RAMANUJAM J.


The following two common questions of law have been referred to this court by the Income-tax Appellate Tribunal, Madras, under s. 256(2) of the I.T. Act, 1961, hereinafter referred to as "the Act"

"1. Whether, on the facts and in the circumstances of the case, the inspection notes of the Inspecting Assistant Commissioner from the records of assessment and the note of the inspector would constitute 'information ' within the meaning of section 147(b) so as to justify the application of section 147 ?


2. Whether, on the facts and in the circumstances of the case, and having regard to the figures given in the order of the Appellate Assistant Commissioner, the Tribunal was right in not giving a reasonable opportunity to the assessee for making out a case for allowance of fair estimate of interest ?" *


The reference relates to the assessment years 1961-62 to 1963-64. The assessee is an individual deriving income from salary, property, share from two managing agency firms and other sources such as dividend, interest, etc. The original assessment for the assessment year 1961-62 was completed on January 1, 1963. The ITO proposed to reopen the assessment under s. 147(b) of the Act as he found that in the original assessment a larger interest was allowed as a deduction from the income assessed under the head "Other sources". The assessee filed a return in response to a notice under s. 148. The assessee had claimed in the original assessment deduction of the interest amounting to Rs. 54, 577 under the bead "Other sources" and a sum of Rs. 41, 627 was allowed and the balance was disallowed. The original disallowance was made on the ground that on his borrowings to whose interest had been paid has not only gone for the purchase of shares which brought in the dividend income but also to his other personal requirements and, therefore, the interest payments, so far as they related to borrowings made for his personal expenditure, should be disallowed. After reopening, the ITO presumed that the entire shareholding of the assessee were acquired by utilising the funds borrowed from the banks and, allowing interest on the amount borrowed at the average rate of 6 1/3%, held that a sum of Rs. 15, 557 only could be allowed as deduction; the balance was disallowed. Similarly, for the assessment year 1962-63 the assessment was originally completed on February 29, 1964, but the same was reopened under s. 147(b) of the Act. In the original assessment, as against the claim of the assessee for allowance of interest at Rs. 57, 245, the ITO had allowed Rs. 42, 184 and disallowed Rs. 14, 061. After reopening of the assessment, the ITO took the aggregate value of the shares held by the assessee in that year at Rs. 2, 83, 611 and adopting the average interest at 6 1/2% he worked out the interest to be allowed at Rs. 18, 500 and the balance was disallowedFor the assessment year 1963-64, the original assessment was completed on March 31, 1965. After the reopening of the assessment, the ITO took the entire value of the shareholding at Rs. 3, 48, 952 and allowing an average interest thereon at 7% he determined the allowable amount of interest at Rs. 24, 500 and the balance of the interest payments was disallowed.


Aggrieved by the orders of reassessment passed by the ITO for all the three years, the assessee appealed to the AAC challenging not only the jurisdiction of the ITO to reopen the assessment under s. 147(b) of the Act but also on the merits of the disallowance of interest. The AAC dealt with the appeals for all the three years by a common order. He found that during all these years the assessee had borrowed monies from certain banks and insurance companies as loans, that the loans in the first instance were deposited with M/s. G. Kuppuswami Naidu and Company and whenever monies were required for payment of tax, LIC premium, personal expenses or loans to others, monies were drawn from the said account and that on the borrowals made by the assessee he had paid interest. The AAC also found that there was an agreement between the assessee and the ITO for the original disallowance and, therefore, he concluded:


"(1) that from a legal standpoint what has been done now was only on account of change of opinion by the ITO and on account of receipt of 'information' within the meaning of section 147(b)


(2) that what the ITO had done was to substitute one mode of computation of inadmissible interest payments by another calculation following a different method, and that.


(3) even on facts the reopening was not called for." *


In that view, all the assessee's appeals were allowed by the AAC:


The Revenue took the matter in appeal to the Income-tax Appellate Tribunal and the Tribunal found that the assessments were reopened on the basis of "information" received by the ITO after he completed the original assessment for these three years, that the said information was contained in the inspection notes of the IAC and that, therefore, s. 147(b) of the Act has rightly been invoked by the ITO. On the merits of the assessment, the Tribunal took the view that the assessee was not able to show any correlation between the interest payments and the investments and that in the absence of any such correlation the allowance now made by the ITO is reasonable and the disallowance was justified. Aggrieved by the order of the Tribunal, the assessee sought for and obtained a reference under s. 256(2) of the Act on the questions referred to aboveThe first question referred involves the scope and ambit of the expression "information" occurring in s. 147(b). Though the expression "information" came up for interpretation in a number of decided cases, its scope cannot be taken to have been finally and conclusively decided or explained. Whether a particular fact or material constitutes "information" in a particular case has to be decided with reference to the facts of that case and there cannot be a definite or uniform rule as to when particular material will be taken to be an "information".


