Balakrishna Eradi, J.
1. Pursuant to a direction issued by this court as per the judgment rendered in O.P. No. 3774 of 1976, the Income-tax Appellate Tribunal (Cochin Bench)--hereinafter called ' the Tribunal '--has stated a case and referred the following questions to this court :
' (1) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that the reassessment made by the Income-tax Officer, under Section 147(b) of the Income-tax Act, 1961, in respect of the assessment year 1967-68 was not valid ?
(2) Whether, on the facts and in the circumstances of the case, and in view of the reasons recorded by the Income-tax Officer on the basis of which he reopened the assessment, the finding of the Income-tax Appellate Tribunal that the reopening of the assessment by the Income-tax Officer under Section 147(b) of the Income-tax Act, 1961, was not on information from the Tribunal's order dated November 30, 1970, is perverse and unreasonable ?
(3) Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal is right in law in holding that once the Appellate Assistant Commissioner has passed an order disposing of the appeal against the assessment it is not possible for the Income-tax Officer subsequently to reopen that assessment '
2. The assessee is a limited company. The relevant accounting period is the year ended December 31, 1966, the assessment year being 1967-68. The original assessment of the company for the year was completed by the ITO, on April, 29 1968. In that assessment order the ITO had stated with reference to the claim put forward by the assessee for the grant of a deduction by way of rebate on export profit under Section 2(4)(a)(i) of the Finance (No. 2) Act, 1967, that such rebate will be given on production by the assessee of necessary particulars. Treating the assessee as an ' industrial company ' as defined in Section 2(7)(d) of the Finance (No. 2) Act, 1967, the ITO in making the aforesaid assessment applied a concessional tax rate of 55%. An appeal was filed by the assessee-company before the AAC, Ernakulam, contending that the claim for export profit rebate ought to have been allowed by the ITO without any insistence on the production of further particulars. During the pendency of that appeal, the ITO in exercise of his powers of rectification under Section 154 of the I.T. Act, 1961 (hereinafter called ' the Act '), passed an order allowing to the assessee the rebate on export profits amouting to Rs. 15,928. The appellate authority held that the ground taken therein regarding the disallowance of the claim for export profit rebate had become infructuous in view of the order dated August 1, 1968, passed by the ITO under Section 154 of the Act allowing such rebate to the assesses. In regard to certain other matters which also formed the subject-matter of the appeal before the AAC, certain directions were given by the AAC to the ITO and the appeal was disposed of with a direction to the ITO to finalise the assessment afresh in the light of the observations and findings contained in the appellate order. Thereafter, the ITO gave effect to the directions of the AAC and finalised the assessment afresh on January 21, 1971. In the order passed by him on that day he allowed to the assessee the rebate on export profits amounting to Rs. 15,928 but held that the correct tax rate applicable was 65% on the ground that the assessee-company could not be regarded as an industrial company.
3. Thereafter on March 4, 1972, the ITO issued a notice to the assessee-company proposing to reopen the assessment in the exercise of his powers under Section 147(b) of the Act, on the ground that he had reason to believe that income chargeable to tax had escaped assessment. The reasons recorded by the ITO in the order sheet as a justification for reopening the assessment under Section 147(b) were:
' In the original assessment dated 29-4-1968 the question whether the assessee is an industrial or a non-industrial co. was not considered. Profit on sale of import entitlements and certain other receipts should have been excluded and the balance income was to be considered to see whether more than 51% of the income is received from processing of goods.
There was also omission to exclude profit on sale of import entitlements, miscellaneous income, etc., before calculating the export profit rebate allowable.
The assessee was granted deduction as bad debts amounts advanced by the erstwhile firm which was succeeded by the assessee. Allowance of debts incurred by the firm should not have been granted in computing the income of the company. This point was omitted to be considered. The assessee was granted deduction on account of interest paid on loan amounts. Proportionate interest on funds advanced to directors and firms in which they were partners was not disallowed. On account of the above omissions and mistakes I have reason to believe that income escaped assessment. The assessment is reopened Under Section 147(b). Issue notice Under Section 148.
Sd......
Income-tax Officer.'
