BHANDARI : - The short point for decision in the present case is whether the appellate tribunal was justified in rejecting an application made under Section 66(1) of the Income-tax Act on the ground that it was barred by time.
The principal point of law which the Commission of Income-tax, Delhi, required the Tribunal to refer to the high court was whether the said tribunal had Jurisdiction to hear and determine an appeal to which the Income-tax officer, Lahore, was party or to make an order directing the Income-tax officer, Delhi, to refund tax which had been levied and imposed by the authorities in Lahore.
This question arose in the following circumstances. One L. Yodh Raj Bhalla, manager of the Punjab National Bank, Limited, Lahore was assessed to the payment of a large sum of money by virtue of an assessment order passed by the income-tax officer of Lahore on the 31st March, 1945. He preferred an appeal to the Appellate Assistant Commissioner, Lahore Division, but this appeal was dismissed on the 8th October, 1945. He was dissatisfied with the order of the Appellate Assistant Commissioner and preferred an appeal to the appellate tribunal at Bombay impleading the Income-tax officer concerned, namely the income-tax officer of Lahore, as a respondent to the appeal.
On the 23rd July, 1947, when the appeal was pending with the tribunal at Bombay, the assessee applied to the income-tax Officer, salary circle, Lahore, for the transfer of his assessment file to the salary Circle, Delhi, owing presumably to the fact that he had migrated to Delhi as a result of the disturbances which had broken out in the Punjab. This request was acceded to and the case was transferred in due course from the Income-tax Officer, Salary Circle, Lahore, to the income-tax Officer, Salary Circle, Delhi both the officer being sub-ordinate to the Commissioner of income-tax at Delhi. It is common ground that this transfer was validly made by a duly constituted authority before country was split up into the Dominions of India and Pakistan.
Although the assessment file was delivered in Delhi early in August 1947. the records of the appeal which was to be decided by the appellate Tribunal at Bombay continued to remain in Lahore. When this appeal came up for hearing before the appellate tribunal constituted by the Government of Pakistan, the income-tax Department of Pakistan raised the preliminary objection that the said tribunal had no jurisdiction to entertain the appeal as the assessment file had been transferred to Delhi as early as the 4th August, 1947. This objection was upheld by the Tribunal and on the 1st June, 1948. the records and appeal were sent under the orders of the Appellate Tribunal in Pakistan to the Appellate Tribunal at Bombay.
On the 28th December, 1948, the Appellate Tribunal at Bombay issued notices to the assessee as well as to the income tax officer, salary circle, Delhi, that the appeal would come up for hearing before the Delhi Bench on the 16th February, 1949. On the 29th March, 1949. the Bombay tribunal adjourned the appeal sine die. When the Delhi Bench of the Tribunal was constituted in June 1949, the case was transferred in the normal course to the said bench and notices were issued to the assessee and the income-tax Officer, salary circle Delhi. The representative of the Income tax department at Delhi appeared before the Tribunal on various hearings and on the 30th October 1949, the Tribunal recorded a finding in favour of the assessee after hearing the said representative.
The Tribunals order dated the 30th October, 1949, was served on the Commissioner of Income-tax, Delhi, on the 5th December, 1949, but when the assessee applied to the Income-tax Officer, Delhi, for a refund of the tax in respect of which the appeal had been allowed, the latter replied that as the original assessment was made by the income tax officer, Lahore, and as the tax was paid in Lahore which formed part of the territory of Pakistan, the application for refund should be made to the income tax Department of Pakistan. The position was further clarified by a communication dated the 13th January, 1950, from the Commissioner of Income-tax, Delhi, to the Assistant Registrar of the Tribunal at Delhi which was in the following terms :-
'From the order referred to above, it is not clear as to how an appeal in a case in which the income tax officer, Lahore, appears as the respondent, has been taken up by the Indian Income-tax Tribunal, According to the Inter-Dominion Agreement such appeals should have been transferred to Pakistan income-tax Appeallate Tribunal. It is, therefore, requested that the circumstances under which the appeal has been taken up by the Delhi Bench may please be reported'.
On the 20th January, 1950, the Assistant Registrar replied as follows :-
'The income-tax Officer, Lahore, has through oversight been shown as the respondent in this case instead to the income-tax Officer, salary Circle, Delhi. The Bench is going to rectify the mistake under section 35'.
The Commissioners reply to the Tribunal as contained in his letter of the 17th February, 1950, was in the following terms :-
'With reference to your letter No. 2566-Atd/49 dated the 20th January, 1950, I have the honour to say that the above-mentioned appeal was filed by the assessee against the order of the income-tax Officer, Salary Circle, Lahore, and not against any order passed by the Income-tax Officer Salary Circle, Delhi. The respondent in this case was, therefore, the income-tax Officer Salary Circle, Lahore, and this has been correctly shown in the order passed by the Tribunal. Under the circumstances there is no mistake apparent from record which may require rectification under section 35. the Department is, therefore, opposed to the contemplated rectification. It is requested that if the tribunal is not pleased to accept this view, an opportunity may be offered to the departmental representative to argue the case before the matter is finally decided'.
