Rajesh Balia, J. - (1.) HEARD learned counsel for the parties.
(2.) THIS reference relates to the assessment year 1976-77. The assessee has claimed deduction under Section 80J of the Income-tax Act, 1961 (for short "the Act"). In the first instance, the return submitted by the assessee-respondent was not accompanied by the audit report as required by Subsection (6A) of Section 80J of the Act. However, before the assessment was made, the assessee-respondent submitted a revised return claiming greater benefit under Section 80J. The audit report was available with the respondent-assessee at the time when he filed the original return but it could not be filed along with the original return. On the basis of the revised return, computation of deduction under Section 80J of the Act was made by the Assessing Officer by excluding the capital borrowed from the Rajasthan Finance Corporation and other scheduled banks amounting to Rs. 6,01,635 and deduction was computed accordingly. Aggrieved by the lesser allowance of deduction than claimed under Section 80J of the Act, the assessee filed an appeal before the Appellate Assistant Commissioner of Income-tax, Range Kota, who, vide his order dated August 24, 1979, accepted the appeal filed by the assessee and directed the Assessing Officer to recompute the deductions allowable under Section 80J of the Act by including the borrowed capital in the fixed capital investment. On that basis, the assessment was completed. Thereafter, the Assessing Officer sought to recall the allowance under Section 80J by rectification of the assessment made in pursuance of the directions of the Appellate Assistant Commissioner relating to the allowance of deduction under Section 80J of the Act on the ground that the audit report was not submitted along with the return of income and thus deduction under Section 80J of the Act was not at all allowable. Against that, an appeal was filed before the Commissioner of Income-tax (Appeals). In the appeal, two-fold points were raised by the assessee-respondent before the Commissioner of Income-tax (Appeals). Firstly, the matter relating to the allowance of deduction under Section 80J of the Act being the subject-matter of appeal before the Appellate Assistant Commissioner, the assessment order in regard to that matter merged with the order passed by the Appellate Assistant Commissioner and, therefore, the Income-tax Officer was not at all competent to make any rectification in that order so far as the matter of allowance of deductions under Section 80J was concerned. The second contention raised before the Commissioner of Income-tax (Appeals) was that in pursuance of the notice under Section 154 of the Act, the assessee-respondent had filed the audited accounts with the audit report. The provision regarding submission of the audit report along with the return being directory in nature, the mistake was not rectifiabie. These contentions did not find favour with the Commissioner of Income-tax (Appeals) and the appeal filed by the assessee-respondent was dismissed.
(3.) HOWEVER, on further appeal, the Income-tax Appellate Tribunal, Bench at Jaipur, accepted both these contentions raised on behalf of the respon-dent-assessee and held that the Income-tax Officer had no jurisdiction to invoke the provisions of Section 154 of the Act on the principle of merger of his order with the appellate order passed by the Appellate Assistant Commissioner. It was further held that on the issue regarding the requirement of filing the audit report being mandatory or directory, there exists a 'difference of opinion between various High Courts and, therefore, considering this issue to be debatable it cannot be treated as a mistake apparent from the record and, hence, is not amenable to rectification proceedings on that ground also. On these findings, the Tribunal allowed the appeal filed by the respondent-assessee and set aside the order of rectification. It is in the aforesaid facts and circumstances of this case, on an application being moved under Section 256(1) of the Act by the Commissioner of income-tax, the following questions of law have been referred to this court for its opinion by the Income-tax Appellate Tribunal : "(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that as a result of the order of the Appellate Assistant Commissioner, the original assessment order is supposed to have merged in the appellate order and, therefore, the Income-tax Officer could not have started rectification proceedings under Section 154 of the Income-tax Act, 1961 ?" (2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the Income-tax Officer passed the order under Section 154 due to change of opinion and that there was no mistake apparent from the record within the meaning of Section 154 of the Income-tax Act, 1961 ?" We have heard Mr. J. K. Singhi, learned counsel appearing for the Revenue, and N. M. Ranka and J. K. Ranka, for the respondent-assessee. ;