S.P Goyal, J.:— The assessee is a private limited firm engaged in the manufacture and sale of electrical goods, such as switches and plugs. It appointed on April 1, 1965, M/s. Kay Engineering Sales Corporation, as their sole selling agents on a payment of 5 per cent, commission on the net sales of the products manufactured by the assessee after deducting trade discounts, freight, sales tax, distributor's commission, etc. During the accounting year ending March 31, 1966, the assessee claimed a deduction of Rs. 1,27,313 alleged to have been paid to the sole selling agents. During the course of the original assessment proceedings, on enquiry by the ITO, the assessee by its detailed letter dated April 22, 1967, furnished the complete details running into 60 pages about the payment of commission and its justification. The claim was accepted and the assessee was allowed deduction by the ITO, vide assessment order dated September 28, 1968. Later on, while examining the assessee's accounts for the next assessment year, the ITO on the basis of the following material formed the opinion that the sole selling agency firm did not render any service to the assessee and hence the income to the extent of Rs. 1,27,313 paid to the said firm by the assessee in the shape of commission had escaped assessment on account of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment:

(a) T.A Bills of Shri K.S Khosla, managing partner of M/s. Kay Engineering Sales Corporation which were impounded under s. 131 were false to the extent that he was shown on tour on certain dates on which he was actually present in Kapurthala and attended the directors' and shareholders' meetings of the company.

(b) The receipt and despatch books of the company which were inspected during the course of proceedings for 1967-68 showed that no correspondence was exchanged between the so-called sole selling agents and the company.

(c) It was found that the existence of Shri S.K Puri and Yodha Ram, who are said to be the two travelling agents employed by the firm and submitted daily progress reports, was doubtful as the assessee had failed to furnish even the basic information about them.

(d) The assessee's claim that M/s˜ Kay Engineering Sales Corporation had issued circulars, letters, etc., to its distributors was doubtful and was not supported by any evidence.

(e) Shri K.S Khosla, who was working as director-in-charge (sales) in the account year relevant to the assessment year 1965-66, continued to work in this year as well and drew his salary and T.A bills. This was in addition to the payment made by the assessee to M/s. Kay Engineering Sales Corporation on account of overriding commission.

2. He accordingly issued a notice under s. 148 of the I.T Act to the assessee which was served on February 2, 1971. In response to the said notice, the assessee filed another return of income on March 26, 1971, and also challenged the validity of the notice. The ITO, however, overruled the objection of the assessee and reassessed its income by including the amount of Rs. 1,27,313. The assessee having failed in the appeal before the AAC went in second appeal which was allowed by the Tribunal, vide order dated October 31, 1975, holding that there was no failure on the part of the assessee to disclose fully and truly the material facts and, therefore, the reopening of the proceedings by invoking the provisions of s. 147(a) was not justified. On behalf of the department an argument was raised that if the facts found did not satisfy the conditions of cl. (a), the reopening of the assessment can be sustained under cl. (b) of s. 147 of the I.T Act, but the contention was rejected on the ground that the proceedings have been expressly reopened under s. 147(a) and, therefore, cl. (b) could not be attracted to this case. Dissatisfied with the said order of the Tribunal, the revenue moved an application under s. 256(1) of the I.T Act, and got the following two questions referred to this court:

“(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in not allowing the department to raise the question of applicability of section 147(b) of the Income-tax Act, 1961?

(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the assessment proceedings were not validly reopened under section 147(a) for the assessment year 1966-67?”

