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Export Enterprises Pvt. Ltd. Vs. Income-tax Officer, 'B' Ward and Ors. (11.02.1982 - CALHC) - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtKolkata High Court
Decided On
Case NumberCivil Rule No. 11590(W) of 1976
Judge
Reported in(1983)36CTR(Cal)215,[1983]142ITR641(Cal)
ActsIncome Tax Act, 1961 - Sections 147 and 154
AppellantExport Enterprises Pvt. Ltd.
Respondentincome-tax Officer, 'B' Ward and Ors.
Appellant AdvocateD. Paul, ;R.N. Bajoria and ;Amalesh Kumar Banerjee, Advs.
Respondent AdvocateB.L. Paul and ;M.L. Bhattacharjee, Advs.
Cases ReferredKasturbhai Lalbhai v. R. K. Malhotra
Excerpt:
- m.n. roy, j. 1. the petitioner, m/s. export enterprises private ltd., is an existing private limited company within the meaning of the companies act, 1956 (for convenience, the petitioner would hereinafter be referred to as the 'said company'). it has been stated that the said company at all material times carried on and still they are carrying on business dealing with imported materials under import licences, which were previously sanctioned in favour of maharajkumari c. pheunkhang, sister of the chogial of sikkim, by the govt. of india for the purpose of enabling the said maharajkumari and her family to enter into the business, and trade and to earn some income for the benefit of the family. the said company has stated that the same was virtually dependent upon the said maharajkumari.....
Judgment:

M.N. Roy, J.

1. The petitioner, M/s. Export Enterprises Private Ltd., is an existing private limited company within the meaning of the Companies Act, 1956 (for convenience, the petitioner would hereinafter be referred to as the 'said company'). It has been stated that the said company at all material times carried on and still they are carrying on business dealing with imported materials under import licences, which were previously sanctioned in favour of Maharajkumari C. Pheunkhang, sister of the Chogial of Sikkim, by the Govt. of India for the purpose of enabling the said Maharajkumari and her family to enter into the business, and trade and to earn some income for the benefit of the family. The said company has stated that the same was virtually dependent upon the said Maharajkumari initially, for using the import licences granted in her favour, and subsequently through her in the name of the said company.

2. It has further been stated that the said Maharajkumari was a director of the said company and as part of her duties, she used to undertakemovements between different towns of India and outside, that apart, it has been stated that although the registered office of the said company was in Calcutta, the said Maharajkumari normally resided in Gangtok (Sikkim) and Kalimpong. It was also the case of the said company that in the past the said Maharajkumari had never charged any travelling expenses up to Calcutta and she was being paid a salary of Rs. 1,000 per month initially but as during the period of 1968-69 she found the work to be extremely heavy and tiresome, the directors and the shareholders of the said company were requested informally in the first instance by her to increase the remuneration by adding a further sum of Rs. 1,000 per month and a share of profits. She also requested for facilities for medical treatment on the amounts which would be actually spent if any illness occurred during the course of her duties as a director of the said company. On such request, on or about 8th January, 1970, the said company passed a resolution whereby an increase in the remuneration of the said Maharajkumari, by adding in her salary 10% of the net profits, was granted. Apart from that, the board of directors of the said company also sanctioned to her medical expenses on the actual basis. Such resolutions, according to the said company, were duly approved. It was the case of the said company that due to the extra strain suffered by the Maharajkumari in the middle of January, 1970, she had some trouble with her left arm and initially she was required to be entered in a nursing home in Calcutta for treatment. After a few days thereafter, it was suspected that there may be a case of the loss of limb and so she, accompanied by one of her doctors and relations, was flown to the U.S.A. to receive further treatment. On such treatment in the U.S.A. the Maharajkumari got cured of the ailment but her left arm had to be amputated. The said company has stated that the same was regularly assessed to income-tax under the I.T. Act and the application which is now being considered relates to the assessment year of 1971-72 for which the relevant accounting year would be the year ending 31st March, 1971. For such assessment year, it has also been stated that the said company was duly assessed under Section 143(3) of the I.T. Act, 1961 (hereinafter referred to as the 'said Act') by Shri S. Bhattacharjee, who computed a loss of Rs. 4,208 and calculated the total amount refundable at Rs. 88,357. It was the case of the said company that while making such assessment the said ITO allowed the director's medical expenses of Rs. 1,76,755 apart from doctor's bills, air passage for the director of the said company and the attending physician and so also hotel and other bills and charges totalling an amount of Rs. 1,42,643 in respect of the assessment year 1970-71. The said company has further stated that at the time of the original assessment for the assessment years 1970-71 and 1971-72, the said company's authorised representative duly appearedbefore the ITO concerned and produced along with other particulars as were asked for, the details of medical expenses incurred in India and abroad during the year ended 31st March, 1970, and the ITO concerned, on a due consideration of all the necessary materials as produced, concluded the assessments for the years in question.

