, where the Appellate Assistant Commissioner has laid an undue emphasis on the fact of the source of information. According to the Appellate Assistant Commissioner, the Income-tax Officer has not come into possession of any external information to justify his action under section 147. The view of the Appellate Assistant Commissioner that in order that the Income-tax Officer can initiate proceedings under section 147, he must have in his possession any external information is not wholly correct. The information which can be the basis of initiating action under section 147 of the Income-tax Act, 1961, corresponding to section 34(1)(b) of the Indian Income-tax Act, 1922, may be one which the Income-tax Officer may derive from the record itself, and which he might not have observed or to which he might not have applied his mind at the time of the original assessment. It may be also the information which the Income-tax Officer may receive from outside agency. That information may be, as has been often said, as to a fact or as to the position of law : vide Kasturbhai Lalbhai v. R. K. Malhotra Income-tax Officer.
8. As has been observed by the Kerala High Court in United Mercantile Co. Ltd. v. Commissioner of Income-tax 'information' means to import knowledge. A detail available to the Income-tax Officer in the papers filed before him does not by its mere availability become an item of information. It is crystallised into information in his possession only when its existence is realised and its implications are recognised. Essentially therefore, it is always a question of fact whether the details on the basis of which action is sought to be initiated under section 147 was one, which was, though available on the record of the case, not realised or to which no mind is applied or the implications of which are not appreciated. Mr. Justice Chandrachud, speaking for the court, said in Commissioner of Income-tax v. H. Holck Larsen that informing oneself of one's own subsequent decision, a decision that has yielded no new facts, is based on no new law nor has revealed a new awareness of what already was law, is not receiving 'information' such as would justify the reopening of an assessment. We have, therefore, to examine, on the facts of this case, whether as held by the Tribunal it was merely a change of opinion on the part of the Income-tax Officer or was it really an information to him which in law invested him with the jurisdiction of initiating proceedings under section 147. It has been clearly found by the Appellate Assistant Commissioner and confirmed by the Tribunal, in fact, that the Income-tax Officer at the time of regular assessment had all information in his possession, namely, particulars of dividends, interest, borrowings, investment, etc., and on full appreciation of all these facts he allowed the interest as business income as claimed the assessee. Similarly, it has been found by the Appellate Assistant Commissioner, and that finding is confirmed by the Tribunal, that the details of the guest house expenses were also available with the Income-tax Officer at the time of the regular assessment. It has also been found by the Appellate Assistant Commissioner that the Income-tax Officer has applied his mind and after careful consideration of the preceding years' assessment orders, he completed the original assessments under reference. According to the Appellate Assistant Commissioner, there was no additional information whatsoever with the Income-tax Officer so as to make him to treat the guest house expenses entirely as entertainment expenses. In that view of the matter, therefore, the Tribunal has rightly confirmed the order of the Appellate Assistant Commissioner that it was merely a change of opinion on the part of the Income-tax Officer and there was no information whatsoever either on the record of his file to which he did not apply his mind earlier or the implications of which he did not appreciate, inasmuch as he finalised the regular assessment for the assessment years under reference after comparing them with the assessments of the preceding years. Nor was there any information from the external source which justified him to initiate proceedings under section 147. In that view of the matter, therefore, we answer the question referred to us in the negative and against the revenue. The Commissioner of Income-tax shall pay costs of this reference to the assessee.