Khosla, J.:— This is a reference by the Income-tax Appellate Tribunal under Section 66(1) of the Income-tax Act. The following question has been referred for our decision:—
“Whether in the circumstances of the case the intimation as to figures received from the Income-tax Officer, Ahmedabad, could be termed a definite piece of information which the Income-tax Officer discovered so as to justify the issue of a notice under Section 34”.
2. The matter arose in the following manner.
3. The firm Tulsi Ram Sham Sundar is a firm dealing in cloth at Amritsar. They also own a business C.L Nayyer & Sons which do business in yarn. This firm has interest in three other registered partnership firms (a) Tulsi Ram Karam Chand of Amritsar, (b) Tulsi Ram Chuni Lal of Bombay and (c) Tulsi Ram Kanhaya Lal of Ahmedabad. In making their returns for the income accruing during the year 1943–44 the firm declared the income, from their cloth firm, Tulsi Ram Sham Sundar, at Rs. 34,061. The returns also made mention of the fact that the firm had a share or interest in three other registered firms (the names of which have been mentioned above). The assessees' share of the income in the firms (a) Tulsi Ram Karam Chand of Amritsar and (b) Tulsi Ram Chuni Lal of Bombay was declared and with respect to the third firm, Tulsi Ram Kanhaya Lal of Ahmedabad the assessees said that they had a 7/16th share in the business but the exact figure of their share was not available and should be obtained from the Income-tax Officer, Ahmedabad. Having this return before him the Income-tax Officer proceeded to make his assessment. He added up the income of the cloth business with the share of the income as declared in the other two registered partnership firms. He, however, omitted or forgot to take into consideration the income from the Ahmedabad firm, although it appears that he did make an enquiry from the Income-tax Officer, Ahmedabad, as to what the assessees share of the income of that firm was. The assessment was made and demand orders were sent. Subsequently the query made from the Income-tax Officer of Ahmedabad brought a reply and the Income-tax Officer, Amritsar, realized that he had forgotten to take this figure into consideration whole assessing the income-tax due. He took the view that this part of the assessees income had escaped assessment and could be revised by having recourse to proceedings under Section 34 of the Indian Income-tax Act. He accordingly sent a notice to the assessees under Section 34 and revised the original assessment by adding the Ahmedabad income. The assessees appealed to the Appellate Assistant Commissioner, but the appeal was dismissed. The assessees objection was that their case was not covered by the provisions of Section 34 inasmuch as the Income-tax Officer had not discovered the evasion in consequence of any definite piece of information received by him after the original assessment was completed. This contention was rejected by the Income-tax Appellate Tribunal on appeal but on an application under Section 66(1) of the Income-tax Act the Tribunal agreed to refer the question noted above for our decision.
4. The contention of Mr. Gosian, who appeared on behalf of the assessees, is that in their original returns the assessees revealed the fact that they had a share in the Ahmedabad firm. They even stated that the extent of their share was 7/16th. The Income-tax Officer was therefore in full possession of all the relevant facts and all he had to do was to make an enquiry from the Income-tax Officer, Ahmedabad, and on receipt of his reply make a complete assessment. Owing to negligence or inadvertence the Income-tax Officer either did not write to Ahmedabad in time or did not wait for a reply from there and proceeded to make his assessment without taking into consideration the Ahmedabad income. He made a complete assessment which could not be revised unless the case was covered by Section 34. The subsequent receipt of a reply from Ahmedabad could not be said to amount to a definite piece of information as the figures received by him were not in the nature of a piece of new or fresh information which came in possession of the Income-tax Officer. He had already set in motion the process which would enable him to make a full and complete assessment. Therefore the discovery of evasion was not in consequence of the figures received from Ahmedabad. Indeed, it was in consequence of the statement made by the assessees themselves in the original returns.
5. On the other hand, it was contended by Mr. Sikri, who appeared on behalf of the Commissioner of Income-tax, that the figures received from Ahmedabad constitute a definite piece of information. Section 34 floes not say anything about new or fresh information. All it requires is that the Income-tax Officer should have received a definite piece of information which would lead him to believe that sortie income had escaped assessment and these conditions were all fulfilled in the present instance. He also argued in the alternative that the declaration of the assessees in their original returns could be looked upon as a definite piece of information which had come into the possession of the Income-tax Officer and as a consequence of this information when the reply from Ahmedabad came, the Income-tax Officer was led to believe that some of the assessees' income had escaped assessment. The second argument, however, has very little force in view of the wording of the question which has been referred to us. The Tribunal appears to assume that the statement of the assessees in the original returns Could not be treated as “a definite piece of information” for the purposes of Applying Section 134 and the question as formulated relates only to the figures received from Ahmedabad. Therefore the sole question for our decision is whether these figures or the reply received from Ahmedabad amounts to a definite piece of information.
6. Counsel have drawn our attention to a number of reported cases, Fazal Dhala v. Commissioner of Income-tax, Bihar and Orissa [1944] 12 I.T.R 341., Badar Shoe Store v. Commissioner of Income-tax [1946] 14 I.T.R 431 and Income-tax Appellate Tribunal, Bombay v. B.P Byramji & Co. [1946] 14 I.T.R 174 In almost all these cases the point stressed was that the Income-tax Officer must have acted on definite information and not on any vague suspicion or realization of the fact that he had taken a wrong view of the law. In Income-tax Appellate Tribunal, Bombay v. B.P Byramji & Co., for instance, the learned Judges took the view that a mistaken view of the law while making original assessment does not amount to “definite information” within the meaning of Section 34. In Fazal Dhala v. Commissioner of Income-tax, Bihar and Orissa, in the original returns the assessee mentioned that he had some income from a branch in Madras. The income from the Madras branch was not included by the income-tax Officer while making his assessment, but subsequently he sent him a notice under Section 34. In this notice he did not inform the assessee that it was intended to assess the Madras branch, although the assessee was informed that he had partially escaped assessment. The learned Judges of the Patna High Court took the view that the Income-tax Officer had not acted on any definite information because he had already in his possession the knowledge that the assessee derived some income from the Madras branch and possessing this knowledge had made a complete assessment. No hew information had been received by him subsequently and so he was not entitled to revise the assessment under the provisions of Section 34. In Badar Shoe Store v. Commissioner of Income-tax, the learned Judges laid stress on the phrase “definite information” and observed that this phrase had been used in Section 34 to protect the subject against the assault by the Income-tax Officer based on mere suspicion. In view of these authorities it appears to me that the correct interpretation of Section 34 is that the evasion or escape of income-tax must be discovered as a consequence of a fresh piece of definite information received by the Income-tax Officer and where the Income-tax Officer has already completed an assessment upon certain data he cannot use the same data for revising assessment under Section 34. The figure received from Ahmedabad in the present case cannot be said to constitute fresh information as they were received in reply to a letter which the Income-tax Officer had already sent and this letter was sent as a consequence of the declaration made by the assessees themselves, namely that they had a 7/16th share in the Ahmedabad firm. I would therefore answer the question referred to us in the negative and allow Rs. 100 as costs to the assessee.
Harnam Singh, J.:— I agree.
8. Reference answered accordingly.