Income-tax---

----Reassessment---Information that income had escaped assessment-- Material considered by I.T.O. while passing original assessment order-- Subsequent discovery of mistake would not constitute "information" for purposes of S.147(b)---One-third of property used for business and depreciation granted in earlier years on that basis---Sale of property---I.T.O. granting terminal allowance in respect of entire property---Reassessment proceedings to correct mistake were not valid---Indian Income Tax Act, 1961, Ss.3T& 147(b).

Section 147(b) of the Income Tax Act, 1961, does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. 1f the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start proceedings for reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act.

Held, that, in the instant case, the Income-tax Officer was aware of the fact that in the earlier assessment years, depreciation was allowed on one third of the value of the property, since only that portion was used for the purpose of business by the assessee. In the original assessment for the assessment year 1971-72, the Income-tax Officer granted the terminal allowance as calculated by the assessee. The assessee calculated the terminal allowance by taking into consideration the entire value of the property. Once he had considered the materials for corning to the conclusion in granting terminal allowance under section 32(1)(ii) again on reappraisal of the same materials it was not possible for the Income-tax Officer to correct the mistake, if any, which was made` by him in the original assessment. Therefore, the reopening of the assessment under section 147(b) by the Income-tax Officer was without jurisdiction.

Bankipur Club Ltd. v. CIT (1971) 82 ITR 831 (SC); CIT v. A. Raman & Co. (1968) 67 ITR 11 (SC); Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996 (SC) and Maharaj Kumar Kamal Singh v. CIT (1959) 35 ITR 1 (SC) applied.

A.L.A. Firm v. CIT (1976) 102. ITR 622 (Mad.); A.L.A. Firm v. CIT (1991) 189 ITR 285 (SC); Allied Publishers (P.) Ltd. v. CIT (1968) 68 ITR 546 (Bom.); CIT v. Chiranji Lal (1969) 74 ITR 480 (Delhi); CIT v. Rathinasabapathy Mudaliar (1964) 51 ITR 204 (Mad.); G. R. Ramachari & Co. v. CIT (1961) 41 ITR 142 (Mad.); Kalyanji Mavji & Co. v. CIT (1976) 102 ITR 287 (SC); Salem Provident Fund Society Ltd. v. CIT (1961) 42 ITR 547 (Mad.) and United Mercantile Co. Ltd. v. CIT (1967) 64 ITR 218 (Ker.) ref.

C. V. Rajan for the Commissioner.

S. A. Batasubramanian for the Assessee.

JUDGMENT

K. A. THANIKKACHALAM, J.----At the instance of the Department, the Tribunal referred the following two questions, for the opinion of this Court, under section 256(1) of the Income Tax Act, 1961:

"(1) Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the Income-tax Officer had not validly taken recourse to section 147(b) of the Income Tax Act, 1961, and hence -the reassessment made for the assessment year 1971-72 was invalid?

(2) Whether, on the facts and in the circumstances of the case and having regard to the provisions of section 38(2) of the Income Tax Act, 1961, the Appellate Tribunal was justified that for purposes of working out the terminal allowance under section 32 (1)(h) or the profit under section 41(2) the property which was sold should be considered to be an asset of the business of the assessee in its entirety even though only one-third portion of the building was used for purposes of the business?"

The original assessment in this case was completed on December 22, 1971. It has been held by the Income-tax Officer that it was noticed that the terminal allowance worked out and claimed by the assessee in respect of property sold by it in Pudukottai to another concern, Southern Roadways (Private) Ltd., was not correct. He, therefore, reopened the assessment under section 147 of the Act, and in response to the notice, the assessee filed a revised return declaring the same income as was originally furnished. It was also stated before the Income-tax Officer that the assessee had furnished all the material particulars in respect of the property sold, including the depreciation allowed, the sale proceeds realised and the terminal depreciation claimed by it under section 32(1)(iii) and, therefore, the reopening of the assessment under section 147 was not valid. According to the Income-tax Officer, in the assessment order the assessment has been reopened on March 29, 1975, under section 147(b) of the Act, and therefore, it was reopened within the time limit prescribed for such action. The Income-tax Officer has narrated the facts relaxing to the property and has given in the assessment the terminal depreciation that was worked out by the assessee and the terminal profits that is actually assessable according to the Income-tax Officer. This is reproduced hereunder:

