JUDGMENT

KHANNA, J.:—This appeal on certificate by the Commissioner of Income-tax is against the judgment of the Calcutta High Court whereby the High Court answered in a reference under the Income-tax Act the following question in favour of the assessee-respondent and against the revenue :

"Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in making the re-assessment under Section 147 (b) of the Income-tax Act, 1961, the Income-tax Officer could not depart from the method of computation permitted in Rule 33 of the Income-tax Rules and followed in the original assessment, and adopt an alternative method of computation also permitted under the said Rules (corresponding to Rule 10 of the Income-tax Rules, 1962 ?)"

2. The matter relates to the assessment year 1959-60, the corresponding financial year for which ended on March 31, 1959. The assessee is a non-resident company carrying on business as construction engineers. The Income-tax Officer made the original assessment on May 31, 1960 on a total income of Rupees 21,49,169. On November 5, 1962 the Income-tax Officer initiated proceedings under Section 147 (b) of the Income-tax Act, 1961 (hereinafter referred to as the Act) and completed the assessment on February 29, 1964 on a total income of Rs. 69,85,097.

3. At the time of the original assessment the assessee filed the return of income along with the auditors certificate of the trading results of the various contracts. One of those contracts was in respect of work at Durgapur with the Hindustan Steel Ltd. In respect of that work the assessee filed a provisional estimate of income which was arrived at "by calculating the income that could be attributable in relation to the tax deducted under Section 18 (3B) by the Hindustan Steel Ltd." The Income-tax Officer computed the income from that contract at Rs. 5,33,16. The income from the other contracts was computed at Rs. 16,16,005 "as per audited statements."

4. In the reassessment proceedings the Income-tax Officer purported to find as under :

(i) That the assessees outlay in India to the total outlay in various contracts represented a fair index of operations carried out in India and as such 60 per cent of the profits attributable to sterling payments and claimed to be exempt related to operations in India and fell to be included in the assessees total income;:

(ii) that the figure of depreciation required to be changed; and

(iii) that some portion of the income had to be assessed under Section 4(1) (A) on receipt basis.

The total income of the assessee, as already mentioned, was determined as a result of reassessment to be Rs. 69,85,097. In arriving at the figure of the total income the Income-tax Officer estimated the income in respect of Durgapur contract to be Rs. 9,33,164 as had been done in the original assessment. Regarding the other contracts, the Income-tax Officer determined the in-come of the assessee in reassessment proceedings to be Rs. 64,51,933. The difference in the income computed at the time of the original assessment and at the time of reassessment was due to the fact that the Income-tax Officer at the time of original assessment adopted one method of computation under Rule 33 of the income-tax Rules, 1922 while the Income-tax Officer making reassessment adopted another method under that rule.

5. On appeal it was submitted before the Appellate Assistant Commissioner on behalf of the assessee that the action of the Income-tax Officer in reopening the assessment under S. 147 (b) was without jurisdiction and that the Income-tax Officer had no jurisdiction to change the method of computation as originally adopted in the revised proceedings. The Appellate Assistant Commissioner held that the proceedings under Section 147 (b) were had and that the Income-tax Officer could not adopt an alternative method of computation in the reassessment proceedings. He, therefore, allowed the appeal. The Appellate Assistant Commissioner at the