4. The assessee filed objections contending, inter alia, that there was no valid ground whatever warranting the invocation of the power under Section 147(b) inasmuch as all the materials had been fully considered by the assessing authority (predecessor of the ITO who issued the notice under Section 148) and it was only after due application of mind to all such materials that the assessment had been finalised afresh by the order dated January 21, 1971, allowing the assessee's claim for rebate on export profits under Section 2(4)(a)(i) of the Finance (No. 2) Act, 1967, as well as for the two items of deductions referred to in the notice issued under Section 148 and hence no information can be said to have come into the possession of the ITO on the basis of which he could have reason to believe that income chargeable to tax had escaped assessment. Contentions were put forward by the assessee on merits of the proposal for reassessment also. All the objections and contentions so taken by the assessee were rejected by the ITO and he passed a reassessment order dated September 27, 1972, holding that there was an escapement of income within the meaning of Section 147 of the Act by reason of the fact that the assessee had been granted rebate on exports, when he was legally not entitled to such a rebate and tax had been levied at the concessional rate of 55%, whereas the correct rate to be applied was 65%, since the assessee could not be regarded as an ' industrial company ' within the meaning of the said expression as defined in Section 2(7)(d) of the Finance (No. 2) Act, 1967. The reason that influenced the ITO to arrive at the aforesaid conclusion that the assessee was not entitled to the grant of rebate on export profits was that in the total income of Rs. 2,89,280 assessed by way of profits and gains under the assessment order dated January 21, 1971, Rs. 2,17,566 was profits realised from sale of import entitlements which could not be considered as income derived from manufacture or processing of goods. Proceeding on this basis the ITO held that the income realised by sale of import entitlements had to be excluded from the total profits before considering whether the assessee's income from manufacturing or processing of goods came to less than 51% as required by the Explanation to the definition of ' industrial company ' in the Finance (No. 2) Act, 1967. The ITO was further of the opinion that the export profit rebate was allowable only on the balance of the profits of the assessee-company after excluding therefrom the profit on sale of import entitlements. It is stated by the ITO in the reassessment order that the aforesaid two points were omitted to be considered by the predecessor while making the original assessment, that the said omission was due to oversight and inadvertence and that the said mistake in the assessment which was noticed by him subsequent to the completion of the original assessment would constitute 'information' within the meaning of Section 147(b). The ITO completed the reassessment by withdrawing the export profit rebate and applying a rate of 55% by refusing to treat the assessee-company as an industrial company.
5. On appeal, the AAC confirmed the reassessment order passed by the ITO.
6. The assessee carried the matter in second appeal before the Tribunal. The main contention urged by the assessee before the Tribunal was that the conditions laid down in Section 147(b) for invoking the power of reassessment therein referred to were not at all satisfied in the present case and that the reassessment had been made by the successor-ITO only on the basis of a mere change of opinion on his part on a consideration of the very same materials to which his predecessor had fully applied his mind while making the original order of assessment dated January 21, 1971. This objection was sought to be met by the departmental representative by contending that the reopening was on account of information received by the ITO from certain decisions rendered by the Tribunal in similar cases, wherein it had been held that profit on sale of import entitlements could not be considered as export profits. The said contention was attempted to be substantiated by relying on a decision given by the Tribunal on 30th November, 1970, in an appeal filed by the very same assessee in respect of an earlier assessment year. Rejecting the contentions put forward by the departmental representative, the Tribunal held that, on a consideration of all the relevant facts, it was difficult to come to the conclusion that the ITO was prompted to initiate action under Section 147(b) in this case by information received by him based on the decisions rendered by the Tribunal referred to by the departmental representative. The Tribunal pointed out that the question as to the exact quantum of export profit in respect of which the rebate was allowable to the assessee had been considered by the ITO more than once, namely, in the original assessment made on April 29, 1968, in the order of rectification passed on June 1, 1968, and the subsequent order dated January 21, 1971, wherein the assessment was finalised afresh by the ITO in implementation of the directions issued by the AAC. Such being the circumstance, the Tribunal held that it was clear that there had been due application of mind by the ITO to the aforesaid aspect and the change of quantum effected in the reassessment order could, therefore, be attributed only to a change of opinion on the part of the officer in regard to the said matter. The Tribunal further found that inasmuch as the AAC had already passed an order allowing the export profit rebate it was not legally competent for the ITO subsequently to reopen the assessment and recall the relief that the first appellate authority had allowed. On the two grounds aforementioned, the Tribunal held that the action taken by the ITO to reopen the assessment under Section 147(b) was not valid. Accordingly, the assessee's appeal was allowed.
7. The Tribunal having in the first instance declined the request of the department to refer the aforementioned questions of law to this court, the department moved this court by filing 0. P. No. 3774 of 1976 and it is by virtue of the order passed by this court in that original petition requiring the Tribunal to refer the said questions that this reference has been made by the Tribunal.