Difference between Rs.1,35,022 and Rs.1,18,000 is claimed as deduction and allowed. Now, as a portion of the building, viz., 1/3rd was used and for business use depreciation duly allowed. Section 41(2) profit on this portion has to be separately worked out as under:

In the place of the original terminal allowance of Rs.17,022 which was allowed by the Income-tax Officer in the original assessment, in the reassessment, the Income-tax Officer computed a profit of Rs.30,554 under section 41(2) of the Act. It can be seen from the working by the Income-tax Officer that he had, bifurcated the cost of the property as one-third only used for the purpose of the business. The depreciation allowed was entirely adjusted against this and the written down value arrived at by deducting the depreciation actually allowed front this one-third portion of the building to the assessee. The sale value was also taken for the purpose of computing the profit under section 41(2) at one-third portion. There is no dispute that only one-third portion of the property was used by the assessee for the purpose of its business. The depreciation on this property for the purpose of computing the business income of the assessee has been calculated at one third of the depreciation that would have been allowed had the property been used entirely for the purpose of its business.

Aggrieved the assessee filed an appeal before the Appellate Assistant Commissioner challenging the validity of reopening under section 147 read with section 143(3) of the Act and also contesting the order passed by the Income-tax Officer on the merits. The Appellate Assistant Commissioner has observed that on the facts that were before the Income-tax Officer at the time of original assessment, the Income-tax Officer had allowed a loss of Rs.17,022 which was actually the terminal allowance that was allowed by the Income-tax Officer under section 32(l)(iii) of the Act. He further pointed out that the action of the Income-tax Officer in revising his opinion on the same facts and in determining profit under section 41(2) at Rs.47,576 merely amounts to a change of opinion on the same facts. He, therefore, held that the Income-tax Officer had no jurisdiction to reopen the assessment under section 147 of the Act of the Appellate Assistant Commissioner further pointed out that even on tire merits the loss of Rs.17,022 is admissible as originally allowed in view of the decision in, Allied Publishers (P.) Ltd. v. CIT (1968) 68 ITR 546 (Bom.). According to the Appellate Assistant Commissioner, the Income-tax Officer has not assumed valid jurisdiction under section 147.

Aggrieved the Department filed an appeal before the Appellate Tribunal. Before the Tribunal, the Department contended that the: Appellate Assistant Commissioner erred in holding that the Income-tax Officer has no validly reopened the assessment. According to the Department the reopening of the assessment by the income-tax Officer could be confirmed in view of the principles enunciated by the Supreme Court in Kalyanji Mavji & Co. v. CIT (1976) 102 ITR 287. On the merits, it was contended that the computation of the profit of Rs.47,576 computed tinder section 41(2) has been correctly made by the Income-tax Officer. It was pointed out that the assessee itself had claimed depreciation only on one-third of the cost and, therefore, the computation made by the Income-tax Officer in the reassessment is in order. It was pointed out that the decision in Allied Publishers (P.) Ltd. v. CIT (1968) 68 ITR 546 (Bom.), was rendered under a different context. According to the Department, in any event, the Appellate Assistant Commissioner should have held that the entire loss claimed by the assessee is not sustainable in view of the provisions of section 38(2).

