1988 PLP 227 (PTD)

RAIDER ALI PIRZADA, J.--In these Income-tax References common' questions of law arise for our determination and hence all these are disposed of by this common judgment. The common questions raised are whether References are competent, I.T.R. No. 40 of 1984 and I.T.R. No. 43 of 1984. The Commissioner of Income-tax, `Central Zone 'B' v. M/s. Asbestos Cement Industries Ltd. Karachi. The only facts, which are necessary to be noticed for deciding these applications are that the assessee Company filed return for assessment years 1977-78 and 1978-79 corresponding to Account years ending 30-6-1977 and 30-6-1978 respectively. The assessee filed appeals before the Appellate Assistant Commissioner which were allowed by order dated 14-11-1979. In the further appeals preferred by the Income-tax Officer, the Income-tax Appellate Tribunal accepted assessee's contention and held that the amount of tax and super-tax payable on the total income were not retained income and rejected the appeals by its order dated 17-8-1980. The Commissioner of Income-tax filed applications under section 66(1) of the Income-tax Act, 1922 (hereinafter referred to as the Act) on the 80th day of communication of the order. The applications were rejected on the ground that they were barred by time by 20 days. The Commissioner being aggrieved against the orders has filed the present reference applications under section 136(2) of the Income-tax Ordinance, 1979 (hereinafter referred to as the Ordinance) on 5-2-1984. I.T.R. No. 116 of 1984, Commissioner of Income-tax Central Zone 'B', Karachi v. Bank of Tokyo Ltd. The Assessee filed return for the assessment year 1977-78 corresponding to Account year ending on 31-3-1977. The assessing officer held the income-tax included within the retained income. The appeal referred by the assessee against the assessment order, Appellate Assistant Commissioner upheld the assessee's contention and held that levy of surcharge is not justifiable in view of the Tribunal's decision in a case reported as (1979) 40 Tax

