1998 PLP 2179 (PTD)

D.K. JAIN, J.

By this application under section 256(2) of the Income Tax Act, 1961, the assessee seeks a direction to the Income-tax Appellate Tribunal to state the case and refer the following questions, stated to be of law, for the opinion of this Court: "(i) Whether, in the facts and circumstances of the case, the Tribunal. was right in law in holding that the miscellaneous application of the appellant was an attempt to review the order of the Tribunal and not a petition pointing out mistakes in the order which were apparent from the record? . (ii) Whether, in the facts and in the circumstances of the case, the Tribunal was correct in law in holding that the arguments of the appellant in the miscellaneous petition were based on misconception and wrong appreciation of facts? (iii) Whether, in the facts and in the circumstances of the case, the Tribunal was correct in holding that five per cent. of the chit amount appropriated by the company as foreman's commission was adequate for meeting the expense on various services to be rendered as foreman, like expenses on administration and other staff? (iv) Whether, in the facts and in the circumstances of the case, the Tribunal was correct in law in not rectifying its mistaken conclusion in the appeal wherein it had stated that the aspect of mutuality applies to the appellant? (v) Whether the Tribunal was correct in law in interpreting that section 28(iii) is applicable when the appellant is admittedly carrying on chit fund business receiving commission, is a trading concern and not a trade association? (vi) Whether, in the facts and in the circumstances of the case, the Tribunal was correct in law in arriving at its mistaken conclusion that the aspect of mutuality applied to the assessee-company relying upon the decision of the Punjab and Haryana High Court in the case of Soda Silicate and Chemical Works v. CIT (1989) 179 ITR 588? (vii) Without prejudice to the foregoing grounds, assuming principles of mutuality applies, as decided by the Tribunal, and on the same parity of its reasoning whether the commission income of Rs.2,06,500 is also not taxable since the appellant is also member in every chit series from which the commission is collected (vide paper book pages 14 to 24 given to the Tribunal)? (viii) Whether, in the facts and the circumstances of the case, the Tribunal was right in law in rejecting the claim of the sixth appellant of the mercantile system of accounting regularly followed under section 145 and not accepting the loss of Rs.5,68,600 incurred upon bidding by the company during the year?" Briefly stated, the facts are that the assessee-company is engaged in the business of chit funds. In respect of the assessment year 1981-82, it claimed an expenditure of Rs.5,68,500 as the amount paid by it as bid on its own chits. The Assessing Officer was of the view that profits/loss on a chit could only be worked out when that chit matures, i.e., when all the instalments have been paid. Accordingly, after deducting the dividend received by the assessee on its own chits (Rs.1,90,095) from the aforesaid amount of Rs.5,68,500, he added back the balance amount of Rs.3,78,405 to the total income of the assessee. The Commissioner of Income-tax (Appeals) accepted the assessee's appeal and deleted the addition. The Revenue preferred appeal to the Tribunal, which, by its order, dated May 21, 1990, came to the conclusion that though there is no dispute to the fact that the assessee does carry on the chit fund business and the receipts for specific services rendered are taxed under section 28(iii) of the said Act, but its activity which involves contributing its own chits, bidding of own chits and suffering losses on own chits are all related to mutual transactions between itself and the other subscribers, and therefore, bid amount on own chits and the commission amounts, being related to mutuality were outside the ambit of the Income Tax Act, and hence, neither the expense claimed was allowable nor the income shown to this extent was taxable. It appears that the assessee did not file any reference application against the said order but instead moved an application purported to be one under section 254(2) of the said Act, for recall of order, dated May 21, 1990, on the ground that the Tribunal had committed an apparent mistake. By its order, dated November 6, 1990, the Tribunal dismissed the application and while doing so observed as under: "The arguments as advanced in paragraphs 3, 3.1 and 3.2 in regard to section 28(iii) its interpretation, retention of five per cent. commission by the foreman as towards specific services rendered is based on misconception and wrong appreciation of facts. The facts as found by the Tribunal on the evidence provided are indicative that out of every bid or auction, the company reserves the right to appropriate five per cent. of the chit amount and if this were not for meeting the various services to be rendered as a foreman who requires assistance of administration and other staff what for it is retained. Coming to the aspect of the mutuality not being applicable to the assessee in view of there being specific services rendered only to members and to any outsiders reliance has been placed by the Tribunal on the Punjab and Haryana High Court decisions, the arguments as advanced in paragraphs 3.1 and 3.2 are fresh lines of argument being raised in this miscellaneous application. In regard to various submissions contained in paragraph 4 onwards the intention of the assessee is clearly one of review of the order for the aspect of mutuality found applicable on the basis of the Punjab and Haryana High Court decision (supra). The miscellaneous application is an attempt to review of the order of the Tribunal. Hence, the same is dismissed." Being aggrieved the petitioner-assessee filed an application under section 256(1) of the said Act requiring the Tribunal to refer the aforementioned question. By its order, dated June 13,1991, the Tribunal dismissed the application on the ground that question No.2 was purely a question of fact and the other questions did not arise out of its aforesaid order in the miscellaneous application as questions posed were only the submissions made by the assessee in the rectification application but no fresh finding thereon had been recorded by the Tribunal. Mr. Sawhney, learned counsel for the assessee, has submitted that the original order of the Tribunal dated May 21, 1990, having merged in its order, dated November 6, 1990, on the assessee's rectification application, the assessee could raise all the issues which were the subject-matter of the main appeal. In our opinion, there is no merit in the contention. Under the provisions of section 254(4) of the said Act, the Tribunal's order, dated May 21, 1990, became final and unless a reference application on questions arising from the original order on the appeal was filed, the correctness of this order could not be challenged in a reference application challenging the correctness of the order made under section 254(2) of the Act, particularly when admittedly the Tribunal did not record any fresh finding on the merits of the case in its later order. We are in complete agreement with the Tribunal that questions Nos.(iii) to (viii) do not arise out of its order, dated November 6, 1990. In so far as questions Nos. (i) and (ii) are concerned, the answer to the questions raised is self-evident and there is no reason to direct the Tribunal to state the case for referring any question. There is no merit in the application. Dismissed with no order as to costs. M.B.A./1325/FC Application dismissed.