3. It has been stated by the said company that while filing the return for the assessment year 1971-72, a letter dated 11th September, 1971, was sent to the ITO concerned stating that as per the last year's (returns) deduction had been claimed on account of the medical expenses of the director, viz., the said Maharajkumari, and for such purposes a detailed statement of the necessary expenses, for consideration of the ITO concerned, was also filed. At that, the said company received two notices both dated 22nd February, 1976, issued by the ITO concerned, respondent No. 1, under Section 154 of the said Act for the assessment years 1970-71 and 1971-72 whereby the said officer asked the said company to show cause why the concerned order of assessment should not be rectified as, in his opinion, there was a mistake apparent from the record. It has also been stated that, thereafter, the said respondent passed two orders both dated 5th July, 1976, under Section 154 of the said Act and thereby disallowed the medical expenses. In fact, a sum of Rs. 1,69,882 was disallowed for the relevant assessment year 1971-72 against which a sum of Rs. 1,76,755, as mentioned above, was ordinarily allowed in the year under Section 143(3) of the said Act. As such, for both the assessment years 1970-71 and 1971-72, the said company preferred two appeals before the AAC and those appeals were decided against the said company by a consolidated order dated 1st May, 1975, and being aggrieved by such order, the petitioner duly preferred an appeal before the Income-tax Appellate Tribunal. It should be noted here that in the course of hearing the Maharajkumari produced an order dated 16th May, 1977, by the said Appellate Tribunal which allowed the appeals and cancelled or set aside the order made by the ITO and initial Tribunal.

4. In this application the said company has stated that in the meantime a notice dated 1st February, 1976, was issued by respondent No. 1, ITO, under Section 148 of the said Act and by that the said company was called upon to submit a return of its income for the assessment year 1971-72 on the allegation that the said respondent No. 1 had reasons to believe that the income of the said company for the said relevant assessment year 1971-72 has escaped assessment. The reasons which were recorded were disclosed at the time of hearing and they are to the following effect :

'9-2-1976. Information have been received from Revenue Audit that the claim for medical expense of Rs. 1,69,882 allowed in the assessment was not allowable in law, in terms of the provision of Section 40(a)(v). ThePunjab High Court has also held that such an information from an external source like Revenue Audit would constitute 'information' within the meaning of Section 147(b). Hence income of the assessee has been underassessed to the extent stated above and consequently proceedings Under Section 147(b) should be started. Issue notice Under Section 148.

(Sd.) S.K.Basu,

Income-tax Officer, 'B' Ward, C-II, Calcutta.'

5. It should be noted that a copy of the said reasons was also handed over by the learned advocate appearing for the respondents during the course of hearing and I direct the said reasons to be kept in the record.

