1. At the instance of the Commissioner of Income-tax, Andhra Pradesh, the Income-tax Appellate Tribunal has made this reference under Section 256(1) of the Income-tax Act, 1961 (hereinafter called "the Act ") for the opinion of this court on the following question of law:

" Whether, on the facts and in the circumstances of the case, in a reassessment made for giving effect to an appellate order on the basis of Section 150, addition of Rs. 78,793 to the gross profit can be made ?"

2. We may notice the material facts that gave rise to this question. The respondent-assessee is a registered firm carrying on business in cloth. For the assessment year 1959-60, the corresponding accounting year of the assessee being Diwali year ending with November 10, 1958, the assessment was completed, by the ITO on March 14, 1960. The original assessment for the year 1960-61 was completed on March 14, 1960, whereunder a sum of Rs. 1,41,729 was added as income from undisclosed sources. On appeal, the AAC held that in respect of Rs. 90,721 out of Rs. 1,41,729 added as income from undisclosed sources in the assessment for the assessment year 1960-61, the order could not stand as it represents the receipts for the assessment year 1959-60 and consequently deleted the sum of Rs. 90,721 from the assessment for the assessment year 1960-61 by his order dated November 2, 1967. Soon thereafter the ITO, after obtaining the permission of the Commissioner initiated proceedings for reopening of the assessment for the assessment year 1959-60 so as to bring the sum of Rs. 90,721 to tax in that year by the issuance of a notice under Section 148 on March 16, 1968, The ITO, found that a sum of Rs. 88,173, should be added as income from undisclosed sources and a further sum of Rs. 78,793 as deficiency in gross profit. Admittedly, no addition to the gross profit was made in the original assessment. The assessee had in fact returned a loss of Rs. 5,401 and after disallowing certain amounts towards interest and also bad debts the net profit was determined at Rs. 9,560 which was assessed as income. The ITO has, therefore, finally passed the assessment order on February 15, 1972, making the aforesaid two additions one on account of the income from other sources to the extent of Rs. 88,193 and the other to the extent of Rs. 78,793 being the difference in gross profit. On appeal, the AAC upheld the addition of Rs. 88,193 but deleted the addition of Rs. 78,793 being the difference in gross profit on the ground that the reassessment was made only to bring in the amount deleted from the assessment year 1960-61 holding that the addition to the gross profit was unjustified. The assessee appealed against the addition of Rs. 88,193 whereas the department preferred an appeal against the deletion of Rs. 78,793 on account of the deficiency in gross profit. The Tribunal disagreed with the contention of the department that the assessment was made under Section 147(a) and held that it was under Section 150 of the Act. Consequently, the Tribunal observed that the reassessment based on Section 150 was to give effect only to the finding of the AAC in the appeal for the assessment year 1960-61 and, therefore, the question of adding any amount on account of the deficiency in gross profit does not arise. Hence this reference.

3. The sum and substance of the submission of the learned standing counsel for the income-tax department, Sri P. Rama Rao is that the assessment for the year 1959-60 has been reopened as a result of which the entire assessment is at large and, therefore, the ITO is not only entitled but justified in making the addition of Rs. 78,793 to the gross profit. The counsel elaborates his argument by stating that in a reassessment made pursuant to Section 150 all the items comprised in the assessment have to be proceeded and the assessment could not be confined only to the items mentioned by the appellate order and the ingredients of the reassessment under law are same for both Sections 147 and 150. In support of this he relies upon the recent Full Bench decision of this court in R.C. No. 39 of 1976 dated 27th June, 1979, (CWT v. Subakaran Gangabhishan--[1980] 121 ITR 69).

4. This claim of the revenue is resisted by Sri M.J. Swamy, the learned counsel for the assessee, contending, inter alia, that the ITO had no jurisdiction to include the sum of Rs. 78,793 in this proceeding in reassessment pursuant to Section 150 as he has to give effect to the finding of the AAC in respect of the unexplained cash credits and investments to the extent of Rs. 90,721.

