JUDGMENT [ENTITY], J.
1. These I.T.Rs., five in number, have been referred by the Income Tax Appellate Tribunal, Cochin. While the first three references are at the instance of the Department, the subsequent two references are at the instance of the assessee. The assessments years for which the Department have preferred reference are for the years 1975-76, 1976-77 and 1977-78. While the reference by the assessee is concerning assessment years 1978-79 and 1979-80. The question of law referred are as follows:
"At the instance of revenue, for assessment years 1975-76 to 1977-78 :
1. Whether on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that the reassessment is barred by limitation?
2. Whether on the facts and in the circumstances of the case, the tribunal is right in law and fact inholding,-
i. This is not a case where the assessing officer could have reason to believe that escapement of income was on account of the omission or failure of the assessee?
ii. This is a case where the assessing officer conies to believe on the basis of the subsequent judicial decision that income liable to tax had escaped assessment:
iii. In such a case, the assessment could have been reopened under [SECTION] only, and are not the above findings extraneous to the issue and also wrong?"
At the instance of assessee, for assessment years 1978-79 and 1979-80 :
"Whether, on the facts and in the circumstances of the case, the notice under [SECTION] of the [ACT] issued for asst. year 1978-79 was within the time limit specified under [SECTION] Act?"
2. The facts of the case are as follows: Assessee is a company. 157 acres belonging to the company was acquired on 28.3.1966. The property is situated in Nagercoil. The assessee has filed an appeal before the Madras High Court challenging the compensation granted. The Madras High Court allowed the appeal by judgment dated 19.4.1979. The enhanced amount included an amount of Rs. 1,54,928/- as interest received by the assessee on the additional compensation. The amount was received in the assessment year 1980-81. For the assessment year 1980-81, the assessment was completed on 27.1.1983. The assessing officer relied on the decision of the High Court in [PRECEDENT] which stated that the entire amount of interest has to be assessed in the year in which it was received. This view was upheld by the appellate authority. That decision was challenged before the Tribunal and the Tribunal relied on the decision in [ENTITY] v. C.I.T., 157 ITR 111 a judgment of the Kerala High Court in which it was held that entire interest should not be taxed for one year but the interest should be spread over various years. Accordingly, the Tribunal held that only the interest which accrued that year could be included and the balance should be spread over. The judgment of the Appellate Tribunal was on 19.2.1988. So for the year 1980-81 only a portion of the interest was included as income. Taking a clue from the judgment of the Appellate Tribunal, the Income Tax Officer issued notice for the escaped assessment for the year 1975-76, 1976-77, 1977-78, 1978-79 and 1979-80. The assessing officer relied on [SECTION] of the [ACT]. The assessee filed objection and the validity of the notice was questioned. The assessing officer rejected the same on the ground that reassessments were made on the basis of [SECTION] and [SECTION] the [ACT]. The assessee filed an appeal before the Commissioner of Income Tax, which took the view that reassessment cannot be made under [SECTION], but it falls under [SECTION]. The reassessments were confirmed. Against that appeals were filed before the Tribunal. The Tribunal also rejected the contention of the Department that reassessments were made on the basis of [SECTION]. It took the view that reassessment could be only under [SECTION] and [SECTION]. Under [SECTION] a time is fixed for completing such assessments. According to the Tribunal, this time should be fixed from the date of the assessment order passed for 1980-81. That date is 27.1.1983. It then came to the view that reassessment for the years 1975-76, 1976-77 and 1977-78 were barred while that for 1978-79 and 1979-80, were not barred. It is subsequently the reference is made at the instance of the revenue as well as the assessee, which are reproduced in paragraph 1 above.
3. The learned counsel for the revenue submitted that reassessments will come under [SECTION] of the Act. Further it is submitted that assessee was aware that land acquisition case was pending and it was his duty to inform the Income Tax Officer about the pendency of such a case. According to the learned counsel for the revenue, the reassessment comes under [SECTION]. Even if the question comes under [SECTION], the relevant date to be taken is the date on which the assessment was passed in the year 1981-82. On the other hand, counsel for assessee submitted that the date is the date on which the assessment or reassessment could not have been made at the time the order which was the subject matter of appeal, reference or revision as the case may be, was made.
