Alladi Kuppuswami, J.:— The respondent is a non-resident sterling company whose business consists in the purchase of tobacco from India and the sale thereof outside, both directly on the respondents' own account and for commission on behalf of others. The purchases were effected through the British India Corporation Ltd., Guntur, who were the appointed agents of the assessee-company under section 43 of the Indian Income-tax Act, 1922. The agents filed returns of income on behalf of the respondent for the assessment years 1959-60 and 1960-61. The Income-tax Officer, Guntur, examined the balance-sheet and profit and loss account of the assessee for the calendar years 1958 and 1959 and completed the assessment under section 23(3) of the Indian Income-tax Act, 1922. The gross profit on the sale of Indian tobacco including commission was shown in the balance-sheet and profit and loss account of the company for the year 1958 at £11,108. As against this, the Income-tax Officer had to allow the assessee a proportionate part of the overhead expenses. The total overhead expenses of the company were £ 19,953. As the company was carrying on business not only in India but in other places, the proportionate overhead expenses for its business in India had to be worked out. The total sales of tobacco were of the value of £5,34,031 and the sales of Indian tobacco were for £ 4,48,590. Hence the overhead expenses were worked out to be As the profit was £ 11,108, the loss came to one-half of this loss, namely, £ 2,826 or Rs. 37,680, was taken to be adjusted loss being the percentage attributable to the purchasing operations in India. The same basis was adopted for the assessment year 1960-61 and after setting off the net income against the previous loss, the total loss was found to be Rs. 96,482. The assessments for the two years were made accordingly.

2. Subsequently, in the course of the assessment proceedings for 1962-63, the Income-tax Officer seems to have noticed that a mistake had been committed in the computation of overhead expenses. The return of the assessee for that year disclosed that the overhead expenses were attributable to the entire business of the company, including its business as commission agents and not merely for the business of purchase and sale of tobacco. The Income-tax Officer, therefore, realised that he ought to have first arrived at the proportionate overhead expenses in relation to the total profits, by taking the proportion which the profits bore to the total of profits and commission and then worked out the proportionate overhead expenses for the profits arising out of the Indian sales. The accounts for the year 1959-60 showed the amount of commission as £8,569 and profits as £15,410 (omitting shillings and pence). Hence, the overhead expenses attributable to profits would beThe proportionate overhead expenses for Indian profits would, therefore, be which would be equal to £10,770. Deducting this amount from the gross profit it would leave a profit of £338 and the adjusted profits would be £160 or Rs. 2,253 and this had to be substituted in the place of loss of Rs. 37,680 arrived at in the original order. Similarly, computing the overhead expenses in the same manner for 1960-61 would result in substituting a profit of Rs. 75,560 instead of loss and the assessment for the year 1960-61 had also to be varied accordingly. The Income-tax Officer, therefore, came to the conclusion that the income of the assessee had escaped assessment for the two years. Therefore, he issued notices to the statutory agents under section 148 of the Income-tax Act, 1961, on January 18, 1964. The agents contested the validity of those notices and contended that in view of the provisions of section 149(3) of the Act no notice of reassessment could be served on the agent of a non-resident assessee after the expiry of two years from the end of the relevant assessment year. As this was a valid objection the Income-tax Officer could not proceed further in pursuance of those notices.

3. The Income-tax Officer thereupon issued notice under section 148 for the two years direct to the assessee to their London address on February 29, 1964. The assessee-company filed returns on August 19, 1964, for both the years, but under protest contending that the two notices, one on the representative and the other on the person cannot be made. The Income-tax Officer overruled these objections and completed the reassessment on the non-resident assessee direct revising the computation on the lines already referred to above.

4. The assessee preferred appeals to the Appellate Assistant Commissioner. It was contended before him, firstly, that as the original assessment had been completed on the agents, the reassessment could not be made directly on the assessee. It was also contended that as all the necessary material, including the commission earned, had been furnished to the Income-tax Officer at the time of the original assessment and there was no fresh information in consequence of which the Income-tax Officer had reason to believe that the income had escaped assessment he could not reopen the assessment under section 147(b) of the Income-tax Act. It may be noticed that this objection was not raised before the Income-tax Officer by the assessee and, therefore, he had no occasion to deal with it. The Appellate Assistant Commissioner rejected both the contentions. As the revised computation was not seriously challenged on the merits and had in fact been accepted by the assessee in the subsequent years he confirmed the order of the Income-tax Officer and dismissed the appeals.

