# COMMISSIONER OF WEALm TAX WEST BENGAL v. IMPERIAL TOBACCO CO. OF INDIA LID

- **Citation:** [1966] Supp. 1 S.C.R. 174
- **Court:** Supreme Court of India
- **Decided:** 1966-04-15
- **Case number:** Civil Appeals Nos. 1062 and 1063 of 1966
- **Bench:** K. N. Wanchoo, J. c. SHAii, s. M. Soon. JJ
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/commissioner-of-wealm-tax-west-bengal-v-imperial-tobacco-co-of-india-lid-3798
- **Pages:** 6

## Headnote

Wealth Tax Act (37 of 1957), ss. 17(b) and 27-Divergence of
views in High Courts as to meaning of "lnjormation" in s. 34(1)(b)
Income Tax Act which is in pari rnateria 1vith s. 17(b)-Duty of Tribunal to make re/<!rence to High Court.
A
B
Orders of reassosmnent under s. 16(3) read with s. 17(b) of the 0
Wealth Tax Act were passed by the Wealth Tax Officer in respect
of two assessment years. and by those orders, amounts which had
been formerly allowed as deduction were included in the total
'
wealth of the respondent. The orders were set aside by the Tribu-
~
nal on the ground that the reassessment was based on a mere change
~
of opinion on the part of the Officer, because, there was no "information" in his possession, as required by s. 17(b), which could lead him
to believe that chargeable wealth of the respondent had escaped asD
sessment. The appellant's applications to the Tribunal and the High
Court, for a reference to the High Court, were dismissed.
In appeal to this Court,
HELD: The Tribunal should be directed to make n reference
either to the High Court under s. 27 (I) or to this Court under s. 27
(3A) of the Wealth Tax Act. [179 G].
There is a divergence cxf opinion among the High Courts as to the E
meaning of the word "information" in s. 34(1)' (b) of the Income-tax
Act, and some High Courts have taken the view that a change of opinion by the Income-tax Officer, in certain circumstances. will justify
the issue of notice under s. 34 (l)(b) of the l'ncome-tax :Act. Since that
section is in pari materia withs. 17(b) of the Wealth Tax Act, a question of law did arise as to the interpretation of the word "information" in s. 17(b) of the Wealth Tax Act and it should have been referred by the Tribunal to the High Court. [179 El
F
,
C!v!L APPELLATE JURrsmcnos: Civil Appeals Nos. 1062 and
1063 of 1966.
Appeals by special leave from the judgment and order dated
February 15. 1965 of the Calcutta High Court in matters Nos. 231
and 232 of J 964.
R. M. l/azarnavis, K. D. Karklranis, R. H. Dlrebar and R. N.
G
Sachthey, for the appellant.
A. K. Sen, T. A. Ramachandran, 'J. B. Dadachanji, 0. C.
Mathur and Ravinder Narain, for the respondent.

## Text

174
COMMISSIONER OF WEALm TAX WEST BENGAL
v.
IMPERIAL TOBACCO CO. OF INDIA LID.
April 15, 1966
[K. N. WANCHOO, J. c. SHAii AND s. M. Soon. JJ.J
Wealth Tax Act (37 of 1957), ss. 17(b) and 27-Divergence of
views in High Courts as to meaning of "lnjormation" in s. 34(1)(b)
Income Tax Act which is in pari rnateria 1vith s. 17(b)-Duty of Tribunal to make re/<!rence to High Court.
A
B
Orders of reassosmnent under s. 16(3) read with s. 17(b) of the 0
Wealth Tax Act were passed by the Wealth Tax Officer in respect
of two assessment years. and by those orders, amounts which had
been formerly allowed as deduction were included in the total
'
wealth of the respondent. The orders were set aside by the Tribu-
~
nal on the ground that the reassessment was based on a mere change
~
of opinion on the part of the Officer, because, there was no "information" in his possession, as required by s. 17(b), which could lead him
to believe that chargeable wealth of the respondent had escaped asD
sessment. The appellant's applications to the Tribunal and the High
Court, for a reference to the High Court, were dismissed.
In appeal to this Court,
HELD: The Tribunal should be directed to make n reference
either to the High Court under s. 27 (I) or to this Court under s. 27
(3A) of the Wealth Tax Act. [179 G].
There is a divergence cxf opinion among the High Courts as to the E
meaning of the word "information" in s. 34(1)' (b) of the Income-tax
Act, and some High Courts have taken the view that a change of opinion by the Income-tax Officer, in certain circumstances. will justify
the issue of notice under s. 34 (l)(b) of the l'ncome-tax :Act. Since that
section is in pari materia withs. 17(b) of the Wealth Tax Act, a question of law did arise as to the interpretation of the word "information" in s. 17(b) of the Wealth Tax Act and it should have been referred by the Tribunal to the High Court. [179 El
F
,
C!v!L APPELLATE JURrsmcnos: Civil Appeals Nos. 1062 and
1063 of 1966.
