(a) Wealth Tax Act (XV of 1963 ---

----S. 2(c)(ii), Explanation [as added by Finance Act (XII of 1991), Ss.24(10), 35 & 156]---Addition of Explanation to S.2(c)(ii) of Wealth Tax Act, 1963 retrospectively by Finance Act, 1991---Nature and effect of amendment made by Finance Act, 1991---Addition of said Explanation is declaratory in nature and does not empower any Authority or Tribunal to re-open the case particularly when no proceedings are pending before the Tribunal and no reference has been filed against the order of the Tribunal and the Tribunal's order had attained finality under S.24(10) of the Wealth Tax Act, 1963-- Contention that since the amendment had been made in law retrospectively under which the judgment of the Supreme Court had been nullified and since the Tribunal's order was based on the Supreme Court's direction which had already been nullified by the Legislature, therefore, the Tribunal should rectify its order was repelled with the observation that it was not a mistake patent on record and a mistake in an order should be on the date on which it was passed.

There is no doubt that the amendment has been made in section 2(c)(ii) of Wealth Tax Act, 1963 by adding Explanation which is declaratory in nature and not only by its nature it is retrospective but the Legislature has also specifically laid down that it would be deemed to have been so added. However, notwithstanding the retrospective operation, such an amendment does not empower any Income-tax Authority or the Tribunal to reopen the case particularly when no proceedings are pending before the Tribunal as no reference had been filed against the order of the Tribunal and the Tribunal's order had attained finality under subsection (10) of section 24 of the Wealth Tax Act.

The Explanation which has been added by the amending law is declaratory in nature. Though retrospective effect has been given saying that it would be deemed to have been part of the law from the beginning, still there is no clear and apparent intention to nullify the judgments or orders of the Courts already passed, to justify the Tribunal to hold that the Legislature intended not only to alter the law with retrospective effect but also to deprive the assessee of a decision made by the Tribunal in his favour which was rightly given at the relevant time. Had there been this intention of the Legislature, it would have said so (which obviously it was competent to do), that all orders or judgments passed earlier were wrong and were to be rectified. Had the amendment been made during the pendency of the appeal before the Tribunal, the Tribunal would certainly have taken note of it and if such a notice had not be taken, it was in that case that an application for rectification would be competent and the mistake which would be apparent from the record could be rectified. A mistake in an order should be on the date on which it was passed.

Even if it be assumed that due to the deeming clause a fiction had been created under which there could be a mistake in the order of the Tribunal on the date when it was passed, even then no further assumption can be made that such a deemed mistake will also be deemed to be apparent on the record and therefore, could be rectified under section 156 of the Ordinance.

Contention that since an amendment had been made in law under which the judgment of the Supreme Court had been nullified and since the Tribunal's order was based on the Supreme Court's decision, which had already been nullified by the Legislature, therefore, the Tribunal should rectify its order was repelled.

Notwithstanding the retrospective nature of the judgment of the Supreme Court being declaratory in nature, it would be effective from the date of its order and all orders passed by the subordinate Courts from that date would follow the same view as has been taken by the Supreme Court but the judgments already passed would not be rendered void or in other words rectified or reviewed.

B.P. Biscuit Factory's case 1981 PTD 217; Civil Appeal No. K-144 of 1981; (1958) 34 ITR 143; Ayre v. Wyan-Machenzie (1896)' 1 Ch.135; East End Dwelling Company Limited v. Finsbury Borough Council (1952) AC 109; CIT v. General Electric Company, Bombay (1978) 112 ITR 246 and Muhammad Yusuf v. Chief Settlement and Rehabilitation Commissioner PLD 1968 SC 101 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.35---Rectification of mistake---When power to rectify mistake can be exercised.

The power to rectify mistake under section 35, Income Tax Ordinance, 1979 can be exercised: ---

(1) On its own motion;

(2) If the mistake has beer brought to the notice of the various Authorities including the Tribunal by an assessee.

If the mistake is taken note of on its own motion the Authority or the Tribunal have been given a discretion to rectify the mistake as the word used is "may". However, if the mistake is brought to the notice by an assessee, then, if the Tribunal or the other Authorities, come to the conclusion that there is a rectifiable mistake, the Authorities/Tribunal are bound to rectify the mistake, as the word used is "shall". It is pertinent to note that this obligatory part is relatable to the cases where the mistake is brought to the notice by an assessee. In the present case the alleged mistake had been brought to the notice of the Tribunal by the Department. There is no provision under section 35 of the Wealth Tax Act that the Department can also bring to the notice any mistake, which can be rectified. Therefore so far as the application of the Department was concerned that in a way was incompetent. At best this could be treated as an information on the basis of which the Tribunal could rectify a mistake on its own motion but certainly it could not be treated as an application on the basis of which the Tribunal was bound to rectify even if there was a mistake patent on the record. It is pertinent to note that the corresponding provision in the Income Tax Ordinance is section 156 under which power for rectification of the orders is provided. But in that section it is provided that both the department and the assessee can move an application for rectification. However, in section 35 of the Wealth Tax Act, only an assessee can move such an application.

