Income-tax----

----Appeal to appellate Tribunal Remind Order of remand final unless challenged through appropriate proceedings---Reassessment---Tribunal upholding jurisdiction of Income-tax Officer to reopen assessment under S.147(b) and restoring matter to First Appellate Authority---Order of the Tribunal regarding reopening of assessment had became final as assessee did not take up matter to High Court--- Question of validity of jurisdiction assumed by I.T.O. under S.147(b) on restoration of appeal to A.A.C. could not be challenged---Indian Income Tax Act, 1961, S.147(b).

Even a wrong order has a finality and unless that finality is disturbed by a process known to law or by a process authorised by law, the rights of the assessee and the Revenue will continue to be governed by the order. Where the Appellate Tribunal remands a case the finality of views expressed by it while doing on depends on the nature of the order of remand. If the remand is in the nature of calling for a finding and the Tribunal keeps seisin of the case it may be permissible for the Tribunal to reconsider its views. On the other hand, if the Tribunal disposes of the appeal while passing the order of remand and another appeal comes before the Tribunal against the order passed after the remand, it has no power to reconsider the finding or opinion. Questions which have become final and concluded by the remand order cannot be reopened. If the correctness of the remand order was not challenged through appropriate proceedings, it would not be open to review it when the matter comes again before that authority in appeal or revision against the order passed by the authorities below in accordance with the remand order.

The assessment was reopened by the Income-tax Officer for the assessment years 1972-73 and 1973-74. The assessee filed appeal raising two contentions. The first contention was that reopening the assessment for the assessment years 1972-73 and 1973-74 was not valid, and the second contention was that the interest payment by the agricultural estate had been validly claimed as a deduction against the interest receipts of the agricultural estate. These contentions were negatived by the First Appellate Authority and the assessee appealed before the Tribunal. The Tribunal upheld the orders of reassessments and restored the matter to the First Appellate Authority, with regard to the other contention. The Appellate Assistant Commissioner set aside the assessment for being done afresh according to law, in accordance with the observations of the Tribunal's order, dated July 31, 1978. On the assessee's appeal against these orders, the Tribunal rejected the contention of the assessee by pointing out that the earlier order, dated July 31, 1978 had, become final as the assessee did not take up the matter to the High Court and the question could not be considered afresh. On a reference:

Held, that the assessee was not entitled to raise the question of the validity of the jurisdiction assumed by the Income-tax Officer under section 147(b) of the Income Tax Act, 1961, in the course of proceedings taken pursuant to the restoration of the appeals to the First Appellate Authority by the Tribunal by its earlier order for the two assessment years 1972-73 and 1973-74.

Seshasayee Paper and Boards Ltd. v. I.A.C. of I.T. (1986) 157 ITR 342 (Mad.); M.K. Muhammad Kunhi v. CIT (1973) 92 ITR 341 (Ker.) and S.P. Gramophone Co. v. ITAT (1986) 160 ITR 417 (P&H) rel.

V. Ramakrishnan for the Assessee.

C.V. Rajan for the Commissioner.

JUDGMENT

The following question of law has been referred by the Tribunal at the instance of the assessee:

"Whether on the facts and in the circumstances of the case, the assessee was entitled to raise the question of the validity of the jurisdiction assumed by the Income-tax Officer under section 147(b) of the Income Tax Act, 1961 in the course of proceedings taken pursuant to the restorations of the appeals to the First Appellate Authority by the Tribunal by its earlier order dated May 31, 1978, for the two assessment years 1972-73 and 1973-74?"

This question of law has been refrained by correcting the date -of the earlier order as July 31, 1978. So, the question of law reframed is as follows:

"Whether, on the facts and in the circumstances of the case, the assessee was entitled to raise the question of the validity of the jurisdiction assumed by the Income-tax Officer under section 147(b) of the Income tax Act , 1961 in the course of proceedings taken pursuant to the restoration of the appeals to the First Appellate Authority by the Tribunal by its earlier order, dated July 31, 1978, for the two assessment years 1972-73 and 1973-74?"