3. As regards question No. 1, it is not disputed between the learned counsel for the parties that the ITO is not required to specify the clause of s. 147 under which the assessment is proposed to be reopened in the notice issued under s. 148. However, according to the learned counsel for the assessee, when the assessee appears in response to that notice and raises an objection regarding the legality of the notice, the ITO necessarily has to specify the clause of s. 147 while rejecting the objection raised. In the present case, according to him, the reason given was that the assessee had failed to disclose fully and truly all material facts necessary for the assessment during the course of the original assessment and, therefore, action was taken under cl. (a) of s. 147. The order of the ITO was upheld by the AAC also by invoking the provisions of cl. (a) of s. 147 and not cl. (b). The argument of the Revenue before the Tribunal that the ITO reopened the case under s. 147(b) was, therefore, rightly rejected. The question which still remains to be determined is whether the Tribunal was justified in law in not allowing the department to invoke the provisions of s. 147(b), to support the reopening of the assessment. According to Mr. Awasthy, learned counsel for the Revenue, the field of operation of the two clauses is not mutually exclusive and, instead, more often than not, overlapping. Under a given set of circumstances, according to him, the case may fall under both the clauses or, in the alternative, under either one of them. He, however, does not dispute that if the assessment has been reopened under cl. 147(b) it cannot be justified under s. 147(a) because, under the latter clause, action cannot be taken unless certain mandatory requirements are complied with. But if the assessment has been reopened under cl. (a) and, on the facts relied upon, it is not possible to hold that there was any failure on the part of the assessee to disclose fully and truly all material facts, it would still be open to the Tribunal to sustain the reassessment if those facts fulfilled the requirements of cl. (b) because all that is required for the applicability of cl. (b) is that the ITO in consequence of information in his possession has reason to believe that income chargeable to tax has escaped assessment for any assessment year. In support of this contention reliance has been placed on the three decisions of the Calcutta High Court in Mriganka Mohan Sur v. CIT, [1974] 95 ITR 503, ITO v. Eastern Coal Co. Ltd., [1975] 101 ITR 477 and Bhupatrai Hirachand v. CIT, [1977] 109 ITR 97.

4. Mr. G.C Sharma, learned counsel for the assessee, on the other hand, argued that the jurisdictions conferred upon the ITO under the two els. (a) and (b) of s. 147 were separate and exclusive to each other. Therefore, according to him, when the ITO has chosen to take action under either of the two clauses it would not be open to the Tribunal to sustain the order of reassessment under a different clause. Reliance for this proposition was placed on the judgment of R.S Pathak J., as he then was, in Raghubar Dayal Ram Kishan v. CIT, [1967] 63 ITR 572 (All) and a judgment of the Supreme Court in Johri Lal (Huf), Agra v. Commissioner Of Income Tax., [1973] 88 ITR 439. After hearing the learned counsel for the parties at length and going through the cases relied upon by them we are of the opinion that this question has to be answered in the negative, in favour of the Revenue and against the assessee.

5. In Johri Lal's case the question before the Supreme Court was as to whether the proceedings which were commenced by notice under s. 34(1)(b) (equivalent to s. 147(b)) could have been converted into proceedings under s. 34(1)(a) of the I.T Act, by the Appellate Tribunal. It was answered in the negative. The reasons given for this view were that before taking action under cl. (a), the ITO is required to form an opinion that because of the failure on the part of the assessee to disclose fully and truly all the material facts, the income chargeable to income-tax has escaped assessment and without the formation of this opinion he will not have jurisdiction to initiate proceedings under that clause. Further, the said clause requires the ITO to record his reasons for taking action thereunder and obtain the sanction of the CBR or the Commissioner, as the case may be. These requirements possibly could not have been fulfilled if the ITO proceeded on the basis of s. 34(1)(b). Therefore, it would not be open to the Tribunal to justify the proceedings taken by the ITO under s. 34(1)(a). Such mandatory condition is required to be complied with before action is taken under s. 34(1)(b) (now s. 147(b)). If the information with the ITO is not sufficient to form an opinion that there has been some failure on the part of the assessee to disclose fully and truly all the material facts, still the information may be sufficient to form the opinion that the income chargeable to tax has escaped assessment and there would be no impediment in the way of the Tribunal to uphold the action under the latter clause. This decision is, therefore, of no help to the assessee.