Agha Sarwar Qazalbash, D.R. for Appellant.

Muhammad Amin Butt for Respondent.

Date of hearing: 8th September, 1993.

ORDER

ABRAR HUSSAIN NAQVI (CHAIRMAN): --These are five miscellaneous applications filed by the Wealth Tax Officer to rectify the Tribunal's order passed in WTA No. 280 to 282/LB of 1985-86 relating to the assessment years 1982-83 to 1984-85. WTA No.327/LB of 1987-88 relating to the assessment year 1986-87 and WTA No. 181/LB of 1988-89 relating to the assessment year 1987-88. This order was passed by the Tribunal on 28-3-1991.

2. The facts of the case under which these applications have been filed are that the assessee is a Private Limited Company which constructed a building known as Akhwan House at 38, Davis Road, Lahore. The assessee had itself occupied the ground floor but the other floors were rented out to M/s. National Insurance Corporation and M/s. Semen Pakistan Engineering Limited. The assessee did not declare any taxable wealth in the wealth-tax return on the ground that the company was not engaged in the business of construction and sale or letting out of property and did not hold any immovable property within the meaning of sub-clause (ii), clause (c) of section 2 read with clause (m) thereof read with charging section 3 of the Wealth Tax Act, 1963. The Wealth-tax Officer did not accept the assessee's plea on the basis of the Karachi High Court decision in B.P., Biscuit Factory reported as 1981 PTD 217. Before the Tribunal the learned counsel for the assessee pleaded that the Karachi High Court's decision which was the basis for rejection of the assessee's plea, had been reversed by the Supreme Court in Civil Appeal No. K-140 of 1981 dated 19-1-1989 and Supreme Court held that the only such immovable properties, which were held for the purpose of business of construction and sale or letting them out, fall within the definition given in section 2(ii)(c)(m). The Tribunal, therefore, following the decision of the Supreme Court, held that the property owned by the assessee did not come within the mischief of levy of wealth tax and as such the orders of the departmental officers were modified holding that no wealth tax was payable by the assessee for the years under consideration. Now these applications have been submitted on the ground that an amendment has been made in section 2(c)(ii) of the Wealth Tax Act by the Finance Act passed on 27th June, 1991 in the following words: ---

"In section 2, in clause (c), in sub-clause (ii) the following explanation shall be added at the end and shall be deemed to have been so added namely; an explanation for removal of doubt, it is hereby declared that immovable property and the purpose, referred to in this sub-clause, includes: ---

(i) Immovable property held for the purpose of letting out or business of letting out of property;

(ii) Immovable property held for the purpose of construction and letting out of property;

(iii) Immovable property held for the purpose of construction and sale of property."

It was therefore pleaded that since an amendment has been made in law under which the judgment of the Supreme Court has been nullified and since the Tribunal's order is based on the Supreme Court's decision, which has already been nullified by the Legislature, therefore, the Tribunal should rectify its order.

4. The learned counsel for the assessee however seriously contested the departmental applications on the ground that mere change in law would not affect the past and closed transactions or the order which have attained finality even though the amendment in law has been given retrospective effect. The learned counsel for the assessee has relied upon a number of cases in support of his arguments. Now this issue being important one needs some discussion No doubt that the Legislature has the authority and power not only to make legislation but also to make legislation with retrospective effect. The amendment made in law referred to above by the Legislature is of declaratory nature and retrospective effect has also been given to it, meaning thereby that from the very beginning the meaning given to the word `assets' should be the some as has been now incorporation by the explanation. However, the question arises as to whether such an amendment made would also affect the order which have already been passed and attained finality. It may be stated here that the Tribunal passed the order on 28th March, 1991 but the amendment had been made in the law on 7-6-1991 i.e. after three months of the passing of the Tribunal's order. Another factor needs mentioning is that no reference application has been filed by the department against the Tribunal's order any thus the Tribunal's order had attained finality. We specifically asked the learned D.R. as to what would be the position of amendment in the law if he has been made before 28th March, 1991 during the pendency of the appeal before the Tribunal. The learned D.R. contended that in that case the Tribunz could not and would not have passed the order which has been passed by the Tribunal now. It therefore follows that there is a distinction if an amendment is made during the pendency of appeal and amendment made after the order of the Tribunal had been passed and attained finality. The learned D.R. has relied upon Indian Supreme Court's decision reported as (1958) 34 ITR 143. The learned D.R. has contended that since the amendment was of clarifactory nature and retrospective effect has already been given, therefore, it would be deemed to be part of the Statute when the Tribunal passed the order.