6. On a reference to the records as disclosed, Mr. Bajoria claimed, and that too duly, that the assessment in respect of the assessment year 1970-71, was not reopend and the reopening was really in respect of the assessment year 1971-72 and since the notice was dated 9th February, 1976, and the same was issued under Section 147(b) of the said Act, which requires that notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the ITO has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned. For the purposes of the section, (a) where income chargeable to tax has been under-assessed; or (b) where such income has been assessed at too low a rate; or (c) where such income has been made the subject of excessive relief under the said Act or under the Indian I.T. Act, 1922; or (d) where excessive loss or depreciation allowance has been computed, are deemed to be cases where income chargeable to tax has escaped assessment. On a construction of the provisions as mentioned above, Mr. Bajoria claimed that a reopening would be possible, firstly, on new information, if any, and, secondly, if on the date of notice, any income had escaped assessment. None of the requirements as mentioned above, according to Mr. Bajoria, could be satisfied in this case and there was a rectification proceeding in the meantime where the assessee lost initially, but, on appeal, has succeeded before the Tribunal.

7. The affidavit-in-opposition, on behalf of the respondents, was dated 9th September, 1980, and the same was filed through Shri Chitta Ranjan Ghosal, ITO, 'B' Ward, Companies District II, respondent No. 1. The amount of medical expances, as allowed in the assessment for 1970-71, has been disputed and the date of assessment has been stated to be 27th November, 1971, instead of the year 1965. These apart, the validity of some other documents and representations have been denied. Suchdefence as above, regarding the date of the proposed order of rectification under Section 154 of the said Act, was also put forward. Similar was the defence regarding the date of the notice under Section 148 of the said Act. It has further been stated that before issuing the concerned notice under Section 148, firstly, the ITO concerned duly recorded his reasons on the basis of the intimation received by him from the Department, that on account of the erroneous application of law with regard to the director's medical expenses, there had been non-assessment of income or in other words income had escaped assessment and, secondly, that such information of the Revenue Audit Dept., received by the ITO, constituted sufficient information, in consequence whereof the ITO could assume jurisdiction under Section 147(b) of the said Act. It was also claimed that it was neither necessary nor imperative that a notice under Section 148 should specify the exact provision of law or indicate as to under which of the two sub-clauses of Sub-section (1) of Section 147, the concerned notice was issued. In any event, it was denied that the officer concerned had initiated a roving or fishing enquiry and that too without any materials or that he has used the power under Section 148 as a cloak or pretence for making such fishing or roving enquiry, with the object of revising the previous order. The deponent has further stated that the letter dated 27th March, 1976, of the petitioner was taken into consideration by the ITO. He has also stated that the assessment order under Section 147(b) was completed on 23rd August, 1976, i. e., before the order was made by this court on 6th September, 1976, and such order as made by this court, came to the knowledge of the officer concerned on 13th September, 1976, only and the assessment order was served on the petitioner on 9th September, 1976. Such happening was also claimed to have happened through mistake or inadvertence. It has further been stated that on detection of such mistake, the assessee was requested to treat the demand notice as withdrawn and cancelled.