On the question of the validity of reopening the assessment, the Department argued that the Income-tax Officer, while making the original assessment, had ignored the admitted position that only one-third of the property was used for the business and the provisions of section 32(2) and 41(2). It was submitted that after the original assessment was completed, the head clerk of the Income-tax Officer had put up a note pointing out the fact that in giving the terminal allowance of Rs.17,022, under section 32(1)(iii) the fact that only one-third of the property has been used for the purpose of business had been ignored. The allowance has been given on the basis of the working made by the assessee itself while submitting the return. If the terminal allowance is properly worked out, there would be no terminal depreciation, but, on the other hand, there will be profit under section 41(2). 'Learned standing counsel submitted that the reopening is valid in that the Income-tax Officer had lost sight of the statutory provision, viz. section 38(2), that at the time of the original assessment, that the head clerk had not only pointed out that the granting of terminal allowance had not been done in accordance with law, that the note of the head clerk to the Income- tax Officer constitutes an information under section 147(b) and, therefore, the reopening has been validly made under section 147 of the Act. The assessee, on the other hand, contended that the reopening is without jurisdiction, when the entire material regarding the original cost, the depreciation allowed and the value for which the property has been sold were before the Income-tax Officer at the time of original assessment. The assessee relied upon the decision in Allied Publishers (P.) Ltd. v. CIT (1968) 68 ITR 546 (Bom.), and the decision in CIT v. Chiranji Lat. (1969) 74 ITR 480 (Delhi). In effect, it was argued that in the place of Rs.17,022 allowed as the terminal allowance, a fair proposition say, one-third of that only can be considered to be allowable under section 32(1)(iii). It was argued that there can be no question of profit to be considered as arising under section 41(2). According to the assessee, the Income-tax Officer has not reopened the assessment: keeping in view the provisions of section 38(2). On the other hand, he had reopened the assessment on an entirely different basis on such material that was disclosed for coming to the conclusion that the claim of the allowance under section 32(1)(iii) is permissible without any further information or material.

According to the Tribunal it is necessary for the Income-tax Officer before initiating action under section 147 of that Act to entertain a bona fide belief that income had escaped assessment by virtue of the circumstances narrated either under section 147(a) or under section 147(b). It is true that the Income-tax Officer had passed an entry. in the order sheet for this assessment year stating that income had escaped assessment. But the income that he considered to have escaped assessment is only a profit under section 41(2), which in fact, has not escaped assessment. According to the Tribunal what has escaped in the assessment is only an excess allowance under section 32(I)(iii), That has not been adverted to either in the note given by the head clerk to the Income-tax Officer or by the Income-tax Officer himself in the order passed by him for the issue of notice under section 147. Therefore, according to the Tribunal, it cannot be said that the reopening has been validly made by the Income-tax Officer, since entertaining an honest belief contemplated under section 147 of the Act is absent in this case. According to the Tribunal, if the Income-tax Officer entertained a belief about the escapement of an item of income, which had not in fact escaped assessment, then he cannot validly reopen the assessment and make a reassessment of an amount, which has actually escaped assessment. Therefore, the Tribunal held that the argument advanced on behalf of the assessee that the Income-tax Officer cannot reopen the assessment even for considering the correctness or otherwise of the allowance granted under section 32(1)(iii) of the Act, in the circumstances of the ca-e, is unacceptable. Further, the Tribunal pointed out that if the head clerk in the instant case had pointed out that the Income-tax Officer had lost sight of the provision of section 38(2), that would, in the opinion of the Tribunal, have constituted valid information under section 147(b) of the Act. Unfortunately that was not the case here according to the Tribunal. Hence, it was held that the reopening of the assessment under section 147 of the Act is not valid.

On the merits, the Tribunal pointed out that the property is by all accounts a business asset of the assessee. The assessee has used the part of it that is necessary for its business and let out the balance, that was not used for its business. Nevertheless the asset should be considered to be an asset of the business of the assessee in its entirety. If this is the correct position, then the determination of the W. D. V. will have to be made in accordance with the provisions of section 43 of the Act. Thus; ultimately, the Tribunal dismissed the appeal filed by the Department.

Before us learned standing counsel appearing for the Department submitted that the Appellate Assistant Commissioner erred in holding that the Income-tax Officer has not validly reopened the assessment. According to learned standing counsel, the reopening should have been sustained by the Appellate Assistant Commissioner and, the Tribunal on the basis of the principles enunciated by the Supreme Court in Kalyanji Mavji & Co. v. CIT (1976) 102 ITR 287. It was argued that the Income-tax Officer while making the original assessment had ignored the admitted position that only one-third of the property was used for the business and the provisions of sections 38(2) and 41(2). It was submitted that alter the original assessment was completed, the head clerk of the Income-tax Officers had put up a note pointing out the fact that, in giving the terminal allowance of Rs. 17,022 under section 32(1)(iii), the fact that only one-third of the property- has been used for the purposes of the Business had been ignored. The allowance has been given on the basis of the working made by the assessee itself while submitting the return. If the terminal allowance is properly worked out, there would be no terminal depreciation, but, on the other hand, there will be a profit under section 41(2.) of the Act. After perusing the note prepared by the head clerk, the Income-tax Officer passed an order, directing the issue of notice under section 148 for reopening the assessment under section 147(b) of the Income Tax Act, 1961. According to the learned standing counsel, the reopening was valid, since the Income-tax 08icer had lost sight of a statutory provision, via., section 38(2) at the time of the original assessment: that the head clerk had , not only pointed out that the granting of the terminal allowance had not been done in accordance with law, the note of the head clerk to the Income-tax Officer constitutes an information under section 147(b) of the Act, and, therefore, the reopening has been validly tide under section 147 of the Act.