5. The assessee appealed to the Tribunal and the same contentions were urged before the Tribunal. The Tribunal was of the view that the basis of the reassessment proceedings was only a change of opinion on the part of the Income-tax Officer and he was not entitled to make a reassessment merely because he changed his opinion. They were also of the view that as the assessment was originally made on the agent he cannot again adopt the second method of direct assessment on the assessee even if it be by way of reassessment under section 147(b) of the Income-tax Act. In view of the above conclusion the Tribunal set aside the assessment of the assessee.

6. The Tribunal was of the view that two questions of law arose out of its order and, therefore, referred the following two questions of law for a decision of the High Court, namely:

“(1) Whether the Tribunal was right in holding that the reassessments being only consequent on a change as to the method of computation of the profits the initiation of proceedings under section 148 for each of the assessment years 1959-60 and 1960-61 was justified and

(2) Whether the Tribunal was right in law in holding that the original assessment for each of the years having been made on the agents, the reassessment proceedings could not be initiated against the assessee direct”

7. Question No. 1:

Under section 147(b) of the income-tax Act, 1961, under which the reassessment is sought to be made, two conditions have to be satisfied:

(a) the Income-tax Officer must have information in his possession; and

(b) in consequence of that information he must have reason to believe that the income chargeable to tax had escaped asssessment for any assessment year.

8. The question for consideration is whether in this case it can be said that the Income-tax Officer had information in his possession, in consequence of which he had reason to believe that income had escaped assessment.

9. The Tribunal was of the view that the present case is only a case where the Income-tax Officer has changed his view. He had at the time of original assessment applied his mind and come to the conclusion after verifying the figures for himself. His successor had merely changed the method of computation. In the circumstances, they held that the Income-tax Officer could not be allowed to change his mind and reopen and rake up what is purported to be a settled assessment.

10. We are, however, not inclined to agree that this is a case of merely a change of opinion on the part of the Income-tax Officer. From the facts set out earlier, it is clear that the Income-tax Officer had arrived at the proportionate overhead expenses which had to be deducted under the impression that the overhead expenses were attributable only to the business of the company consisting of purchase and sale of tobacco. Later on, the returns submitted for the year 1962-63 by the assessee made it clear that the overhead expenses shown in the balance-sheet and profit and loss account were not only attributable to their business of purchase and sale of tobacco, but also to their business as commission agents. No doubt, those returns and the accounts submitted in connection therewith related to the particular year 1962-63, but from this information it was obvious to the Income-tax Officer that the overhead expenses for the years in question were also attributable to the entire business. From that information he came to the conclusion that he had worked out the proportionate overhead expenses relating to profits made in India wrongly and thus had reason to believe that income had escaped assessment on the prior occasion. It is clear, therefore, that the information gathered from the records relating to the subsequent year, including the assessee's own return would constitute “information in the possession of the Income-tax Officer” within the meaning of section 147(b).

11. It will be useful in this connection to refer to a few of the decided cases construing section 147(b) of the Act of 1961 and section 34 of the Act of 1922. It is admitted that, so far as this aspect is concerned, there is no difference in the language of section 34(1)(b) of the old Act and section 147(b) of the new Act.

12. The Supreme Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax [1959] 35 ITR 1 SC., held, that the word “information” in section 34(1)(b) would include not only information as to a fact but also information as to law. They, however, did not express any opinion on the question whether it would be open to the Income-tax Officer to act under this section if he merely changed his mind without any information from external source and came to the conclusion that in a particular case he had erroneously allowed the assessee's income to escape assessment. It may, however, be taken as settled law at present that without any information, a mere change of opinion by the Income-tax Officer would not entitle him to reopen an assessment under section 34(1)(b) of the Act of 1922 or section 147(b) of the Act of 1961. Difficulty has been experienced, however, in deciding whether in any particular case the Income-tax Officer could be said to have acted on information, or whether he had merely changed his opinion. In this connection, a further question that frequently arises is whether the information should be wholly from an external source or whe ther it is sufficient if the information is one which the Income-tax-Officer gathered from the records of the original assessment itself. In Commissioner Of Income Tax, Gujarat v. A. Raman & C. 2, the Supreme Court held that the expression “information” in section 147(b) means instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment. They further held that the fact that the information in consequence of which proceedings for reassessment were intended to be started could have been gathered by the Income-tax Officer in charge of the assessment in the previous years is wholly irrelevant. It is sufficient if the information has come into possession of the Income-tax Officer after the previous assessment. But even if 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 but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected.

13. In this case also it was sought to be argued that the Income-tax Officer could have, by applying due diligence, come to know, even at the stage of the original assessment, that the overhead expenses shown by the assessee were attributable to the entire business including their business as commission agents and not merely to their business of sale and purchase and, therefore, it could not be said that he received that information subsequently. This contention has to be negatived, in view of the above observations of the Supreme Court in Commissioner Of Income Tax, Gujarat v. A. Raman & C.