8. On the basis of and in view of the pleadings as noted hereinbefore, Mr. Bajoria sought to impeach the initiation as made, and so also the notice, to be void, bad, illegal, irregular and without any basis or reasons as, according to him, from the statements as made or as contained in the affidavit-in-opposition of the respondents, such initiation of proceeding or the issue of the notice, was either on information as received or on formation of the belief, on the basis of information from external source like 'Revenue Audit' and not of his own by the officer concerned or merely, the said officer had acted on a change of opinion. He specifically claimed that it was not possible or permissible for the officer concerned to act on the information as received from the internal audit or to act on their advice, as the opinion of or by such internal audit, could (not ?) be regarded as 'Information' within the meaning of Section 147(b) of the said Act.In support of such submissions, reference was made to the determinations in the case of Indian and Eastern Newspaper Society v. CIT : [1979]119ITR996(SC) . In that case, it has been observed that the opinion of the audit party on a point of law could not be regarded as 'information' enabling the ITO to initiate reassessment proceedings under Section 147(b). The ITO had, when he made the original assessment, considered the provisions of Sections 9 and 10 of the Indian I.T. Act, 1922. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. In that case, it has also been observed that the proposition in the decision of the Supreme Court in the case of Kalyanji Mavji & Co. : [1976]102ITR287(SC) , to the effect that a case where income had escaped assessment due to 'oversight, inadvertence or mistake' of the ITO must fall within Section 34(1)(b) of the Indian I.T. Act, 1922, was stated too widely and travelled farther than the statute warranted in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovered that he had committed an error inconsequence of which income had escaped assessment, it was open to him to reopen the assessment. An error discovered on a reconsideration of the same material (and no more) did not give him that power. In that case it has also been observed that the I.T. Dept. included an internal audit organisation, whose function was to examine income-tax records and check mistakes made therein, with a view ultimately to improve the quality of assessments. In that case, it would appear that in the course of auditing the income-tax records pertaining to the assessee for the assessment years 1960-61 to 1963-64, the internal audit party expressed the view that the money realised by the assessee on account of the occupation of its conference hall and rooms, should not have been assessed as income from business. It said that an assessment should have been made under the head 'Income from property'. The ITO treated the contents of the report as 'information' in his possession for the purpose of Section 147(b) of the I.T. Act, 1961, and reassessed the income on that basis. The AAC allowed the appeals filed by the assessee holding, inter alia, that in law it could not be said that the ITO had any 'information' in his possession enabling him to take action under Section 147(b). On appeal by the Revenue, the Income-tax Appellate Tribunal, Delhi Bench, noticed a conflict of judicial opinion on the question whether the internal audit report could be treated as 'information' for the purpose of Section 147(b). The Gujarat High Court in Kasturbhai Lalbhai v. R. K. Malhotra, ITO : [1971]80ITR188(Guj) , had held that an internal audit report could not be regarded as 'information', while the Delhi High Court in CIT v. H. H. Smt. Chand Kanwarji : [1972]84ITR584(Delhi) , had expressed a contrary view. Followingthe view adopted by the Delhi High Court, the Tribunal held that the ITO had jurisdiction to proceed under Section 147(b). The assessee applied for a reference, and having regard to the difference between the High Courts on the point, the Tribunal had considered it expedient to refer the following question of law directly to the Supreme Court :

'Whether, on the facts and in the circumstances of the case, the Income-tax Officer was legally justified in reopening the assessments under Section 147(b) for the years 1960-61, 1961-62, 1962-63 and 1963-64, on the basis of the view expressed by the internal audit party and received by him subsequent to the original assessment ?'

