1. These two petitions have been filed by the assessee challenging two notices issued under section 154 of the Income-tax Act, 1961, by which the assessee was called upon to show cause why relief allowed under section 80J of the Act should not be recomputed excluding the borrowed capital in view of the retrospective amendment brought about by the Finance (No. 2) Act of 1980.
2. It is now common knowledge that by an amendment introduced in section 80J of the Act, sub-section (1A) was incorporated with effect from April 1, 1972, by the amending Act and now this amended section which has been given retrospective effect has been held to be constitutionally valid by the Supreme Court. The notices impugned in these petitions were, however, issued long prior to the Supreme Court decision.
3. The two assessment years in question for the purposes of these two petitions are 1972-73 and 1974-75. It is not necessary to refer to the entire history of the assessment proceedings in the case of the assessee which is a public limited company registered under the Indian Companies Act. The assessment proceedings for the assessment year 1972-73 in its final stage was determined by an order of the Income-tax Appellate Tribunal I.T.A. No. 1241 (Mds) /76-77. In paragraph 10 of the order, the Tribunal has positively held that the assessee was entitled to the relief claimed under section 80J of the Act in respect of machineries utilised for the manufacture of paper known as duplex board. While giving effect to the order of the Tribunal, the Income-tax Officer computed the necessary relief by an order dated December 7, 1977. The capital employed in the new industrial undertaking was computed at Rs. 3,63,74,658.
4. For the assessment year 1974-75, the relief under section 80J of the Act is given to the assessee by an order of the Appellate Assistant Commissioner of Income-tax while deciding the appeal, I.T.A. No. 566/77-78. Dealing with ground No. 5, taken by the assessee, the Appellate Assistant Commissioner has held that the assessee was entitled to the benefit of section 80J of the Act and he further directed the Income-tax Officer to allow the assessee, the relief admissible under section 80J of the Act. The Income-tax Officer while giving effect to the order of the Appellate Assistant Commissioner determined the capital employed at Rs. 3,43,35,331.
5. After these orders were passed, the Inspecting Assistant Commissioner notices on October 6, 1980, purporting to be under section 154 of the Act.
6. The grounds on which these notices are challenged in these two writ petitions are that the Inspecting Assistant Commissioner was not competent rectify an order made by the Income-tax Officer and, secondly, that the orders of the Income-tax Officer for the two assessment years referred to above being in the nature of giving effect to the relief to which the assessee was held entitled by the order of the Tribunal the assessment year 1972-73 and by the Appellate Assistant Commissioner for the assessment year 1974-75, the Inspecting Assistant Commissioner was not competent to exercise any powers under section 154 of the Act. However, in the view which we are taking on the latter point, it is not necessary for us to decide the first point on which arguments have been advanced by both sides.
7. On hearing the learned counsel for the Revenue and the assessee, we are not satisfied that the Inspecting Assistant Commissioner, on the facts circumstances of the present case, was entitled to exercise the powers of rectification under section 154. In so far as the assessment year 1972-73 is concerned, we have already stated that this earlier order of the Tribunal holds that the assessee was entitled to a relief under section 80J of the Act. The finality which is given to that order by virtue of section 254(4) cannot be disturbed except under section 256. Section 254(4) reads :
'Save as provided in section 256, orders passed by the Appellate Tribunal on appeal shall be final.'
8. When the Income-tax Officer gave effect to the direction of the Tribunal by making the computation by order dated December 7, 1977, undoubtedly he had correctly interpreted the order that, according to the Tribunal, the assessee was entitled to the benefit of section 80J. The attempt on the part of the Inspecting Assistant Commissioner now to take away the relief under section 80J virtually has the effect of amending the order of the Tribunal by reversing the view which is taken by the Tribunal, viz., the assessee is entitled to relief under section 80J of the Act. It was vehemently argued before us that section 80J(1A) of the Act has now been held to be valid by the Supreme Court. While this fact cannot be disputed, it is equally true that the decision of the Supreme Court does not automatically have the effect of vacating the order of the Tribunal which has been statutorily made final under section 254(4) of the Act and which has already been given effect to. Assuming for a moment as contended by the learned counsel for the Revenue that an infirmity is now created in the order by virtue of the decision of the Supreme Court, that order cannot be read as automatically been corrected nor is the effect given to that order automatically undone. Its legal validity is not in any way affected by the decision of the Supreme Court. 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 of the Tribunal. There is no justification for the action of the Inspecting Assistant Commissioner in interfering with the order of the Income-tax Officer giving effect to the order of the Tribunal in his order under section 154. The proposition that the order of the Income-tax Officer merely gives effect to the relief as directed by the Income-tax Tribunal cannot be doubted. But even then, what is important is that the source of that order is the order of the Tribunal which till remains final between the Revenue and the assessee. So far as the order of the Appellate Assistant Commissioner is concerned, even there, by parity of reasoning, the only authority which will be entitled to interfere with the order of the Appellate Assistant Commissioner by way of rectification is the Appellate Assistant Commissioner himself. The order of the Income-tax Officer granting relief under section 80J for the assessment year 1974-75 is only an order which is consequential on giving effect to the order of the Appellate Assistant Commissioner. Under the guise of exercise of power under section 154 of the Act, the directions given by the Appellate Assistant Commissioner cannot be rendered ineffective. The Revenue had a right to agitate the correctness of the order of the Appellate Assistant Commissioner by taking the matter to the Tribunal. If the Revenue has not chosen to do that and allowed the directions of the Appellate Assistant Commissioner to stand, that order cannot now be undone by adopting the circuitous procedure of purporting to exercise the powers under section 154 of the Act. In our view, both these petitions must, therefore, be allowed. The notices issued under section 154 of the Act are quashed. The assessee will be entitled to the costs of these petitions, one set. (Rupees 500).