On the 19th August, 1950, the Tribunal rectified the mistake under Section 35 of the statute by directing that the name of the respondent should be changed from 'Income-tax Officer Salary Circle, Lahore' to 'Income-tax Officer, Salaries Circle, Delhi'. In making this order the Tribunal observed as follows :-
'It is to be noted in this connection that on 28th December, 1948, a notice of hearing was served on the income-tax Officer, Private Salary Circle, Delhi, and out the date of hearing of appeal No. 2243 of 1945-46 being fixed for the 16th February, 1949, before the Delhi Bench. We cannot understand how after receiving that notice and acting in pursuance thereof and directing the departmental representative to appear and contest the appeal before the Delhi Bench, it lies in the mouth of the Department now to say that the appeal should have been transferred to the Pakistan Income-tax Tribunal. It is claimed by the departmental representative that it is a bona fide mistake. Apart from the fact that it is facilely assumed that the appeals should be transferred to the Pakistan Tribunal by whom it is not mentioned on such a vial matter we fail to see how mistakes could at all arise. We are constrained in this case to make a order under Section 48 to the income tax officer directing a refund to be made by the income-tax Officer Salaries Circle Delhi, of the amount due to the assessee as a result of the orders passed by the Appellate Tribunal. The name of the respondent is changed to Income-tax Officer, Salaries Circle, Delhi instead of Income-tax Officer, Salary Circle, Lahore'.
The above order was made in the presence of both the parties, and was formally served on the commissioner on the 20th September, 1950.
On the 16th Novermber 1950, the Commissioner submitted an application under section 66(1) of the Income-tax act in which he asked the Appellate tribunal to refer to the High Court certain questions of law arising out of an order under sub-section (4) of section 33, notice of which was served on the applicant on the 20th September, 1950. The questions were worded as follows :-
(1) Whether the Tribunal had jurisdiction to make the order dated 30th October, 1949 as amended by order dated 19th August 1950.
(2) If the answer to the above question be in the affirmative whether the tribunal in passing the order under Section 48 could legally change the name of the respondent from income-tax Officer Salary Circle, Lahore, to Income-tax Officer, Salary Circle, Delhi ?
(3) Whether the Tribunal has not misdirected itself in law by holding that in order to constitute business as defined in Section 2(4) of the Income-tax Act there must be a motive to make profit ?
(4) Whether the transactions of sale and purchase of shares made by the assessee in the circumstances found by the tribunal do not constitute a carrying on of business as defined in Section 2(4) of the Income-tax Act ?
On the 31st March, 1951, the Tribunal dismissed commissioners application on the ground that it was barred by time. The commissioner had applied to this court under sub-section (3) of Section 66, and the question for this court is whether the Appellate Tribunal should be required to treat the application as made within the time allowed under sub-section (1).
Before I proceed to deal with the specific questions which have arisen in this cases it would be desirable to ascertain who the real respondent is when an appeal is filed by an assessee under Section 33(1) of the Income-tax Act.
Ordinarily a Government servant or other agent of Government who recovers a sum of money on behalf of government in excess of the amount due to it, cannot be held personally liable for monies recovered by him in his capacity as such agent, and the aggrieved party is thus put to the necessity of bringing an action for the recovery of the excess amounts not against the agent who collected the monies but against the government on whose behalf the collections were made. If this rule had been followed in the matter of assessments considerable inconvenience would have been caused to government and to government servants and the legislature in its wisdom enacted in section 67 that no suit shall be brought in any Civil court to set aside or modify any assessment made under the Act of 1922. Rule 14 of the Appellate Tribunal Rules, 1946 provides that in an appeal by an assessee under section 33(1) or Section 33B(3) the 'Income-tax Officer concerned' shall be made a respondent to the appeal. The provision that the Income-tax Officer concerned shall be made a respondent has been made presumably with the object of enabling the appellate tribunal to see at a glance the particular circle from which the order of assessment has emanated and for enabling the income tax authorities to depute a Departmental Representative who is acquainted with the circle and is in a position to answer the points which have been taken up in the appeal. So far as I can judge, this provision has been made with the sole object of facilitating the disposal of work and not with the object of declaring that the government which is to benefit by the assessment and which is the real respondent to the appeal filed by the assessee is not real respondent. When the assessee in the present case, who was dissatisfied with the order the Appellate Assistant Commissioner, preferred an appeal to the Appellate Tribunal at Bombay in the year 1945 the real respondent was the Government of India although the ostensible respondent was the Income-tax Officer of Lahore.
