COMMISSIONER OF Income Tax, MADRAS vs K. M. S. LAKSHMANA IYER.

(Judgment of the Court was delivered by the Honble the Chief Justice.)

The question which arises in this reference is really answered by our judgment delivered on the 16th February, 1945, in V. M. Raghavalu Naidu & Sons v. Commissioner of Income Tax, Madras, R. C. No. 38 of 1944. The assessee is a partner in two firms. He has a son who is a minor and the minor has been admitted to the benefits of these partnerships. The share of the profits falling to the minor should have been included in the fathers assessment for the year 1938-39; but the Income Tax Officer, under a wrong conception of the law, did not include the minors share in calculating the income of the father, and the matter was left there. In the following year, the minors share was included. The assessee took objection to this course and carried the matter to this Court which on the 15th September, 1941, held that the minors share was properly included in the assessment for the year 1939-40. On the 14th March, 1940, that is eighteen months before this Court had given its decision in the respect of the assessment for 1939-40, the Income Tax Officer served a notice on the assessee u/s 34 in respect of the sons share of the profits which had escaped assessment in the year 1938-39. The Income Tax Appellate Tribunal held that the Income Tax Officer was not entitled to reopen the assessment for the year 1938-39 on this ground because he had already applied his mind to the question and had adjudicated upon it. At the instance of the Commissioner of Income Tax, the Tribunal has referred to this Court for decision u/s 66 (1) of the Act the following question :-

"Whether in the circumstances of this case, the notice by the Income Tax Officer u/s 34 dated 14th March, 1940, was incompetent by reason of the fact that an earlier notice dated 30th November, 1938, u/s 34 in respect of the identical item of escaped income, had been issued, considered, adjudicated upon and ultimately dropped by the Income Tax Officer."

In V. M. Raghavalu Naidu & Sons v. Commissioner of Income Tax, Madras, we had occasion to consider what was meant by the expression "definite information" which appears in Section 34 as amended in 1939. We said that the application of the section must depend on the particular circumstances of the case, but definite information with regard to the state of the law would bring the section into operation. The Income Tax Officer must be in receipt of some information. If the notice served on the assessee u/s 34 had been the result of this Courts decision on the 15th September, 1941, in respect of the order of assessment of 1939-40, we consider that it could be said that the Income Tax Officer had been in receipt of definite information as to the state of the law, but that was not the position on the 14th March, 1940. The question of law had not then been decided and therefore the Income Tax Officer could not say that definite information had come into his possession with regard to this matter.

In these circumstances we hold that the Income Tax Appellate Tribunal was right in holding that the assessment could not be reopened u/s 34. We do not base our decision on the reasoning of the Tribunal. Our decision is based on the fact that there was no "definite information" in the possession of the Income Tax Officer when he served the notice u/s 34 and the question referred will be answered in this sense.

The assessee is entitled to his costs Rs. 250.

Reference answered accordingly.