The question of law involved in this tax case relates to the assessment years 1972-73 and 1973-74. The assessee is a co-owner of the agricultural estate "Stanmore Estate". Though the agricultural operations resulted in surplus, the borrowings were not returned by the agricultural estate; but were lent to sister concerns at interest. The original assessment was made by the Income-tax Officer. The assessment was reopened on the basis of audit objection raised by the internal audit party of the Income-tax Department and the assessment. was made by not allowing the interest payment made by the agricultural estate against the interest earned by the agricultural estate on the monies lent by it. The assessee filed appeals against these orders raising two contentions. The first contention was that reopening the assessment for the years 1972-73 and 1973-74 were not valid and the second contention was that the interest payment by the agricultural estate has been validly claimed as a deduction against the interest receipts of the agricultural estate. These contentions were negatived by the First Appellate Authority and the assessee appealed before the Tribunal. The Tribunal by its order, dated October 31, 1985 (sic) upheld the orders of reassessments, and the Tribunal restored the matter to the First Appellate Authority. With regard to the other contention for considering whether there is any excess payment of interest by the agricultural estate, consequent to this order of the Tribunal, the Assistant Commissioner passed orders which again came up on appeal the Appellate Assistant Commissioner set aside the assessments for being done afresh according to law, in accordance with the observations of the Tribunal in order, dated July 31, 1978. Against these orders, the assessee came in appeal before the Tribunal. The Tribunal rejected the contention of the assessee by pointing out that the earlier orders, dated July 31, 1978, had become final as the assessee did not take up the matter on a reference to the High-Court and so, that question cannot be considered afresh. Against these orders of the Tribunal, the reference has arisen.

Counsel for the assessee submitted that the finding of the Tribunal that the earlier order of the Tribunal, dated July 31, 1978, has become final and the question cannot be considered afresh is not correct and that question can be considered.

Learned counsel, Mr. C.V. Rajan, appearing for the Revenue, submitted that the Tribunal upheld the jurisdiction and the order of the Tribunal had become final and without challenging the earlier order, the subsequent order cannot be challenged.

In the decision in Seshasayee Paper and Boards Ltd. v. I.A.C. of I.T. (1986) 157 ITR 342 (Mad.), it has been held that (headnote):

"Even a wrong order has a finality and unless that finality is disturbed by a process known to law or by a process authorised by law, the rights of the assessee and the Revenue will continue to be governed by the order. A decision of the Supreme Court will not automatically have the effect of vacating the order of the Tribunal which has been statutorily made final under section 254(4) of the Income Tax Act, 1961 and which has already been given effect to."

In the decision in M.K. Muhammad Kunhi v. CIT (1973) 92 ITR 341 (Ker.), it has been held that headnote):

"Where the Appellate Tribunal remands a case the finality of views expressed by it while doing so depends on the nature of the order remand. If the remand is in the nature of calling for a finding and the Tribunal keeps seisin of the case it may be permissible for the Tribunal to reconsider its views. On the other hand, if the Tribunal disposes of the appeal while passing the order of remand and another appeal comes before the Tribunal, against the order passed after the remand, it has no power to reconsider the finding or opinion. Question, which have become final and concluded by the remand order cannot be reopened."

It has been held in the decision in S. P. Gramophone' Co. v. LT.A.T. (1986) 160 ITR 417 (P&H) that (headnote):

" .... if the correctness of the remand order was not challenged through appropriate proceedings, it would not be open to review it when the matter comes again before that authority in appeal or revision against the order passed by the authorities below in accordance with the remand order."

Following .the above decisions we uphold the view taken by the Tribunal that the earlier orders of the Tribunal, dated July 31, 1978, had become final.

We answer this question of law in the negative and against the assessee.

M.B.A./615/FCReference answered.