6. In Raghubar Dayal Ram Kishan's case, [1967] 63 ITR 572 (All), Pathak J., as he then was, gave three reasons for holding that if the action purports to have been taken by the ITO under s. 34(1)(a), it would not be open to the Tribunal to sustain the same under s. 34(1)(b). The first reason given was that the provocation for invoking the jurisdiction is distinct in each case and it is the ITO in whose judgment the Legislature has reposed confidence for the purpose of deciding whether the proceedings for assessing and reassessing the escaped income should be taken under cl. (a) or (b) that the notice issued by the ITO has to specify as to under which clause it is being issued and that the limitation for the notice under the two clauses is different. With due respect to the learned judge, none of these reasons, in our view, has any substance. As already noticed above, on the given set of facts constituting the opinion, it may not be reasonably possible to hold that the income chargeable to tax has escaped assessment because of the failure on the part of the assessee to disclose fully and truly-all material facts but still on those very facts an opinion may be reasonably formed that income chargeable to tax has escaped assessment. The second reason given, even according to the learned counsel for the parties, has no significance because in the notice issued it is not necessary to specify the particular clause of s. 147 under which it is issued. The third reason has hardly any bearing on the disputed problem. If the notice is issued within the period of four years, resort can be had to either of the two clauses by the ITO and if it is issued beyond that period, cl. (b) cannot be invoked under any circumstance and proceedings can be taken only under cl. (a). None of the reasons given in this decision, therefore, can justify the view that if the proceedings are purported to have been taken by the ITO under cl. (a) of s. 147, the same cannot be sustained by invoking cl. (b) if the proceedings had been initiated within a period of four years. On the other hand, in Mriganka Mohan Sur's case, [1974] 95 ITR 503, a Division Bench of the Calcutta High Court, after noticing the said two decisions relied upon by the learned counsel for the assessee, went on to say that where the reassessment made under s. 34(1)(a) is set aside by the Tribunal, it is open to the Tribunal to treat the reassessment as one properly made under s. 34(1)(b) provided that all the necessary conditions under s. 34(1)(b) are satisfied. The reasons given for this view would be discernible from the following passage (p. 508):

“Section 34, as mentioned hereinbefore, is a machinery section and it deals with the power of the Income-tax Officer to reopen and reassess certain income and the situations in which such power of reopening and reassessment can be used have been prescribed in the two different clauses of sub-section (1) of section 34. It appears to us that these two clauses deal with the power of reopening and of making reassessment and it covers different contingencies and situations. Clauses (a) and (b) do not deal with separate jurisdictions; both deal with cases of income escaping assessment. It is also necessary to examine whether clause (a) and clause (b) are mutually exclusive. It is true that these two clauses are mutually exclusive from one point of view, that is to say, where information is of such a nature as to lead to the formation of the belief that there was failure or omission on the part of the assessee to disclose fully and truly all material facts, that information must come always within clause (a) of sub-section (1) of section 34. Action in such cases must be taken within the condition prescribed under clause (a) of sub-section (1) of section 34. But if the information is not sufficient to lead to the formation of the belief or if there was no such information at all that there was failure or omission on the part of the assessee to disclose fully and truly all material facts but there was information that there was escapement of income or under-assessment of the income provided it is within four years of the completion of the original assessment and the belief to that extent is reasonably formed, then action under clause (b) of sub-section (1) of section 34 can be taken.”

7. While differing with the view of Pathak J., in Raghubar Dayal Ram Kishan's case, [1967] 63 ITR 572 (All), the Bench further observed (p. 509 of 95 ITR):

“With respect it may be pointed out that the separate proviso limiting the conditions under which notices under clause (a) or clause (b) can be issued and assessment has to be completed do not indicate that clause (a) or clause (b) deal with two separate jurisdictions. It is true that there are separate limitations prescribed for different contingencies but some of the conditions are common and provided the conditions which are common are all fulfilled and the other limitation of the other clause is also fulfilled, then action taken in respect of one might be justified with reference to the powers under the other clause. In the aforesaid decision, Manchanda J. observed that even though the Income-tax Officer might have chosen to make the assessment under the more stringent and onerous provisions of section 34(1)(a) there was nothing to prevent the appellate court from invoking section 34(1)(b) provided the pre-requisite conditions were satisfied and these were found on record. The learned judge further observed that section 34 was not a charging section. It merely provided a machinery whereby an income which had escaped assessment or had been underassessed in the relevant assessment years could be brought into the net work of taxation. With respect, we are in agreement with the aforesaid view expressed by Manchanda J.”