According to learned standing counsel, if the Income-tax Officer had already considered the materials available or, record, then on reappraisal of the same materials, it could not have been possible for him to come to the conclusion that the income had escaped from assessment. But, in the present case, the Income-tax Officer has not considered that terminal allowance is allowable only with regard to the one-third of the property, which alone was used for the purpose of the business of the assessee. Inasmuch as this aspect was not considered, it was submitted that the reopening is valid. Therefore, it was submitted that it cannot be said that the reopening was made merely on a change of opinion on the same materials available on record when the original assessment was completed. Further, it was submitted that the assessee had given a working of the allowance under section 32(1)(iii), which has been accepted, without question by the Income-tax Officer and hence there was no change of opinion involved in his assumption of jurisdiction under section 147(b) of the Act. It was also urged that the Income-tax Officer cannot be considered to have originally formed an opinion on the issue of actual cost as defined under section 43(1), since only a portion of the building was utilised for the purpose of the business. Hence, it was submitted that the reopening under section 147(b) of the Act was valid and the Tribunal was not correct in stating that the reopening under section 147(b) of the Income Tax Act, 1961, is bad. It is the contention of learned standing counsel that in the present case the sale value is more than the W. D. V. Therefore, there is no question of allowing terminal allowance under section 32(l)(iii), but only the profit has got to be assessed under section 41(2) of the Income Tax Act, 1961.

On the other hand, learned counsel appearing for the assessee while supporting the order passed by the Tribunal, submitted that the reopening is without jurisdiction. The entire materials regarding the original cost, depreciation allowable and the value for which the property had been sold were placed before the Income-tax Officer at the time of original assessment. The Income-tax Officer, according to the definition of written down value in section 43(6), it has to be calculated only on the basis of the cost of the asset to the assessee/reduced by the depreciation actually allowed. Therefore, in the original assessment, the Income-tax Officer considered the terminal allowance allowable under section 32(1)(iii) in the case of the assessee on the materials available on record. Thereafter, no new materials were brought on record. On the same materials on which the Income-tax Officer completed the , assessment under section 143(3) originally he cannot reopen the assessment simply because he made a mistake in the earlier original assessment order. According to learned counsel appearing for the assessee, it is not correct to state that the Income-tax Officer has not considered the terminal allowance allowable in the case of the assessee. Even though all the particulars were furnished, the Income-tax Officer allowed the terminal allowance on the particulars furnished by the assessee. Hence, it is not correct on the part of the Department to contend that allowing terminal allowance on one-third of the cost of the building, which was actually used by the assessee, was not considered by the Income-tax Officer at the time when the original assessment was completed. Learned counsel for the assessee further submitted that the reasoning recorded by the Income-tax Officer, the income that he considered to have escaped assessment is only a profit under section 41(2) of the Act, which in fact has not escaped assessment. What appears to be the escaped assessment is only an excess allowance under section 32(1)(iii) of the Act. This was not stated either in the note given by the head clerk to the Income-tax Officer or in the reasons recorded by the Income-tax Officer his record for reopening the assessment For these reasons, it was submitted that the Tribunal was correct in holding that reopening under section 147(b) of the Income Tax Act, 1961, is not valid.

On the merits, learned standing counsel appearing for the Department submitted that in the present case, there is no terminal allowance but there is only profit as contemplated under section 41(2) of the Act. It was submitted that the property sold was not used entirely for the purpose of the business of the assessee. Only one-third of the property was used for the business purpose. The depreciation was allowed only on the value of the one -third of the sale consideration. All along the assessee was claiming depreciation on the value of one-third of the property, which was actually for the purpose of the business. It was, therefore, submitted that even section 41(2) profit should be ascertained on the basis of the one-third value of the property, which was actually used for the business. According to learned standing counsel, the asset is capable of division, and therefore, only one-third of the property, which was utilised for-business purpose for which depreciation was allowed in the earlier orders alone would be considered for assessing profit under section 41(2) of the Act.

