I. T. A. NO. 1836/KB OF 1995-96 VS I. T. A. NO. 1836/KB OF 1995-96
1997 P T D (Trib) 1466
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman and
S.M. Sibtain, Accountant Member
I.T.A. No. 1836/KB of 1995-96, decided on 21/03/1997.
(a) Income Tax Ordinance (XXXI of 1979)---
----S.156---Rectification of mistakes---Essential conditions for exercise of such power---Power of rectification is restricted to the mistake apparent on record, meaning thereby the mistake which may be seen floating on surface and which does not require investigation or further evidence.
Law confers power to rectify any mistake in the order which is apparent from the record. Such power can be exercised suo motu or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading of the order it may immediately strike or) the face of it.. Where an officer exercising power to rectify enters into the controversy, investigates into the matter, re-assesses the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not Amount to rectification of the order. Any mistake, which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising such power. The power of rectification vested under section 156, Income Tax Ordinance, 1979 is restricted to the mistakes apparent on record, meaning thereby the mistake which may be seen floating on surface and which does not require investigation or further evidence.
1992 PTD 570 = 1992 SCMR 687 fol.-
(1962) 46 ITR 609 (SC) (India)); (1966) 62 ITR 558 (Punjab H.C.); 1987 PTD (Trib.) 539; (1952) 22 ITR 539 (Allahabad H.C.) and (1955) 29 ITR 252 (Andhra Pra. H.C.) distinguished.
(b) Income Tax Ordinance (XXXI of 1979)---
---Ss.65, 62 & 63---Re-opening of assessment---Assessing Officer is required to frame assessment under Ss.62 & 63 of the Income Tax Ordinance, 1979 as the case may be and if he does so it could not be in keeping with policy of law to give him power to re-open the assessment under S.65 of the Ordinance, simply on the ground that he had not applied his mind earlier for one reason or the other.
1987 PTD (Trib.) 539 fol.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.132---Decision in appeal---Assessing Officer is not empowered to make an assessment order under S.132 of the Income Tax Ordinance, 1979 which deals with the powers of Appellate Additional Commissioner while disposing of first appeal.
(d) Income Tax Ordinance (XXXI of 1979)---
----S.132---Decision in appeal---Where first appeal was decided by the C.I.T.(A); whereby certain issues were set aside and some additions were deleted and the findings were assailed in second appeal by the assessee as well as department, order made by Assessing Officer under S.132, Income Tax Ordinance, 1979 while deferring reassessment on set aside issues was the most proper order---Reasons.
Where first appeal was decided by the C.I.T.(A), whereby certain issues were set aside and some additions were deleted and the findings were assailed in second appeal by the assessee as well as department, the order made by assessing officer under section 132 while deferring re-assessment on set aside issues was the most proper order. The reason being that with the filing of second appeals at the instance of assessee and department the period of limitation already stood extended and until and unless such an order was passed, true picture in demand and collection register could not be reflected.
If such an order is not made the demand and collection register shall continue to show the original demand as created with the assessment order which would not be reflecting the actual state of affairs and thus such wrong statistics would not be in the larger interest of financial system.
(e) Words and phrases---
----"Decide"---Connotation.
New Shorter Oxford Dictionary, 1993 Edn.; Chambers' Dictionary, 1993 Edn. and Legal Thesaurus by Willaim C. Burton, 1980 Edn. ref.
(f) Income-tax---
----Act to decide---What includes.
An act to decide includes adjudication, giving of judgment, exercising of discretion, forming of opinion, making of choice, finalising of issue and giving of a verdict etc. If these attributes and elements are not there then the act cannot be termed as decision.
(g) Income Tax Ordinance (XXXI of 1979)---
----S.132---Decision in appeal---What includes---Assessing Officer while making order under S.132, Income Tax Ordinance, 1979 and by making observation that the addition is deleted because of setting aside of issues by the C.I.T. (A) for the time being till re-assessment made under S.132/62 of the Ordinance, the officer has not given any decision but he has merely deferred his decision to which no objection can be taken for the simple reason that he was not making an order under section 62/63 of the Ordinance.
An act to decide includes adjudication, giving of judgment, exercising of discretion, forming of opinion, making of choice, finalising of issue and giving of a verdict etc. If these attributes and elements are not there then the act cannot be termed as decision.
While making order under section 132 and by making observation that the addition is deleted because of setting aside of issue by the C.I.T.(A) for the time being till re-assessment under section 132/62, the assessing officer has not given any decision but he has merely deferred his decision to which no objection can be taken for the simple reason that he was not making an order under section 62 or 63 of the Income Tax Ordinance, 1979.
(h) Income Tax Ordinance (XXXI of 1979)-----
----Ss.156 & 132---Rectification of mistake---Assessing Officer, while making order under S.132, Income Tax Ordinance, 1979 and by making observation that the addition is deleted because of setting aside of issues by the C.I.T. (A) for the time being till re-assessment under 5.132/62 of the Ordinance has not given any decision but he has merely deferred his decision to which no objection can be taken for the simple reason that he was not making an order under S.62/63 of the Ordinance---Order of the Tribunal to the effect that the Assessing Officer had redecided all the set aside issues and, therefore, the appeal of the assessee had become infructuous was result of mistake apparent on record which needed rectification a circumstances.
