Judgment

PATHAK, J.:- Can the view expressed by an internal audit party of the Income Tax Department on a point of law be regarded as "information" for the purpose of initiating proceedings under S. 147 (b) of the Income-tax act, Opinion on the question has been divided among the High courts and accordingly the present cases have been referred by the Income-tax Appellate Tribunal under S. 257 of the Act.

2. The assessee, Messrs. Indian and Eastern Newspaper Society, is a society registered under the Indian Companies Act. It is a professional association of newspapers established with the principal object of promoting the welfare and interest of all newspapers. The assessee owns a building in which a conference hall and rooms are lesst out on rent to its members as well as to outsiders. Certain other services are also provided to the members. The income from that source was assessed to tax all along as income from business. It was so assessed for the years 1960-61, 1961-62, 1962-63 and 1963-64 also.

3. The Income-tax Department includes an internal audit organisation whose function it is to examine income-tax records and check mistakes made therein with a view ultimately to improve the quality of assessments. In the course of auditing the income-tax records pertaining to the assessee for the assessment years 1960-61 to 1963-64, the internal audit party expressed the view that the money realised by the assessee on account of the occupation of its conference hall and rooms should not have been assessed as income from business. It said that an assessment should have been made under the head "Income from property." The Income-tax Officer treated the contents of the report as "information" in his possession for the purpose of S. 147 (b) of the Income-tax Act, 1961, and reassessed the income on that basis. The Appellate Assistant Commissioner allowed the appeals filed by the assessee holding, inter alia, that in law it could not be said that the Income-tax Officer had any "information" in his possession enabling him to take action under S. 147 (b). On appeal by the Revenue, the Income-tax Appellate Tribunal, Delhi Bench noticed a conflict of judicial opinion on the question whether the internal audit report could be treated as "information" for the purpose of S. 147 (b). The Gujarat High Court in Kasturbhai Lalbhai v. R. K. Malhotra, (1971) 80 ITR 188 (Guj) had held that an internal audit report could not be regarded as "information," while the Delhi High Court in Commr. of Income-tax v. H. H. Smt. Chand Kanwarji Alwar (1972) 84 ITR 584 had expressed a contrary view. Following the view adopted by the Delhi High Court, the Tribunal held that the Income-tax Officer had jurisdiction to proceed under S. 147 (b). The assessee applied for a reference, and having regard to the difference between the High Courts on the point, the Tribunal has considered it expedient to refer the following question of law directly to this Court :-

"Whether, on the facts and in the circumstances of the case, the Income-tax Officer was legally justified in reopening the assessments under S. 147 (b) for the years 1960-61, 1961-62, 1962-63 and 1963-64 on the basis of the view expressed by the Internal Audit party and received by him subsequent to the original assessment?"

4. Since then, the judgment of the Gujarat High Court in Kasturbhai Lalbhais case (supra) has, on appeal, been reversed by this Court in R. K. Malhotra v. Kasturbhai Lalbhai (1977) 109 ITR 537. It has been strenuously contended that the view taken by this Court calls for further consideration. Having regard to the dimensions of the controversy and the importance of the question, we have been persuaded to take a fresh look at the point.

5. An assessment proceeding is a quasi-judicial proceeding. It acquires finality on the assessment order being made. And the finality of such an order can be disturbed only in proceedings, and within the confines, provided by law. An appeal, revision and rectification