Appeals by special leave from the judgment and order dated
February 15. 1965 of the Calcutta High Court in matters Nos. 231
and 232 of J 964.
R. M. l/azarnavis, K. D. Karklranis, R. H. Dlrebar and R. N.
G
Sachthey, for the appellant.
A. K. Sen, T. A. Ramachandran, 'J. B. Dadachanji, 0. C.
Mathur and Ravinder Narain, for the respondent.
The judgment of the Court was delivered by
Wancboo, J. These two appeals by special leave arise out of B
two applications by the appellant to the Income-tax Appellate
I
""'
w. TAX COMMR. v. IMPERIAL TOBACCO (Wanchoo, J.)
175
A
Tribunal for reference to the High Court of a question of law,
which was formulated as follows: -
B
c
D
E
F
G
H
"Whether on the facts and in the circumstances of
the case, the Tribunal was right in holding that the reassessment proceedings under s. 17(b) of the Wealth Tax Act
were not validly initiated and in setting aside the same."
The facts which led to the
applications for reference are
briefly these. The respondent submitted
wealth-tax returns for
the years 1957-58 and 1958-59. For the year 1957-58 the respondent claimed that an amount of Rs. 51 lakhs and odd being
provision for taxation and another amount of Rs. 37 lakhs and
odd being provision for contingencies, being ascertained liability,
should be allowed as deduction from the total wealth. For the
year 1958-59, the respondent claimed Rs. 31 lakhs and odd being
provision for contingencies as ascertained liability as deduction
from the total wealth.
Assessment for the year 1957-58 was completed on December
30, 1957 and the Wealth-tax Officer accepted the contention of
the respondent and allowed the claim for deduction. Subsequently
the Commissioner of Wealth-tax by his order dated December 29,
1958 passed under s. 25(2) of the Wealth Tax Act, No. XXXVII
of 1957, (hereinafter referred to as the Act) disallowed the deduction of Rs. 51 lakhs and odd being the provision for taxation for
the assessment year 1957-58. The order of the Wealth-tax Officer
allowing deduction for contingencies for the assessment year
1957-58 however stood. The assessment for the year 1958-59 was
completed on December 9, 1958 and deduction was allowed for
contingencies only. It may be added that we are not concerned
in the present appeals so far as deduction for provision for taxation is concerned. On March 22, 1960, the Wealth-tax Officer
completed the assessment of the respondent for the year 1959-60
and disallowed the claim for deduction of the provision for contingencies.
On June 2, 1960, the Wealth-tax Officer issued two
notices under s. l 7(b) of the Act for reassessment of net wealth
for the years 1957-58 and
1958-59. On September 24, 1961
orders of reassessment under s. 16(3) read withs. 17(b) of the Act
were passed in respect of the assessment years 1957-58 and 1958-59
and by these orders the amounts which had been formerly allowed
as deduction with respect to contingencies were included in the
total wealth of the respondent. The respondent then went in appeal against the two reassessment orders and the Appellate Assistant Commissioner sustained the decision of the Wealth-tax Officer
with respect to the reassessments in question. The case of the respondent was that the Wealth-tax Officer had no information on
the basis of which he could proceed to reassess the net wealth of
the respondent and in this connection reliance was placed on the
words "in consequence of any information in his possession" appearing in s. l 7(b) of the Act.
176
~L"PREllE CO\:RT REPORTS
[1966] SL"PP. S.C.R.
The re5pondent then went in appeal to the Appellate Tribunal and his contention there was that the issue of notices under s.
I 7(b) of the Act was invalid as it was based on a mere change of
opinion on the part of the
Wealth-tax
Officer, as at that time
there was no informat;on
in
the
possession of the Wealth-tax
Officer which could lead him to believe that the net wealth chargeable to tax h~d escaped assessment. It was contended that such information must be information which came into possession of the
Wealth-tax Olticer subsequent to the making of the orig;nal assessment and that the information must lead him to believe that income chargeable to tax had escaped assessment.
The Tribunal
accepted this contention of the respondent.
