Income-tax Act (XI of 1922)---

----S. 66(1)---Income Tax Ordinance (XXXI of 1979), Ss.136(1) & 166(2)-- Reference to High Court---Limitation---Applicability of Income Tax Ordinance, 1979 in proceedings pending before Income Tax Authorities before its promulgation---Construction of S.166(2) of the Income Tax Ordinance, 1979----Whether proceedings pending before various Income Tax Authorities at the time of commencement of Ordinance, 1979 to be governed by the provisions of the Income-tax Act, 1922---Difference of opinion between two Division Benches of the same High Court on question of limitation for Reference Applications---Necessity of constituting a larger Bench to resolve the conflict---Department filed application before Income-tax Appellate Tribunal for referring certain questions of law arising in the case for opinion of the High Court on the 75th day of the service of the notice of the order of the Tribunal---Tribunal dismissed application as barred by time on the ground although the Income Tax Ordinance, 1979 providing 90 days period of limitation for Reference Applications, had come into force when Reference Application was riled under S.136(1) of the Ordinance, the limitation would be governed by S.66(1) of the repealed Income Tax Act providing 60 days period for such applications by virtue of S.166(2) of the Ordinance which lays down that all proceedings pending on the commencement of the Ordinance would be continued and disposed of under the repealed Act of 1922---Question of applicability of Income Tax Ordinance or the repealed Act in determining limitation period having been examined by two Division Benches of the High Court giving different and conflicting views on the issue, it was found necessary that the question be resolved by a larger Bench---Case was referred to Chief Justice for constitution of a larger Bench.

The Commissioner of Income Tax v. Income Tax Appellate Tribunal and another 1989 P T D 1240 and I.T.C. 113 of 1984, decided on 26-9-1988 ref.

Waheed Farooqui for Applicant.

Rehan Hasan Naqvi for Respondent.

Date of hearing: 7th November, 1991.

JUDGMENT

MAMOON KAZI, J.---Briefly stated, the facts of the case are that, the applicant filed appeal (ITA No.1732/KB of 1979-80) before the learned Income Tax Appellate Tribunal, Karachi challenging the order of the Appellate Assistant Commissioner `C' Range, Karachi, whereby he had directed the Income Tax Officer to accept the trading results as disclosed by the assessee during the assessment year 1976-77. The order of the learned Appellate Commissioner was, however, upheld by the Tribunal vide its decision dated 28-1-1982 which was served upon the applicant on 1-3-1982. The applicant being aggrieved by such decision filed an application before the learned Tribunal for referring the question of law involved in the said appeal for opinion of this Court but such application was presented before the learned Tribunal on 15-5-1982 i.e. on 75th day of the date upon which the applicant had been served with the notice of the order passed by the Tribunal. The Income Tax Ordinance came into force on 1-7-1979 and S. 136(1) thereof provides for a period of 90 days for filing an application thereunder which is to be computed from the time when the notice of the order of the Tribunal is served upon the party. However, section 66(1) of the repealed Ordinance provided for a period of 60 days for filing an application thereunder. When the said application had been filed by the applicant before the learned Tribunal, although the Income Tax Ordinance, 1979 had already come into force but when the proceedings in the case were pending before the learned Appellate Assistant Commissioner or the learned Appellate Tribunal, the repealed Income Tax Act of 1922 was applicable. Section 166 of the Income Tax Ordinance, subsection (2), clause (i) provided that: ---

"(i) any proceeding pending on the commencement of this Ordinance before any income-tax authority, the Appellate Tribunal or any Court or tribunal by way of appeal, reference, revision or prosecution, shall be continued and disposed of as if this Ordinance had not come into force;"

However, the learned Tribunal held that in case where appeal proceedings were pending before the Appellate Assistant Commissioner or the Appellate Tribunal on the commencement of -the Ordinance, they were to be continued and disposed of according to the provisions of the repealed Act. Consequently, the Tribunal held that the application in view of the provisions of section 66 of the repealed Act, which were applicable in the present case, was barred by time.