8. In order to warrant the reopening of an assessment already made against an assessee and subject him to a reassessment under Section 147(b) of the Act, the pre-requisite jurisdictional condition is that the ITO should have in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for the concerned year. As to what would constitute ' information ' for the purpose of exercising the power under Section 147(b) is now well settled by the decisions of the Supreme Court and various High Courts in this country. Two conditions precedent must be satisfied before the ITO can take action under Clause (b)(i) : he should have reason to believe that the income has escaped assessment, and (ii) it should be in consequence of information received after the original assessment that he should have reason so to believe. If either condition is not satisfied, the ITO will have no jurisdiction to resort to the power conferred under Section 147(b). As pointed out by Shah J. in CIT v. A. Raman and Co. : [1968]67ITR11(SC) , the ' information ' may even be such that 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 inquiry or research into facts or law, but if it was not in fact obtained, it is legally open to the ITO to rely on such information for the purpose of exercise of the power under the section. It is equally well settled that a mere change of opinion on the part of the ITO in respect of a matter on which he had come to a conclusion after due application of his mind to the same set of materials which were originally available before him will not be a valid ground for reopening the assessment under Section 147(b)--See CIT v. Dinesh Chandra H. Shah : [1971]82ITR367(SC) , CIT v. H. Holck Larsen : [1972]85ITR467(Bom) and Indian & Eastern Newspaper Society v. CIT : [1979]119ITR996(SC) . In the pronouncement of the Supreme Court last mentioned, we get an exhaustive statement of law as to what constitutes ' information ' for the purpose of exercise of the power under Section 147(b). The following observations contained in that judgment, while dealing with the question, are of particular relevance in the present context (pp. 1004 & 1005 of 119 ITR) :
' Now, in the case before us, the ITO had, when he made the original assessment, considered the provisions of Sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The revenue contends that it is open to him to do so, and on that basis to reopen the assessment under Section 147(b). Reliance is placed on Kalyanji Mavji & Co. v. CIT : [1976]102ITR287(SC) , where a Bench of two learned judges of this court observed that a case where income had escaped assessment due to the ' oversight, inadvertence or mistake ' of the ITO must fall within Section 34(1)(b) of the Indian I.T. Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT : [1959]35ITR1(SC) , CIT v. A. Roman and Co. : [1968]67ITR11(SC) and Bankipur Club Ltd. v. CIT : [1971]82ITR831(SC) and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji & Co. v. CIT : [1976]102ITR287(SC) suggesting the contrary do not, we say with respect, lay down the correct law.
A further submission raised by the revenue on Section 147(b) of the Act may be considered at this stage. It is urged that the expression ' information ' in Section 147(b) refers to the realisation by the ITO that he has committed an error when making the original assessment. It is said that, when upon receipt of the audit note, the ITO discovers or realises that a mistake has been committed in the original assessment, the discovery of the mistake would be ' information ' within the meaning of Section 147(b). The submission appears to us inconsistent with the terms of Section 147(b). Plainly, the statutory provision envisages that the ITO must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words ' reason to believe ', and it follows from the ' information ' received by the ITO. The information is not the realisation, the information gives birth to the realisation.'
9. Judged in the light of the legal position emerging from the aforesaid pronouncement, we have no hesitation whatever to uphold the conclusion of the Tribunal that the ITO could not be said to have come by any information after the passing of the original order of assessment on the basis of which he could have reason to believe that income chargeable to tax had escaped assessment. The question whether the assessee-company could be regarded as an ' industrial company ' as denned in Section 2(7)(d) of the Finance (No. 2) Act, 1967, as well as the further question whether the profits realised by the assessee by sale of the import entitle merits could be treated as export profits for the purpose of grant of rebate under Section 2(4)(a)(i) of the Finance (No. 2) Act, 1967, had both been duly considered by the ITO on more than one occasion before the assessment was finalised afresh consequent on the directions given by the first appellate authority as per the order dated January 21, 1971. There is no indication at all in the note made by the ITO in the file at the time of initiating action under Section 147 that in addition to the materials which were then available before the assessing authority any fresh material or information whatever had come to his possession. In the circumstances, it is obvious that what has transpired in this case is only a mere change in the opinion of the successor-ITO in respect of the matters covered by the aforesaid two questions, namely, as to whether the assessee-company could be regarded as an industrial company and whether profits derived by the sale of import entitlements could be treated as export profits for the purpose of grant of rebate under Section 2(4)(a)(i) of the Finance (No. 2) Act, 1967. As pointed out by Pathak J. in the passage above extracted from Indian & Eastern Newspaper Society : [1979]119ITR996(SC) any error discovered by the successor officer or even by the very same officer on a reconsideration of the same material or on the application of the same statutory provision to the same set of facts, would not constitute ' information ' for purposes of initiation of proceedings under Section 147(b).
10. Though a contention had been advanced by the revenue before the Tribunal that the ITO had been prompted to reopen the assessment in the context of the information that he gathered from a decision rendered by the Tribunal on 30th November, 1970, the Tribunal has found that the reopening of the assessment by the ITO was as a matter of fact not based on any such information gathered from the Tribunal's decision. We find no ground whatever which would justify the said finding arrived at by the Tribunal being characterised as unreasonable or perverse.
11. Such being the factual and legal position obtaining in respect of the matter, we answer the first question in the affirmative, that is, against the department and in favour of the assessee, and we answer the second question in the negative, that is, in favour of the assessee and against the department. In the light of the conclusions recorded by us on questions Nos. 1 and 2, it is unnecessary for us to answer question No. 3 and we decline to answer the said question. The reference is disposed of as above. The parties will bear their respective costs.
12. A copy of this judgment under the seal of the court and the signature of the Registrar will be forwarded to the Tribunal, as required by law.