(i) Income Tax Ordinance (XXXI of 1979)---
----Ss.62, 65 & 156---Assessment---Re-opening of assessment --- Rectification, of mistake---Assessing Officer has to make a complete assessment on de basis of total income of assessee---Not open to Assessing Officer to make assessment piecemeal---Where the Assessing Officer had proceeded to asst one part of the income and had decided to assess the rest of the income or a later date he could not rely on the provision of S.65, Income Tax Ordinance, 1979 which relates to the re-opening of assessment or on the provision contained in S.156 of the Ordinance which related to the rectification of mistake.
(j) Income Tax Ordinance (XXXI of 1979)---
----Ss.62 & 156---Assessrrient---Rectification of mistake---Assessment order made with the observation that the finding was subject to rectification is not permissible.
An assessment order made with the observation that the finding subject to rectification is not permissible in law for the simple reason that that rectification of mistake apparent on record does not envisage a deliberate a intentional act on the part of an assessing officer and the provision contain in section 156 is not meant either to extend the period of limitation or to empower the assessing officer for making assessment order piecemeal.
(k) Income Tax Ordinance (XXXI of 1979)---
----Ss.62, 63 & 132---Assessment---Principle that an assessment order cannot be made in piecemeal is applicable to the original assessment only and not to the subsequent assessment orders in consequence of decision by the Appellate Authority---Principles.
The principle that an assessment order cannot be made piecemeal is applicable to the original assessment only and pot to the subsequent assessment orders in consequence of decision by the Appellate Authorities & The reason being that there may be various findings in first appellate order. Some issues may be confirmed, some additions may be deleted while some issues may be set aside. Again the assessee and department may prefer second appeals before the Tribunal consequently extending the period of limitation for making re-assessment. Moreover the assessing officer in fairness to the assessee and as a matter of deference to the Appellate Authorities, may not like to decide the issues which are pending before the Tribunal. However, it does not mean that the issues on which there is no dispute and which stand settled with the decision of first Appellate Authority should also be deferred till the decision on issues is given in second appeal. In such situations the assessing officer may modify the assessment order in conformity with the finding of First Appellate Authority and defer fresh findings till the decision of second appeal by the Tribunal. The Assessing Officer may further pass an order under section 132 only giving appeal effect in respect of settled issues and defer the finding on issues pending in the Income Tax Appellate Tribunal as done in the present case. It would be appropriate to do so, so that the correct position of the demand outstanding may be reflected in the demand and collection register at a particular point of time. If such an order is not passed, the demand in respect of which the issues have been set aside, or in respect of which the additions have been deleted by the First Appellate Authority, shall not be existing in law while they will continue to be so reflected in the demand and collection register. This will not give true picture of the state of affairs. Thus after decision in first appeal the Assessing Officer can pass an order showing the issues on which no dispute is pending and it would not be a fresh order by the Assessing Officer but it would merely crystallize the state of affairs as obtaining on decision of first appeal. He may defer the findings on set aside issues till decision of second appeal and if the finding of C.I.T.(A) setting aside the issues is maintained by the Tribunal he may make second order under section 62/ 135. Thus, in this situation and other situations like this there may be more than one orders by the Assessing Officer which would not be open to any exception.
(1) Income Tax Ordinance (XXXI of 1979)---
----Ss.132, 62 & 63---Order made by the Assessing Officer under 5.132, Income Tax Ordinance, 1979, only while deferring his finding on set aside issues would not be deemed to be re-deciding of the issues---Principles.
An order made by the Assessing Officer under section 132 only while deferring his findings on set aside issues would not be deemed to be re -deciding of the issues. The re-deciding of issues would only be deemed when the Assessing Officer has adjudicated upon the issues by considering the facts and law as directed by the Appellate Authority after forming opinion and determining the issues. If an Assessing Officer has merely given his finding without supporting opinion and the reasons, it would amount to decision and consequently assessment order under section 62 or 63, of course subject to Appellate Court's finding if such decision is maintainable in law or not.
Muhammad Naseem Ahmed for Appellant,
Inayatullah Kashani, D.R. for Respondent,
Date of hearing: 7th March, 1997.
ORDER UNDER SECTION 156
The appeal has been preferred by the appellant/assessee in the second round of litigation. During the course of arguments a show-cause notice was issued to the learned counsel for the appellant as to why the following finding contained in the order of this Tribunal dated 12-9-1993 in ITA No.2572/KB of 1887-88 (assessment year 1986-87) may not be rectified being result of mistake apparent on record:
"Mr. Muhammad Naseem, learned counsel for the assessee has stated that all the issues on which the assessee was in appeal have been redecided by the I.T.O., and finding on this issue is in favour of the assessee. In spite of this he intended to argue his appeal.
We have examined the record and from the appellate order it appears that the learned C.I.T. (A) has set aside the finding on all the issues except disallowances and since all the set aside issues have been redecided by the I.T.O., therefore, the appeal of assessee has become infructuous on these issues. We, therefore, dismissed the appeal as infructuous on those issues which have been decided by the I. T. O."
