In pursuance of the directions of this Court in T.C.P. No. 198 of 1984 dated 29th January, 1985, the Tribunal has referred the following question of law for our consideration under s. 256(2) of the IT Act, 1961.

"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding and had valid materials to hold that the reassessment made under s. 147(b) of the IT Act was without jurisdiction and, therefore, invalid ?"

The assessee filed its return for the asst. yr. 1976-77 and claimed extra depreciation in respect of certain plant and machinery which were leased out to Spencer & Co., which is running a hotel, approved by the Central Government. The assessee claimed extra depreciation allowance at 50 per cent of the normal depreciation under item No. III, Part I of Appendix I to the IT Rules, 1962. The ITO in the original assessment for the year 1976-77 granted the extra depreciation as claimed by the assessee. Subsequent to the completion of the original assessment, the audit party had drawn to the attention of the ITO that the initial depreciation was wrongly allowed as the assessee has only leased out the assets belonging to it and the same was neither installed nor used in the assessee's business premises for its business. It seems that the audit party brought to the attention of the ITO, the relevant provisions of sub-item (iii) of Part I of Appendix I of the IT Rules. The ITO on the basis of the report of the audit initiated proceedings for reassessment under s. 147(b) of the IT Act, 1961 (hereinafter referred to as "the Act"), and after hearing the objections of the assessee, held that the assessee was not entitled to extra depreciation allowance as the assessee was not using the machinery in the hotel business run by the assessee, and accordingly he withdrew the extra depreciation allowance granted earlier and completed the reassessmentThe assessee filed an appeal before the CIT(A-I), Madras, against the order of reassessment and the CIT(A) held that under the relevant rules, the assessee is not entitled to extra depreciation as the rules make it clear that the building should be used by the assessee as hotel and since that condition was not satisfied, the withdrawal of extra depreciation was in order. He also held that the audit party has not interpreted any provisions of the law and the audit party has only brought to the attention of the ITO the relevant rules for the grant of extra depreciation. The CIT(A-I), confirmed the order of reassessment made by the ITO and dismissed the appeal preferred by the assessee

Aggrieved by the order of the CIT(A), the assessee carried the matter in appeal before the Tribunal and the Tribunal held that the audit party has interpreted the law and since there was an expression of an opinion of the law by the audit party, the opinion expressed by the audit party would not constitute "information" within the meaning of s. 147(b) of the IT Act, and placing reliance on the decision of the Supreme Court in the case of Indian and Eastern Newspaper Society vs. CIT, the Tribunal held that the report of the audit party cannot form the basis for reopening the assessment and in this view of the matter, the Tribunal allowed the appeal preferred by the assessee

Mr. C. V. Rajan, learned counsel for the Revenue, submitted that the order of the Tribunal is erroneous in point of law as the Tribunal proceeded on an erroneous basis that the audit party has interpreted the provisions of the law and according to learned counsel for the Revenue, the audit party has merely brought to the attention of the ITO the provisions of law and there is no question of interpretation of law involved by the audit partyMr. Aravind P. Datar, learned counsel for the assessee, has contended that the audit party has interpreted the law and as there was a mistake in the order of the original assessment made by the ITO, it is not open to the ITO to resort to reassessment proceedings. Accord