Income-tax---

----Reference---Appeal to Appellate Tribunal---Rectification of mistakes-- Tribunal rejecting application for rectification after considering matter-- Tribunal whether right in law in admitting second application on, same facts---Tribunal whether right in recalling its original order---Questions of law--Indian Income Tax Act, 1961, Ss. 254 & 256.

The question regarding maintainability of the second application raising the same and similar points which had already been dealt with by the Tribunal while disposing of the first rectification application is a question of law on which, there is no decision either of the Punjab and Haryana High Court or of the Supreme Court of India:

Held, accordingly, that the questions whether, on the facts and circumstances .of the case, the Tribunal was right in law in entertaining a second application under section 254(2) of the Income Tax Act, 1961, raising the same and similar points which had been dealt with by it in the first application filed by the assessee under section 254(2) of the Act after affording full hearing to the parties and whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in recalling its previous finding given in its appellate order, dated March 18, 1976, restoring the addition of Rs.9,36,000 by the Income-tax Officer and affirming the order of the Appellate Assistant Commissioner granting relief to the assessee to the tune of Rs.8,34,730 against the aforesaid addition, had to be referred.

R.P. Sawhney with Sanjay Goyal for Petitioner,

Nemo for Respondent

JUDGMENT

ASHOK BHAN, J. ---The Commissioner of Income-tax (Central), Ludhiana (hereinafter referred to as "the Revenue"), has filed this petition under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for issuance of a mandamus directing the Income-tax Appellate Tribunal, Chandigarh Bench, Chandigarh (hereinafter referred to as "the Tribunal"), to refer the following questions of law to this Court of its opinion on the ground that the same arise from the order of the Tribunal, dated March 31, 1979, in the case of Messrs. Pearl Woollen Mills, Ludhiana (hereinafter referred to as "the assessee"):

"(1) Whether, on the facts and in the circumstances of the case, it was open to the assessee to reagitate the merits of the addition of Rs.9,36,000 on account of the value of the extra stock of yarn pledged by the assessee with the banks by way of an application under section 254(2) of the Income Tax Act, 1961, when limitation for an application under section 256(1) had expired long before?

(2)Where an application under section 254(2) of the Income Tax Act had been rejected after full hearing and consideration of its merits can the Tribunal entertain a second application under section 254(2) raising the same or similar point dealt with by it in the previous application?

(3)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in law in admitting the second application under section 254(2) of the Act, dated March 17, 1978, after rejecting the previous application of the assessee, dated June 27, 1977, by its order, dated July 12, 1977?

(4)Whether the order of the Tribunal, dated March 31, 1979, is vitiated by admission of irrelevant facts and evidence and rejection of relevant and admissible facts and evidence in contrary to the weight of the record and was arrived at without considering the entire evidence and material on the record?

(5)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in recalling its previous finding given in its appellate order, dated March 18, 1976, restoring the addition of Rs.9,36,000 by the Income-tax Officer and affirming the order of the Appellate Assistant Commissioner granting relief to the assessee to the tune of Rs. 8,34,730 against the aforesaid addition?"

The assessee is a registered firm. It derives its income from manufacture and sale of woollen yarn and also manufacture and sale of scooters. It has also income from other different businesses. The previous year for the assessment year 1966-67 ended on October 25, 1965. The assessee declared a loss of Rs.37,854 but the total income was assessed by the Income-tax Officer vide his assessment order, dated March 20, 1971, at Rs.23,43,260. Rupees 9,36,000 were added on account of unaccounted stock found pledged with the bank but not accounted for in the books of account maintained by the assessee. In appeal, the assessee was granted relief to the extent of Rs.17,73,424. Certain other directions in connection with the assessment were also issued by the appellate authority. Before the Appellate Assistant Commissioner, the assessee admitted that excess stock to the extent of 36,543 kgs. of the yarn was pledged with the bank. It was, however, pleaded that this stock related to the business done outside the books of account. The appellate authority, after giving due consideration to the assessee's pleadings, held that against the addition z: Rs.9,36,000 only Rs.1,01,270 was taxable in the year under assessment. Relief of Rs.8,34,730 was thus, granted to the assessee against this item.

