Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Position prior to 1-4-1989 - Assessment years 1968-69 and 1969-70 - Whether in order to constitute 'information' within meaning of section 147(b), knowledge need not be acquired from external source only, but it may well be acquired by ITO himself on further research and discovery of facts or law which had previously passed unnoticed - Held, yes - Whether where ITO reopened assessments on basis of audit party's note that 'langer expenses' had been wrongly allowed by ITO, view of audit party constituted information and reopening of assessment was legal and valid - Held, yes FACTS The assessments of assessee company for the relevant assessment years were completed by the ITO. In the profit and loss accounts filed along with the returns, the assessee claimed 'langer' expenses (expenses on customers). The expenses claimed by the assessee were allowed by the ITO without any question. Subsequently, the internal audit party of the income-tax department pointed out by its note, that entertainment expenses had wrongly been allowed in excess of Rs. 5,000 contrary to the provisions of section 37(2). On the basis of the audit party's note, the ITO reopened the assessments under section 147(b) and reassessed the assessee by including an additional sum The AAC, however, cancelled both the reassessments on the ground that there was not before the ITO 'information' within the meaning of section 147(b). According to the AAC, the view expressed by the internal audit party of the income-tax department that the limit of Rs. 5,000 prescribed by section 37 had been exceeded, was not such information. The orders of the AAC were confirmed by the Tribunal. On reference : HELD In order to constitute 'information' within the meaning of section 147(b), the knowledge need not be acquired from an external source only, but it may well be acquired by the ITO himself on further research and discovery of facts or law which had previously passed unnoticed. Thus, it may be 'self-generated'. This knowledge he may also acquired from his attention being drawn to it by some other agency. Whatever be the source of knowledge, what…

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