JUDGMENT
Gopalan Nambiyar, J.
1. The Income-tax Appellate Tribunal, Cochin Bench, has referred the following question of law for our opinion:
“Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in holding that the reopening of the assessment under Section 147(b) is valid ?”
2. For the assessment year 1965-66, the assessee, a company, was assessed by the ITO by his order dated 30th November, 1965. That order shows, among other things, that rebate on export profits was granted to the assessee-company at 4.6 per cent. There was an inconsequential order of rectification dated 11th August, 1966. An appeal against this order was dismissed on 25th June, 1968. Meanwhile, by an order dated 29th February, 1968, there was a further rectification of the order of assessment, the officer holding that the assessee should be treated not as a public limited company but only as one in which the public are substantially interested, and that, therefore, the assessee would be entitled to rebate only at 20 per cent. on export profits and not at the higher rate of 30 per cent. The assessee appealed to the AAC contending that it was a manufacturing company and not a trading company. The AAC allowed the appeal and directed the ITO to examine the question. The officer, by his order dated 22nd February, 1969 (annexure F), held that the assessee was the manufacturing company entitled to rebate at 30 per cent. on its export profits. The succeeding officer took the view that the question whether a company was mainly engaged in the business of manufacture in accordance with the provisions of the Finance Act, 1965, had not been considered at all by his predecessor-ITO; and, therefore, he revised the assessment holding that the company was not mainly engaged in the manufacture or processing of goods as the income from these operations came to less than 51 per cent. (annexure G). Against the said order the assessee preferred an appeal to the AAC, which was rejected by him (annexure H). The Tribunal also rejected the assessee’s appeal on this point (annexure I). It, however, formulated the question of law noticed earlier and forwarded the same for the opinion of this court.
3. There is no controversy that the question as to whether the assessee was a trading company or a manufacturing company, had to be decided in the light of the provisions of the Finance Act, 1965. Under the provisions of that Act rebate is to be allowed in the case of a company which is not a company in which the public are interested and which is wholly or mainly engaged, inter alia, in the manufacture or processing of goods at 30 per cent. There was a prov. to this provision, and Expln. 1 to the said prov. enacted that:
“For the purposes of this paragraph, a company shall be deemed to be mainly engaged in the business of generation or distribution of electricity or any other form of power or in the construction of ships or in the manufacture or processing of goods or in mining, if the income attributable to any of the aforesaid activities included in its total income for the previous year is not less than fifty-one per cent. of such total income.”
4. The ITO who issued the reassessment order (annexure G) dated 8th October, 1970, was of the view that the original assessment order dated 30th November, 1965, was passed without reference to the provisions of the Finance Act, 1965, and for that reason, required rectification. It was this view that was sustained on appeal by the AAC and on further appeal, by the Tribunal.
5. In A. Raman & Co.’s case [1968] 67 ITR 11, 15, 16, it was observed by the Supreme Court:
“The condition which invests the ITO with jurisdiction has two branches : (i) that the ITO has reason to believe that income chargeable to tax has escaped assessment; and (ii) that it is in consequence of information which he has in his possession that he has reason so to believe. Since the learned judges of the High Court have concentrated their attention upon the second branch of the condition and have reached their conclusion in favour of the assessees on that branch, it would be appropriate to deal with the correctness of that approach. The expression ‘information’ in the context in which it occurs must, in our judgment, mean instruction or knowledge derived from an external source concerning facts or particulars, or as to law relating to a matter bearing on the assessment……Jurisdiction of the ITO to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information, must, it is true, have come into the possession of the ITO after the previous assessment, but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the ITO is not affected.”
6. To our mind, the above observations make it clear that the information which was made the foundation for reassessment may well be obtained from the material on record or the facts disclosed thereby, or from other enquiry or research into the facts or law, even if these could well have been obtained on the earlier occasion. The position was stated by a Division Bench of this court in United Mercantile Co. Ltd. v. CIT [1967] 64 ITR 218 (Ker). The learned Chief Justice who delivered the judgment referred to the Salem Provident Fund Society Ltd.’s case [1961] 42 ITR 547 of the Madras High Court and observed (page 222):
“‘To inform ‘means’ to impart knowledge’ and a detail available to the ITO in the papers filed before him does not by its mere availability become an item of information. It is transmuted into an item of information in his possession only if, and only when, its existence is realised and its implications are recognised.
We consider the awareness of the ITO, for the first time, after the assessment order of the 19th November, 1957, that the bonus shares were issued not out of premiums received in cash and the consequent result in the light of the Finance (No. 2) Act, 1957, as information within the meaning of that expression as used in Section 34(1)(b) of the Indian I.T. Act, 1922.” Attention was also called to the Imperial Tobacco Company’s case [1966] 61 ITR 461 (SC). The Supreme Court there referred to the Salem Provident Fund Society’s case [1961] 42 ITR 547 (Mad), Rathinasabapathi Mudaliar’s case [1964] 51 ITR 204 (Mad) and to various other cases, and restated the position that if there is information leading to the belief that income has escaped assessment, the mere fact that this information has resulted in a change of opinion will not make Section 34 inapplicable. A change of opinion is not sufficient for initiating proceedings under Section 34 only when such change of opinion is the result of a different method of reasoning, and not based on “information “.
7. The principle laid down in these decisions is clear enough, and we find nothing contrary in the decisions in Reform Flour Mills (P.) Ltd.’s case [1973] 88 ITR 150 (Cal), Dinesh Chandra H. Shah’s case [1971] 82 ITR 367 (SC), Bankipur Club Ltd.’s case [1971] 82 ITR 831 (SC) and Raja Priyanand Prasad Singh’s case [1957] 32 ITR 320 (All) to which our attention was drawn. On the facts, the principle of these latter set of decisions, on which reliance was placed by the assessee, can have no application.
8. We are of the opinion that on the facts disclosed, the Tribunal was correct in its view. We answer the question of law referred to us in the affirmative, i.e., in favour of the department and against the assessee. The assessee will pay the costs of this reference.