On the other hand, learned counsel appearing for the assessee submitted that terminal allowance was granted by the Income-tax Officer in the original assessment on the basis of the calculation submitted by the assessee. In fact, the assessee was using only one-third of the property in question for business purpose and two-thirds of the property was let out. In the earlier orders also depreciation was claimed on the value of one-third of the property. In order to ascertain the profit under section 41(2), the asset cannot be bifurcated, according to learned counsel appearing for the assessee unlike section 38(2), where for the purpose of allowing depreciation or terminal allowance a portion of the property, which was used for business purpose can be taken into consideration, it is not possible under section 41(2) to take into consideration only a portion of the property, which was utilised for the purpose of the business, since there was no provision like sectioi7 38(2) for ascertaining the profit under section 41(2) to the Act, Learned counsel also submitted that inasmuch as there is no provision like section 38(2) for the purpose of allowing depreciation on a portion of the building used for business purposes, under section 41(2) for assessing the profit, the Income-tax Officer would not have entertained an honest belief that section 41(2) profit had escaped from the assessment. Therefore, even on this ground also learned counsel for the assessee submitted that reopening is bad.

We have heard both learned standing counsel appearing for the Department as welt as learned counsel appearing for the assessee. We have already set out the facts in detail. In the original assessment terminal allowance was granted at Rs.17,022. In the reassessment, the Income-tax Officer computed the profit of Rs.30,544 under section 41(2). It will be seen from the working by the Income-tax Officer that he had bifurcated the cost of the property as one-third only used for the purpose of the business. The depreciation allowed was entirely adjustable against this and the written down value was arrived at by deducting the depreciation actually allowed from this one-third portion of the building to the assessee. The sale value was also taken for the purpose of computing the profit under section 41(2) at one-third portion. There was no dispute between the parties that only one-third portion of the property was used by the assessee for the purpose of business.

For determining terminal allowance under section 32(1)(iii) of the Act and the profit under section 41(2) the difference between the sale proceeds and the written down value to the extent of actual allowance of depreciation becomes material If the difference is more than the actual allowance of depreciation, then the excess depreciation allowed is with drawn under section 41(2) of the Act. If the difference is less, then a further allowance is given to the assessee so as to compensate for the actual cost incurred by the assessee. Under section 38(2) when the asset has been partly used for the purpose of business and partly for personal purposes, terminal allowance will have to be restricted to a fair proportion of the total terminal allowance, if the property had been used entirely for business purpose. In the present case, the total terminal allowance is Rs.17,022. Under section 38(2) of the Act, the Income-tax Officer should have allowed only a proportion of it. The Income-tax Officer himself held in the earlier assessments regarding the grant of depreciation on this property, the allowance under section 32(1)(iii) of the Act after this building was sold should be only one -third of this amount of Rs.17,022. If the assessment in the original assessment had been made properly, then the terminal allowance should have been restricted only to one-third of Rs.17,022. To that extent there has been an excess allowance of depreciation. .

The Income-tax Officer reopened the assessment on the basis of the note submitted by his head clerk. The note put up by the head clerk pointed out the fact that in giving the, terminal allowance of Rs.117,022 under section 32(1)(iii) of the Act the fact that only one-third of the property has been used for the purpose of business had been ignored: The allowance has been given on the basis of the working made by the assessee himself while submitting the return. If the terminal allowance is properly worked out, there would be no terminal depreciation, but on the other hand, there will be a profit under section 41(2) of the Act.