5. The answer to the question largely depends upon the scope of the proceedings initiated by the ITO pursuant to the finding of the AAC in his order dated November 2, 1967, while disposing of the appeal preferred by the assessee in respect of the addition of Rs. 1,41,729 for the assessment year 1960-61. Section 146 provides for reopening of the assessment at the instance of the assessee whereas Section 147 empowers the ITO to reassess if the income chargeable to tax has escaped assessment for any year. Section 147(a) would apply to cases where default is committed by the assessee by reason of his omission or failure to make a return or to disclose fully or truly all material facts necessary for that year, whereas Clause (b) will come into play only when there has been no default on the part of the assessee. Section 148 provides for the issuance of notice to the assessee by the ITO, whereas Section 149 prescribes time limit for the issuance of such notice which is not very material for our purpose. Section 150 which is material reads thus:

" 150. (1) Notwithstanding anything contained in Section 149, the notice under Section 148 may be issued at any time for the purpose of making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act by way of appeal, reference or revision.

(2) The provisions of Sub-section (1) shall not apply in any case where any such assessment, reassessment or recomputation as is referred to in that sub-section relates to an assessment year in respect of which an assessment, reassessment or recomputation could not have been made at the time the order which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation may be taken."

6. Section 150(1) provides for making an assessment or reassessment or recomputation in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under the Act by way of appeal, reference or revision. This power to make assessment or reassessment or recomputation can be exercised at any time. In other words, there is no time limit for invoking the provisions of Section 150(1). The non-obstante clause with which this section begins makes it clear that the period of limitation provided under Section 149 for the issuance of notice under Section 148 will not apply. Sub-section (2) limits the application of the provisions of Sub-section (1) of Section 150 to cases where an assessment or reassessment or recomputation could not have been made at the time the order, which was the subject-matter of the appeal, reference or revision, as the case may be, was made by reason of any other provision limiting the time within which any action for assessment, reassessment or recomputation might be taken.

7. The crux of the question is, in the reassessment made by the ITO under Section 150, whether it is open to him to take any item and make the addition of Rs. 78,793 pertaining to the deficiency in gross profit which was not the subject-matter of the appeal before the Assistant Commissioner whose finding was sought to be given effect to within the meaning of Section 150. True, as contended by Sri P. Rama Rao, it has been held in the above Full Bench decision that when once an assessment has been validly reopened under Section 147(a) the original assessment stands annulled and the ITO would be not only entitled but has a duty to include all items of escaped income including the items which normally would fall under Clause (b) of Section 147 notwithstanding the fact that the four year period has expired. But we are unable to agree with the standing counsel that the present reassessment has been made under Section 147(a). In fact this particular plea raised by the ITO has been negatived by the Tribunal. Further, question No. 2, whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in holding that the reopening of the assessment was not under Section 147(a) of the Act, was disallowed by the Tribunal in the reference application. There is no application under Section 256(2) by the department seeking reference on that question. Hence we have to take it for granted that the finding of the Tribunal on this aspect has become final and the revenue is not entitled to urge this point in this reference. If the department was really aggrieved they could have taken steps to have that question referred as pointed above. The very question with which we are now concerned indicates that in a reassessment proceeding made for giving effect to an appellate order on the basis of Section 150 whether the addition of Rs. 78,793 towards the deficiency in gross profit for the assessment year 1959-60, can be made. We, therefore, confine ourselves to the correctness or otherwise, of the order of the Tribunal on the basis that the reassessment has been made for giving effect to the finding of the Appellate Tribunal on the basis of Section 150.

8. This brings us to examine the question as to what is meant by the expression

" in consequence of or to give effect to any finding or direction contained in an order passed by any authority in any proceeding under this Act, by way of appeal, reference or revision"

. We may usefully refer to Section 153(3)(ii) and Expln. 2 to Sub-section (3) of Section 153. Section 153 provides time limit for completion of assessment and reassessments. Section 153(3) says that the provision of Sub-sections (1) and (2) shall not apply to the following classes of assessments, reassessments and recomputations which may, subject to the provisions of Sub-section (2A), be completed at any time:

" (i) where a fresh assessment is made under Section 146;

(ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Sections 250, 254, 260, 262, 263 or 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act,

(iii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under Section 147."