2. The above show-cause notice was issued in the following background. The appellant is a private limited company engaged in execution of civil work as a contractor for various Government and semi-Government organisations. While completing assessment under section 62 the assessing officer rejected the declared version to the extent of application of G. P.. rate. The appellant had declared G.P. rate at 5.37% and the assessing officer applied G.P. rate at 15% thereby making an addition of Rs.53,02,067 in the trading account. The assessing officer made various other additions including addition at Rs.1,87,487 by recourse to rule 7(b)(1) of the Third Schedule to the Income Tax Ordinance, 1979 on sale of road-roller. Another addition was made at Rs.49,000 by making disallowance of the claim' under the head consultancy charges. The appellant being aggrieved with the additions preferred first appeal and the learned CIT(A) set aside the additions with the direction to decide the issues afresh. The appellant being dissatisfied with the setting aside of issues preferred second appeal before this Tribunal being ITA No.2572/KB of 1987-88. The appeal came for hearing before a Division Bench of this Tribunal alongwith other appeals preferred by the assessee and the department. At the time of hearing of appeals Mr. Muhammad Naseem, Advocate informed the learned Bench of this Tribunal hearing the appeals that the set aside issues were redecided by the I.T.O. and findings on these issues were given in favour of the assessee. The learned members of the Bench then examined the record and observed that all the set aside issues have been redecided by the I.T.O., therefore, the appeal of assessee has become infructuous on these issues. It would be appropriate to mention that the original assessment order was completed on 31-3-1987 and the first appeal was preferred on 14-4-1987 which was decided on 29-8-1987 and thereafter second appeal was preferred in this Tribunal. On 14-10-1987 the assessing officer passed an order under section 132 of the Income Tax Ordinance, 1979 which is reproduced below:
ASSESSMENT ORDER
"Consequent upon the order of learned Commissioner of Income-tax Appeals, Zone-3, Karachi bearing No.767/CIT(A)/Z-3/1986-87, dated 29-8-1987, assessment framed under section 62 of the Income Tax Ordinance, 1979 is revised as under:--
Total income as per original order Rs.85,25,144 Less: Relief Allowed:
| (1) Addition made in the income of the assessee company by rejecting of Trading Account and application of G.P. @ 15% since the issue has been set aside by learned CIT (A), the addition is, therefore, deleted from income for the time being till re-assessment under section 132/62. | Rs. 53,02,057 |
| (2) Addition under the head "other Receipts" Rs.10,000 deleted | Rs. 10,000 |
| (3) Addition on account of sale of four plots Rs.22,25,999 Order on this issue has been annulled, hence deleted. | 22,25,999 |
| (4) Determination of profit under rule 7(b)(i) of the Third Schedule on sale of Road Roller 1,87,487 Since this issue has also been set aside by learned CIT (A) the addition as being deleted for the time being till its re-assessment under section 132/62. | 1,87,487 |
| (5) Addition made under the head salaries Rs.4,87,200 learned CIT(A) has knocked off this addition, hence deleted | 4,87,200 |
| (6) Disallowance of consultancy charges Rs.49,000. The issue has been set aside. The addition is, therefore, being deleted for the time being till its re-assessment under section 132/62. | 49,000 |
| (7) Tender registration fee Rs.5,104 deleted. | 5,104 Rs.82,66.84 |
| Revd total income: | Rs.2,58,291 |
COMPUTATION OF TAX
Income-tax @ Rs.7"489
Super tax @ 25 %Rs.64,574
Total:Rs.142,063
Issue revised demand notice and challan accordingly.
(Sd.)
INCOME TAX OFFICER;
COMPANIES CIRCLE C-7,
CENTRALZONE-C, KARACHI
DATED: 14-10-19'87.
3. After dismissal of second appeal as bang infructuous the assessing officer made an order under section 62/135 of 28-6-1995. The additions which were set aside by the learned CIT (A) where repeated. The merits of the case shall be considered separately as it is cat relevant for the purpose of present order. The reopening part of ~e assessment order under section 62/135 of the Income Tax Ordinance is reproduced below for the sake of convenience:---
"The assessee, a Private Limited Company, derives income from execution of civil work as a contract of for various Government and semi-Government organisations.
In this case, original assessment way finalized on an income of Rs.85,25,144 against, the declared income of Rs.1,49,733 under section 62 of the Income Tax Ordinance, 1979 on 31-3-1987.
The assessee, feeling aggrieved against the order of the then learned assessing officer, preferred appeal before the learned CIT(A), Zone-3, Karachi, who vide his order NO.CIT(A-Z-3)/767 dated 29-8-1987, set side the following issues to be decided afresh on the basis of material, facts and in accordance with the law:
(1) Addition of trading account which 0 made by applying G.P. rate of 15 % on declared receipts.
(2) Determination of profit under rule 70)(t) of the Third Schedule of the I.T. Ordinance, 1979 on sale of road-rollers.
(3) Disallowances of consultancy charges of Rs.49,000
Further, following additions were deleted:
(1) Addition under the head other receipts, amounting to Rs.10,000
(2) Addition on account of, sale of four plots, amounting to Rs.22,25,999
(3) Addition under the head salaries, amounting to Rs.4,87,200.