14. In R.B Bansilal Abirchand Firm v. Commissioner of Income-tax at the time of the first assessment the Income-tax Officer's information was that the assessee was a partner in a firm called Bisesar House, but after the Tribunal and the High Court gave their decision in the proceedings for the assessment of tax of Bisesar House, the Income-tax Officer came to know that the assessee was not receiving interest in question in the capacity of a partner, but in his capacity of a financier. The Supreme Court, following the decision in Commissioner Of Income Tax, Gujarat v. A. Raman & C., held that the Income-tax Officer had jurisdiction to proceed under section 34(1)(b), in view of the information which came to him from the external source of the Tribunal and the High Court in the assessment proceedings of Bisesar House. They observed:

“It is true that, if the facts had been properly considered at the time of the first assessment, the Income-tax Officer might have discovered the correct position and might have come to the conclusion that the assessee-firm was not receiving interest as a partner, but this circumstance that such a decision could have been arrived at does not mean that, at the time when the Income-tax Officer started proceedings under section 34(1)(b), he was not acting on information received from the decisions of the Tribunal and the High Court in the assessment proceedings of Bisesar House. It was not a case where the Income-tax Officer on his own initiative and on the material which was before him at the time of the first assessment changed his opinion and came to a different conclusion. The correct conclusion was brought to his notice by the decision of the Tribunal and the High Court and that must be held to be information, as a consequence of which he came to believe that the provisions of section 34(1)(b) were attracted.”

15. In Assistant Controller of Estate Duty v. Mir Osman Ali Khan Bahadur the opinion of the Central Board of Revenue regarding the correct valuation of securities for purposes of estate duty, expressed in an appeal preferred by the accountable person, was held to be “information” within the meaning of section 59 of the Estate Duty Act, 1953, as amended by the Estate Duty (Amendment) Act of 1958.

16. That section is on the same lines as section 34(1)(b) of the Income-tax Act of 1922 and section 147(b) of Act of 1961. The Supreme Court observed:

“When the expression ‘information’ is understood in the sense of instruction or knowledge derived from an external source concerning facts or particulars or as to law relating to a matter bearing on the assessment, it is difficult to see how determination of valuation for the purpose of assessment of estate duty would not squarely fall within the meaning of the expression ‘information’ in the context in which it occurs in section 59 of the Act.”

17. This court had to consider a similar question in V.S.L Narasimha Rao v. Assistant Controller of Estate Duty. That case also related to section 59 of the Estate Duty Act. The two pieces of information which led to the reassessment were: (1) deposition of the deceased in which he had given the details of cost incurred in constructing two houses, and (2) the order of the Appellate Assistant Commissioner made subsequently dealing with the question in regard to the property. It was held that these two pieces of information came within section 59(b) of the Act. It was observed that the test is to see whether the Controller is really acting in pursuance of an information which is received by him from an external source for the first time after he had parted with the assessment proceedings or is it a case where the officer happens to change his opinion or holds a different opinion from that held by his predecessor. This court pointed out that once the information is gathered subsequently it may even consist of a different view taken of the facts or law on record by a higher tribunal on appeal from the Income-tax Officer's decision.

18. Sri Dasaratharama Reddy, learned counsel for the assessee, relied on the decision in Commissioner of Wealth-tax v. Imperial Tobacco Co. of India Ltd. [1966] 61 ITR 461 SC. In that case the assessee was assessed to wealth-tax for certain years after deducting provision for contingencies, but for a subsequent year the Wealth-tax Officer disallowed the claim for deduction. Thereafter, he issued notices, for the previous years, for reassessment by including in the total wealth the amounts which had been formerly allowed as deduction. Ultimately, the Tribunal rejected the application for reference. The Supreme Court held that, as there was divergence of opinion among the High Courts on the question as to what constitutes “information”, a question of law did arise and the matter should have been referred to the High Court. Beyond merely referring to the decisions of the various High Courts to show that there was difference of opinion as to the meaning of the expression “information”, the Supreme Court did not render any decision on that aspect.

