The Commissioner of Income Tax vs Sri K.M.S. Lakshmana Iyer

Alfred Henry Lionel Leach, C.J.—The question which arises in this reference is really answered by our judgment delivered on the 16th

February, 1945, in V.M. Raghavalu. Naidu and 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 of the benefits of these partnerships. The share of the profits falling to the

minor would have been included in the father''s assessment for the year 1938-39; but the Income Tax Officer, under a wrong conception of the

law, did not include the minor''s share in calculating the income of the father, and the matter wasteft there. In the following year, the minor''s 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

minor''s 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 respect of the assessment for 1939-40, the Income Tax Officer served a notice on the assessee u/s 34 in respect of the

son''s 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 re-open 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 and Sons by executors Mr. C.G. Krishnaswami Naidu and Another Vs. The Commissioner of Income Tax, , 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 Court''s 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 noi 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.