2. The applicant in view of the aforesaid order of the Tribunal has, therefore, referred the following questions of law for determination by this Court:--

"(a)Whether on the facts and circumstances of the case the learned Tribunal was justified in holding the application of the applicant as barred by time:

Whether on .the facts and circumstances of the case the learned Tribunal was justified in holding that in, terms of clause (1) of subsection (2) of section 166 any appeal or reference filed against the order of the learned Appellate Assistant Commissioner/learned Income Tax Appellate Tribunal passed after the commencement of the Income Tax Ordinance, 1979, shall be construed to have been filed and decided under, the repealed Act.

Whether on the facts and circumstances of the case the learned Income Tax Appellate Tribunal was justified in confirming the order passed by the learned Appellate Commissioner in spite of definite and serious defects in books of accounts which rendered the same to be rejected."

3. Learned counsel appearing for the parties have invited our attention to different judgments, of this Court where conflicting views have been expressed on, the question of applicability of the Income Tax Ordinance or the repealed Act in such cases and the question of limitation arising therefrom. In the case of The Commissioner of Income Tax v: Income Tax Appellate Tribunal and another 1989 PTD 1240 it has been held by the learned Division Bench as follows: ---

"2. In support of the above petition Mr. Waheed Farooqui, learned counsel for the petitioners has relied upon the case of Commissioner of Income Tax v. Saeeda Sarwat Sultana and others reported in 1986 PTD 368 (SCLAH), in which a D.B. of the Lahore High Court took the view that section 136 of the Ordinance would be applicable as the law of limitation is a part of procedural law. On the contrary a Division Bench of this Court in the case of the Commissioner of Income Tax, Central Zone `B', Karachi v. Messrs Asbestos Cement Industries Ltd. 1988 PTD 227, has taken 3 contrary view. From the above-cited judgment of the Lahore High Court, it seems that the attention of the learned Judges was not invited to clause (a) of subsection (2) of section 156 of the Ordinance which provides as follows:

`(a) Where a return of income has been filed before the commencement of this Ordinance by any person for any assessment year, proceedings for the assessment of that person for' that year may be taken and continued as if this Ordinance has not come into force'.

On the basis of the above clause it has been held in the above Karachi case that the limitation provided in section 66 of the Act namely, 60 days would be applicable to the cases in which original assessment orders were passed under the Act. The relevant portion of the above judgment reads as follows: ---

`The present reference applications cannot be treated as one under subsection (2) of section 66 because the Appellate Tribunal dismissed the reference applications under subsection (1) of section 66 as barred by time, and for the same reason we have held that the applications do not lie under subsection (2) of section 136.'

However, by another judgment in I.T.C. No.113/84, decided on 26-9-1988 another Division Bench of this Court has decided the question not on the basis of section 156 of the said Ordinance, as was done in the previous case, but the same has been determined on the basis of section 166 of the Ordinance, clause (2), paragraph (1) just reproduced above, as it has been held that:

"So far proceedings after the framing of assessment are concerned which include appeal, reference and revision if they were pending on 1-7-1979 they will be governed by section 166(2)(i) of the Ordinance. Section 166(2) divides the entire procedure in two parts i.e. framing of assessment and other proceedings, which include appeal and reference. Therefore, where a right to file an appeal, reference or revision accrues to any party after the commencement of the Ordinance it shall be governed by the provisions of the Ordinance. Accordingly the period of limitation will be calculated as provided by the Ordinance."

It was further held in this case that: ---

"Consequently, reference application filed on or after 1-7-1979 shall be governed by section 136 of the Ordinance which provides a period of limitation of ninety days from the date of service of order of the Tribunal."

4. It is, therefore, clear that the two Division Benches of this Court have given different and conflicting views on the same question and it is necessary that the issue must be resolved by a larger Bench. We, therefore, refer the matter to the learned Chief Justice for constitution of a larger Bench.

M, B.A./C-281/K Order accordingly.