9. The judgment of the Gujarat High Court in Kasturbhai Lalbhai v. R. K. Malhotra, ITO : [1971]80ITR188(Guj) , on appeal, was reversed in the case of R. K. Malhotra, ITO v. Kasturbhai Lalbhai : 1975CriLJ1545 , and it was contended before the Supreme Court, in the case under consideration, that the decision as made, required further consideration. As such, the determination as quoted hereinbefore, were made by the Supreme Court. The above determination by the Supreme Court was made on 31st August, 1979, and the determination in the case of R. K. Malkotra, ITO v. Kasturbhai Lalbhai : 1975CriLJ1545 was dated 11th August, 1977. The reasons in this case, which were the basis of the notice, were dated 9th February, 1976, and the order under Section 154 of the said Act, on the basis of an assessment for the year 1971-72, which was completed on 31st January, 1972, was dated 5th July, 1975, and Mr. B. L. Pal, appearing for the Revenue, claimed that there was no illegality or irregularity in issuing the concerned notice on the basis of the information as received from the Revenue Audit, as at that time the law was not as such, which has subsequently been pronounced by the Supreme Court in the case of Indian and Eastern Newspaper Society v. CIT : [1979]119ITR996(SC) , and more particularly when under the law as was in force, the officer concerned could act on the basis of the advice of the Revenue Audit or treat such advice as information in his possession. It should be noted that in the case of R. K. Malhotra, ITO v. Kasturbhai Lalbhai : 1975CriLJ1545 , in the original assessment of the respondent the ITO allowed a deduction of municipal taxes in computing the annual value of house properties in the occupation of the respondent. Subsequently, the audit department of the office of the Controller and Auditor.General of India pointed out that, on a true interpretation of Section 23(2) of the I.T. Act, 1961, the deduction of municipal taxes in respect of self-occupied properties was not admissible. Treating this intimation as 'information' within the meaning of Section 147(b) of the Act, the ITO issued a notice under Section 148 to reopen the assessment. On a writ petition being filed by the respondent, the High Court quashed the noticeholding that though for the purposes of Section 147(b), it would be 'information' on law if it was stated by a person, body or authority competent and authorised to pronounce upon the law and invested with authority to do so, the audit department was not an authority competent or authorised to declare the correct state of the law or pronounce upon it and that, therefore, its opinion on the correct state of the law was not 'information' which could warrant the initiation of proceedings under Section 147(b) and, on appeal, the Supreme Court, allowing the appeal, observed that, (i) that the audit department was the proper machinery to scrutinise the assessments by ITOs and point out the errors, if any, in law, and that the intimation received by the ITO constituted 'information' within the meaning of Section 147(b) in consequence of which the ITO could reopen the assessment, and (ii) neither the fact that the ITO was aware of the fact that the properties were self-occupied nor the fact that he could have with diligence found that the respondent would not be entitled to the deduction of municipal taxes, would preclude the officer from using the audit note as fresh 'information' and it has further been observed that two conditions were necessary for invoking Section 147(b)(i) The officer should receive information after the original assessment; (ii) in consequence of such information he should have reason to believe that income had escaped assessment. The 'information' may be of facts or of law. The 'information' of a fact may be from an external source. The fact that the ITO with diligence could have obtained the information during the previous assessment on a proper investigation of the materials on the record or the facts disclosed thereby, would not make it any the less information if the fact was not in fact obtained, and came to his knowledge only subsequently. So also the fact that on a research as to the state of law the ITO would have ascertained the true legal position would not make any difference if the officer came to know the real position of the law only subsequently, apart from holding that the words 'external source' cannot be construed as implying that the source must be outside the record. The information must be gathered from the assessment record itself. There is no doubt that the ITO concerned, in this case, has not evaluated the case or the circumstances and the background of the same directly but has simply acted on the basis of the information as received from the revenue audit and, in fact, the recorded reasons as quoted hereinbefore would show that he has simply acted on the basis of such information as received from the Revenue Audit.