8. Similar view was taken by two other Benches of the same court in Eastern Coal Co. Ltd.'s case, [1975] 101 ITR 477 (Cal) and Bhupatrai Hirachand's case, [1977] 109 ITR 97 (Cal). We fully agree with the reasons given in Mriganka Mohan Sur's case, [1974] 95 ITR 503 (Cal) and, respectfully following the same, hold that the Tribunal erred in not allowing the Revenue to support the reassessment by invoking the provisions of s. 147(b). The first question is accordingly answered in the negative against the assessee and in favour of the Revenue.

9. On the second question, the Tribunal held that according to the principles laid down by the Supreme Court in Commissioner Of Income Tax, Calcutta v. Burlop Dealers Ltd.† , [1971] 79 ITR 609, the duty of the assessee is to disclose the primary facts and not to point out the principle of chargeability to income-tax or the inference which could possibly be drawn from the disclosure of these primary facts and, applying this principle, it further observed:

“Now, in the present case, the assessee disclosed fully and truly all material particulars with regard to the payment of commission made to the sole selling agents and the Income-tax Officer was satisfied in the course of the original proceedings about the allowability of the said commission. In these circumstances, the stand taken by the successor Income-tax Officer with regard to the allowability to the sole selling agents merely amounts to a change of opinion. There was no material on record to suggest that the assessee's income had escaped assessment due to its omission or failure to disclose fully and truly all material facts necessary for the assessment. In view of the above discussion and having regard to all the facts and circumstances of the case, we are of the opinion that the Appellate Assistant Commissioner was not justified in coming to the conclusion that the proceedings were validly reopened under section 147(a) of the Income-tax Act, 1961.”

10. Though the law was correctly enunciated by the Tribunal, it erred in its application of it (the law) to the facts of the present case on the ground that the assessee had disclosed fully and truly all the material particulars with regard to the payment of the commission made to the sole selling agents whereas during the course of the assessment for the latter years, the ITO on the basis of the fresh material discovered, found that the assessee had not truly disclosed all the material particulars with regard to the services rendered by the sole selling agents and that the corporation was nothing but a legal device to evade the tax which was due from the assessee. Therefore, even if the assessee had made a full disclosure of the material facts, the same having been found to be untrue later, on the basis of the discovery of new facts, it cannot be said that the assessee disclosed fully and truly all the material particulars and that the reopening of the assessment is the result of a mere change of opinion.

11. The Tribunal for its view relied on Burlop Dealers Ltd.'s case, [1971] 79 ITR 609 (SC). In that case the assessee had disclosed a profit of Rs. 1,75,876 from a joint venture in plywood chests and claimed to have paid half the sum to one “R” under an agreement, dated October 7, 1948, for financing the transactions in the joint venture. The ITO brought to tax only Rs. 87,937 as the profits earned from the said venture. For the next assessment year, the respondent has similarly again claimed that it had paid half the profits from the joint venture to “R” but, on an examination of the transaction, the officer held that the agreement of October 7, 1948, was a got-up device to reduce the profits and taxed the entire profits from the venture-which was ultimately upheld. Meanwhile, the officer issued a notice under s. 34(1)(a) for reopening the earlier assessment and brought to tax the sum of Rs. 87,937, allowed as having been paid to R. The Tribunal, however, held that the respondent had produced all the relevant accounts and documents for completing the assessment and it was under no obligation to inform the officer about the true nature of the transactions and directed that the said amount be excluded. Having failed to get a reference made either under cl.(1) or cl. (2) of s. 66, the Revenue took the matter to the Supreme Court but its appeal was rejected and the view of the Tribunal was confirmed holding that the respondent had disclosed its books of account and evidence from which material facts could be discovered; it was under no obligation to inform the ITO about the possible inferences that might be raised against it. It was for the officer to raise such an inference and if he had not done so in the original assessment, the income that escaped assessment, could not be brought to tax under s. 34(1)(a). It was further observed that a mere production of books of account or other evidence from which material facts could with due diligence have been discovered does not necessarily amount to disclosure within the meaning of s. 34(1) but where on the evidence and the material produced, the ITO could have reached a conclusion other than the one which he has reached, a proceeding under s. 34(1)(a) will not lie merely on the ground that the ITO has raised an inference which he may later regard as erroneous.

