Bhargava J. - (1.) This is an appeal by certificate against a judgment of the High Court of Bombay returning an answer against the assessee, R. B. Bansilal Abirchand Firm, Kamptee, to the following question :"Whether, under the facts and circumstances of the case, there was any information before the Income-tax Officer seeking to reopen the assessment so as to invest him with jurisdiction to issue notice under section 34(1) (b) of the Income Tax Act -
(2.) The assessee firm consisted of four partners, who were all brothers belonging to the Daga family, and three minor sons of one late Narsingdas Daga were also admitted to the benefits of the partnership. This firm was financing another firm known as Bisesar House in which an 8-anna share belonged to one late Shri Manekji Dadabhoy, an outsider, while the remaining 8-anna share belonged to the four Daga brothers. Bisesar House used to pay interest on advances made to it by the assessee-firm, and the assessee-firm was assessed in the relevant assessment year a 1947-48, on the amount of interest received from Bisesar House, treating it as income accruing to the assessee-firm in the capacity of a partner in Bisesar House. There were then proceedings for the assessment of Bisesar House and, in those proceedings, the Income-tax Officer first disallowed the interest paid to the assessee-firm as an expenditure on ground that it was interest paid to the partner. The proceedings of assessment of Bisesar House came up before the Tribunal which, by its order dated 23rd February, 1950, allowed the claim for interest as an expenditure to the extent of Rs. 5,10,788, holding that this payment of interest was a payment to a banker as the assessee-firm had financed Bisesar House and its various business and that the assessee-firm was not a partner in the Bisesar House firm. This decision of the Tribunal was upheld by the High Court in the reference made to it in those proceedings.
(3.) The assessee-firm, in its original return of total income for this assessment year, had declared a business loss of Rs. 1,09,311. In calculation of this business loss, the interest received from Bisesar House was not taken into account, as it was not treated a business income of the assessee-firm and was shown as receipt of income by the assessee-firm in the capacity of a partner in Bisesar House. When the Tribunal and the High Court held that the assessee-firm was not a partner in Bisesar House and had been receiving interest in the capacity of a banker, the Income-tax Officer decided to take action under section 34(1) (b) of the Income Tax Act in order to include this amount of interest in calculating the taxable profits and losses of the assessee-firm. The assessees objected on the ground that all the facts, on the basis of which the Income-tax Officer was reopening the assessment under section 34(1) (b), were already in the possession of the Income-tax Officer when he first made the assessment and, consequently, it could not be held that there was any information in his possession at the time of issuing the notice under section 34(1) (b) in consequence of which he could have reason to believe that income, profits and gains chargeable to income-tax had escaped assessment or were under-assessed or had been made the subject of excessive relief. The Tribunal and the High court both held that the Income-tax Officer was justified in resorting to section 34(1) (b), because of the information which came into his possession as a result of the decision of the Tribunal and the High Court in the proceedings for assessment to tax of Bisesar House which showed that the interest, which was being received by the assessee-firm, was not in the capacity of a partner, but as business income. It is against this decision that the assessee has come up to this court in this appeal.;