Consequent upon the order of the learned Commissioner of Income tax (Appeals), Zone-3, Karachi, appeal effect was accordingly given vide order under section 132 of the I.T. Ordinance, 1979 dated 14-10-1987.
Subsequently cross-appeals were filed by the departments as well as the assessee. The learned Income-tax Appellate Tribunal Pakistan', Karachi vide following consolidated appellate order, adjudicated the matter by disposing of six appeals.
ITA No.2574/KB of 1987-88
(Assessment year 1983-84)
ITA No.2572/KB of 1987-88
(Assessment year 1986-87)
ITA No. 1490/HQ of 1988-89
(Assessment year 1987-88)
ITA No.350/HQ of 1990-91,
(Assessment year 1989-90)
In the light of C.I.T. (Appeals) and above appellate orders, de novo assessment proceedings were started by issuing notice under section 61 of the I.T. Ordinance, 1979 and in compliance therein Mr. Muhammad Naseem, Advocate of M/s. Muhammad Naseem & Company, Advocates and A.R. of the assessee attended the proceedings and filed necessary details and documents. Power of Attorney is already available on record. The case was discussed with him from time to time and assessment is framed according to the facts, material and circumstances of the case".
4. The appellant feeling aggrieved with the assessment order under section 62/135 preferred first appeal before the learned CIT(A). In addition to the objection on merits the following preliminary objections were also raised:---
"The learned Deputy Commissioner of Income-tax has erred in re framing the assessment order:---
(a) in which he has no jurisdiction, to frame an assessment it;
(b) the assessment has been framed in disregard of the orders of the Income-tax Appellate Tribunal;
(c) the orders have been passed in complete disregard of the orders of the R.C.I.T. relating to the self-assessment entitlement for the year; 1987-88;
(d)' the revised assessment is based on no evidence/investigation.
The learned Deputy Commissioner of Income-tax has not appreciated that a revised assessment order could not have been passed since the original order passed was final and complete and his predecessor was not entitled to frame a piecemeal assessment and revise the same later.
5. It was contended before the learned CIT(A) that the issues were not available for rejection as they stood finally settled with the finding of Tribunal. It was further contended that the R.C.I.T., also considered the order dated 14-10-1987 under section 132 of the Income Tax Ordinance, 1979 as the final order in compliance of order of the learned CIT(A). It was submitted that while examining the return filed by the appellant for the assessment year 1987-88 for the purpose of immunity from detailed scrutiny the R.C.I.T. held that the reassessment framed by the assessing officer at an income of Rs.2,50,257 on 14-10-1987 was final and in capable of being revised and consequently the R.C.I.T., did not permit the removal of return from exemption from total audit in respect of assessment year 1987-88. The learned CIT(A) did not accept the contention for the following reasons:---
"It was admitted by the A.R. that the above issues/matters were set aside for de novo consideration, however, while giving appeal effect under section 132 of the I.T. Ordinance, 1979, an addition amounting to Rs.53,02,057, which was made by applying G.P. rate of 15 % was deleted for the time being by the learned assessing officer till the re-assessment vide order dated 14-10-1987. When re-assessment proceedings were started by issuing notice under section 61 of the I.T. Ordinance, 1979, in compliance therein, Mr. Muhammad Naseem, Advocate, the learned counsel for the appellant, attended and vehemently objected against the initiation of proceedings vide his letter No.AAL/IT 87-88/121 (38)1100 dated 21-12-1987 and requested to hold the same for the reasons that the appellant had gone in appeal before the Income-tax Appellate Tribunal and the appeal is pending. He also substantiated the above principal with the following Income-tax Tribunal decision: (1986) 53 Tax 17 (Trib).
In view of the above appellant's A.R. submission, re-assessment proceedings were kept pending till the decision of the Income-tax Appellate Tribunal. However, on, the contrary, before the Income tax Appellate Tribunal, the learned counsel for the appellant has stated that: 'All the issues on which the appellant was in appeal, have been redecided by the I.T.O., and finding on this issue is in favour of the appellant'. Since facts and circumstances of the case were not properly put forth before the learned I.T.A.T. therefore, appeal of the appellant, being infructuous, was dismissed.'
Now while framing the re-assessment, the learned assessing officer had rightly considered all facts and circumstances of the case, and had observed that since the issue of application of G.P. rate was not decided according to the directions of the learned C.I.T. (Appeals) and pending for re-adjudication, therefore, again consequent upon the above order of the learned I.T.A.T., after duly confronting the appellant vide notices under section 62 of the I.T. Ordinance, 1979, he has rejected the trading account and applied G.P. rate of 15% according to the facts and circumstances of the case and in the light of parallel cases. Accordingly appeal on this issue fails as the learned assessing officer has rightly adjudicated the matter. "
6. Being still dissatisfied the appellant has preferred appeal before this Tribunal reiterating the contentions raised before the learned C.I.T.(A).
