Rastogi, J. - (1.) THE assessee, M/s. Sterling Machine Tools, Agra, was a partnership firm consisting of 4 partners including Sri Satish Chandra. THE assessee carried on business of manufacture and sale of centering machines and also purchase and sale of spare parts for the assessment year 1965-66. For the previous year ended December 15, 1964, the assessee filed a return showing an income of Rs. 34,148-43 on sales of Rs. 1,86,000. THE ITO made the assessment on August 5, 1966, and computed the total income at Rs. 37,218. During the previous year relevant to the assessment year 1966-67, the assessee carried on the same business and during the course of assessment for that year, on enquiry from the Vigilance Bureau and the Boards of Experts, the ITO found that the actual cost of a centering machine came to Rs. 7,331, whereas the assessee claimed the same at Rs. 9,432. When Satish Chandra, partner, was confronted with that report he gave a note in writing on May 15, 1968, to the ITO stating that though his cost was much more, yet in view of the opinion of the experts he was willing to his income being worked out on that basis. Because of the aforesaid report of the Board of Experts and the note of Satish Chandra, the ITO initiated proceedings under s. 147(b) of the I.T. Act, 1961, for the assessment year 1965-66 and issued a notice to the assessee under Section 148. Pursuant to that notice the assessee filed a return showing an income of Rs. 37,218, that is the figure which had been determined in the original assessment. THE ITO made the reassessment and in doing so added a sum of Rs. 98,028 representing the difference in cost in the price of the machines as per the note of Satish Chandra and the opinion of the Board of Experts, and as per the assessee's books which came to Rs. 8,169 per machine, and thus the total income computed came to Rs. 1,35,296.
(2.) THE assessee appealed. THE AAC had, in the appeal filed by the asses-see against the assessment order for 1966-67, held that the note dated May 17, 1968, given by Sri Satish Chandra was null and void in law and so in his opinion the initiation of proceedings for the year under consideration was bad and invalid and hence he annulled this reassessment. Being aggrieved, the revenue took up the matter in appeal before the Appellate Tribunal. THE Tribunal considered this appeal along with three other appeals relating to the assessment year 1966-67. THE Tribunal did not agree with the AAC on the question of the validity of the note dated May 17, 1968, given by Satish Chandra and held that it was a perfectly valid document which had been written after due deliberation. Thus, in the opinion of the Tribunal the report of experts and the aforesaid letter of Satish Chandra constituted information within the meaning of Section 147(b) and the initiation of proceedings thereunder was thus perfectly justified. However, coming to the quantum of the income assessed, the Tribunal found that in the first instance the AAC had not dealt with that aspect and, apart from that, the aforesaid admission made by Satish Chandra was relevant to the assessment year 1966-67 and for 1965-66 at best it could be treated as a piece of evidence and not as admission and hence the matter was remanded to the ITO to recompute the income. Now, at the instance of the assessee, the following question has been referred by the Tribunal for our opinion : "Whether, the Tribual was right in law in holding that the Income-tax Officer had 'information' in his possession within the meaning to be given to that word under Section 147(b) of the Income-tax Act, 1961, from which he could have reason to believe that income chargeable to tax in the assessment year 1965-66 had escaped assessment and that the Income-tax Officer was justified in making the reassessment of the assessee for the assessment year 1965-66 ?" On behalf of the assessee, it was urged before us that it was only a case of change of opinion and as such reopening of the assessment was not justified. There was nothing to show that the ITO had information that the cost of manufacture of these machines as debited in the account books represented an inflated figure. It was brought to our notice that penalty for concealment under Section 271(1)(c) for the assessment year 1966-67 was quashed by the Tribunal. After hearing counsel for the parties we do not find that there is much substance in this argument.
(3.) SECTION 147 of the Act, in so far as it is relevant for our purpose, reads: "147. If--..... (b) Notwithstanding that there has been no omission or failure as mentioned in Clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of SECTIONs 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in SECTIONs 148 to 153 referred to as the relevant assessment year)....." For the application of Clause (b) the essential ingredient is that the ITO should have had some information in consequence of which he had reason to believe that income chargeable to tax had escaped assessment. What does information in Section 147(b) connote has come up for consideration before the Supreme Court and the various High Courts time out of number. In Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), when called upon to construe the corresponding provision as contained in Section 34(l)(b) of the 1922 Act, the Supreme Court held that the word "information" means not only facts or factual material but includes also information as to the true and correct state of the law. Thereafter, in CIT v. A. Raman andamp; Co. [1968] 67 ITR 11 (SC), this expression as occurring in s. 147(b) was held to signify instruction or knowledge derived from an external source concerning facts or particulars or as to law, relating to a matter bearing on the assessment. This definition has been reaffirmed in subsequent cases though in some cases a slight departure has also been made. It would not be necessary to refer to the same because of a recent decision of the Supreme Court in Indian and Eastern Newspaper Society v. CIT (Tax Reference Cases Nos. 1 to 4 of 1973) dated August 31, 1979 (since reported in [1979] 119 ITR 996). The view expressed in this decision is that in so far as the word "information" means instruction or knowledge concerning facts or particulars, there is little difficulty, the reason being (p. 1001): "By its inherent nature, a fact has concrete existence. It influences the determination of an issue by the mere circumstance of its relevance. It requires no further authority to make it significant. Its quintessential value lies in its definitive vitality." ;