Income Tax Ordinance (XXXIX of 1979)---

----Ss. 136(1), 135 & 156---Reference---Rectification of mistake---Order by Tribunal refusing to rectify mistake passed under S. 156 of the Ordinance-- "Such order" in S. 136(1), Income Tax Ordinance 1979 is referable to order passed under S.135 of the Ordinance---Reference could be filed to the High Court for its opinion on a question of law arising out of the Tribunal's order passed under S. 135, Income Tax Ordinance, 1979---Order refusing to rectify the mistake having been passed by Tribunal under S. 156 of the Ordinance, reference application against such order was not competent---If, however, an earlier order was rectified, such rectified order was as much an order passed under S. 135 of the Ordinance as the original order and reference would lie against such order ---[C.I.T. v. Arunachalam Chettiar (1953)23 ITR 180 partly dissented from].

Under section 136(1) of the Ordinance a reference can be filed to the High Court for its opinion on a question of law arising out of the Tribunal's order passed under section 135 of the Ordinance.

The Tribunal can be required to refer any question of law "arising out of such order". "Such order" is referrable to order passed under section 135 of the Income Tax Ordinance which has been mentioned in the earlier part of section 136(1). On perusal of section 135 the Tribunal can pass an order under that section in regard to assessment or the order which is the subject of the appeal and ought to be interfered with. It has been provided under subsection (4) that the Tribunal if satisfied that an assessment which is the subject of appeal sought to be interfered with, may reduce or annul the assessment, it can enhance the assessment or it can set aside the assessment and direct the I.T.O. to make fresh assessment. If the subject of appeal is an order, the Tribunal, if satisfied, can either cancel or vary the order and can also give consequential directions. Refusing to rectify its order cannot be regarded as an order passed under section 135 of the Income Tax Ordinance. Since, only that question of law which arises out of the order passed under section 135 of the Ordinance is referrable to the High Court for its opinion under section 136(1) of the Ordinance, any question arising out of the order which is not passed under section 135 of the Ordinance, therefore, cannot be referred to the High Court for its opinion under section 136(1) of the Ordinance. Since, the order in the present case, refusing to rectify the mistake, was passed under section 156 of the Ordinance, was not such an order, therefore, the reference application was not competent.

If an earlier order is rectified that rectified order is as such an order passed under section 135 as the original order and, therefore, reference would lie.

If an order is rectified by the Tribunal that order in as much an order as the original order and any question arising out of the rectified order is referrable to the High Court for its opinion. However, where the application under section 156 is rejected the case is entirely different as in that case the original order of the Tribunal remains intact and; therefore, a reference can only be made if the question of law arose out of the original order of the Tribunal.

When an application under section 156 of the Ordinance was moved by the assessee he took a deliberate risk and once the application is dismissed the assessee cannot file reference application under section 136(1) of the Income Tax Ordinance as the order passed under section 156 of the Ordinance rejecting the application for rectification, is not an order passed by the Tribunal under section 135 of the Income Tax Ordinance.

C.I.T. v. Arunachalam Chettiar (1953) 23 ITR 180 partly dissented from.

C.I.T. v. Bombay Dyeing and Manufacturing Company Limited (1971) 82 ITR 892 ref.

Shahbaz Butt for Applicant.

Mazhar F. Sherazi, DR for Respondent.

Date of hearing: 16th November, 1993.

ORDER

ABRAR HUSSAIN NAQVI (CHAIRMAN).---This is a reference application filed by the assessee praying for referring the following questions to the High Court for its opinion under section 136(1) of the Income Tax Ordinance:---

(1) Whether on the facts and in the circumstances of the case, the learned ITAT after admitting that necessary evidence was obtaining on the record of their appeals was justified in holding that no mistake was apparent from the fact of the record?

(2) Whether on the facts and in the circumstances of the case the learned ITAT was right in holding that no mistake was apparent from the face of the record though it has been admitted that evidence such as debit memos and bank statement were obtaining on the record of appeals alongwith affidavit to this effect?

(3) Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was right in rejecting the application of the assessee filed under section 156. When it was admitted by the Tribunal that on perusal of record of appeals debit advices and bank statements were found available on record alongwith deposing that said information was filed with the lower authorities?"

2. According to this application the alleged questions of law referred to above arise out of the order of the Tribunal passed in MA. No.40/LB of 1990-91 for the assessment year 1977-78 disposed of vide order dated 22-12-92. According to the learned counsel, the assessee moved an application under section 156 of the Ordinance to rectify the Tribunal's order passed in I.T.A. No.5688/LB of 1980-81 including to the assessment year 1977-78 dated 21-10-1990. This application for rectification was dismissed by the Tribunal. The learned counsel for the assessee conceded that no question of law arose out of the original order of the Tribunal. However, if the original order is read with the order .passed in Miscellaneous Application referred to above, the questions referred to above do arise out of. the order of the Tribunal and therefore, should be referred to the High -Court for its opinion under section 136(1) of the Ordinance.