19. The next decision that was relied on was Y. Rajan v. Income-Tax Officer, M.P.P Circle, (A) Ward, Hyderabad . In that case, the assessee's wife submitted returns, in which she claimed that she had constructed a house from her own income. This was accepted and her income was assessed. Subsequently, the Income-tax Officer proceeded to reopen the assessment of the husband for the previous year by including therein the investment of construction of the house on the footing that it belonged to him. It was pointed out that while on the one hand holding that the investment made by the wife is her own investment and the income derived therefrom is her income and on that footing assessing her to tax for the relevant years, the Income-tax Officer cannot, on the other hand, rationally come to the conclusion that this is “information” which furnishes him the ground and vests him with jurisdiction to deem the investment and the income derived therefrom as that of the petitioner which had escaped assessment. We do not think that this decision is of any assistance to the petitioner, as in that case the court held that there was no information apart from the petitioner's wife's own return, but that information was to the effect that the house was constructed out of her own income, which did not entitle the officer to reopen the assessment of the husband.

20. Another decision that was relied on is that of the Gujarat High Court in Kasturbhai Lalbhai v. R.K Malhotra, Income-tax Officer . In that case it was held that “information” as to the correct law derived from the audit department which audits the work of the income-tax department is not “information” as it is not competent to declare the correct state of law. The High Court observed that the “information” must 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”. Mere change of opinion on the part of the Income-tax Officer cannot con stitute information. If the information is as to any fact, it may be received from any person who knows the fact, and it cannot be limited to any particular person, body or authority since such fact may be within the knowledge or possession of anyone and it may be received by the Income- tax Officer from any source. But in regard to information as to the correct state of law, the external source from which it may be received must necessarily be a person or body or authority competent and authorised to pronounce upon the law.

21. In the present case, however, we are concerned only with “information on a question of fact, namely, whether the overhead expenses were attributable to the entire business, or only to the business of purchase and sale. The above decision is, therefore, of no assistance to the petitioner. On the other hand, the observations in so far as they relate to” information” on questions of fact would support the case of the department.

22. Sri P. Rama Rao drew our attention to a decision in Salem Provident Fund Society Ltd. v. Commissioner Of Income-Tax, Madras. in which it was held that, to constitute “information” within the meaning of section 34 of the Income-tax Act of 1922, it is not necessary that it must be wholly extraneous to the record of the original assessment. A mistake apparent on the face of the order of assessment itself would constitute “information”. It was observed:

“We are unable to accept the extreme proposition, that nothing that can be found in the record of the assessment, which itself would show escape of assessment or under-assessment, can be viewed as information which led to the belief that there has been escape from assessment or under-assessment. Suppose a mistake in the original order of assessment is not discovered by the Income-tax Officer himself on further scrutiny but it is brought to his notice by another assessee or even by a subordinate or a superior officer, that would appear to be information disclosed to the Income-tax Officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the Income-tax Officer in such circumstances is in one sense extraneous to the record. It is difficult to accept the position that while what is seen by another in the record is ‘information’ what is seen by the Income-tax Officer himself is not information to him. In the latter case he just informs himself. It will be information in his possession within the meaning of section 34. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or underassessment.”

23. This extreme view, in our opinion, runs somewhat contrary to the view expressed by the Supreme Court and other High Courts that the “information” must be from an extraneous source. We are anyhow not concerned with that question in this case, as we have held that the “information” which the Income-tax Officer got was not merely from the record relating to the assessment which he sought to re-open, but from the record of the subsequent years. In a later decision, namely, Sankaralinga Nadar v. Commissioner of Income-tax , it was held that it was well settled that an action under section 34 of the Act cannot be justified on the ground of a mere change of opinion regarding chargeability of income on the part of the reassessing officer different from his own previous opinion or from that of his predecessor in office. It was observed:

“There can be no doubt of the soundness of this principle of law as otherwise the assessee might become the victim of the freaks of changes of opinions of the officers from time to time. But income which escapes assessment as a result of the lack of vigilance of the Income-tax Officer or due to inadvertence or negligence or the perfunctory performance of his duties without due care and caution, can well be within the ambit of section 34(1)(b) provided the requirements of that section are satisfied.”

24. In Commissioner of Income-tax v. Rathinasabapathy Mudaliar also the Madras High Court held that, while a mere change of opinion does not justify a reopening of the assessment, that the information was gathered from the records of the original assessment itself does not make it any the less information which led the Income-tax Officer to believe that the income had escaped assessment.

