ALI MEDICINE CO., FAISALABAD VS I.A.C. OF INCOME TAX/WEALTH TAX, RANGE-V, FAISALABAD, 2007 PTD-LAHORE-HIGH-COURT-LAHORE 1770 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 135, 136 & 156---Refusal of Tribunal to rectify/amend its original order recorded under S.135 of Income Tax Ordinance, 1979---Reference or appeal to High Court against such refusal order---Maintainability---Limitation---Appeal to High Court would be competent only on a question of law with reference to original order of Tribunal, which was either pleaded, argued or decided by Tribunal or which arose as a natural consequence thereof---Order refusing rectification would not merge in or become part of original order of Tribunal for purpose of reference or appeal to High Court---High Court, in case of unsuccessful rectification application, would not entertain issue as a question of law, if Tribunal was justified in refusing to rectify its original order---Rectified/amended order of Tribunal passed on rectification application or in exercise of its suo motu powers, if prejudiced interest of either party, then appeal thereagainst to High Court would be competent by virtue of S.135 of Income Tax Ordinance, 1979 alone for being part of order made at subsequent stage giving rise to fresh cause of action and limitation--Principles.

Commissioner of Income Tax v. Ateed Riaz 2002 PTD 570 ref.

Messrs Hong Kong Chinese Restaurant, Main Boulevard Gulberg, Lahore v. Assistant Commissioner of Income Tax, Circle-6, Lahore and another 2002 PTD 1878 fol.

Muhammad Bashir Malik for Petitioner.

Sajjad Ali Jaffrery for Respondent.

Date of hearing: 6th April, 2006.

JUDGMENT

NASIM SIKANDAR, J.---In this constitutional petition following prayer has been made:--

"The petitioner, therefore, prays;

(a) That this Hon'ble Court may be pleased to issue a declaratory writ or such other appropriate writ order or direction in the nature of certiorari under Article 199 of the Constitution of Islamic Republic of Pakistan against the Respondents calling for the record pertaining to orders at Annexure-I and at Annexure-J and examining them and setting aside and quashing the orders at Annexure-I and at Annexure-J holding that rectification or refusal of rectification under section 156 of the Ordinance or order under section 66-A of the Ordinance is appealable under section 134 of the Ordinance.

(b) That this Hon'ble Court may be pleased to issue direction to respondent No.2 to call for order I.T.A. No. 2498/LB of 1999, dated 18-8-1999 at Annexure-I and order I.T.A. No.456/LB of 1999 at Annexure-J and decide the appeal of the petitioner on merit.

(c) That pending the hearing and final disposal of the petitioner the Hon'ble Court may be pleased to Stay the operation of order, dated 21-5-1997 at Annexure 'D' passed by the respondent No.3 and restrain the respondent No.3 by an order and injunction from effecting recovery of unlawful demand of tax of Rs.1,71,609 levied through order at Annexure `D'.

(d) That the petitioner may have much other relief as the nature and circumstances of the case may require."

2. The petitioner is an assessee of the Income Tax Department. For the assessment year 1993-94 an assessment was made in his respect under section 62 of the late Income Tax Ordinance, 1979 on 28-2-1994 at an income of Rs.159,000. Subsequently that order was revised by the concerned IAC under section 66-A on 14-12-1995. On 6-4-1999 the petitioner moved an application before the I.A.C. under section 156 of the late Ordinance to rectify his order. It was, however, declined by him on 26-5-1999. The petitioner filed an appeal before the Income Tax Appellate Tribunal, Lahore Bench, Lahore which was rejected. While doing so the learned Members of the Tribunal expressed the view that an order under section 156 of the late Ordinance refusing rectification of the order under section 66-A was not appealable before them. The petitioner appears to have filed yet another miscellaneous application requiring the tribunal to rectify its order as according to him section 134 of the late Ordinance provided an appeal in case rectification was refused by the Additional Commissioner. That application was also rejected.

3. All these orders, first on the part of the IAC and then on the part of the Tribunal refusing rectification of the earlier orders and then rejection of appeal by the Tribunal have been challenged in this constitutional petition. In support of his submissions that an order refusing rectification of earlier order recorded under section 66-A is appealable before the Tribunal learned counsel relies upon a judgment of the Hon'ble Sindh High Court in re: Commissioner of Income Tax v. Ateed Riaz cited as 2002 PTD 570.

4. Learned counsel representing the Revenue, however, states and I will agree that the judgment relied upon by the learned counsel for the petitioner does not in any manner help him. He is also correct in pointing out that the issue in hand already stands settled by a judgment of this Court in Messrs Hong Kong Chinese Restaurant; Main Boulevard Gulberg, Lahore v. Assistant Commissioner of Income Tax, Circle-6, Lahore and another (2002 PTD 1878). In that order it was inter alia, found that where rectification of the order either at the instance of the assessee or the revenue was refused the order recorded by the Tribunal under section 135 of the late Ordinance, 1979 remained intact in all respects and the order refusing to rectify stood alone. Further that an order refusing rectification did not in any manner either merged in the original order or otherwise would be taken to be a part of it at least for the purpose of a reference or appeal to the High Court. Same is the position of an order recorded by an IAC under section 66-A or an order recorded by Assessing Officer refusing to rectify the assessment order.