3. We confronted the learned counsel for the assessee as to the competency of the reference application as this application has been admittedly filed against the order passed in Miscellaneous Application filed under section 156 of the Ordinance for rectification of the original order' of the Tribunal. Under section 136(1) of the Ordinance a reference can be filed to the High Court for its opinion on a question of law arising out of the Tribunal's order passed under section 135 of the Ordinance. Subsection (1) of Section 136 may here be reproduced for reference:---

"S.136. Reference to High Court.--(1) Within ninety days of the date upon which he is served with notice of an order under Section 135, the assessee or the Commissioner may, by application in such form and accompanied by such document as may be prescribed, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall, within ninety days of the receipts of such applications, draw up a statement of the case and refer it to the High Court."

It is evident that the Tribunal can be required to refer any question of law "arising out of such order". "Such order" is referable to order passed under section 135 of the Income Tax Ordinance which has been mentioned in the earlier part of section 136(1). On perusal of section 135 we find that the Tribunal can pass an order under that section in regard to assessment or the order which is the subject of the appeal and ought to be interfered with. It has been provided under subsection (4) that the Tribunal if satisfied that an assessment which is the subject of appeal is ought to be interfered with, may reduce or annul the assessment, it can enhance the assessment or it can set aside the assessment and direct the I.T.O. to make fresh assessment. If the subject of appeal is an order, the Tribunal if satisfied, can either cancel or vary the order and can also give consequential directions. Refusing to rectify its order cannot be regarded as an order passed under section 135 of the Income Tax Ordinance. Since, only that question of law which arises out of the order passed under section 135 of the Ordinance is referable to the High Court for its opinion under section 136(1) of the Ordinance, any question arising out of the order which is not passed under section 135 of the Ordinance, therefore, cannot be referred to the High Court for its opinion under section 136(1) of the Ordinance. Since, the order in this case, refusing to rectify the mistake, was passed under section 156 of the Ordinance, is not such an order, therefore, this reference application is not competent. In a case C.I.T. v. Arunachalam Chettiar reported as (1953) 23 ITR 180 a similar question come up for consideration before the Supreme Court of India wherein it was held that an order which is not an order under section 33(4) of the repealed Income-tax Act (corresponding to Section 135 of the Ordinance) could not be referred under section 68(1) or 68(2) of the repealed Act. It may be noted that in that case the Tribunal did not refuse to rectify but as a matter of fact directed the I.T.O. not to include certain amount in the assessment meaning thereby that the earlier order passed by the Tribunal had been modified. Still the Supreme Court held the order as not referable. The Supreme Court made the following observations at page 189 of the report:--

"An order thus founded on an error as to his jurisdiction may conceivably be corrected by appropriate proceedings but it cannot certainly be regarded as such an order as is contemplated by any of the subsection of section 31. Such an order not coming within the purview of section 28 or section 31, no appeal lay there from to the Appellate Tribunal under Section 33(1) and if no such appeal properly came before the Appellate Tribunal it could not properly make up order under section 33 (4) and if there was no order under section 33(4) there could be no reference under section as subsection (1) or subsection (2). It follows, therefore, that the order of the Appellate Tribunal correcting the order of the Income-tax Officer directing that the sum of Rs.13,541 should not be included in the assessment cannot be regarded as an order passed by the Appellate Tribunal under section 33(4) so as to attract the operation of section 68:'

Though we respectfully disagree with the second part of the order of the Supreme Court because if an earlier order is rectified that rectified order is as much an order passed under section 135 as the original order and, therefore, reference would lie. As a matter of fact the Supreme Court of India in a subsequent case C.I.T. v. Bombay Dyeing and Manufacturing Company Limited reported as (1971) 82 ITR 892 has not followed its earlier view. As stated above the Supreme Court held the view that if an order is rectified by the Tribunal that order inasmuch an order as the original order and any question arising out of the rectified order is referable to the High Court for its opinion. However, where the application under section 156 is rejected the case is entirely different as in that case the original order of the Tribunal remains intact and therefore, a reference can only be made if the question of law arose out of the original order of the Tribunal. The learned counsel for the assessee has also submitted that this reference application may be treated as against the original order and the delay for filing this reference application may be condoned on the ground that the assessee could not submit this application because of the pendency of the Miscellaneous Application for rectification.

4. This prayer cannot be granted for two reasons. Firstly it has been conceded by the learned counsel for the assessee that no question of law arose out of the original order of the Tribunal. Secondly, the Tribunal's order was passed on 21-10-1990 but the Miscellaneous Application for rectification of mistake was filed on 24-12-1990. This Miscellaneous Application for rectification was dismissed on 22-12-1992 and this Reference Application was filed on 6-3-1993. This is hardly a ground for condonation of delay that the assessee had filed a Miscellaneous Application for rectification of the original order. If such a proposition is accepted then the limitation period can always be got extended by any party by making an application for rectification. When an application under section 156 of the Ordinance was moved by the assessee he took a deliberate risk and once the application is dismissed the assessee cannot file reference application under section 136(1) of the Income Tax Ordinance as the order passed under section 156 of the Ordinance rejecting the application for rectification, is not an order passed by the Tribunal under section 135 of the Income Tax Ordinance.

5. As a result of the above discussion, the reference application is rejected:

M.B.A./14/T.T. Appeal rejected