7. In the above perspective the earlier order of this Tribunal dated 12-9-1993 came to our notice and the appellant was called upon to show that as to why,, the order of Tribunal which appears to be result of mistake apparent on record may not be rectified. Before proceeding further we would like to observe that against the order dated 29-8-1987 the assessee and department both preferred appeals before the Tribunal. The appeal of assessee was ITA No.2572/KB of 1987-88 while the appeal at the instance of department was ITA No.3467/KB of 1987-88. The assessee was aggrieved with the setting aside of issues relating to application of G.P. rate at 15% the determination of profit under Rule 7(b)(i) of the Third Schedule and disallowance of consultancy charges at Rs.49,000 While the department was aggrieved with the deletion of addition at Rs.22,25,999 as income earned on disposal of commercial plots. As already stated the assessing officer on 14-10-1987 made an order under section 132 of the Income Tax Ordinance, 1979 showing total income at Rs.2,58,297 only and, deleting the additions set aside by the learned C.I.T.(A) as well as the additions deleted by the learned C.I.T.(A). The Division Bench of .the Tribunal while hearing appeals at the instance of assessee observed that after order dated 14-10-1987 the appeal at the instance of assessee was rendered infructuous for the reason that the issues were re-decided by the I.T.O. A perusal of the order dated i2-9-1993 further shows that Mr. Muhammad Naseem had raised similar objection in respect of departmental appeal as well, which was not accepted. The learned Members of the Division Bench held as follows:
"Before we take up the arguments of learned D.R. it would be appropriate to dispose of the legal preliminary objection of the learned counsel for the assessee. Mr. Muhammad Naseem, learned counsel for the assessee has taken a preliminary objection that the original assessment for the assessment year 1986-87 was set aside by the learned CIT(A) and the re-assessment proceedings have been completed, therefore, the appeal of the department has become infructuous.
The above contention of the learned counsel for the assessee has been examined by us and on this issue, the appeal of the assessee has been held as infructuous. The contention of learned counsel for the assessee in departmental appeal seems to be misconceived because of the facts that the assessment on this issue was annulled by the learned C.I.T.(A), therefore, the I.T.O., did not proceed with the matter on this point as the appeal of the department was pending before this Tribunal. We are at a loss to understand as to why this appeal has become infructuous when no finding was recorded by the I.T.O., in order passed under section 62/132 of the Income Tax Ordinance, 1979. In view of this, the contention of preliminary objection of the learned counsel for the assessee is repelled."
7-A. Mr. Muhammad Naseem, learned counsel for the appellant has reiterated the contentions before us as raised before the learned C.I.T.(A) We drew attention of the learned counsel for the appellant to the order dated 14-10-1987 and particularly to the- expressions that, "since the issue has been set aside by the learned C.I.T.(A), the addition is, therefore, deleted from income for the time being till re-assessment under section 132/62", and asked him to show as to how this amount to the making of an assessment order a envisaged in the Income Tax Ordinance, 1979.
8. Mr. Muhammad Naseem contended that the assessing officer is empowered to make assessment order once only and it cannot be made subject to rectification. He further submitted that the assessing officer cannot make assessment order in piecemeal and, therefore, an assessment order once made is final. Mr. Muhammad Naseem therefore, maintained that whatever the worth of order dated 14-10-1987 be, it is a final assessment order and the additions shown to have been deleted in the said order were not available for re-assessment. Mr. Muhammad Naseem has further contended that the order of Tribunal holding that the issues have been redecided by the assessing officer and, therefore, the appeal at the instance of assessee was rendered infructuous cannot be rectified because according to him it is not a mistake apparent from record and the power of rectification under section 156 is confined to the mistake apparent on record only. In support of his contentions Mr. Muhammad Naseem has produced following judgments:
(i) (1962) 46 ITR 609 (SC of India.)
(ii) (1966) 62 ITR 558 (Punjab H.C.)
(iii) (1987) PTD (Trib.) 539.
(iv) (1952) 22 ITR 539 (Allahabad RC.)
(v) (1955) 28 ITR 252 (Andhra Pra. H.C.)
(vi) (1992) PTD 570 = 1992 SCMR 687.
9. First we will deal with the judgments on the scope of rectification of mistake vested in the Income Tax Appellate Tribunal and the Income-tax Authorities. Mr. Muhammad Naseem has placed reliance in this behalf on the judgment of Hon'ble Supreme Court of Pakistan reported as 1992 PTD 570 = 1992 SCMR 687 and on some judgments from the Indian jurisdiction as well. We are of the opinion that in view of the judgment from Hon'ble Supreme Court of Pakistan we need not to advert to the judgment from Indian jurisdiction. The Hon'ble Supreme Court of Pakistan has held in the judgment reported as 1992 PTD 570 = 1992 SCMR 687 that, "section 35 of the-repealed Income-tax Act, 1922 hereinafter referred to as the Act, confers power to rectify any mistake in the order which is apparent from the record. Such power can be exercised suo motu or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading of the order it may immediately strike on the face of it. Where an officer exercising power under section 35 enters into the controversy investigates into the matters, re-assesses the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to rectification of the order. Any mistake which is not patent and obvious on the record, cannot be termed td be an order which can be corrected by exercising power under section 35".
10. After the above dictum laid down by the Hon'ble Supreme Court of Pakistan there is no scope for any further discussion on the point and in principle we agree with the contention of Mr. Muhammad Naseem, that the owner of rectification vested under the Income Tax Ordinance, 1979 is restricted to the mistake apparent on record, meaning thereby the mistake which may be seen floating on surface and which does not require investigation or further evidence. However, we are of the opinion that in the present case the mistake sought to be rectified is apparent on record and is floating on the surface.