47. In the earlier appeal preferred by the Income-tax Officer, the Income-tax Appellate Tribunal accepted the assessee's contention and upheld the order of the Appellate Assistant Commissioner based on its earlier decision cited above. The applicant filed reference application under section 136(1) of the Ordinance on 18-8-1986, that is, on the 63rd day of the date upon which the applicant was served with the notice of the order. The application was dismissed in limine, as barred by limitation. The applicant being aggrieved has filed the present application under section 136(2) of the Ordinance on 14-5-1984. The applicant has sought our opinion to the following question of law "Whether the Tribunal was right in applying here the provisions of 66(1) of the repealed Act instead of section 136(1) of the Income-tax Ordinance, 1979." A further prayer has been made to direct the Income-tax Appellate Tribunal to treat the applicant s application within time and to direct the Tribunal to hear the reference application and submit the question of law for adjudication of this Court. In the I. T. R. No. 116 of 1984, the Commissioner has referred the following two questions for our opinion:-- (a) Whether 'the Tribunal was right in applying here the provisions of 66(1) of the repealed Act instead of section 136(1) of the Income-'tax Ordinance 1979, in the instant case. (b) Whether, on the facts and in the circumstances of the case the learned Income-tax Appellate Tribunal was justified in holding that the tax liability of the tax payable in requirement of working capital and therefore needs to be excluded from the total income for the levy of surcharge". We have heard Messrs Shaikh Haider and Waheed Farooqui for the applicants and Messrs Iqbal Naeem Pasha and Salahuddin for the respondents. The first question, which calls for decision is as to the provision of law under which the present applications can be entertained by this Court. It is an admitted position that the returns in I.T.R. Nos. 40 and 43 of 1984 were filed under the repealed Act. The Income-tax Ordinance, 1979 came into force with effect from 1-7-197, that at the time, the assessee's appeals against the assessment orders of the Income-tax Officer, were pending before the Appellate Assistant Commissioner which were disposed of by order, dated 14-11-1979. The department filed second or further appeals against the said orders before the Income-tax Appellate Tribunal on 13-6-1981. In Income tax Reference Nos. 40 of 1983 and 43 of 1983 the consolidated order under section 33(4) of the Act was passed on 17-8-1980. The orders were served on the applicant on 25-3-1981. The applications under section 66(1) of the Act were presented before the Tribunal on 13-6-1981 i.e. on the 80th day of the date upon which the applicant was served. In the Income-tax Reference No. 116 of 1983, the order under section 33(4) of the Act was passed on 28-2-1983. The order was served upon the applicant on 16-6-1983. The applicant presented 136 of the Ordinance on 18-8-1983, i.e.63rd day of the date upon which the applicant was served. Section 66(1) of the Act provides that within sixty days of the date upon which he is served with notice of an order under subsection (4) of section 33, the assessee or Commissioner may, by an application in the prescribed form require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, whereas section 136(1) of the Ordinance provides that within ninety days of the date upon which he is served with notice of an order under section 135, the assessee or the Commissioner may, by application in such form as may be prescribed, require the Appellate Tribunal to refer to the High Court any question of law rising out of such order. The short point that arises for our consideration is as to whether the reference applications could be initiated under the new Ordinance or whether the reference applications are required to proceed under the old Act. Learned counsel for the Revenue submitted that provisions of section 136 of the Ordinance would come into play because the appeals were decided by the Appellate Assistant Commissioner and the Tribunal after the commencement of new Ordinance. The learned counsel for the assessee s, on the other hand, urged that in the present cases, the orders were passed not under the provisions of the 1979 Ordinance but under the provisions of the Act of 1922. In support of the submission, reliance was placed on section 166, which deals with Repeals and saving Subsection (1) of section 166 provides that the Income-tax Act of 1922 stands repealed and Subsection (2) deals with the Saving of the proceedings commenced under the Act of 1922. Subsection (2)(a) of section 166 reads as under:-- "(a) Where a return of income has been filed before the commencement of this Ordinance by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Ordinance has not come into force;" The learned counsel for the assessee s submit that the returns of income were filed by the assessee s before the commencement of the Ordinance of 1979 and the proceedings were not only completed but appeals were pending before the Appellate Assistant Commissioner, that is, the proceedings continued under the Act of 1922 as if the Ordinance of 1979 had not been promulgated. The assessee s appeals were allowed by the Appellate Assistant Commissioner on 22-6-1980 and 14-11-1979. The Income-tax Officer's appeals against the orders of the Appellate Assistant Commissioner before the learned Tribunal were ultimately disposed of by orders dated 17-8-1980 and 28-2-1983, that the applications for reference were admittedly filed long after that date, and that the returns of income in respect of which the second appeals had been disposed of by the learned Tribunal and the references to this Court (for the assessment years 1977-78 and 1978-79 respectively) had been filed by the Revenue. It is in this perspective that we are called upon to decide whether the submission of the learned counsel for the Revenue to the effect that in view of the repeal of the 1922 Act with effect from 1-7-1979, the applications for reference had of necessity to be made to the Tribunal under section 136(1) of the Ordinance only, and that, therefore, the Tribunal has ignored the provisions of section 136(1) while holding that it had no jurisdiction to entertain the applications. The 1922 Act has been repealed by subsection (1) of section 166 of the Ordinance. If things had rested there, Messrs Shaikh Haider and Waheed Farooqui would indeed have been correct in their submission. Clauses (1) and (i) of subsection (2) of section 166 have, however, to be considered before coming to a decision about that matter. The case of the assessee s is that the applications for reference had to be made under the 1922 Act because of the provisions contained in Clause (a) of subsection (2) of section 166 of the Ordinance. The relevant extract from that section is quoted below:-- "

