D.R Dhanuka, J.:— By this reference under section 256(1) of the Income-tax Act, 1961, made at the instance of the Revenue, the Income-tax Appellate Tribunal has referred the following two questions of law to this court for its opinion:

“(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the Income-tax Officer could not assume valid jurisdiction to proceed under section 147(b) of the Income-tax Act, 1961?

(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the provisions of section 40a(7) were not attracted in a case where no provision for gratuity liability was made in the books of account maintained by the assessee?”

2. The principal question which arises for consideration of the court in this reference is as to whether the Income-tax Officer had jurisdiction to initiate reassessment proceedings invoking section 147(b) of the Income-tax Act, 1961, relying on section 40A(7) of the Act inserted therein with retrospective effect, i.e, from April 1, 1973, even though the same very provision was specifically invoked on behalf of the Revenue before the Income-tax Appellate Tribunal in the second appeal arising from the original proceedings and a view was taken by the Tribunal in the said proceedings (rightly or wrongly) that the said section was not applicable to the case of the assessee. The relevant facts are summarised hereinafter. The relevant assessment year is assessment year 1973-74. The relevant accounting year ended on December 31, 1972. During the course of the original assessment proceedings, the assessee claimed deduction in respect of provision of a sum of Rs. 37,36,928 towards gratuity payable to its employees. The said amount consisted of two components, i.e, Rs. 24,72,002 being the amount of gratuity payable in respect of the years prior to the previous year under consideration and a sum of Rs. 12,64,926 towards gratuity payable by the assessee in respect of the relevant previous year. By an assessment order made on March 20, 1974, the Income-tax Officer disallowed the claim for deduction made by the assessee in respect of the abovereferred first sum of Rs. 24,72,002 but allowed the claim for deduction in respect of Rs. 12,64,926 being the amount of gratuity payable by the assessee in respect of the previous year under consideration. The assessee appealed to the Appellate Assistant Commissioner against disallowance of the abovereferred sum of Rs. 24,72,002. The Appellate Assistant Commissioner allowed the claim of the assessee. The Revenue filed a second appeal before the Income-tax Appellate Tribunal. The Appellate Tribunal decided the appeal arising from the original assessment proceedings by its order dated December 15, 1975. During pendency of the appeal before the Tribunal, section 40A(7) was inserted in the Act with retrospective effect. On May 12, 1975, the Finance Act of 1975 came into force. Section 40A(7) was introduced in the Income-tax Act, 1961, with effect from April 1, 1973. At the hearing of the second appeal before the Tribunal arising from the original assessment proceedings, it was in terms argued on behalf of the Revenue that no deduction could be allowed in respect of the claim made by the assessee for deduction in respect of the abovereferred amount of Rs. 37,36,928 in view of the provisions contained in section 40a(7) newly inserted in the Income-tax Act, 1961, by section 6 of the Finance Act of 1975. Section 40A(7) of the Act provided that “subject to the provisions of clause (b), no deduction shall be allowed in respect of any provision (whether called as such or by any other name) made by the assessee for the payment of gratuity to his employees on their retirement or on termination of their employment for any reason”. The Income-tax Appellate Tribunal considered the abovereferred plea urged on behalf of the Revenue and negatived the same. The Income-tax Appellate Tribunal relied on its order dated October 28, 1975, passed by it in Income-tax Appeal No. 2347/(Bom) of 1974-75 in the case of Maniar Brothers, Bombay, considering in detail the submission made on behalf of the Revenue in respect of the interpretation and application of section 40A(7) of the Act to the case of the assessee. Copies of the order passed by the Income-tax Appellate Tribunal on October 28, 1975, in the case of Maniar Brothers, Bombay, as well as the order dated December 15, 1975, passed by the Tribunal in appeal filed by the Revenue against the assessee herein have been placed on record. On perusal of the abovereferred orders passed by the Tribunal in the abovereferred second appeal arising from the original assessment proceedings, we find that the Income-tax Tribunal did adjudicate upon the plea of the Revenue regarding interpretation and application or non-application of the abovereferred newly inserted provision in respect of the claim of the assessee referred to hereinabove. The Revenue did not seek any reference against the order dated December 15, 1975. The said order of the Tribunal thus acquired finality. It is irrelevant for the purpose of this reference to ascertain as to whether the view taken by the Tribunal in respect of the interpretation of section 40A(7) was correct or not. The only question arising for the consideration of the court in this reference is as to whether reassessment proceedings could be validly initiated by the Income-tax Officer on the same ground, i.e, on the ground already adjudicated upon by the Tribunal, rightly or wrongly, by invoking section 147(b) of the Income-tax Act, 1961. In the above backdrop, let us resume the narration of facts concerning the second round of litigation commenced by issue of notice for reassessment proceedings on the ground already adjudicated upon by the Income-tax Appellate Tribunal as aforesaid.