11. Before adverting to the facts of the case we would like to refer the judgments on which Mr. Muhammad Naseem has placed reliance, in support of his contention that the assessing officer is empowered to make one assessment order only. The first judgment relied upon by Mr. Muhammad Naseem from the Indian jurisdiction is reported as (1962) 46 ITR 609. It is in respect of the scope of rectification and we would not like to consider the ratio in this judgment because of the availability of judgment from Supreme Court of Pakistan. The' second judgment is (1966) 62 ITR 558. In this judgment the Punjab High Court has cited a judgment from Indian Supreme Court reported as (1962) 46 ITR 601 which reads as follows:
"The assessment of the assessee was completed on January 22, 1952. As the assessment of a firm in which the assessee had a share was not completed at that time a certain amount was included as his share in the firm and the assessment orders were passed with a note that action under section 35 of the Income Tax Act would be taken when the correct share income was known.
The assessment of the firm was completed in 1954 and it was discovered that the share income of the assessee was much higher, and thereupon 'revised assessment orders were made under section 35(5); held that the fact that a note was added that action under section 35 would be taken after the firm's assessment could not make final assessment as provisional one. "
12. The next judgment is 1987 PTD (Trib.) 539. The relevant facts in this case were that the assessing officer framed assessments without any detailed examination and on the first date of hearing on the understanding that they were being accepted provisionally subject to rectification on receipt of assessment orders from home country. The assessing officer subsequently rectified the assessments and a question arose before the Tribunal if the assessing officer was empowered to do so. A contention was raised before the Tribunal on behalf of the department that the assessments originally made by the assessing officer were protective assessments. The contention was not accepted for the reason that the assessment was shown to have been completed under section 23(3) of the repealed Income-tax Act, 1922 and therefore, it was not a provisional assessment. It was further held that an assessing officer is required to frame assessment under section 62 or 63 as the case may be and if he does so, it could not be in keeping with policy of law to give him power to reopen it under section 65 simply on the ground that he had not applied his mind earlier for one reason or the other.
13. Mr. Muhammad Naseem has placed reliance on the judgment of Allahabad High Court reported as (1952) 22 ITR 539. It has been held in this case that section 23 of the Indian Income-tax Act, 1922 contemplates that the Income Tax Officer should make a complete assessment on the basis of the total income of an assessee. It is not open to him to make assessments piecemeal and in a case where the Income-tax Officer has proceeded to assess one part of the income on a latter date he cannot rely on the provisions of section 34 for the purpose of reopening the assessment. The last decision relied upon by Mr. Muhammad Naseem is by the Andhara High Court reported as (1955) 28 ITR 252. It has been observed in this case that the Income-tax Act, 1922 does -not contemplate piecemeal assessment and ordinarily it is expected of an Income-tax Officer to complete his assessment for a particular year once and for all. He cannot resort to the method of piecemeal and compartmental assessment. In this case the question referred to the High Court was if the reopening of assessment under section 34 of the Income-tax Act, 1922 was valid or not and the High Court held that the action taken by the I T.O., under section 34 of the Act was right.
14. The above resume of the case-law produced by Mr. Muhammad Naseem shows that the facts considered in the above judgments and the facts in the case before us are distinguishable and thus none of the ruling is applicable to the present case. The reason being that in all the judgments produced by Mr. Muhammad Naseem the assessments under consideration were original assessments and they were subsequently either reopened or rectified. In the present case neither the order dated 14-10-1987 under section 132 of the Income Tax Ordinance, 1979 is an original assessment nor it has been reopened or rectified. We respectfully agree in principle with the findings of a Division Bench of this Tribunal reported as 1987 PTD (Trib.) 539 wherein the then learned Chairman has observed that assessing officer is required to frame assessment under section 62 or 63 as the case may be and if he does so it could not be in keeping with policy of law to give him power to reopen it under section 65 simply on the ground that he had not applied his mind earlier for one reason or the other. However, this principle is not applicable to the facts of the present case. The reason being that, firstly, the order dated 14-10-1987 by the assessing officer under section 132 of the Income Tax Ordinance, 1979 is not an original assessment order. Secondly, this order has neither been rectified nor reopened subsequently by the assessing officer. The assessing officer subsequently made assessment order not by way of rectification under section 156 of the Income Tax Ordinance, 1979 or by way of reopening of assessment under section 65 but in compliance of the direction by the appellate authority. (For the time being we are not considering whether the direction has been properly complied with or not which will be considered when the appeal is heard on merits). Thirdly, a perusal of order dated 14-10-1987 shows that it is not an assessment order by assessing officer at all because the assessing officer can make an assessment order under section 62 or 63. In this case the assessing officer has not made any order under section 62 or 63 but has merely revised the original assessment framed under section 62 in order to bring it in conformity with the order of first appellate authority as it stood at that time and which was, of course subject to decision of Tribunal in second appeal, as the assessee and department both had preferred second appeal before the Tribunal. An assessing officer is not empowered to make any assessment order under section 132 of the Income Tax Ordinance which deals with the c powers of Appellate Additional Commissioner, while disposing of first appeal. Thus, in fact, the assessing officer has merely made the order whereby the actual position has been crystallized as obtaining after decision by the first appellate authority under section 132 of the Income Tax Ordinance, 1979. The observations made by the assessing officer in the order dated 14-10-1987 clearly reflect his intention and the purpose. He has clearly observed that, "since the issue has been set aside by the learned C.I.T.(A) the addition is, therefore, deleted from income for the time being till re assessment under section 132162". Thus, the deletion of income was not as a result of any order or finding by the assessing officer but it was as a result of setting aside of the issue by the learned C.I.T.(A), meaning thereby that in order dated 14-10-1987 merely the directions of first appellate authority have been summarised from which the actual position in respect of the demand outstanding in-between decision of first appeal and second appeal is reflected. Here we would like to observe that in the facts and circumstances of the case where first appeal was decided by the C.I.T.(A), whereby certain issues were set aside and some additions were deleted and the findings were assailed in second appeal by the assessee as well as department, the order made by assessing officer under section 132 while deferring re-assessment on set aside issues was the most proper order. The reason being that with the p filing of second appeals at the instance of assessee and department the period of limitation already stood extended and until and unless such an order was passed, true picture in demand and collection register could not be reflected. If such an order is not made the demand and collection register shall continue to show the original demand as created with the assessment order which would not be reflecting the actual state of affairs and thus such wrong statistics would not be in the larger interest of the financial system.
