COMMISSIONER OF INCOME TAX Vs. EMPIRE INDUSTRIES LIMITED

JUDGEMENT

(1.) BY this reference under S. 256(1) of the IT Act, 1961, made at the instance of the Revenue, the Tribunal has referred the following two questions of law to this Court for its opinion :

(2.) THE principal question which arises for consideration of the Court in this reference is as to whether the ITO had jurisdiction to initiate reassessment proceedings invoking S. 147(b) of the IT Act, 1961 relying on S. 40A(7) of the Act inserted therein with retrospective effect, i.e., from 1st April, 1973, even though the same very provision was specifically invoked on behalf of the Revenue before the Tribunal in the second appeal arising from original proceedings and a view was taken by the Tribunal in the said proceedings (rightly or wrongly) that the said section was not applicable to the case of the assessee. The relevant facts are summarised hereinafter.

(3.) AFTER the Tribunal disposed of the said appeal of the assessee on merits as aforesaid, the ITO commenced reassessment proceedings against the assessee invoking S. 147(b) of the IT Act, 1961 relying on the retrospective amendment of the IT Act, 1961 whereby S. 40A(7) was incorporated in the Act with retrospective effect even though the same very ground was already raised on behalf of the Revenue before the Tribunal in the second appeal arising from original assessment proceedings and adjudicated upon. On or about 21st Jan., 1977, the assessee filed its return under protest. Throughout the reassessment proceedings, the assessee contended that the ITO could not invoke s. 147(b) of the IT Act, 1961 at the stage he did so and commence reassessment proceedings on the basis of same ground which was already urged on behalf of the Tribunal (Revenue) and negatived. On 24th Oct., 1977, the assessee filed written submissions before the ITO, inter alia, contending in alternative that S. 40A(7) of the Act was not at all attracted to the case of the assessee. On 17th July, 1979, the ITO passed an order of reassessment rejecting all the contentions of the assessee. Being aggrieved by the said order, the assessee preferred an appeal before the CIT(A). By his order dt. 18th Jan., 1979, the CIT(A) allowed the appeal preferred by the assessee. The CIT(A) did not go into the correctness or otherwise of the ITO's action invoking s. 147(b) of the Act but decided the appeal of the assessee in its favour on merits of the controversy. By an order dt. 25th April, 1980, the Tribunal dismissed the Department's appeal and allowed the cross objection filed by the assessee.