5. The learned counsel for the assessee on the other hand raised a number of issues against this Miscellaneous Application for rectification. It was contended firstly that what this application prays for is to review the Tribunal's own order which power the Tribunal does not possess. Secondly, it was contended, that there was no mistake patent on the record when the Tribunal' passed the order. The mistake patent on the record has to be seen as on the date when the order was passed by the Income-tax Authorities or the Tribunal. Since the amendment in the law was made subsequent to the passing of the order by the Tribunal, therefore, as on the date of the order, there was no mistake in the order of the Tribunal as the Tribunal could not foresee that subsequently the law would be amended. Had it been the case that the law had been amended before the passing of the order and it had escaped notice of the Tribunal, in that case it would be a mistake patent on the record rectifiable under section 156 of the Ordinance. It was further contended that the retrospective operation of the law does not mean that the transactions past and closed and the judgments and the decisions already given, can be reopened. The learned counsel for the assessee has relied upon a number of cases decided by the Supreme Courts in support of his contentions.

6. We have given careful thought to the contentions raised by the rival parties. There is no doubt that the amendment has been made in the law by adding Explanation which is declaratory in nature and not only by its nature it is retrospective but the legislature has also specifically laid down that it would be deemed to have been so added. However, notwithstanding the retrospective operation, such an amendment does not empower any Income-tax Authority or the Tribunal to reopen the case particularly when no proceedings are pending before the Tribunal as no reference had been filed against the order of the Tribunal and the Tribunal's order had attained finality under subsection (10) of section 24 of the Wealth Tax Act. In Ayre v. Wyan-Machenzie (1896) I Ch. 135 the Chancery Division, Lindley Lord Justice observed: ---

"It is obvious that the Act was not intended to interfere with judgments which had already been given by the Court. If we give leave to appeal in this case, we should be reopening all judgments of a similar kind which had been given prior to the passing of the Act. We cannot do that:"

7. The explanation which has been added by the amending law is declaratory in nature. Though retrospective effect has been given saying that it would be deemed to have been part of the law from the beginning, still there is no clear and apparent intention to nullify the judgments or orders of the Courts already passed, to justify the Tribunal to hold that the Legislature intended not only to, alter the law with retrospective effect but also to deprive' the assessee of a decision made by the Tribunal in his favour which was rightly given at the relevant time following the judgment of the Supreme Court and which order of the Tribunal still subsists. Had there been this intention of the Legislature, it would have said so (which obviously it was competent to do), that all orders or judgments passed earlier were wrong and were to be rectified. As stated above, had the amendment been made during the pendency of the appeal before the Tribunal, the Tribunal would certainly take note of it and if such a notice could not be taken, it was in that case that an application for rectification would be competent and the mistake which would be apparent from the record could be rectified. A mistake in an order should be on the date on which it was passed. Even if it be assumed that by fiction of law it has to be assumed that the amended law was in existence when the Tribunal passed the order, even then the case of the department could not be advanced. At best it can be argued that the amended law must to deemed to have been there at the time of the order passed by the Tribunal as there are some cases which do support this view that all the incidences which flowed from the retrospective legislation have to be given effect to as has been laid down in East and Dwelling Company Limited v. Finsbury Borough Council (1952) AC 109 where the Lord Acquit observed as under: --

"If you are bidden to treat an imaginary state of affairs as real, you must surely, unless prohibited from doing so, also imagine as real the consequences and incidents which, if the putative state of affairs had in fact existed, must inevitably have flowed from or accompanied it. One of these in this case is emancipation from the 1939 level of rents. The statute says that you must imagine a certain state of affairs. It does not say that, having done so, you must cause or permit your imagination to boggle when it comes to the inevitable corollaries of that state of affairs.

