Chandrashekhar, J. - (1.) AT the instance of the revenue, the Income-tax Appellate Tribunal, Allahabad Bench, Allahabad (hereinafter referred to as "the Tribunal") has referred to this court the following question of law : " Whether, on the facts and in the circumstances of the case, the proceedings under Section 147(b) of the Income-tax Act, 1961, for the assessment year 1961-62 were barred by limitation and Sections 150(1) and 153(3), Explanation 2, did not save the limitation for issue of notice as provided under Section 149 of the Act ? "
(2.) THE material facts of the case are these : THE assessee is a firm engaged in the manufacture of sugar. THE original orders of assessment of its income for the assessment years 1960-61 and 1961-62 were made on March 31, 1964. For the assessment year 1960-61, the assessee had claimed deduction of Rs. 4,49,704 and Rs. 4,18,291 as expenditure on excise duty on stocks of sugar held at its factories on the last day of the relevant previous year. THE assessee who had adopted the mercantile system of accounting had made provision in its accounts for payment of such excise duty. THE Income-tax Officer had disallowed this claim for the assessment year 1960-61, but had allowed these two sums as expenditure for the assessment year 1961-62. In the appeal preferred by the assessee from the order of assessment for the year 1960-61, the Appellate Assistant Commissioner held that these two sums should be allowed as expenditure towards excise duty for the assessment year 1960-61, since it (the assessee), who was following the mercantile system of accounting, had made provision for payment of these two sums towards excise duty in its accounts in the relevant previous year. Consequent on the decision of the Appellate Assistant Commissioner, the Income-tax Officer modified the assessment for the year 1960-61 by allowing the expenditure of Rs. 8,67,995 in that year. Since the very same two amounts had been allowed as expenditure in the assessment for the year 1961-62 also, the Income-tax Officer initiated proceedings under Section 147 of the Income-tax Act, 1961 (hereinafter referred to as " the Act "), in respect of that year and issued to the assessee on March 17, 1969, a notice under Section 148 of the Act. After considering its objections, he reassessed its income for the year 1961-62, by adding back these two sums which he had allowed as expenditure in his original order of assessment for the year 1961-62.
(3.) THE appeal by the assessee against the order of reassessment for the year 1961-62 was dismissed by the Appellate Assistant Commissioner. In the further appeal by the assessee, the Tribunal held that the reassessment proceedings for that year were barred by time and that hence the reassessment was invalid. In this reference, the learned standing counsel for the income-tax department contended that as the reassessment for the year 1961-62 was made in consequence of the finding of the Appellate Assistant Commissioner that the aforesaid two sums were allowable towards excise duty in the assessment year 1960-61 itself, there was no time-limit for making such reassessment and that the Tribunal was in error in holding that the reassessment was barred by time. The learned standing counsel maintained that in view of Explanation 3 to Sub-section (3) of Section 153 of the Act, there was no time limit for making such reassessment.;