12. From the above observations it is evident that the assessment was sought to be reopened on a different opinion having been formed on the same material which was before the ITO at the time of the original assessment and no new facts had been discovered from which the ITO could form an opinion that the facts disclosed earlier were untrue, unlike in the present case. Reliance on this case, therefore, by the Tribunal was wholly misplaced. The learned counsel for the assessee, apart from Burlop Dealers Ltd.'s case, [1971] 79 ITR 609 (SC), also relied on several other Supreme Court cases, i.e, ITO v. Madnani Engineering Works Ltd., [1979] 118 ITR 1 (SC), Parashuram Pottery Works Co. Ltd. v. ITO, [1977] 106 ITR 1 (SC), ITO v. Lakhmani Mewal Das, [1976] 103 ITR 437 (SC), ITO v. Nawab Mir Barkat Ali Khan Bahadur, [1974] 97 ITR 239 (SC) and several other decisions of the High Court such as Dwarka Dass and Brothers v. ITO, [1979] 118 ITR 958 (Delhi), Sirpur Paper Mills Ltd. v. ITO, [1978] 114 ITR 404 (AP), Kashmir Agencies Pvt. Ltd. v. ITO, [1978] 112 ITR 563 (Cal) and Sujir Ganesh Nakak & Co. v. ITO, [1976] 104 ITR 524 (Ker). It is not necessary to notice in detail the facts and the law laid down in these cases because in none of them there was any fresh material discovered by the ITO which showed that the disclsoure of the primary facts by the assessee was untrue. The reopening of the assessment was held to be bad in these cases because the ITO had sought to draw different inferences on the same set of facts which were before him at the time of the revised assessment. These cases are consequently distinguishable and have no bearing on the facts of the present case. On the other hand, so far as this court is concerned, the law has been settled by two Division Bench decisions, in Hazi Amir Mohd. Mir Ahmed v. CIT, [1977] 110 ITR 630 (P & H) and Civil Writ Petition No. 3671 of 1971 (Kirpa Ram Ramji Dass v. ITO) decided on November 20, 1979 (since reported in [1982] 135 ITR 68 (P & H)). In the former case, it was held (headnote):

“That if the Income-tax Officer has reason to believe that primary facts were not fully disclosed or that they were not truly disclosed, he may reopen the assessment. This he may do either because fresh facts come to light which were not previously disclosed or because new light thrown on facts previously disclosed tends to expose the untruthfulness of such facts. Where subsequent information comes into the possession of the Income-tax Officer exposing the accounts as false, the Income-tax Officer is not precluded from reopening the assessment. It would not be a case of mere change of opinion as a result of drawing a different inference from the same facts. It would be a case where the Income-tax Officer has reason to believe, on the basis of subsequent information, that the assessee had failed to disclose material facts truly.”

13. In Kirpa Ram Ramji Dass' case the assessee had disclosed the discharged hundis and other entries before the ITO and also gave a list of the addresses of the creditors and claimed that he had taken the said loans. Later on, it was found that the transactions were not genuine. On these facts it was held that it cannot be said that the assessee had fully and truly disclosed all the material facts. Similarly, in Hazi Amir Mohd. Mir Ahmed's case, [1977] 110 ITR 630 (P & H), the ITO enquired into the genuineness of certain cash credits found in the assessee's books and accepted them as true, Later on, a hundi racket operating on an all India basis was unearthed and some of the creditors shown in the balance-sheet of the assessee made confessional statements to the effect that they were lending names and not money. On these facts it was held that the Tribunal would be justified in upholding the reopening of the assessment under s. 147(a) if the confessional statements were in any manner related to the assessee; otherwise, not. In view of these two decisions, the law, so far as, this court is concerned, is well settled that though the assessee may have disclosed fully the facts at the time of the original assessment, if they are found to be untrue on the basis of the material discovered later on by the assessing authority, the assessment would be liable to be reopened under s. 147(a) because in such a case the assessee failed to disclose truly all the material facts necessary for the assessment and it would not merely be a case of change of opinion. As observed above, in the present case, the assessing authority had, from the facts discovered later on, formed an opinion that the primary facts disclosed were untrue. The reopening of the assessment was, therefore, fully covered by the provisions of s. 147(a) and question No. 2 is accordingly answered in the negative, in favour of the Revenue and against the assessee. No costs.