3. After the Income-tax Appellate Tribunal disposed of the said appeal of the assessee on the merits as aforesaid, the Income-tax Officer commenced reassessment proceedings against the assessee invoking section 147(b) of the Income-tax Act, 1961, relying on the retrospective amendment of the Income-tax Act, 1961, whereby section 40A(7) was incorporated in the Act with retrospective effect even though the very same ground was already raised on behalf of the Revenue before the Income-tax Tribunal in the second appeal arising from the original assessment proceedings and adjudication upon. On or about January 21, 1977, the assessee filed its return under protest. Throughout the reassessment proceedings, the assessee contended that the Income-tax Officer could not invoke section 147(b) of the Income-tax Act, 1961, at the stage he did and commence reassessment proceedings on the basis of the same ground which was already urged on behalf of the Department and negatived. On October 24, 1977, the assessee filed written submissions before the Income-tax Officer, inter alia, contending in the alternative that section 40A(7) of the Act was not at all attracted to the case of the assessee. On July 17, 1979, the Income-tax Officer passed an order of reassessment rejecting all the contentions of the assessee. Being aggrieved by the said order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). By his order dated January 18, 1979, the Commissioner of Income-tax (Appeals) allowed the appeal preferred by the assessee. The Commissioner of Income-tax (Appeals) did not go into the correctness or otherwise of the Income-tax Officer's action in invoking section 147(b) of the Act but decided the appeal of the assessee in its favour on the merits of the controversy. By an order dated April 25, 1980, the Income-tax Appellate Tribunal dismissed the Department's appeal and allowed the cross-objection filed by the assessee.

4. The first question which arises for consideration of the court in this reference is as to whether the Income-tax Officer had jurisdiction to commence reassessment proceedings by invoking section 147(b) of the Income-tax Act, 1961, on the same very ground which was already urged before the Income-tax Appellate Tribunal in the appeal arising from the original assessment proceedings. Section 254(4) of the Income-tax Act reads as under:

“Save as provided in section 256, orders passed by the Appellate Tribunal on appeal shall be final.”

5. There is nothing to show that the Revenue pursued its remedy to impugn the order passed by the Income-tax Appellate Tribunal on December 15, 1975, dismissing the appeal of the Revenue, being Income-tax Appeal No. 1875/(Bom) of 1974-75. The said order dated December 15, 1975, thus acquired finality. Instead of pursuing the remedy before the reference court, the Income-tax Officer issued notice of reassessment against the assessee on the same ground even though he was bound by the order of the Tribunal dated December 15, 1975.