25. From a review of these decisions bearing on this aspect, the following principles emerge:

(a) The Income-tax Officer must have information in his possession; (b) that information must have been obtained subsequent to the order of assessment; (c) it may be in regard to a fact or to a law; (d) it should, however, be from an extraneous source; (e) there is some difference of opinion as to whether the external source would include the records of the original assessment itself; (f) if the information satisfies the above requirements it does not matter whether such information could have been acquired by the Income-tax Officer even at the time of the original assessment itself, if he had exercised due diligence; and (g) it is, however, settled law that a mere change of opinion on existing facts would not entitle the Income-tax Officer to re-open the assessment. Applying these principles to the present case, we are of the view that the conditions necessary for invoking section 147(b) are present. The Income-tax Officer got the information subsequent to the assessment, namely, from the records of the subsequent year that the overhead expenses relate to the entire business, including the business as commission agents and not merely to the business of purchase and sale. It is true that this information he could have acquired if he had exercised due diligence at the time of the original assessment itself, but as stated by the Supreme Court, that consideration is not relevant. This is not a case of mere change of opinion. We, therefore, answer the first question of the Tribunal, that the Tribunal was not right in stating that the reassessment proceedings were not justified.

26. Question No. 2:

The contention of the assessee is that the original assessment for each of the years having been made on the statutory agent, the reassessment proceedings could not be initiated against the assessee direct.

27. Under section 161 read with section 163 the statutory agent of a nonresident is a representative assessee within the meaning of section 160 and he is subject to the same duties, responsibilities and liabilities as if the income in respect of which he is a representative, were income received by or accruing to or in favour of him beneficially and shall be liable to assessment in his own name in respect of that income. Section 160(2) provides that every representative assessee shall be deemed to be an assessee for the purpose of the Act and the second part of section 161(1) says that any assessment shall be deemed to have been made in his representative capacity only and the tax shall be levied upon and recovered from him in like manner and to the same extend as it would be leviable upon and recoverable from the person represented by him.

28. In view of the section, the original assessment was made on the statutory agent. Subsequently, when the assessment was sought to be re-opened under section 147(b), notice had to be given under section 148. Under section 149(3) it is provided that if the person on whom notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year. In this case, as two years had elapsed, notice could not be given to the agent under section 149(3). Therefore, notice was given direct to the principal and reassessment proceedings were initiated directly against the principal. It is argued on behalf of the assessee that, as the original assessment was made against the agent, it is not open to initiate the reassessment proceedings against the principal. It is submitted that the department has an option to make the assessment either against the agent or against the principal and it is not open to them to make assessments against both and once they have exercised the option by assessing the agent, it is not open to them to start reassessment proceedings against the principal. We do not find any warrant for this argument in any of the provisions of the Income-tax Act. It is true that the department cannot make the assessment on both the agent and the principal. If they exercise the option of making the assessment on the agent, the authorities cannot make an assessment on the principal. But it does not follow that the reassessment proceedings cannot be started against the principal instead of on the agent. Section 160(2) makes it clear that the agent who is the representative assessee shall be deemed to be an assessee for the purpose of the Act. Hence, an assessment made against the agent is the assessment against the principal. Section 2(7)(b) also states that “assessee” means a person by whom any tax or any other sum of money is payable under this Act and includes every person who is deemed to be an assessee in default under any provision of the Act. Section 2(8) states that “assessment” includes reassessment. Section 166 states that nothing in the foregoing sections in the chapter shall prevent either the direct assessment of the person on whose behalf or for whose benefit income therein referred to is receivable, or the recovery from such person of the tax payable in respect of such income. It follows from a reading of all these sections together that, at the time of reassessment, again there is an option on the part of the department either to proceed against the agent or against the principal. The department, therefore, in this case chose to initiate reassessment proceedings against the principal. It is true that the remedy against the agent became barred on the lapse of two years by reason of section 149(3), but that does not in any way prevent the authorities from initiating proceedings for reassessment against the principal. No decision dealing with this question has been brought to our notice. Sri Dasaratharama Reddy, however, drew our attention to the decision in Commissioner of Income-tax v. Murlidhar Jhawar and Puma Ginning and Pressing Factory, in which it was held that the partners of an unregistered firm might be assessed individually or they might be assessed collectively in the status of an unregistered firm, but the Income-tax Officer cannot seek to assess the same income twice, once in the hands of the partners and again in the hands of the unregistered firm. We do not think that this decision has any application to the facts of the case, nor the decision in Commissioner of Income-tax v. Kanpur Coal Syndicate in which it was held that section 3 of the Act gives an option to assess the total income of either an association of persons or the members of the association individually. On the other hand, in 5. Inder Singh Gill v. Commissioner of Income-tax the original assessment was on the agent and the reassessment proceedings were initiated against the principal, as in the present case. It is true, no objection was raised that such a procedure could not be adopted and no decision rendered. But it seems to have been assumed that reassessment proceedings could be taken against the principal even though the original assessment was made against the agent.

29. For all the above reasons, we answer the second question by stating that the Tribunal was wrong in holding that the reassessment proceedings could not be initiated against the assessee direct in this case.

30. The parties will bear their own costs of the reference.