The order of the appellate authority was challenged both by the assessee as well as by the Department by way of filing separate appeals before the Tribunal. The Tribunal vide its order, dated March 18, 1976, restored the addition of Rs.8,34,730 which had been deleted by the Appellate Assistant Commissioner of Income-tax out of the addition of Rs.9,36,000 made by the Income-tax Officer. While dealing with the aforesaid item of unaccounted extra stock to the tune of 36,543 kgs. of yarn of the value of Rs.9,36,000 pledged by the assessee with the banks, the Tribunal held that it was for the assessee to explain as to how the debits in the so-called "Khazan Chand goods account" were connected with the aforesaid goods kept outside the books of account and pledged with the banks. The Tribunal observed that there was no ostensible reason why yarn purchased even without vouchers was not debited to the hosiery account which was maintained entirely for goods supplied to the army authorities. .The Tribunal recorded this finding after noticing the evidence present on the record and the arguments advanced before it by counsel for the parties. No reference under section 256(1) of the Act was sought by the assessee to question the legality and propriety of the aforesaid additions restored by the Tribunal.

The assessee filed an application under section 254(2) of the Act before the Tribunal for rectification of the order, dated March 18, 1976, saying that addition of Rs.9,36,000 was wrongly confirmed. In the rectification application, the assessee raised as many as six grounds in support of its contention. The Tribunal disposed of all the grounds raised in the rectification application. It was observed that there was no mistake apparent on the record and that the addition of Rs.9,36,000 as made by the Income-tax Officer was duly confirmed. In doing so, the Tribunal in its order, dated July, 12, 1977, observed as under:

"We have considered the rival contentions and are of the view that there is no mistake apparent from the record so far as the addition of Rs.9,36,000 is concerned. No fraud or palpable mistake has alto been pointed out on the basis of which the earlier order of the Tribunal can be recalled. The six points made out by the assessee would not either individually or collectively lead to the inference that there is a mistake apparent from the record. In fact, point No.4 was not considered to be relevant by learned counsel himself when it was pointed out to him that in paragraph 8 of its order, the Tribunal itself had stated that the Appellate Assistant Commissioner's order for the assessment year 1965-66 in relation to Khazan Chand's account was not relevant so far as the addition of Rs.9,36,000 was concerned. Point No.6 is also of no consequence. The other four points are also of an argumentative nature and would not establish that there is any mistake apparent from the record. These points either mention that some contention of the assessee has not been noted or an appropriate inference has not been drawn. The order of the Tribunal is to be read as a whole. After appreciating the entire evidence on record, the Tribunal restored the entire addition of Rs.9,36,000. On the facts of this case, we are not satisfied that any mistake apparent from the record exists which requires rectification under section 254(2)."

On March 17, 1978, after a lapse of nine months, the assessee filed another application on the same subject-matter under section 254(2) of the Act for the rectification of the original order passed by the Tribunal on July 12, 1977. The second rectification petition was admitted to hearing by the Tribunal and accepted vide its order, dated March 31, 1979. The Tribunal modified its original order, dated July 12, 1977, and the deletion made by the Appellate Assistant Commissioner to the tune of Rs.8,34,730 was restored.

The Revenue aggrieved against the aforesaid order moved an application under section 256(1) of the Act for making a reference to this Court of the questions of law reproduced in the earlier part of the judgment to this Court for its opinion arising from its order, dated December 21, 1979. The Tribunal refused to refer these questions of law on the ground that it had rightly restored the order of the Appellate Assistant Commissioner.

Counsel for the Revenue has been heard. There is no representation on behalf of the assessee.

In our considered opinion, the Tribunal has erred in declining some of the questions raised by the Revenue which arise from the order of the Tribunal, dated December 21, 1979. The assessee had filed the first rectification application raising certain points on which a considered opinion was given by the Tribunal after hearing counsel for the parties. The question regarding maintainability of the second application raising the same and similar points which had already been dealt with by the Tribunal while disposing of the first rectification application is a question of law on which there is no decision either of this Court or of the Supreme Court of India. Whether it would amount to review of the order passed by the Tribunal while dealing with the first rectification application or the same would fall within the ambit of rectification of the original order passed by the Tribunal needs to be examined.

Accordingly, we direct the Tribunal to refer the following two refrained questions of law alongwith the statement of the case to this Court for its opinion: ,

"(i)Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in entertaining a second application under section 254(2) of the Act raising the same and similar points which had been dealt with by it in the first application filed by the assessee under section 254(2) of the Act after affording full hearing of the parties?

(ii)Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in recalling its previous finding given in its appellate order, dated March 18, 1976, restoring the addition of Rs.9,36,000 by the Income-tax Officer and affirming the order of the Appellate Assistant Commissioner granting relief to the assessee to the tune of Rs. 8,34,730 against the aforesaid addition?"

No costs.

M.B.A./1535/FCOrder accordingly.