In R. K. Malhotra, ITO v. Kasturbhai Lalbhai, there was a reopening of the assessment on receipt of a report from the office of the Comptroller and Auditor-General of India that on a proper interpretation of s. 23(2) of the Act the deduction of municipal taxes was not admissible in the computation of annual value of self-occupied house properties. The assessee contended that the said report did not constitute "information" within the meaning of s. 147(b) and a Bench consisting of two judges of the Supreme Court held that the audit department was the proper machinery to scrutinise assessments made by the ITO and to point errors of law contained therein and, therefore, its report will come within the scope of "information" occurring in s. 147(b) of the Act. The court rested its decision on Asst. CED v. Nawab Sir Mir Osman Ali Khan Bahadur CIT v. H. H. Smt. Chand Kanwarji CIT v. Kelukutty and Vashist Bhargava v. ITO. However, in Indian and Eastern Newspaper Society v. CIT a Bench of the Supreme Court overruled the decisions in CIT v. H. H. Smt. Chand Kanwarji and CIT v. Kelukutty and disapproved the conclusions in R. K. Malhotra, ITO v. Kasturbhai Lalbhai and held that the opinion of the audit party on a point of law could not be regarded as "information" enabling the ITO to initiate reassessment proceedings under s. 147(b) and the ITO who made the original assessment having considered and applied certain provisions of the statute, any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on materials already considered by him. Applying the said latest pronouncement of the Supreme Court to the facts of this case, we have to hold that the reopening of the assessments under s. 147(b) is not possible. From the facts stated above, it will be clear that even at the original assessment the ITO was aware of the fact that out of the borrowings, part of it has gone to the assessee's personal expenses and the other part has gone towards acquisition of shares and it is only on that basis interest payments were apportioned as Partly relating to the personal expenses and partly for the acquisition of shares, and adopting an estimate, he allowed a portion of the interest payments as allowable expenditure and the balance as not allowable. The instructions given by the IAC merely indicated that there has been excessive allowance of interest, and that cannot be taken as "information" as contemplated by s. 147(b). It merely means a change of opinion on the part of the ITO on the same materials and a fresh application of mind on the same set of facts. In fact, even after reopening, the ITO adopted, in the absence of a proper correlation, a rough and ready-method of apportioning of interest payments partly to personal expenses and partly to investments. In a case where the ITO was at the time of original assessment fully aware of the facts and consciously adopted an estimate to determine what portion of the interest payments is relatable to the investment and what portion related to the assessee's personal expenses, for the purpose of increasing the disallowance, he cannot adopt a different estimate by correcting his own earlier estimate, by reopening the assessments. Such reopening can be taken to be the result of only a change of opinion on the part of the ITO. There has been no erroneous application of the law. Nor was there any new material or information which was brought to his notice so as to enable him to invoke s. 147(b). The inspection notes of the IAC merely indicated that part of the borrowings for which interest had been paid was for the assessee's personal expenses, which fact the ITO was well aware of even at the time of the original assessment. It is not, therefore, open to the ITO, basing himself on the said inspection notes, to change his estimate of disallowance by adopting different basis. In the original assessment, for purposes of determining the allowable portion of the interest payments, he adopted a particular method of estimation. When it was pointed out that the amount of interest allowed was excessive, he has chosen to adopt a slightly different basis which is also another estimate. This is clearly a second opinion taken by the ITO on the same matter on the same materials. If the ITO has proceeded in the original assessment on a wrong basis that the entire interest payments related to the investments, then the inspection notes can be taken to be an "information" for invoking s. 147(b). But where the ITO is asked to consider the same materials and come to a different conclusion, that is not possible because it will merely amount to a change of opinion on the same facts and materials. We have to, therefore, hold that in this case the inspection notes of the IAC which itself had been procured by the ITO would not constitute "information" within the meaning of s. 147(b) as to justify application of s. 147 of the ActHowever, the learned counsel for the Revenue refers to the following decisions as supporting his stand that the inspection notes constituted "information": (1) Musasons Pvt. Ltd. v. CIT and (2) Elgin Mills Co. Ltd. v. ITO We are of the view that those decisions cannot apply to the facts of this case. In those decisions the ITO had originally assessed the income under a wrong head and when that was pointed out, the ITO, after reopening, assessed the income under the proper head and that is not the case here. Musasons Pvt. Ltd. v. CIT is a case where the original assessment of the assessee was completed by adopting the sum assessable under the head "Dividends" at the gross amount of intercorporate dividend received by the assessee and the audit party which went into the file of the assessee informed the officer that as part of the loans borrowed by the assessee went towards investment in shares, the interest payments should be apportioned between dividend income and business income instead of accepting the assessee's claim for deduction of the entire interest payment against business income alone. On the basis of this information furnished by the audit party, the assessment was reopened under s. 147(b) of the Act and the amount of dividend income assessable was reduced by certain amounts, while the business income was enhanced by similar amounts. When, the matter came up before this court it specifically found that the ITO did not have knowledge when he completed the assessment of the diversion of only a portion of the borrowed money for investment in shares and that it is only from the report of the audit party it was known that a portion of the borrowed money had been utilised for investment in shares and this would constitute "information" coming to the possession of the officer subsequent to the original assessment in consequence of which he entertained the belief that the income had escaped assessment and, therefore, the reassessment was justified. In Elgin Mills Co. Ltd. v. ITO an audit objection that an extra shift allowance which had been allowed by the ITO in the original assessment was n

ot in accordance with the I.T. Rules regulating depreciation, was held to be an "information" on the basis of which action for reassessment under s. 147 of the Act was justified. Thus, in the first case the ITO was not aware of the fact that the interest payments related partly to the acquisition of shares while in the second case the correct provision of law had not been applied, while making the original assessment. However, the facts in the case on hand are entirely different. Even at the stage of the original assessment the ITO was aware of the fact that the borrowings and the interest payments thereon partly related to the purchase of shares which earned income and partly related to his personal expenses. The instructions given by the IAC did not bring in any new fact or material which was not before the ITO at the stage of the original assessment. The instruction given by the IAC is in essence an intimation to the ITO that he has given an excessive allowance in the original assessment than what was due to the assessee. Such an intimation cannot constitute "information" as it does not bring to light any new material. Hence, we answer the first question in the negative and in favour of the assessee. In view of the fact that we have answered the first question in favour of the assessee, the second question referred does not call for any answer. The reference is answered accordingly. The assessee will have his costs from the Revenue. Counsel's fee Rs. 500.