(The judgment of the court was delivered by VISWANATHA SASTRI, J.)
The question that has been referred to us is in these terms :-
'Whether the Tribunal was right in holding that there was no definite information under Section 34 of the Income-tax Act which would enable the Income-tax Officer to start proceedings against the assessee under that section ?'
The assessee was a partner in a registered firm consisting of three individuals one of whom was a minor. The assessee was asked to furnish a return of his income and in that return he stated that the annual value of his house property was Rs. 494 and did not show any other income. During the course of the assessment proceedings, the Income-tax Officer made enquiries as regards the acquisition of house property by the assessee during the year of account and he came to the conclusion that a sum of about Rs. 16,000 invested by the assessee on the purchase of house property came from his share of the profits of the partnership of which he was a member. On this basis, he added this sum as well as certain other amounts to the income of the firm and assessed the firm on the basis that the sum of about Rs. 16,000 invested by the assessee in the acquisition of house property was part of the profits of the partnership. The profits of the partnership were assessed on an estimate. Even before making the assessment on the assessee, the income-tax Officer assessed the firm to tax, and even before making the assessment on the firm the Income-tax Officer had come to know of the fact that the assessee had during the year of account purchased properties worth Rs. 16,000 from his profits. While making the assessment on the firm the Income-tax Officer also considered the question of the possibility or otherwise of the assessee having acquired properties out of his capital asses and came to the conclusion that the acquisitions had been made out of his share in the profits of the partnership. While making the assessment on the firm the Income-tax Officer added a sum of Rs. 22,558 to the income returned by the firm and this sum of Rs. 22,558 included the sum of Rs. 16,000 invested by the assessee on the acquisition of house property and held by the Income-tax Officer to be the share of the assessees profits in the firm. There was an appeal by the firm which after having gone to the Appellate Assistant Commissioner finally came before the Appellate Tribunal. The Appellate Tribunal held that the addition of Rs. 22,558 including the sum of Rs. 16,000 referred to above was not justified and there was no reason to regard the sum of Rs. 16,000 invested by the assessee in the year of account as part of the income of the firm. The Tribunal was of the opinion that as the addition of this sum considerably increased the firms income and also affected the minor partner who had been admitted to the benefits of the partnership the sum of Rs. 16,000 could not be considered to be the income of the firm and reduced the assessment on the firm accordingly. Thereafter the Income-tax Officer purported to take proceedings under Section 34 of the Income-tax Act and added the sum of Rs. 16,000 to the income of the assessee and assessed him afresh. There was an appeal against this revised assessment and the matter was taken up before the Tribunal which held that there was no justification for taking action under Section 34 of the Income-tax Act and cancelled the revised assessment.
The contention of Mr. C. S. Rama Rao Sahib, the learned Advocate for the Commissioner of Income-tax is that there was definite information which came into the position of the Income-tax Officer in the shape of the decision of the Tribunal and in consequence of this definite information the Income-tax Officer discovered that the assessees income to the extent of Rs. 16,000 chargeable to income-tax had escaped assessment. He states that the 'definite information' referred to in Section 34 of the Income-tax Act is not only confined to factual information but also covers a decision rendered on matters of law or matters of mixed fact and law subsequent to the assessment which bring to light circumstances unknown at the date of the original assessment. This contention was sought to be supported by reference to decided cases both of this and other High courts. Before referring to these decisions it is necessary to concentrate attention on the section itself. It is clear that a mere change of opinion based on the same facts and figures which were present to the mind of the Income-tax Officer at the time of the original assessment does not amount to discovery. The discovery must be the result of definite information that is to say new information that has come to the knowledge of the Income-tax Officer. The Income-tax Officer cannot act under this section even though the taxpayer has escaped assessment if he is acting on information which was already in his possession and within his knowledge. Unless it can be said that there is fresh information which was not in his possession at the time when the original assessment was made, action under Section 34 of the Income-tax Act is not justified. 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 who was in possession of the same facts and entire facts at time of the original assessment. We have got the fact that there was a detailed enquiry made at the time of the original assessment by the Income-tax Officer. At that stage he had definite information that the assessee had acquired properties worth Rs. 16,000. On that basis he came to the conclusion that this sum of Rs. 16,000 must have come from the profits of the partnership of which the assessee was a member. There was no fresh information that came to his knowledge at the time of the revised assessment. All that he did was to change his opinion and add the sum of Rs. 16,000 to the assessees taxable income instead of to the firms profits as he did before. We consider that this is nothing more than a change of opinion on the part of the Income-tax Officer on the same facts and figures on the basis of which he made the original assessment. Only he adopted the suggestion of the Tribunal as his own and proceeded to assess afresh on the basis of the Tribunals opinion. This we consider he was not entitled to do under Section 34 and his order reopening the assessment under that section was therefore unauthorised.
The question whether the requisites of Section 34 are fulfilled in a particular case must depend upon the facts and circumstances of each case and in our opinion the facts of the present case are fairly clear and the decision of the Tribunal is correct. It is unnecessary for us to examine the decisions that have been referred to us the more especially because the section has been radically amended in 1948 and much larger powers of revising the assessment have been given to the Revenue authority possibly because the provisions of the section as it stood were found to be inadequate to prevent escape of taxation.
The question referred to us is answered in the negative and against the Commissioner of Income-tax. The assessee will be entitled to Rs. 250, costs of this reference.
Reference answered in the negative.