15. Now we revert to the order of Tribunal which is under consideration. It has been observed that, "we have examined the order and from the appellate order it appears that the learned C.I.T.(A) had set aside the finding on all the issues except disallowances, and since all the set aside issues have been redecided by the I.T.O., there fore, the appeal of assessee has become infructuous on these issues". The point for consideration at this stage is whether this finding is a result of mistake apparent on record or not and it is to be examined vis-a-vis the order dated 14-10-1987 under section 132 of the Income Tax Ordinance. It would further be helpful to look into the finding of Tribunal on the preliminary objection of Mr. Muhammad Naseem, while deciding appeal at the instance of department on the same point. It has been observed while repelling the contention of learned counsel, "the contention of learned counsel for the assessee in departmental appeal seems to be misconceived because of the fact that the assessment on this issue was annulled by the learned C.I.T.(A), therefore, the I.T.O., did not proceed with the matter on this point as the appeal of the department pending before this Tribunal. We are at a loss to understand as to why this appeal has become infructuous when no finding was accorded by I.T.O., in order passed under section 62/ 132 of the Income Tax Ordinance. In view of this, the contention on preliminary objection of the learned counsel for the assessee is repelled".
16. A perusal of the two findings by the learned Division Bench of the Tribunal shows that firstly a mistake has crept in to the effect that the order dated 14-10-1987 has been taken as an order under section 62/132 of the Income Tax Ordinance, while a bare perusal of the order shows that it is merely under section 132 of the Income Tax Ordinance. On the contrary the assessing officer has clearly observed in the order that since the issue has been set aside by the learned C.I.T. (A) the addition is, therefore, deleted from income for the time being till re-assessment under section 132/62. Thus, this mistake is very much floating on the record and no long drawn process of argument is required to find out this mistake. Secondly, while deciding departmental appeal it has been held that the appeal at the instance of department would not be held to be infructuous because the I.T.O. has not proceeded with the matter on this point. However, while deciding appeal at the instance of assessee the fact very much apparent on record was overlooked that in respect of the issues set aside by the learned C.I.T.(A) the assessing officer had likewise not proceeded with the matter but had, merely referred to the order of learned C.I.T.(A) with the intention to make re assessment under section 132/62 at a subsequent stage. Due to this oversight another mistake apparent on record was committed whereby it was held that all the set aside issues have been redecided by the I.T.O. Here it would be appropriate to consider the meaning and connotation of the word "decide" in order to consider if the assessing officer had redecided the set aside issues or not. According to the New Shorter Oxford Dictionary, 1993 Edition, the word "decide" means to determine, settle the question or dispute by finding in favour of one side; bringing to a settlement, resolve; influence, decisively outcome of a context; settle a question in dispute, pronounce judgment, come to determination or resolution etc. According to Chamber's Dictionary, 1993 Edition, the word "decide" means to determine; to end, to settle; to resolve; to make up one's mind etc. In Legal Thesaurus by William C. Burton, 1980 Edition, the word "decide" has been defined as follows:
"adjudge, adjudicate, adjust, agree, arbitrate, arrive at a judgment, ascertain, award, choose, choose a course of action, choose an alternative, choose an option, come to a conclusion, cc me to an agreement, come to terms, commit oneself, conclude, constitutere, decernere, decree, determine, diagnose, diiudicare, dispose of, elect, end, establish, finalize, find, fix, form a resolution, form an opinion, hold, judge, make a choice, make a decision, make a selection, make up one's mind, opt, ordain, pass judgment, pass sentence, pick, pronounce, reach a decision, settle, sit in judgment, -- terminate, umpire, vote.
ASSOCIATED CONCEPTS: decide a case, decide a motion, decided adversely, decided as a matter of law, decided on the merits, decided upon legal principles, jurisdiction to decide."