5. The relevant portion of the reported judgment contained in paras. 14 to 16 reads as under:--

"(14) If the interpretation of the appellant/assessee is accepted then we will have to read so many provisions together. For example, the period of sixty days provided for appeal under section 136 at the relevant time will have to be read with the provisions of section 156 of the Income Tax Ordinance which in turn provides for a limitation of four years. An assessee or revenue can conveniently make an application pleading any conceivable ground to seek rectification of the order and on the rejection of such application can approach this Court by trampling the parameters provided for appeal (or reference) to this Court. The fixation of time to bring appeal or to make reference being one of the important parameters. Where a right of appeal or reference is provided with reference to a specific provision of law as in the present case an appeal is maintainable only with reference to an order recorded under that section alone. The scope of right necessarily stands restricted to that provision and none else. An appeal under section 136 of the Ordinance at the relevant time as held by this Court in re: Iram Ghee Mills Limited, (supra) was in fact a reference and, therefore, needed to be dealt with as such. It goes without saying that the reference jurisdiction of this Court is different from its appellate and revisional jurisdiction under Civil Procedure Code, Criminal Procedure Code or similar other laws. The essence of advisory or reference jurisdiction under section. 136 after the aforesaid amendment is necessarily restricted to the questions of law which were either pleaded, argued and decided by the Tribunal or which arose as a natural consequence of that order. If on rectification the rectified order of the Tribunal proceeds to the prejudice of the interest of any of the parties, the assessee or the revenue, an appeal would be competent not by reading together the provisions of sections 156 and 135 but under section 135 alons as being part of the order made at a subsequent stage.

(15) An order recorded under section 135 is "rectified" only if an actual modification or rectification is made therein. If no rectification is made and the prayer for rectification is refused then the order under section 135 already recorded stands intact. The refusal cannot, by any rule of interpretation be read as a part of the original order. An order by which an interference, rectification, correction or amendment in the original order is refused has no legal or factual nexus to become part thereof to give rise to a question to be considered in reference. For similar reasons in case of an unsuccessful application or rectification this Court will never entertain the issue as a question of law if the Tribunal was justified in refusing to rectify an order under section 135.

(16) In our view there is neither an authority under the Income Tax Ordinance nor any pronouncement by a superior Court in the Sub-Continent under the late Act of 1922 which goes to support the proposition that a question of law arises from an original order of the Tribunal reading with the one through which any amendment, rectification or correction was refused by it. However, as noted earlier if a rectification, amendment, or correction or other interference has been made in the order recorded under section 135 which goes to the prejudice of any of the parties, then obviously a fresh cause as well as period of limitation will start from the date when such addition, amendment, rectification or correction was made. An unsuccessful application for rectification can never give rise to either a fresh cause of action or to a question of law giving new lease of life to the order which had become barred by limitation. A successful application for rectification or suo mou exercise of the Tribunal which goes to add, excise or amend the order of the Tribunal earlier recorded under section 135 becomes the part of that order to be read together."

6. Learned counsel for the petitioner as noted above, has not been able to point out the portion of the judgment of the Hon'ble Sindh High Court which could directly or indirectly support his case. As a matter of fact the ratio settled by the Hon'ble Sindh High Court runs counter to the submissions made at the bar for the petitioner. This is evident from the following para. of the judgment of the Hon'ble Court:---

"We are, of the considered opinion, that merely because, a reference application lies against an order under section 56 of the Income Tax Ordinance, nobody can be allowed to circumvent the law relating to the period of limitation provided in subsection (1) of section 136 and in subsection (2) of section 136 of the Income Tax Ordinance, 1979. The effect of treating the order under section .159 made by the Tribunal under section 135, is that, for the purpose of making reference to High Court, it shall be related as an order under section 135 of the Income Tax Ordinance. Nonetheless, party cannot be allowed to seek a reference to the High Court in respect of question of law arising out of the original order under section 135 of the Income Tax Ordinance, if no such application was submitted within the period of ninety days of the date upon which he is served with the notice of an order under section 135 of the Income Tax Ordinance, as provided under section 136(1) of the Income Tax Ordinance, in the garb of an order under section 156 of the Income Tax Ordinance, 1979. We would like to clarify that orders under section 135 and section 156 made by the learned I.T.A.T. are subject to reference to the High Court, but the period of limitation, for making reference from the each order, would be the same as provided in subsection (1) of section 136 of the Income Tax Ordinance. If any reference application is sought to be made in respect of an order under section 156 of the Income Tax Ordinance, then the reference shall lie, if the question of law arises out of the order under section 156 only and not otherwise. If any question of law arises out of order under section 135 of the Income Tax Ordinance, then it cannot be referred to the High Court with reference to the order under section 156, if the period of limitation has expired. In the present case, we find that the original order by the Tribunal under section 135 of the Income Tax Ordinance, was made on 21-9-2000 and no reference application was filed in respect of any question of law arising out of the said order. The applicant instead, chose to file rectification application which was rejected on 26-1-2001. Thus the only question which could arise out of the order of Tribunal under section 156 was whether Income Tax Ordinance Appellate Tribunal was justified, in rejecting the rectification Application.

7. For the various reasons given in the judgment which was a authored by me in re: Messrs Hong Kong Chinese Restaurant, Main Boulevard Gulberg, Lahore v. Assistant Commissioner of Income Tax, Circle-6, Lahore and another (supra) this constitutional petition shall be rejected.

S.A.K./A-112/KPetition rejected.