6. Mr. Kaka, learned counsel for the assessee, has invited the attention of the court to the judgment of the Supreme Court in the case of CIT v. Rao Thakur Narayan Singh, [1965] 56 ITR 234. In this case, the Supreme Court in terms observed that even if the order of the appellate authority was erroneous, the Income-tax Officer could not initiate reassessment proceedings on the ground which was covered by the decision of the appellate authority in the appeal arising from the original proceedings. In the said decision, the apex court further observed that the Income-tax Officer was not entitled to circumvent the order passed by the appellate authority which had become final. The findings of the Tribunal recorded in the appeal arising from the original proceedings (whether the same were right or wrong) were binding on the Income-tax Officer and in such a situation the Income-tax Officer could not reopen the original assessment and seek to adjudicate on the ground which was already adjudicated upon by the Tribunal or other appellate authority. It is not the case of the Revenue that the Income-tax Officer acquired any new information after the decision of the Income-tax Appellate Tribunal. The retrospective amendment of the Act by the Finance Act of 1975 incorporating section 40A(7) in the Act was very much known to the Income-tax Officer while the second appeal before the Income-tax Appellate Tribunal was being argued in the assessee's own case. The plea based on the amendment to the Act was in terms taken on behalf of the Revenue before the Income-tax Appellate Tribunal and negatived. In the abovereferred case of CIT v. Rao Thakur Narayan Singh, [1965] 56 ITR 234 (SC), Subba Rao J., speaking for the Supreme Court, observed as under (at page 239):

“He could not on the same facts reopen the proceedings on the ground that he had new information.”

7. The ratio of this judgment is clearly on all fours. The said judgment provides a complete answer to the problem under consideration.

8. Learned counsel for the assessee has also relied on the ratio of the judgment of the High Court of Madras in the case of P. Palanisiwami v. CIT, [1977] 106 ITR 811 and the judgment of the High Court of Bombay in the case of Commissioner Of Income-Tax, Bombay City-Viii v. Sitadevi N. Poddar., [1984] 148 ITR 506. In this case, the Division Bench of this court observed as under (headnote):

“This decision (the decision of the Supreme Court in H.H Maharaja Rana Hemant Singhji's case, [1976] 103 ITR 61) was already before the Income-tax Officer when he completed the original assessment and, therefore, it could not be said that by reading the decision in Maharaja Rana Hemant Singhji's case, [1976] 103 ITR 61 (SC), the Income-tax Officer came into possession of information that gave him reason to believe that income chargeable to tax had escaped assessment. Therefore, the reopening of the assessment for the assessment year 1975-76 was not valid.”

9. The principles laid down in the abovereferred decisions completely support the case of the assessee. Learned counsel for the assessee is justified in his submission that the reassessment proceedings were initiated without jurisdiction and in view of the admitted facts of the case, section 147(b) of the Act could not be invoked by the Income-tax Officer at the stage at which he invoked the same. We accept the abovereferred submission of learned counsel for the assessee.

10. Learned counsel for the Revenue has submitted that the Income-tax Officer was entitled to invoke section 147(b) of the Act relying on the retrospective amendment of the Income-tax Act, 1961, incorporating section 40A(7) therein as retrospective amendment of the Act could constitute “information” on the basis of which the Income-tax Officer could have reason to believe that the income had escaped assessment. In the appellate proceedings arising from the original assessment order, the question of interpretation and applicability of section 40A(7) of the Act was duly considered by the Tribunal at the instance of the Revenue. In this view of the matter, we hold that there is no merit in the submission of the Revenue. Section 147(b) of the Act cannot be interpreted so as to circumvent section 254(4) of the Act. At the time when the Income-tax Officer issued notice under section 147(b), he had no new information in his possession on the basis of which he could have reason to believe the income of the assessee had escaped taxation. The Income-tax Officer had no jurisdiction to sit in judgment over the view taken by the Income-tax Appellate Tribunal.

11. We are conscious of the fact that in the recent decision of the Supreme Court in the case of Shree Sajjan Mills Ltd., [1985] 156 ITR 585, the Supreme Court has interpreted section 40A(7) differently and perhaps the view taken by the Tribunal in the appeal arising from the original assessment proceeding is erroneous. We need not examine this aspect on the merits. In our opinion, this aspect of the case is not relevant for the purpose of judging the question of finality attached to the decision of the Tribunal arising from the original assessment proceedings. The Income-tax Officer had no jurisdiction to commence reassessment proceedings on the ground already adjudicated upon by the Tribunal as discussed above. In the result, we answer question No. 1 in the affirmative and in favour of the assessee. In view of the above, question No. 2 does not survive for the consideration of the court. We accordingly refrain from answering question No. 2.

12. Having regard to the facts and circumstances of the case, there shall be no order as to costs.