166. Repeal and savings.--(1) The Income-tax Act, 1922 (XI of 1922) is hereby repealed. (2) Notwithstanding the repeal ............ (a) Where a return of income has been filed before the commencement of this Ordinance by any person for any assessment year, proceedings for the assessment of that person for that year may be taken and continued as if this Ordinance has not come into force; (b) ............................................................ (c) ............................................................ (d) ............................................................ (e) ............................................................. (f) ............................................................ (g)............................................................. (h) ............................................................ (i) any proceedings pending on the commencement of this Ordinance before any Income-tax Authority, the Appellate Tribunal or any Court or Tribunal by way of appeal, reference, revision of prosecution, shall be continued and disposed of as if this Ordinance had not come into force; (j) ............................................................. (k) ............................................................. (1) ........................................................... (m) ............................................................. (n) ............................................................. (o) ........................................................... (p) ............................................................ (q) ........................................................ Clause (i) of section 166(2) applies to the particular and specific proceedings which were pending on the commencement of the Ordinance; i.e. on 1-7-1979. As already stated, there were the assessee s' appeals to the Appellate Assistant Commissioner which were pending on that day and the same had, therefore, necessarily to be disposed of under the 1922 Act as if the new Ordinance had not been promulgated. The appeals before the Tribunal or the applications for reference were admittedly not pending on the date of coming into force of the Ordinance. Clause (i) of subsection (2) of section 166 could, therefore, have application to the proceedings in dispute. It seems to us that section 166 is meant to provide as far as possible for all contingencies, which may arise out of the repeal of the 1922 Act. It deals with non-completed assessments pending at the commencement of the Ordinance and assessments to be made after the commencement of the Ordinance. Then clause (c) deals with assessment in respect of escaped income; Clauses (g) and (h) deal with levy of penalties and prosecution, clause (n) continues the effect of election or declaration made under the 1922 Act; Clause (1) deals with default or refunds; Clause (k) deals with recovery; Clause (p) deals generally with all agreements, notifications issued under any provision of the repealed Act; Clause (m) continues the notification issued under section 60(1) of the repealed Act; Clause (j) guards against the application of a (longer period of limitation prescribed under the Ordinance to certain applications, appeals or revisions. Admittedly, the clause (i) of section 166(2) applied since appeal was pending before the Appellate Assistant Commissioner. The words "shall be continued and disposed of" do not import any substantive provisions of the Ordinance, which create rights or liabilities. The learned counsel for the Revenue invited our attention to the Explanation and subsection (2-A), which were inserted by section 10 of the Finance Act, 19&

5. It is necessary to reproduce the same hereunder:-- "Explanation.--The period of ninety days within which an application is to be made shall apply notwithstanding that the application relates to an assessment year prior to the assessment year beginning on the first day of July, 1979, if such application is made on or after the first day of July, 1979." "(2-A) If on any application made under subsection (1) the Appellate Tribunal rejects it on the ground that it is time-barred, the assessee or the Commissioner, as the case may be may, within three months from the date on which he is served with notice of the rejection, apply to the High Court, and the High Court, if it is not satisfied of the correctness of the Appellate Tribunal's decision, may require the Appellate Tribunal to treat the application as made within the time allowed under subsection (1);" In the instant cases the applications which were presented before the Tribunal were not only rejected when the Explanation was inserted by the Finance Act of 1985 but applications under section 136(2) were presented to this Court. In the circumstances it seems that the Explanation is not applicable in these cases. Subsection (2-A) is also not applicable to the facts and circumstances of these case's because the application is were rejected by the Tribunal prior to the insertion of this subsection. The subsection came into force on 1-7-1985 and the Revenue did not take any step in pursuance of this subsection. The learned counsel for the Revenue placed reliance on the case of C .I. T. v. Syed Sarwat Sultana and others 1986 P T D 368 and unreported judgment of this Court in the case C.I.T. v. Olympia Watch Company and 13 others references. These decisions are not applicable to the facts of these cases. The present reference applications cannot be treated as one under subsection (2) of section 66 because the Appellate Tribunal dismissed the reference application under subsection (1) of section 66 as barred by time, and for the same reason that we have held that the applications do not lie under subsection (2) of section

136. The learned counsel for the Revenue lastly submitted that these applications should be disposed of under Article 199 of the Constitution of Pakistan as the Tribunal has refused to exercise jurisdiction vested in it by law. This contention is devoid of force. This Court can invoke Article 199 for setting aside an order of a Tribunal holding that it has no jurisdiction to decide a particular matter placed before it if it is found that in fact the Tribunal had jurisdiction to adjudicate upon the matter and it erroneously refused to exercise statutory jurisdiction vested in it by law. If the application is made beyond the prescribed time, the Tribunal has no discretion but to dismiss the same unless a statutory provision to the contrary is made. The effect of the operation of clauses (a) and (i) of subsection (2) of section 166 of the Ordinance is that all proceedings including an application for reference to the High Court in relation to the assessment year in respect of which the return of income was filed before July 1, 1979 must be dealt with under the repealed Act as id the Ordinance had not passed. As a result of the above findings, these applications are dismissed as not maintainable. We do not, however, make any order as to costs. M. B. A./C-34/ K Applications dismissed.