9. The provisions of Sub-sections (1) and (2) would not apply to cases where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order. Explanation 2 to Sub-section (3) of Section 153 says that where by an order referred to in Clause (ii) of Sub-section (3) any income is excluded from the total income of the assessee for an assessment year then an assessment of such income for another assessment year shall, for the purpose of Section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order. Explanation 2 to Sub-section (3) of Section 153 makes it abundantly clear that any exclusion of the income or any portion thereof of an assessee from its or his total income for an assessment year in the order passed by the appellate or revisional authority under the Act shall be deemed to be one made in consequence of or to give effect to any finding or direction contained therein for the purpose of Section 150. From this Explanation, there is no option for the ITO but to hold that any amount excluded from the total income of the assessee by appellate or revisional order for any assessment year must be added under Section 150 to the relevant assessment year as he is bound to give effect to the finding or direction contained in the appellate or revisional order.

10. We may now refer to the scope of the expression " in consequence of or to give effect to any finding or direction ". The scope of Section 34(3) of the Indian I.T. Act, 1922, which corresponds to the present Section 150 fell for consideration in ITO v. Murlidhar Bhagwan Das . The learned judge Subba Rao J. (as he then was), speaking for the majoriry view, ruled :

A ' finding', therefore can be only that which is necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner may hold, on the evidence, that the income shown by the assessee is not the income for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context is that, that income does not belong to the relevant year. He may incidentally find that the income belongs to another year, but that is not a finding necessary for the disposal of an appeal in respect of the year of assessment in question. The expression ' direction' cannot be construed in vaccum, but must be collated to the directions which the Appellate Assistant Commissioner can give under Section 31. Under that section he can give directions, inter alia, under Section 31 (3)(b), (c), or (e) or Section 31(4). The expression 'direction' in the proviso could only refer to the directions which the Appellate Assistant Commissioner or other Tribunals can issue under the powers conferred on him or them under the respective sections. Therefore, the expression ' finding' as well as the expression ' direction' can be given full meaning, namely, that the finding is a finding necessary for giving relief in respect of the assessment of the year in question and the direction is a direction which the appellate or revisional authority, as the case may be, is empowered to give under the sections mentioned therein. The words ' in consequence of or to give effect to ' do not create any difficulty for they have to be collated with, and cannot enlarge, the scope of the finding or direction under the proviso. If the scope is limited as aforesaid, the said words also must be related to the scope of the findings and directions.

11. This decision is also an authority for the proposition that this expression " any person " in the second proviso to Section 34(3) referred to means a person who would be liable to be assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision. A finding or a direction must be necessary for the disposal of an appeal or for giving relief in respect of the assessment in question.

12. Admittedly, in the present case, the AAC has only deleted the sum of Rs. 90,721 added as income from undisclosed sources as it pertained to the year 1959-60. By virtue of the application of Expln. 2 this amount which was excluded from the total income of the assessee for the assessment year 1960-61 must be deemed to be one made in consequence of or to give effect to any finding or direction for the purpose of Section 150. This amount alone can be added by the ITO when he reopens the assessment under Section 150. There is no power or authority for the ITO to make an addition of Rs. 78,793 pertaining to the deficiency in gross profit. We are unable to agree that the consequences that flow after the reopening of the assessment under Section 150 are the same as those in the case of reopening of the assessment under Section 147(a). We are unable to persuade ourselves to agree with the plea of Sri P. Rama Rao that after the reopening of the assessment although reasons for reopening under Section 147(a) and (b) or Section 150 are different, there can be no distinction between reassessment proceeding under Section 147(a) and (b) and that under Section 150. The scope and content of the proceeding under Section 147(a) are admittedly different from those arising on the reopening of the assessment under Section 150. If the plea of the revenue is accepted, it would lead to anomaly and hardship. The reassessment under Section 150 cannot be equated to the reassessment proceeding under Section 147. The very purpose and purport of Section 150 is only to make assessment or reassessment or recomputation in pursuance of an order on appeal, revision or reference as the case may be. Where the order of the ITO is modified or annulled by the AAC or the Tribunal or on reference, consequential orders pursuant to the final order passed by the appellate revisional or reference authority have to be passed. That is why, Parliament has designedly not placed any time limit for the purpose of making an assessment or reassessment under Section 150. Section 150 is altogether a different provision enacted to meet the different situations unlike Section 147.

13. For all the reasons stated, we have no hesitation to hold that the ITO has no jurisdiction to include a sum of Rs. 78,793 towards the deficiency in gross profit for the assessment year 1959-60 in the reassessment made for giving effect to the order of the AAC on the basis of Section 150 of the Act and answer the question in the negative and in favour of the assessee and against the revenue. The Commissioner shall pay the costs. Advocates' fee Rs. 300.