Law:

Section:

Section 147 of the Income-tax Act, 1961 - Income escaping assessment - Position prior to 1-4-1989 - Assessment year 1974-75 - Whether, if assessing officer solely acts on opinion expressed by revenue audit party without indication of application of mind by him, as regards applicability of position of law indicated to him to case of assessee, reopening under section 147(b) would be illegal - Held, yes FACTS The assessment for the relevant assessment year was reopened on the ground that the assessee kept its accounts on the mercantile basis and, therefore, interest receivable on the loans was taxable irrespective of whether the interest was credited to the 'Interest account' or 'Interest suspense account'. The Commissioner (Appeals) was of the view that reassessments completed under section 147(b) were not in accordance with law because the reopening of the assessment was on the basis of a revenue audit objection. The Tribunal confirmed the view of the Commissioner (Appeals). On reference : HELD The expression 'information' referred to in section 147(b ) means information as to law created by a formal source. It is law which, because it issues from a competent Legislature or a competent judicial or quasi-judicial authority, influences the course of the assessment and decides any one or more of those matters which determine the assessee's tax liability. An audit party does not possess the power to pronounce law. Nevertheless, it is not incompetent to draw the attention of an ITO to the correct legal position. A distinction between source of law and communicator of law is to be maintained. While law is to be enacted or laid down only by a person or body with authority in that behalf, the knowledge or awareness of the law may be communicated by any one. No authority is required for the purpose. That part of the note of the audit party which mentions the law which has escaped the notice of the ITO constitutes 'information' within the meaning of section 147(b ), but the opinion embodies in the audit report in regard to the application or interpretation of law does not constitute 'information' so far as the ITO is concerned and cannot be taken into account for the…

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