10. Mr. Bajoria also made a reference to the determinations in the case of Jiyajeerao Cotton Mills Ltd. v. ITO : [1981]130ITR710(Cal) , wherein it has been observed that the principle of retrospective legislation is notapplicable to the decisions of the Supreme Court declaring the law or interpreting a provision in a statute. The law is laid down or a provision in a statute is interpreted by the Supreme Court only when there is a debate or doubt on the interpretation of any provision of a statute requiring interpretation by the Supreme Court or when there is a conflict of judicial opinion on the provision of a statute among the different High Courts of India which is required to be resolved and settled by the Supreme Court. The law laid down by the Supreme Court cannot be said to have retrospective operation in the sense that although a debate, or conflict of judicial opinion is resolved and settled by the Supreme Court, it does not obliterate the existence of such debate, doubt or conflict prior to such decision. The appellant in that case derived profits from three industries, one of which qualified for the special rebate under Para. F of Part I of Schedule I to the Finance Act, 1965, for the assessment year 1966-67. In granting the special rebate, the ITO computed the profits and gains attributable to that industry without deducting development rebate granted to the appellant. Thereafter, the ITO sought to rectify the mistake under Section 154 of the I.T. Act, 1961, by recomputing the profits by deducting the development rebate. The appellant filed a writ petition for quashing the notice of rectification and a single judge of the High Court dismissed the petition and, on appeal, a Division Bench of this court, allowing the writ petition, has observed in the case of ITO v. Textile Mills Agents P. Ltd. : [1981]130ITR733(Cal) , which has been made an Appendix to the determination in Jiyajeerao Cotton Mills Ltd. v. ITO : [1981]130ITR710(Cal) , that it could not be said that on a plain reading of the provisions of Para F of Part 1 of Schedule I to the Finance Act, 1965, no two views were possible on the question whether the development rebate had to be deducted in computing the profits and gains of the qualifying industry and that, therefore, there could not be said to be a mistake which could be corrected under Section 154. It was true that Section 80E was in pari materia with Para. F of Part I of Schedule I to the Finance Act, 1965, the correct interpretation whereof was laid down by the Supreme Court in Cambay Electric Supply's case : [1978]113ITR84(SC) , and, therefore, the profits and gains attributable to the business of manufacture or production of the articles or things specified in Part III of Schedule I to the Finance Act, 1965, which qualified for the special rebate under Para. F of Part I of Schedule I to the Finance Act, 1965, could not be gross or commercial profits or gains but were the net or taxable profits or gains computed after allowing all allowable deductions and rebates including the development rebate but without allowing the special rebate under Para. F of Part I of Schedule I to the Finance Act, 1965. However, the course of the Cambay Electric Supply's case up to the High Court clearly showed that there was a debate on the question ofinterpretation of Section 80E. The Supreme Court decision related to the subsequent assessment year 1967-68. The fact that the Supreme Court had resolved the conflict did not obliterate the conflict in views existing prior to the decision. The ITO had no jurisdiction to rectify and the notice issued under Section 154 had to be quashed. The determinations on the principle of retrospective legislation was made in the case under reference as it was argued that there was no mistake at all in computing the profits and gains attributable to the business of production and manufacture of soda ash and the development rebate allowed, was not deductible in such computation inasmuch as the said special rebate was allowable on the gross or commercial profits and not on the net or taxable profits. It was further urged that as the statute provided no guidelines for the computation of the said profits and gains, two views thereon were not only reasonably possible but at the material time, there were in fact two views thereon and thus the mistake, if any, was not such, which could be rectified under Section 154 of the I.T. Act, 1961. Mr. B. L. Pal claimed that the observations in the case under discussion do really support the contentions of the Revenue and are against the petitioner, the more so when the action in the matter of issuing the notice or initiating the proceeding was done on the basis of the law as existing on that date or at the relevant time. In support of his submissions that the opinion or advice of the revenue audit could, in the instant case, be regarded or treated as 'information' in the possession of the ITO, Mr. Pal made a pointed reference to the determinations in the case of Asst. CED v. Nawab Sir Mir Osman Ali Khan Bahadur : [1969]72ITR376(SC) . In that case, which was of course under the provisions of the E.D. Act, 1953, it has been observed that the opinion of the CBR 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 of the E.D. Act, 1953, as amended by the E.D. (Amend.) Act of 1958, on the basis of which the Controller can entertain a reasonable belief that property assessed to estate duty has been undervalued. Apart from the cases as mentioned hereinbefore, Mr. Bajoria also placed reliance on the determination in the case of CIT v. Assam Oil Co, Ltd. : [1982]133ITR204(Cal) . In that case, in the original assessment for 1960-61, the assessee had claimed deduction of payments of royalties on crude oil and gas and this had been allowed by the ITO. Subsequent to the completion of the original assessment, the ITO became aware of the decision of the Rajasthan High Court in CIT v. Gotan Lime Syndicate , wherein the High Court had held that payment of royalties by the assessee for obtaining mining rights for the mining of limestone was capital in nature and could not be allowed as a deduction in the computation of theincome of the assessee. The ITO started reassessment proceedings and in the course of reassessment disallowed, (i) the payment of royalty on crude oil and gas; and (ii) part of the management expenses paid by the assessee to its parent company in London. The decision of the Rajasthan High Court was reversed by the Supreme Court. The Tribunal held that the decision of the Supreme Court did not render the reassessment proceedings void but the ITO had no jurisdiction to disallow part of the management expenses of the assessee. On a reference it has been held that, (i) the decision of the Rajasthan High Court in the case of Gotan Lime Syndicate , constituted 'information' on the basis of which reassessment proceedings under Section 147(b) were validly taken. The pronouncement of the Supreme Court subsequently did not render the proceeding void ab initio, and (ii) the action under Section 147(b) in so far as it related to the claim for deduction of the London office management expenses was validly taken, apart from observing that a decision of the High Court that a particular kind of expenditure was not deductible would constitute 'information' within the meaning of Section 147(b) and reassessment proceedings taken in consequence of such information would be valid. A subsequent reversal of the decision of the High court by the Supreme Court would not render the reassessment proceedings void ab initio. On principle, the Supreme Court does not make the law from the date it is pronounced but declares it to be so from its very inception. But the knowledge about the law is not always there and once an assessment is reopened, the previous assessment is set aside and the whole assessment proceedings start afresh. In such a case, the ITO has not only the jurisdiction but also the duty to levy tax on the entire income that had escaped assessment. Once an assessment is reopened notice is given for a fresh return of all the items.