4. The two questions to be decided in this case are - whether the reassessment was under [SECTION] or [SECTION]? The counsel for the department tried to argue that it comes under [SECTION]. According to them, the assessee has not disclosed about the pendency of the appeal in the Madras High Court for enhanced compensation. This is a circumstance which could be made use of for reopening the assessment. According to us, this submission cannot be accepted. It is an admitted case that the earlier view was that as per the judgment in [PRECEDENT], interest on the compensation amount is liable to be assessed in the year in which it is received. It was only by a later decision in [ENTITY]'s case ([CASE NUMBER] Bench of this Court held that interest is liable to be spread over. Hence, we agree with the Tribunal that it cannot be said that the assessee failed to disclose all materials before the assessing officer. If that be so, the assessment can not be under [SECTION]. Then it can be only under [SECTION]. Here it was by virtue of the decision of the Appellate Tribunal on 19.2.1988, that information was received by the assessing officer that interest can be spread over. There was a contention as to actually whether there is any such direction or finding in the appellate tribunal's order. According to us, when the Appellate Tribunal hold that only interest that accrued for the year 1980-81 can be assessed for that year, it becomes clear that rest of the interest is spread over to various years and this gives a right to the assessing officer under [SECTION] to start proceedings for escaped assessment read with [SECTION] of the Act. [SECTION] says that, notwithstanding anything contained in [SECTION], the notice under [SECTION] 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 proceedings under this Act by way of appeal, reference or revision. Thus, the limitation under [SECTION] does not apply to [SECTION]. But [SECTION] says that the provisions of [SECTION] 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 appeal, reference or revision as the case may be was made by reason of any other provision limiting the time within which any action tor assessment, reassessment or recomputation may be taken. The question is what is the meaning of subject matter of appeal. While the Department contends that subject matter of appeal refers to order or assessment passed for the year 1980-81, i.e 27.1.1983; the assessee would contend that assessment order passed on 27.1.1983 was subjected to appeal before the Commissioner and that appeal was dismissed and against that order, an appeal before the Tribunal was filed. It is the Tribunal which passed the order on 19.2.1988. So, according to the assessee, it is the order of the Commissioner of Income Tax (Appeals) which was subject matter of appeal before the Tribunal which is relevant. That date is 1.3.1984.
5. Here, so far as the assessment years 1975-76, 1976-77 and 1977-78 is concerned, it has been found by the Tribunal that even if the date is reckoned from 27.1.1983 was pointed out by the Revenue, reassessment cannot be had for these three years viz., 1975-76 to 1977-78. As a matter of fact, the Department can rescue only if the contention under [SECTION] is accepted. Since that is rejected, we agree with the Tribunal and hold that reassessment for the years 1975-76, 1976-77 and 1977-78 is barred. So, the next two years are 1978-7 9 and 1979-80. The Department has found that so far as these two years are concerned, there is no bar of limitation if the date is taken from 27.1.1983. But, the assessee contends that if 1.3.1984 is taken, the re-assessment for 1978-79 and 1979-80 would have been barred. So, the question to be considered is the meaning of the words, "at the time the order which was the subject matter of appeal, reference or revision". Learned counsel for the assessee would rely on the decision of the Andhra Pradesh High Court in [PRECEDENT]. Even though in that case, the Court observed as follows:
"The judgment of the Tribunal in Second Appeal is dated September 9,1974. According to [SECTION], the initiation of reassessment proceedings would be bad, even when they are initiated in consequence of or to give effect to any finding or direction contained in the appellate order, if such initiation of reassessment proceedings is barred by any other provision of the Act on the date of the order which was the subject matter of appeal. In this case, the second appeal in which the finding was recorded arose from the order of the Appellate Assistant Commissioner dated October 6, 1972. The question is, whether on that date the initiation of reassessment proceedings is burred by any provision of law? According to [SECTION] reassessment proceedings cannot be initiated after the expiry of four years from the end of the relevant assessment year. Four years therefrom would expire on March 31, 1971. Thus, the impugned initiation of proceedings under [SECTION] by a notice issued on a date subsequent to September 9, 1974 would be clearly barred".
But in that case, the Court found that even if the date is construed as referring to the original order of assessment, the proceedings will be barred. Another decision relied on by the Department is [PRECEDENT]. In that case, there is no discussion regarding this aspect. But it is assumed there that, date mentioned is the date of the original order. According to us, the words at the time the order which was the subject matter of appeal, reference or revision, as the case may be, was made " in [SECTION] are significant. It is because of the word "appeal" that, it is contended that the subject matter should be construed as the original order. There are two tiers of appeals from the assessment order; one to the Commissioner of Income Tax and another to the Tribunal. But, the next word is reference. Reference, is made under [SECTION] of the Act. What is referred is the subject matter of the order of the Tribunal. Can we say that when the Income Tax Tribunal refers the matter to the High Court, the order that was considered by the Tribunal is the order of the assessing officer? No. It is the order of the Tribunal that is being referred. For example, in this case, where there is a reference to the High Court against the order of the Tribunal, it will be order of the Tribunal that will be material. Further, according to us, when an order is passed by the original authority and an appeal is filed, the order passed by the original authority merges with that of the order of the appellate authority. When a second appeal is filed, the subject matter is the order of the appellate authority. So also, when the order of the Tribunal is challenged, what is the subject matter, is the order of the Tribunal. If that be so, there is no difficulty in construing [SECTION]. Then, in this case, the order which was subject matter of appeal is to be construed as the order passed by the Commissioner of Income Tax, Appeals on 1.3.1984. If so, the reassessment for 1978-79 will also be barred.
6. In the result, the question of law raised at the instance of the revenue for the years 1975-76 to 1977-78 are answered in the affirmative, in favour of the assessee and against the revenue. With regard to the question of law raised at the instance of the assessee, we answer the question in the negative, in favour of the assessee and against the department.
7. The I.T.Rs. are disposed of as above.