Admittedly, the Income-tax Officer has not taken into consideration the provisions of section 38(2) of the Act while reopening the assessment. The note, in fact, has not pointed out the consequence of a correct application of section 38(2) to the facts of this case. On the other hand, it proceeds on an entirely different footing, viz., that the building is to be divided into two portions, one used for the purpose of business and the other not used for such purpose, that the cost of the assessee should also be apportioned in the same manner and only the cost apportioned for the business use should be taken into account for the purpose of determining the allowance under section 32(1)(iii) of the Act and for the profit under section 41(2). Therefore, it is clear that even an indirect reference to the position that would emerge by proper application of section 38(2) has not been made in the note given by the head clerk to the Income-tax Officer. According to the reasons recorded by the Income-tax Officer, the income that he considered to have escaped the assessment is only the profit under section 41(2), which, in fact has not escaped assessment. What actually escaped assessment was only an excess allowance granted under section 32(1)(iii) of the Act. This was not stated either in the note given by the head clerk or in the notice given by the Income-tax Officer. It can be seen that the Income-tax Officer had made a mistake in determining the allowance under section 32(1)(iii) of the Act. It remains to be seen that even at the time of the original assessment, all the material particulars for claiming terminal allowance were placed before the Income-tax Officer. The Income-tax Officer was also aware of the fact that in the earlier years, depreciation under section 32(1)(iii) of the Act was claimed on one-third of the valuation of the building, which was actually used for the purpose of business. Therefore, on taking into consideration all these facts, the Income -tax Officer would have granted terminal allowance in the original assessment. It may be wrong, but whether this wrong can be set right by reopening the assessment under section 147(b) of the Act. If the Income-tax Officer had not considered the materials available on record and came to a conclusion in the original assessment, and if later on he found that such assessment was wrong, then it is open to him to reopen the assessment to correct the mistake. But if the materials on record were already considered by him while making the assessment, if he found that such an order was not correct, at a later stage, he cannot reopen the assessment by reassessing the same materials, which were already considered by him in the original assessment.

In Kalyanji Mavji & Co. v. CIT (1976) 102 ITR 287, the Supreme Court while considering the provisions of section 34(1)(b) of the Indian Income-tax Act, 1922, held that on a combined review of the decisions of this Court, the following tests and principles would apply to determine the applicability of section 34(1)(b) to the following category of cases (page 296):

"(1) where the information is as to the true and correct state of the law, derived from relevant judicial decisions;

(2) where in the original assessment the income liable to tax has escaped' assessment due to oversight, inadvertence or a mistake committed by the Income-tax Officer. This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority;

(3) where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh facts, which were not present at the time of the original assessment;

(4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law.

If these conditions are satisfied, then the Income-tax Officer would have complete jurisdiction to reopen the original assessment. It is obvious that where the Income-tax Officer, gets no subsequent information, but merely proceeds to reopen the original assessment without any fresh facts or materials or without any enquiry into the materials which form part of the original assessment, section 34(1)(b) would have no application."

In Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996, the Supreme Court, while considering section 147(b) of the Income Tax Act, 1961, held that (page 1004): "In our opinion an error discovered on a reconsideration of the same material (end no more) does not give him that power. That was the view taken by this Court in Maharaj Kumar Kamal Singh v. CIT (1959) 35 ITR 1 (SC); CIT v. A. Raman & Co. (1968) 67 ITR I1 (SC) and Bankipur Club Ltd. v. CIT (1971) 82 ITR 831 (SC), and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji & Co. v. CIT (1976) 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law".

The Supreme Court has had an occasion again to consider the provisions of section 147(b) of the Income Tax Act, 1961 in A. L. A. Firm v. CIT (1991) 189 ITR 285, wherein the Supreme Court held as under (headnote):

"...that though the Income-tax Officer, at time of the original assessment, had looked at the facts and accepted the assessee's contention that the surplus was not taxable, in doing so, he had obviously missed to take note of the law laid down in the case of G. R. Ramachari & Co. (1961) 41 ITR 142 (Mad) and there was nothing to show that the case had been brought to his notice. When he, subsequently, became aware of the decision, he initiated proceedings under section 147(b). The material which constituted information and on the basis of which the assessment was reopened was the decision in G. R. Ramachari & Co. (1961) 41 ITR 142 (Mad.). This material was not considered at the time of the original assessment. Though it was a decision of 1961 and the Income-tax Officer could have known of it had he been diligent, the obvious fact was that he was not aware of the existence of that decision then and, when he came to know about it, he rightly initiated proceedings for assessment."

It was further held that (page 298 of. 189 ITR) "even making allowance for this limitation placed on the observations in Kalyanji Mavji's case (1976) 102 ITR 287 (SC), the position as summarised by the High Court in A. L. A. Firm v. CIT (1976) 102 ITR 622 in the following words represents, in our view, the correct position of law (page 629 of 102 ITR):

"The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147 (b) of the Act'."