11. There cannot be any doubt on the facts of this case that the reopening was sought to be under Section 147(b) of the said Act and reopening under these provisions would be possible and permissible on new information and if on the date of notice, any income had escaped assessment. On the basis of the arguments as advanced at the Bar, the effect of subsequent rectification proceedings, in which the assessee ultimately succeeded, would have to be considered. Admittedly, the ITO concerned had recorded his reasons on the basis of the intimation received by him from the revenue audit, viz, that on account of an erroneous application of law with regard to the director's medical expenses, there had been a non-assessment of income or, in other words, income had escaped assessment and that such information of the revenue audit department, constitutedGotan Lime Syndicate v. CIT : [1966]59ITR718(SC) .sufficient information, in consequence whereof, the officer concerned could assume jurisdiction under Section 147(b) of the said Act. The relevant dates of the judgment in the cases of Indian and Eastern Newspaper Society v. CIT : [1979]119ITR996(SC) and R. K. Malhotra, ITO v. Kasturbkai Lalbhai : 1975CriLJ1545 , wherein the effect of 'information' received from the revenue audit department by the officer concerned, if at all he can use or act on such 'information' treating them to be informations in his possession, had been dealt with or considered. The date of the initiation or action as taken in this case, has also been indicated. On the said date of initiation, the views expressed in the case of R.K. Malhotra, ITO v. Kasturbhai Lalbhai, which incidentally was in favour of the Revenue, viz., initiation could be made on 'information' of the revenue audit department, was the law, which was of course dissented from in the case of Indian and Eastern Newspaper Society's case : [1979]119ITR996(SC) . Such being the position, the determination in the case of Jiyajeerao Cotton Mills Ltd. v. ITO : [1981]130ITR710(Cal) , binds me and, as such, agreeing with the submissions of Mr. Pal, I hold that initiation of proceeding or the action as taken in this case, on 'information' received from the revenue audit department, was neither improper nor irregular and the same was within the jurisdiction and competence of the authority concerned. Mr. Bajoria, who is known for his fairness, did not contend otherwise. But, he contended that as in the rectification proceeding the assessee had succeeded, there was no new material or information, on the basis whereof, the action as taken could be justified. There, in my view, is ample substance, in such submissions of Mr. Bajoria. Thus, even though the first point fails, the second one should succeed, viz., as there was no new information and it cannot be stated that on the date of the notice, any income had escaped assessment, particularly when the relevant facts were avilable and known to the authorities concerned, through the different proceedings as mentioned hereinbefore. On the specific facts of the case and the circumstances as disclosed hereinbefore, that since there was thus no mistake apparent from the records, rectification under Section 154 of the said Act was neither possible nor permissible.

12. The rule is thus made absolute. There will be no order as to costs.


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