It may be pointed
out that the assessment made by the Wealth-tax Officer for the year
1959-60 was taken in appeal to the Appellate Assistant Commissioner by the respondent and the
respondent's appeal was dismissed in November 1960. The Tribunal pointed out that if the
Wealth-tax Officer had waited till after the decision of the Appellate Assistant Commissioner about the assessment for the year
I 959-60 and then issued notices there would have been sufficient
information for the purpose of s. I 7tb) with the Wealth-tax Officer
to authorise him to issue notice thereunder; but as the Wealth-tax
Officer issued the notices in June 1960 before that appeal was decided, it was only a case of change of opinon by the Wealth-tax
Officer which did not justify issue of notices under s. I 7(b).
The
Tribunal also pointed out that the
departmental
representative
was specifically asked what the information was upon which the
Wealth-tax Otfaer came to the conclusion that taxable wealth had
escaped assessment. The departmental representative was unable
to point to any specific information which came into the possession of the Wealth-tax Officer and which could lead him to issue
the notices in question.
The Tribunal therefore held that the
reassessment proceedings under s. I 7(b) for the years 1957-58 and
1958-59 were not validly initiated and set them aside. Thereupon
the appellant applied to the Tribunal for making references under
s. 27(1) of the Act. The Tribunal rejected the applications.
The
appellant then applied to the High Court under s. 27(3) of the
Act for direction to the Tribunal to state a case.
The High Court
however rejected the applications
summarily.
Thereupon the
appellant applied to thi> Court for special leave which was granted;
and that is how the matter has come before us.
The main contention that ha, been urged on behalf of the
appellant before us is that there is divergence of opinion among
the High Courts on the question as to what constitutes "information" for the purpose of s. 34(1)(b) of the Indian Income-tax Act.
B
c
D
E
F
G
No. II of 1922, (hereinafter referred to as the Income-tax Act).
H
That section is in pari materia with s. I 7(b) of the Act and therefore
a question of law did arise which should have been referred to the
l
•
A
B
-
c
D
F
G
H
w. TAX COM1lR. v. IMPERIAL TOBACCO (Wanclwo, J.)
177
High Court for its decision on the question raised by the appellant. Reliance in this connection is placed on the deci5ion of this
Court in Maharajkumar Kamai Singh '" Commissioner of Income-
/ax Bihar(') where this Court held that "the word 'information' in
section 34(1)(b) included information as to the true and correct
state of the law, and so would cover information as to relevant
judicial decisions". A further question was raised in that case,
namely, "whether it would be open to the Income-tax Officer to
take action under s. 34(1) on the ground that he thinks that his
orii:inal decision in making the order of assessment was wrong
without any fresh information from an external source or whether
the successor of the Income-tax Officer can act under s. 34 on the
ground that the order of assessment
passed by his predecessor
was erroneous". That question was not decided by this Court in
that case, though this Court pointed out that in construing the
scope and effect of s. 34, the High Courts had expressed divergent
views on the point. It is urged on behalf of the appellant that
the precise question left undecided by this Court in Maharajkumar Kamalsingh's case(') arises in the present case, and as there
are divergent views taken by the High Courts on that question, a
question of law did arise on the order of the Appellate Tribunal
and therefore the Tribunal should have made a reference.
In Commissioner of Income-tax
Bombay v. Sir
Mohomed
Yusuf Ismail(') it was held by the Bo:nbay High Court as far back
as 19-43 that under s. 34 a mere change of opinion on the same
facts or on a question of law or the mere discovery of a mistake
of law is not sufficient information within the meaning of s. 34 and
that in order to take action under s. 34 there must be some information as a fact which leads the Income-tax Officer to discover
that income has escaped or has been under-assessed.
The same view was taken in a later case by the Nagpur High
Court in IncomMax A pp~llate Tribunal Bombay v. B. P. Byramji
& Co.(') where it was again emphasised that a mere change of
opinion by the Income-tax Officer is no ground for taking action
under s. 3-4.
Further in Bhimraj Pannalal v. Commissioner of Incometax
Bihar(') it was held by the Patna High Court that "an order of
assessment made after investigation by a particular officer should
not at his sweet will and pleasure be allowed to be revised merely
because he changed his opinion and that there must exist something either suppressed by the assessee or a fact or a point of law
which was inadvertently or otherwise omitted to be considered by
the Income-tax Officer, before he can proceed to act under s. 34;
and a mere change of opinion on the same facts and law is not
covered by tl!at section."
-----c--------- -·---------
(') [1959] Supp. I 8.C.R. 10, (19b9) ~5 LT.I\. I.
('! (19«\ 12 I.T.R. 8.
~u~u~~
~~·~-
178
SUPREllE COURT REPORTS
(1966] SUPP. 8.0.R.
The appellant on the other hand relies on some recent decisions which show that there is some divergence of opinion in the
High Courts on this question.
