R. K. MALHOTRA, I.T.O. GROUP CIRCLE II(L), AHMEDABAD versus KASTUR BHAI LALBHAI (H.U.F.)

Citation: [1978] 1 S.C.R. 289 · Decided: 11-08-1977 · Supreme Court of India · Bench: Y.V. CHANDRACHUD · Disposal: Appeal(s) allowed
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Judgment (excerpt)

.i 
R. K. MALHOTRA, l.T.O. 
GROUP CIRCLE II(l), AHMEDABAD 
v. 
KASTUR BHAI LALBHAI (H.U.F.) 
August 11, 1977 
(Y. Y, CHANDRACHUD AND P. S. KAILASAM, JJ.l 
289 
Income Tax Act, section I47(b), conditions for invoking-'lnfonnalion', 
scope of,-Wltether includes i11titnation fro111 the Audit Departtnent pointing out 
erroneous application of law. 
A 
B 
The respondent, H.U.F., is an assessee owning two 
houses. 
During 
the 
assessment year 1965-66, the Income-tax Officer, in determining the annual valu-
ation of its properties ur.der s. 23 (2) of the Income-ta·x Act, erroneously allowed 
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a deduction of municipal taxes amounting to Rs. 4,052/-. 
Subsequently 
on 
scrutinising the assessments, the office of Con1ptroller and Auditor General of 
India pointed out that the deduction of municipal taxes in respect of self occupied 
properties was not admissible u /s. 23 (2). 
The Income-tax Officer treated the 
intimation as 'information' \\-'ithin the meaning of s. 147 (b), and consequently 
propqsed to re-assess the respondent's income for 1965-66. 
On September 12, 
1969, he issued a notice u/s. 148 requiring the respondent to file a return of his 
income. 
On an application by the respondent, the High Court issued a writ of 
mandamus quashing the notice, but granted a certificate under Art. 133 ( 1) ( c). 
D 
It was contended by the' respondent that the mere pointing out by the Auditor, 
the error in the application of law, would not amount to 'inforn1ation' u/s. 147 
(b): especially as the' I.T.0. knew the houses to be self-occupied. 
Allowing the appeal, the Court, 
HELD : ( 1) Two condHions are necessary for invoking sub-section (b) of 
section 147; (i) The Officer should receive information after the original assess-
n1ent and (ii) in consequence of such information he should have reason 
to 
E 
believe that income h.:'1s escaped assessment. 
The 'information' may be of facts 
or of law. 
r291D-El 
(2) That the Income-tax Officer with diligence could have 
obtained 
the' 
information during the previous assessment on a proper investigation 
of the 
materials on record or the facts disclosed thereb}', would not make it any less 
the information jf the fact was not, in fact, obtained and came to his_ knowledge 
only subsequently. It would be 'information of law' if it is stated by a person, 
body or authority competent and authorised to pronounce upon the law and is 
F 
invested with authority to do so. 
[291E, F, 294E] 
Maharaj Kun1ar Kania.I Singh v. Conunissioner of lnconze-tax, Bil1ar and 
Orissa 35 ITR 1; R. B. Bansilaf Abirchand Finn v. Con1misiso11er of lnconze Tax, 
1'.1.P. 70 ITR 74; Asstt. Controller of Estate Duty, Hyderabad v. Nawab Sir Mir 
Os.111an Ali Khan Bahadur, H.E.H. the Nizc~1n oft Hyderabad & Ors~ 72 ITR 376, 
referred to. 
Cam1nissioner of !11co1ne-tax, Gujarat v. A. Ran1an & Co. 67 ITR 11, applied. 
(3) 1he Audit Department is the proper machinery to scrutinise the assess-
G 
ments of the Income-tax Officer and point out the errors, if any, in law. 
The 
I.T.0. \\-·ill not be precluded from using the auditors' note as fresh 'inforrniation'~ 
[294F] 
Co1nn1is.sio11er of lnco1ne-tax, Delhi v. H. H. S111t. Chand Kanwarji 84 ITR 
584; Con11nissio11er of lncon1e-tax v. -Keluku.tty 85 ITR 102 and Vashist Bhargava 
v. lncon1e-tax Officer, Salary Circle, !>lew Delhi 99 ITR 148, approved. 
, 
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1977 of 1971. 
From the Judgment and Order dated 23-6-70 of the Gujarat High 
Court in Special Civil Application No. 1372 of 1969. 
A 
B 
290 
SUPREME COURT REPORTS 
[1978] 1 S.C.R. 
B. B. Ahuja and Girish Chandra for the Appellant. 
B. Sen, R. M. Mehta, S. K. Dholakia and R. Ramachandran for the 
Respondent. 
The Judgment of the Court was ddivered by 
KAILASAM, J.-This appeal is by the Income-tax Officer, Group 
Circle II(!), Ahmedabad, by certificate granted under Art. 133(1)-
(c) by the High Court of Gujarat against its judgment June 23, 1970, 
allowing the application filed by the respondent assessee and issuing a 
writ of mandamus quashing and setting aside the notice dated Septem-
ber 12, 1969, issued by the Income-tax Officer under section 148 of the 
Income-tax Act. 
The respondent who is a Hindu undivided family is an assessee own-
C 
ing two house properties : one in Ahmedabad and the other in Bombay. 
During the relevant assessment year 1965-66 both the properties were 
occupied by the respondent. 
The Income-tax Officer treated the pro-
perties as self-occ
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