Fazl Ali, J. - (1.) This appeal by special leave involves the interpretation of the scope, extent and ambit of S. 34 (1) (b) of the Income-tax Act. 1922 with particular reference to the connotation and import of the word information' used in Section 34 (1)(b). Although the question appears to have been settled in one form or the other by the decisions of this Court, the changing and diverse society such as ours' dealing in complex commercial activities continues to produce multifarious facets of taxable income which has escaped assessment cloaked under difficult propositions and knotty legal problems. It is the onerous task of this Court to dispel the doubts and resolve and reconcile the differing views taken by the High Courts in various situations which every time poses a new problem.
(2.) The points involved in the instant case have baffled many a legal brain so much so that the High Court also appears to have been in two minds whether to place the information in the instant case as based on the materials already on the record of the original assessment of 1956-57 revealed by closer circumspection or to the information derived from subsequent or 'fresh facts. Before, however, examining the legal incidents of Section 34 'of the. Income Tax Act, 1922, it may be necessary for us to travel into the domain of the facts of the present case which are short and simple.
(3.) The assessee appellant M/s. Kalyanji Mavji and Company is a registered partnership firm dealing in various commercial activities. The said firm filed its return for the year 1956-57 corresponding to the accounting Gujarati Diwali year 2001 showing a total- income of Rs. 7,44.551/- after claiming a deduction of a sum of Rs. 43,116/- being the amount of interest paid by the assessee on the debts incurred for the partnership business. The Income-tax Officer accepted the return but on appeal to the Appellate Assistant Commissioner the assessment was reduced by a sum of Rs. 9,200/- by his order dated July 3, 1958. For the assessment year 1957-58 the assessee showed the same income and the deduction claimed was allowed. The next year 1958-59. however, presented quite a different complexion. While the assessee filed his return in the year 1958-59, the Income-tax Officer concerned suspected the correctness of the return particularly the deduction of interest and found that as the amount of the deduction claimed was utilised for giving interest-free loans to the partners for clearing up their income-tax dues it could not be said to be a loan incurred for the expenses of the partnership business and he accordingly disallowed the deduction claimed by the appellant. This discovery led the Income-tax officer to issue notice to the appellant under Section 34 (1) (b) of the Income Tax Act, 1922 - hereinafter referred to as 'the Act' - for reopening the assessment of the year 1956-57 - hereinafter to be referred to as 'the original assessment' on the ground that the deduction having been wrongly allowed, taxable income 'had escaped assessment. After hearing the appellant the Income-tax officer completed the assessment and included the sum of Rs. 43.116/- to the total income shown by the assessee. Thereafter the appellant filed an appeal before the Appellate Assistant Commissioner against the order of the Income-tax officer but the appeal was dismissed by the Appellate authority which confirmed the order of the Income-tax officer. It may be pertinent to note here that in his order the Appellate Assistant Commissioner pointed out that in the assessment years 1958-59 and 1959-60 the Income-tax Officer found that the appellant had no evidence with him to show that the funds borrowed on which the interest was paid were utilised for the purpose of the business and not diverted to the partners. Thereafter the appellant filed a second appeal to the Income-tax Appellate Tribunal. "B" Bench Calcutta. The Tribunal after having accepted the facts culminating in the order of the Appellate Assistant Commissioner was of the opinion that the information of the Income-tax officer resulting in the notice under Section 34 (1) (b) of the Act to the assessee was not based on any fresh facts but was derived from the materials on the record of the original assessment, the Tribunal further found that if the Income-tax Officer while completing the Original assessment would have been careful enough to scrutinise the balance-sheet he would have at once detected the infirmity on the basis of which the subsequent Income-tax Officer issued the notice under Section 34(1)(b) of the Act to the appellant. The Tribunal further was of the opinion that the subsequent Income-tax Officer merely changed his opinion on the basis of the very materials that were before him when the original assessment was made and that was not sufficient to attract the provisions of Section 34 (1) (b) of the Act. The Tribunal accordingly allowed the appeal and set aside the order of the Income-tax Officer issuing notice to the assessee under Section 34(1) (b) for reopening the original assessment. Thereafter the respondent, namely, the Commissioner of Income-tax approached the Tribunal for making a reference to the High Court under Section 66 (1) of the Act as a result of which the Tribunal referred the case to the High Court at Calcutta after framing the following question: "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the re-assessment made by the Income-tax Officer under Section 34(1)(b) of the Indian Income Tax Act, 1922 was incompetent - The High Court, after hearing the parties, differed from the view taken by the Tribunal and held that the present case squarely fell within the ambit of S.34 (1) (b) of the Act inasmuch as the information on the basis of which the Income-tax Officer sought to re-open the original assessment was based on subsequent facts as also on the materials of the original assessment revealed by more careful and closer circumspection of those materials. The High Court referred to a number of decisions of this Court as also to the decisions of the Calcutta High Court. The appellant sought leave to appeal to this Court against the order of the High Court which having been refused, the appellant obtained special leave from this Court and hence this appeal..;