1996 PLP 149 (PTD)

Reassessment

Central Board of Direct Taxes

Information that income has escaped assessment

Meaning of `information'

Opinion of CBDT Interpreting Law

Does not constitute information

Reassessment on the basis of such opinion is not valid

Indian Income-tax Act, 1961, S. 147(b)-- CBDT Circular No. 21 of 1969. The expression "information" in the context in which it is used in section 147(b) of the Income-tax Act, 1961, means instruction or knowledge. When section 147(b) is read as referring to "information" as to law, what is contemplated is information as to the law created by a formal source. Any statement by a person or body not competent to create or define the law cannot be regarded as law. There are three categories in which opinions on law may be expressed by the Central Board of Direct Taxes. Where the opinion is expressed by the Central Board of Direct Taxes as the appellate authority, the said opinion will constitute information. The other circumstance may be that the Central Board of Direct Taxes, on its own, does not express any opinion on law but merely communicates judicial pronouncements through a circular in order to invite the attention of the taxing authorities. In such a situation also its opinion constitutes information. The third category is where the opinion is not expressed on any appeal but merely represents the Board's own opinion of the position of law. Such opinion cannot be information to form the basis of a notice for reassessment. The assessee, a non-resident company, rendered technical services to an Indian company. The technical service fees were not included in the total income but these fees were regularly and consistently shown by the assessee year after year in a part of the return showing exempted receipts. This was accepted and the Income-tax Officer in Bombay made the assessment up to the assessment year 1965-66 consistent with the view taken for the assessment year 1962-63. The jurisdiction over the assessee was transferred to the Income-tax Officer in Calcutta. In 1970, a notice of reassessment was issued in relation to the assessment year 1965-66. The Income-tax Officer completed the assessment under section 147(b) and mentioned that the basis for the reassessment was the Central Board of Direct Taxes' Circular No.21 of 1969 which dealt generally with the admissibility and taxation of royalties, service fees etc., in the case of foreign, collaboration agreements. The Tribunal held that the reassessment was not valid. On a reference: Held, that in the instant case, the opinion of the Central Board of Direct Taxes as to the position of law did not constitute information within the meaning of section 147(b). The Tribunal was correct in holding that the proceedings initiated under section 147(b) were illegal. Indian and Eastern Newspaper Society-v. CIT (1979) 119 ITR 996 (SC) applied. Union of India v. Arvind N. Mafatlal, Trustee of Seth Hemant Bhagubhai Trust (1986) 160 ITR 420 (Bom.) fol. Bankipur Club Ltd. v. C.I.T. (1971) 82 ITR 831 (SC); CIT v. A. Raman and Co. (1968) 67 ITR 11 (SC); CIT v. West Coast Industrial Co. Ltd. (1987) 168 ITR 72 (Ker.); CED (Asst.) v. Nawab Sir Mir Osman Ali Khan Bahadur (1969)72 ITR 376 (SC); Kalyanji Mavji and Co. v. CIT (1976) 102 ITR 287 (SC); Maharaj Kumar Kamal Singh v. CIT (1959 35 ITR 1 (SC); Malhotra (R.K.), ITO v. Kasturbhai Lalbhai (1977) 109 ITR 537 (SC); Meenakshi Achi (V.S.S.V.) v. CIT (1966) 60 ITR 253 .(SC) ref. S.K. Mitra and R.C. Prasad for the Commissioner. Dr. D. Pal and Miss M. Seal for the Assessee.