17. From above meanings of the expression "decide" we can infer without any hesitation that an act to decide includes adjudication, giving of judgment, exercising of discretion, forming of opinion, making of choice,finalizing of issue and giving of a verdict etc. If these attributes and elements are not there then the act cannot be termed as decision. Now applying this principle to the facts of the present case we find that the assessing officer while making order under section 132 and by making observation that the addition is deleted because of setting aside of issue by the C.I.T.(A) for the time being till re-assessment under section 132/62, the assessing officer has not given any decision but he has merely deferred his decision to which no objection can be taken for the simple reason that he was not making an order under section 62 or 63 of the Income Tax Ordinance, 1979. Thus, the finding by the Division Bench of this Tribunal dated 12-9-1993 that all the set side issues have been re-decided by the I.T.O. is a result of mistake very much patent and floating on record. The learned C.I.T.(A) in his order dated 29-2-1996 has rightly observed that the assessing officer while making order under section 132 dated 14-10-1987 merely followed the decision of Income Tax Appellate Tribunal reported as (1986) 53 Tax 17 (Trib.).
18. As a result of above discussion it is held that the order of Tribunal dated 12-9-1993 in ITA No.2572/KB of 1987-88 relating to assessment year 1986-87 to the effect that the assessing officer had redecided all the set aside issues and, therefore, the appeal of the assessee has become infructuous is a result of mistake apparent on record and consequently the said finding is hereby rectified. The order is recalled with the result that I.T.A. No.2572/KB of 1987-88 shall still be deemed to be pending. This appeal shall be fixed for hearing on merits alongwith the I.T.A. No.1836/KB of 1995-96, the appeal filed by the assessee in the second round of litigation.
19. As the issues decided by this order contain very important proposition of law and are likely to affect large number of orders, therefore, for the sake of convenience we would like to summarise our findings as follows:
(i) As already held by a Division Bench of this Tribunal in the judgment reported as 1987 PTD (Trib.) 539 an assessing officer is required to frame assessment under section 62 or 63 as the case may be and if he does so it would not be in keeping with policy of law to give him power to reopen it under section 65 simply on the ground that he had not applied his mind earlier for one reason or the other.
(ii) An assessing officer should make a complete assessment on the basis of total income of an assessee. It is not open to him to make assessment piecemeal and in a case where the I.T.O., has proceeded to assess one part of the income and has decided to assess the rest of the income on a latter date he cannot rely on the provisions contained in section 65 of the Income Tax Ordinance, which relates to the reopening of assessment or on the provisions contained in section 156 of the Income Tax Ordinance, which relates to the rectification.
(iii) An assessment order made with the observation that the finding is subject to rectification is not permissible in law for the simple reason that the rectification of mistake apparent on record does not envisage a deliberate and intentional act on the part of an assessing officer and the provision contained in section 156 is not meant either to extend the period of limitation or to empower the assessing officer for making assessment order in piecemeal.
(iv) However, the principle that an assessment order cannot be made in I piecemeal is applicable to the original assessment only and not to the subsequent assessment orders in consequence of decision by the appellate authorities. The reason being that there may be various findings in first appellate order. Some issues may be confirmed, some additions may be deleted while some issues may be set aside. Again the assessee and department may prefer second appeals before the Tribunal consequently extending the period of limitation for making re-assessment. Moreover the assessing officer in fairness to the assessee and as a matter of deference to the appellate authorities may not like to decide the issues which are pending before the Tribunal, however, it does not mean that the issues on which there is no dispute and which stand settled with the decision of first appellate authority should also be deferred till the decision of issues being decided in second appeal. In such situations the assessing officer may modify the assessment order in conformity with the finding of first appellate authority and defer fresh findings till the decision of second appeal by the Tribunal. The assessing officer may further pass an order under section 132 only giving appeal effect in respect of settled issues and defer the finding on issues pending in the Income Tax Appellate Tribunal as done in the present case. It would be appropriate to do so, so that the correct position of the demand outstanding may be reflected in the demand and collection register at a particular point of time. If such an order is not passed the demand in respect of which the issues have been set aside, are in respect of which the additions have been deleted by the first appellate authority shall not be existing in law while they will continue to be so reflected in the demand and collection register. This will not give true picture of the state of affairs. Thus after decision in first appeal the assessing officer can pass an order showing the issues on which no dispute is pending and it would not be a fresh order by the assessing officer but it would merely crystallize the state of affairs as obtaining on decision of first appeal. He may defer the findings on set aside issues till decision of second appeal and if the finding of C.I.T.(A) setting aside the issues is maintained by the Tribunal he may make second order under section 62/ 135. Thus, in this situation and other situations like this there may be more than one orders by the assessing officer, which would not be open to any exception.
(v) An order made by the assessing officer under section 32 only while deferring his findings on set aside issue would not be deemed to be re-deciding of the issues. The re-deciding of issues would only be deemed when the assessing officer has adjudicated upon the issues by considering the facts and law as directed by the appellate authority after forming opinion and determining the issues. We would like to clarify here that if an assessing officer has merely given his finding without supporting opinion and the reasons, it would amount to decision and consequently assessment order under section 62 or 63, of-course subject to Appellate Court's finding if such decision is maintainable in law or rot.
M.B.A. /344/Trib. Order accordingly.