2006 PLP 423 (PTD)

NASIR ASLAM ZAHID, J.

The relevant facts which led to this reference on the question of law to this Court for opinion are given in the statement of the case as follows:

"The assessment of the respondent a private limited company, for the assessment year 1970-71 was completed under section 23(3) of the repealed Income Tax Act, on 23rd June, 1973. The income was assessed at Rs.3,36,047, capital gain at Rs.51,353 and free reserve at Rs.4,89,

205. However, subsequently, on 1-12-1997 additional tax amounting to Rs.20,221 was charged under section 18A of the repealed Income Tax Act. The respondent felt aggrieved and went up in appeal. It was contended before the learned Commissioner of Income Tax (Appeals) that the order regarding additional tax recorded on 1st December, 1977, was nothing but a rectificatory order recorded under section 35(1) of the repealed Income Tax Act, and as such, it was time-barred having been recorded after four years and five months from the date of assessment order, dated 23rd June, 1973. The contention was upheld by the learned Commissioner of Income Tax (Appeals). The Department however, felt aggrieved and came up in appeal. A Division Bench of this Tribunal by its order dated 22nd November, 1983, recorded in I.T.A. No.1247 of 1980-81. Assessment year 1970-71 confirmed the finding of learned Commissioner of Income Tax (Appeals) and observed that making of an order under section 18A(7) was tantamount to passing a rectificatory order of the assessment. The Department, however, still felt aggrieved and has moved this application. Mr. Muhammad Farid, appearing for the Department contended that the following question be referred to the High -Court: "Whether on the facts and in the circumstances of the case, the learned Income Tax Appellate Tribunal was justified in holding that the order charging additional tax under section 18A(7) of the repealed Income-tax Act, 1922, was barred by limitation?"

2. From perusal of the application it appears that the Department has taken up a new plea that the assessment order framed on 23rd June, 1973, was rectified and stood merged in the subsequent order which was dated 6th May, 1974. It is, therefore, argued in the application that the additional tax charged on 1st December, 1977 was not time-barred.

3. Mr. Sirajul Haq, appearing for the respondent argued that the Department has itself accepted interpretation of law as far back as 14th July, 1960, when the Central Board of Revenue issued Circular No.10. He further argued that the question as framed by the Department in Reference Application was not arising out of the order of the Tribunal. He, therefore, suggested that the question be re-framed as under:

"Whether on the facts and circumstances of the case, the learned Income Tax Appellate Tribunal was justified in holding that the making of the order under section 18A(7) tantamounts to a rectificatory order which is time-barred under section 35(1)?"

4. Muhammad Farid, the learned Departmental Representative exercising his right of reply contended that even if the Circular 10 of 14th July, 1960 dealt with the relevant question, the Reference Application was itself moved on behalf of the Central Board of Revenue and the question be referred to High Court for authoritative pronouncement.

5. We have heard both the learned Departmental Representative as well as the learned counsel for the respondent. As far as the question regarding the merger of the assessment order in subsequent order recorded on 6th May, 1974 is concerned, we are afraid, we cannot look into it at this stage. The Department would have been better advised to agitate this point right from the first appellate forum. In any case this issue should have been taken up before the learned Division Bench of this Tribunal which recorded the order.

6. Now as far as the alleged Central Board of Revenue Circular No.10 of 14th July, 1960 is concerned, we think the submission of Mr. Muhammad Farid that the Reference Application also moved for and on behalf of the Central Board of Revenue carries much weight. We, therefore, think that even if the Central Board of Revenue Circular No.10 of 14th July, 1960 dealt with this question, the matter should be referred to High Court.

7. Regarding the question as framed by .the Department we think that it has not been properly framed. Nevertheless we are of the view that the following question of law does arise from the order of this Tribunal and be referred to High Court. As suggested by the learned counsel for the respondent the question is re-framed as under: QUESTION OF LAW " whether, on facts and circumstances of the case, the Tribunal was justified in holding that the making of the order under section 18A(7) tantamounts to passing a rectificatory order and, as such the order dated, 1st December, 1977 was time-barred?"

2. We have heard Mr. Nasrullah Awan, learned counsel for the Department and Mr. Sirajul Haq, learned counsel for the assessee. It is an admitted position that the assessment order in this case was passed on 23-6-1973 by the concerned Income-tax Officer and the order whereby demand for additional tax was raised was admittedly passed after four years i.e. on 1-12-1977. Apparently the order dated 1-12-1977 is an order rectifying the regular assessment/order and having been passed after a period of four years, it was time-barred and it has been held so by the Income Tax Appellate Tribunal. Before us, Mr. Nasrullah Awan, A learned counsel for the Department, wanted to rely on some order dated 6-5-1974, which has been referred to in the statement of the case. It was rightly pointed out by the Tribunal dealing with the application for reference that the question regarding merger of the original assessment order in the subsequent order dated 6-5-1974 could not be looked into at that stage as the Department should have agitated this point before the First Appellate Authority and in any case when the second appeal was being considered and decided by the Tribunal. In the circumstances in this reference application no advantage can be taken of the order dated 6-5-1974, even if it had been passed.

3. As observed, the order dated 1-12-1977 has been passed after four years and as such it was barred by time. The Tribunal has correctly decided the matter and as such the question referred to us in this reference application is answered in the affirmative. There will be no order as to costs. S.A.K./C-45/K Answer in affirmative.