This passage was approved by the Supreme Court of India in Bombay Dyeing and Manufacturing Company Limited reported as (1958) 34 ITR 143. According to this principle laid down by the Courts, the amended law has to be imagined as existing on the date of the order passed by the Tribunal. However, then another question arises as to whether the deeming clause also requires the Tribunal to assume that the character of record had changed or that the mistake is of the kind which is patent. on the record. However, in Bombay Dyeing and Manufacturing Company's case, as has already been stated above, the amendment was already made before passing of the order of assessment or in other words on the date when the order of assessment had been passed the amendment had already been made in the law which had escaped notice of the Assessing Officer, and therefore, it was for this reason that the Supreme Court held that there was a mistake patent on the record which had to be rectified. In the present case the position is entirely different. Here the Tribunal had already passed the order when the, amendment had been brought. In CIT v. General Electric Company, Bombay reported as (1978) 112 ITR 246 the Calcutta High Court observed as under:---

"In the instant case the Amending Act came into 'existence long after the order sought to be rectified and the order of rectification. Therefore, at the relevant time, the mistake though deemed, could not be apparent from the records. We do not propose to include the expression deemed to be apparent' in section 35 of the Act.

We hold that though it could be deemed that there was a deemed mistake in the order at the relevant time yet there was no rectifiable mistake apparent on the face of the record."

It is, therefore, evident that even if it be assumed though not conceded, that due to the deeming clause a fiction had been created under which there could be a mistake in the order of the Tribunal on the date when it was passed, even then no further assumption can be made that such a deemed mistake will also be deemed to be apparent on the record and therefore, could be rectified under section 156 of the Ordinance.

8. In still another case Muhammad Yusuf v. Chief Settlement and Rehabilitation. Commissioner reported as PLD 1968 SC 101 the Supreme Court of Pakistan in somewhat similar circumstances held the same view. In that case a certain view was taken by the Supreme Court and naturally all the Courts had to follow the view taken by the Supreme Court as from the date of the order. The Supreme Court in that context observed: ---

"It (the judgment) did not have, and it cannot be contended that it had, the effect of altering the law as from the commencement of the Act so as to render, void of its own force all relevant orders of the Settlement Authorities or of the High Court made in the light of the earlier interpretation which was that the exercise of the delegated power was subject to the provisions in Chapter VI of the Act."

It may be noted that the judgment of the Supreme Court was declaratory in nature as is the explanation in law in the present case. The conclusion from the Supreme Court's observations was that notwithstanding the retrospective nature of the judgment of the Supreme Court being declaratory in nature, it would be effective from the date of its order and all orders passed by the subordinate Courts from that date would follow the same view as has been taken by the Supreme Court but the judgments already passed would not be rendered void or in other words rectified or reviewed.

9. There is still another aspect of this case. It is to be noted that power to rectify in the Tribunal has been provided by section 35 of the Wealth-tax Act which reads as under: ---

S.35. "Rectification of mistakes.--At any time within four years from the date of any order passed by him, or it, the Commissioner, the Wealth Tax Officer, the Appellate Assistant Commissioner and the Appellate Tribunal may, on his or its own motion rectify any mistake apparent from the record and shall, within a like period, rectify any such mistake which has been brought to the notice of the Commissioner, the Wealth Tax Officer, the Appellate Assistant Commissioner or the Appellate Tribunal, as the case may be, by an assessee:

Provided that no such rectification shall be made which has the effect of enhancing the assessment unless the assessee has been given a reasonable opportunity of being heard in the matter."

10. From the bare reading of this section it would be apparent that the power can be exercised: ---

(1) On its own motion;

(2) If the mistake has been brought to the notice of the various authorities including the Tribunal by an assessee.

11. If the mistake is taken note of on its own motion the authority or the Tribunal have been given a discretion to rectify the mistake as the word used is "may". However, if the mistake is brought to the notice by an assessee, then, if the Tribunal or the other Authorities, come to the conclusion that there is a rectifiable mistake, the Authorities/Tribunal are bound to rectify the mistake as the word used is "shall". It is pertinent to note that this obligatory part is relatable to the cases where the mistake brought to the notice by an assessee. Here the alleged mistake has been brought to the notice of the Tribunal by the Department. There is no provision under section 35 of the Wealth Tax Act that the Department can also bring to our notice any mistake which can be rectified. Therefore, so far as the application of the Department is concerned that in a way incompetent. At best this could be treated as an information on the basis of which the Tribunal can rectify a mistake on its own motion but certainly it could not be treated as an application on the basis of which the Tribunal was bound to rectify even if there was a mistake patent on the record. It is pertinent to note that the corresponding provision in the Income Tax Ordinance is section 156 under which power for rectification of the orders is provided. But in that section it is provided that both the department and the assessee can move an application for rectification. However, as stated above, in section 35 of the Wealth Tax Act, only an assessee can move such an application. It, therefore, follows that in the given circumstances and in view of the complicated circumstances and debatable issue, even otherwise we do not like to rectify an alleged mistake in our order on our own motion.

12. For the foregoing reason, there being no rectifiable mistake patent on the record, the application of the department even otherwise is dismissed being .not competent.

M.BA./28/T.T.

Application dismissed.