Learned standing counsel appearing for the Department, in order to support his contention that the reopening under section 147(b) of he Act is valid, relied upon the decision in Salem Provident Fund Society. CIT -(1961) 42 ITR 547 (Mad); CIT v. Rathinasahapathy Mudaliar (1964) 51 ITR 204 (Mad) and United Mercantile Co. Ltd. v. CIT (1967) 64 ITR 218 (Ker.) and in order to support his contention that a mere mistake made by the Income-tax Officer in the original assessment would entitle him to reopen the assessment under section 147(b) of the Act. But in view of the later decision of the Supreme Court cited supra, the law on this aspect has to be understood as adumbrated by the Supreme Court in the above cited decision.

Therefore, if the Income-tax Officer failed to consider a particular material in the original assessment and later on became to know that because of such omission to consider it, certain income had escaped from assessment, it is open to him to reopen the assessment under section 147(b) of the Income Tax Act, 1961. But on the same materials, which were already considered by the Income-tax Officer in the original assessment even if a mistake is committed, he cannot reopen the assessment under section 147(b) of the Act.

In the present case, the learned standing counsel appearing for the Department, submitted that the fact that the assessee is entitled to terminal allowance under section 32(1)(iii) of the Act only on the one-third of the value of the asset was not considered by the Income-tax Officer, and, therefore, reopening under section 147(b) of the Act is valid, if the Income -tax Officer wanted to withdraw the escaped excessive terminal allowance granted in the original assessment. The fact remains that the Income-tax Officer is aware of the fact that in the earlier assessment years, depreciation was allowed on the one-third value of the property, since only that portion was used for the purpose of business by the assessee. In the original assessment for the assessment year 1971-72, the Income-tax Officer granted the terminal allowance as calculated by the assessee. The assessee calculated the terminal allowance by taking into consideration the entire value of the property. According to the Income-tax Officer, the assessee is entitled to terminal allowance under section 32(1)(iii) only with regard to the one-third of the sale consideration, because the assessee was using only one-third of the building for the purpose of business. In the reassessment, the Income-tax Officer not only withdrew the terminal allowance already granted in the original assessment, but also brought to tax the profit under section 41(2) of the Act. On those facts, the point for consideration is, whether it can be said that the Income-tax Officer has considered in the original assessment the material relating to terminal allowance under section 32(1)(iii) of the Act. In fact all the information s on this aspect were furnished before the Income-tax Officer and the Income-tax Officer was also aware of the fact that in the earlier -years, depreciation was allowed on one-third of the value of the property, which was used for business purpose. Under circumstances, it cannot be said that without considering the materials for allowing terminal benefit, the Income-tax Officer would not have allowed the terminal allowance of Rs.17,022 under section 32(1)(iii) of the Act. No doubt, the Income-tax Officer was not correct in allowing terminal allowance of Rs.17,022 under section 32(1)(iii) of the Act on the basis of the entire value of the asset, even though only one-third of the asset was used for business purpose. On this basis, whether it is open to the Income-tax Officer to reopen the assessment to correct the mistake. Inasmuch as the Income-tax Officer has considered while the granting terminal allowance under section 32(1)(iii) of the Act in the original assessment all the materials available on record, it cannot be said that the Income-tax Officer has not considered this aspect in the original assessment. Once if he has considered the materials for coming to the conclusion in granting terminal allowance under section 32(1)(iii) of the Income Tax Act, 1961, again on reappraisal of the same materials it is not-possible for the Income-tax Officer to correct the mistake if any, which was made by him in the original assessment. Therefore, we are of the opinion that the reopening of the assessment under section 147(b) of the Income Tax Act, 1961, by the Income-tax Officer is without jurisdiction. Since we came to the conclusion that the reopening under section 147(b) of the Income Tax Act, 1961, is not valid, we are not deciding the question referred to us on the merits. In that view of the matter, we answer question No.l referred to us in the affirmative and against the Department.

In so far as question No. 2 is concerned, which relates to the merits of the case, we are not rendering any opinion on the same. No costs.

M.B.A./3181/FCOrder accordingly.