In Salem Provident F1111d Society
Limited v. Commissioner of Income-tax Madras(') the Madras
High Court held that "information for the purpose of section 34
need not be wholly extraneous to the record of the original assessment. A mistake apparent on the face of the order of assessment
would itself constitute 'information'; whether someone else gave
that information to the Income-tax Officer or whether he informed
himself was immaterial."
In Commissioner of Income-tax v. Rathinasabhapathy M11da1iar(') the Madras High Court again held that "the discovery of
the Income-tax Officer after he had made the assessments that he
had committed an error in not including the minor's income in
the father's assessment was 'information' obtained after the assessment, and even though all the facts were in the original records.
the case was covered by section 34(1)(b) of the Income-tax Act and
the reassessment was not invalid, and this was not a case of mere
change of opinion on the same facts but a case of getting information that income had escaped assessment."
Jn Canara Industrial and Banking Syndicate Limited v. Commissioner of Income-tax, Mysore,(') the Mysore High Court held
that "if income had escaped assessment owing to the failure of the
Income-tax Officer to understand the true implication of a notification. and the Income-tax Officer later on finds that on a correct
interpretation of the notification the income was liable to be
assessed. he can take proceedings under section 34 for assessment
of such income; the word 'information' in section 34 is wide
enough to apply to such a case."
The last case to which reference is made is Asghar Ali
Mohammad Ali v. Commissioner of Income-tax(') wherein the
Allahabad High Court held that "the word 'information' used in
the provision covers all kinds of information received from any
person whatsoever or in any manner whatsoever; all that is required is that the Tncomo-tax Officer should learn something i.e.
he should know something which he did not know previously." It
was further held that "if there is information leading to the belief
that income has escaped assessment, the mere fact that this information has resulted in a change of opinion will not make section
34 inapplicable. A change of opinion is not sufficient for initiating proceedings under s. 34, only when such change of opinion is
the result of a different method of reasoning. and not based on
'information'".
(') (19BI) 42 I.T.I\ . .'>17.
(') (19M) 61 LT.R. 479.
(') (1964) 51 I.T.R. 204.
(') (loo.I) 62 I.T.R, 962.
A
•
B
r·
c
D
E
'
G
H
~
)
,- '
J.._'
•
i
'
-~
A
B
c
D
E
F
G
w. '.!'AX COMMR. v. IM:Pll!\IAL TOBACCO (Wanchoo, J.)
179
It does appear that some High Courts at any rate are taking
the view that a change of opinion by the Income-tax Officer in
certain circumstances will be sufficient for the purpose of s. 34(1)
(b) and will justify the issue of a notice thereunder. It may be
added that after the decision of this Court in Maharajkumar
Kamal Singh's case(') it is now settled that "information in s.
34(J)(b) included information as to the true and correct state of
law, and so would cover information as to relevant judicial decisions" and that such information for the purpose of s. 34(l)(b) of
the Income-tax Act need not be confined only to cases where the
Income-tax Officer discovers as a fact that income has escaped
assessment. To that extent the decision of the Bombay High
Court in Sir Mohamed Yusuf Ismail(') has been over-ruled. That
is why the Appellate Tribunal stated in its decision that if the
notices in the present case had been issued after the decision of
the Appellate Assistant Commissioner in the appeal from: the
assessment for the year 1959-60, there would have been information in possession of t1ie Wealth-tax Officer to justify him in issuing
notices under s. 17(b) of the Act. But in the present case the
Wealth-tax Officer issued notices before that decision was known
to him and the question is whether in the circumstances, in view
of the later decisions of the High Courts to which we have referred, a question of law arose or not. The language of s. 17(b) of
the Act is in pari materia with the language of s. 3'4(l)(b) of the
Income-tax Act and therefore the decisions under s. 34([)(b) of
the latter Act would be relevant in construing the scope and effect
of s. l 7(b) of the Act. There does appear to be divergence of opinion among the High Courts as to the meaning of the word
"information" in section 34(l)(b) of the Income-tax Act, and in
view of that divergence we are of opinion that a question of law
did arise in the present case as to the interpretation of the word
"information" ins. 17(b) of the Act and should have been referred
by the Tribunal.
We therefore allow the appeals, set aside the order of the
High Court and direct the Tribunal to state a case referring the
question of law arising in these cases in the form suggested by the
appellant. The Tribunal will be free to decide whether to refer the
matter to the High Court under s. 27(1) or to this Court under s. 27
(3A) of the Act. Costs of this Court will abide the result of the
reference.
Appeals allowed.
(') [1059] Supp. I S.C.R. 10.
"
Q-1-t. 12 I.T.R. 8.