The question now arises whether the Appellate Tribunal at Delhi was justified in proceeding under the provisions of Section 35 and directing that the Income-tax Officer of Delhi should replace the Income tax Officer of Lahore as a respondent. The answer is clearly in the affirmative. It is abundantly clear from the record that the assessee was an employee of the Punjab National Bank and was residing and carrying on his business at Lahore; that the assessment to which objection has been taken was made by the income-tax Officer at Lahore; that the appeal against the order of the Income-tax Officer of Lahore was heard and decided by the Appellate Assistant Commissioner at Lahore; that as long ago as the 10th December, 1945, the assessee had preferred an appeal from the order of the appellate Assistant Commissioner, Lahore, to the Appellate Assistant Tribunal at Bombay which was the Income-tax Tribunal for the whole of India including the area now comprised within the territory of Pakistan; that the Income-tax Officer, Lahore, transferred the assessment paper to the Income-tax Officer, Salary Circle, Delhi, on the 24th July, 1947; that when the appeal came up for hearing before the tribunal constituted by the government of Pakistan, the Tribunal came to the conclusion that it had no jurisdiction to entertain the appeal and sent the records of the appeal to the Tribunal at Bombay; that the Tribunal at Bombay issued notices to the Income-tax Department in Delhi although the Income-tax Officer, Lahore, was mentioned as the respondent; that the said Department deputed a representative to oppose the appeal before the Tribunal at Bombay and later before the Tribunal at Delhi; and that although the departmental representatives appeared for the Department on several hearings and conducted the appellate proceedings with zeal and energy they did not consider it necessary to raise any objection to the jurisdiction of the Indian Tribunal on even a single occasion. The parties understood all along that although the respondent as stated in the appeal was the Income-tax Officer, Lahore, the real respondent was the government of India. It was only when the tribunal at Delhi accepted the appeal preferred by the assessee and when it was clear that the Income-tax Department at Delhi was likely to be called upon to refund that amounts realized by it that on the 10th January, 1950, the Income-tax Officer declined to give a refund on the ground that as the original assessment was made in Lahore and the tax had been paid there, the Government of Pakistan and not the government of India, was liable for the refund. This plea is hopelessly belated and the Commissioner is, in my opinion, estopped by his conduct from raising it at this late stage. As pointed out by lord Denman in another connection (in Pickard v. Sears 'Where one by his words or conduct wilfully causes another to believe in the existence of a certain state of things, and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter a different state things as existing at the same time' (Benjamin on Sale, page 873). It is, in my opinion, a quibble to say that the real respondent in the appeal was the Income-tax Officer at Lahore and not the Income-tax Officer at Delhi. As stated above the real respondent in the case was the Government of India though it appeared through the income-tax Officer at Lahore, when the assessment file was in Lahore, and through the Income-tax Officer at Delhi, when the assessment file was transferred to Delhi. Indeed, when the assessment file was transferred to Delhi. Indeed, when the assessment file was transferred to Delhi early in August, 1947, the Income-tax Officer, Delhi, should have been made the respondent in the appeal for he was the 'Income-tax Officer concerned'. The conduct of the income-tax authorities at Delhi in sending their departmental representatives to contest the appeal in the Appellate Tribunals at Bombay and Delhi and in failing to object to the jurisdiction of the Tribunal makes it quite clear that they knew that the Government of India was the real respondent. It follows as a consequence that the order allowing the appeal which was served on the Commissioner on the 15th December, 1949 was an order against the Government of India and not an order against the Income-tax Officer of Lahore or the Government of Pakistan.
The language of Section 66 makes it quite clear that a reference under sub-section (1) can be made in respect of an appellate order under sub-section (4) of section 33. As the express mention of one thing implies the exclusion of another, the express mention of Section 33(4) implies the exclusion of Section 35. This matter came up for consideration in Commissioner of Income tax, Madras v. Sevugan, the head-note of which runs as follows :-
'Section 35 of the Indian Income-tax Act has limited application. It does not enable an order to be reversed by revision or by review but permits only some error, which is apparent on the face of the record, to be corrected. The rectification of an error under Section 35 in an order passed by the Appellate Tribunal under section 33(4) cannot be said to be the passing of a new order which gives a right to either party to apply to the Tribunal requiring a case to be stated referring a question or questions for the opinion of the High Court arising out of the order in which correction is made. The granting of the application for rectification and correcting the error in the order is not an order within Section 33 (4) nor one in respect of which Section 66(1) enables a case to be stated'.
Mr. Umrigar who has argued this case for the commissioner with conspicuous ability admits that the order under Section 33(4) was served on the Commissioner on the 15th December, 1949 and that ordinarily the period of limitation should have commenced on that date, but he contends that as that order was passed against the Income-tax Officer of Lahore, the income-tax commissioner of Delhi could not be saddled with liability for refunding the amount for which the appeal was allowed. He could not be called upon to comply with an order which was made against another person and he accordingly decided to ignore it. When the Tribunal decided on the 19th August, 1950, to replace the Income-tax Officer of Lahore by the Income-tax Officer of Delhi, the order of the 15th December, 1949, became applicable to his client and must be deemed to be an order under Section 33(4) in so far as his client is concerned. The period of limitation must be deemed to start on the 20th September, 1950, that is the date on which the notice of the order under Section 35 was served on the Commissioner. This argument would certainly have some force if, for example, an order under Section 33(4) were passed against an assessee and if by means of an order under Section 35 the name of another person who is a total stranger to the proceedings were substituted for that of the said assessee. In that case it may be argued that although the later order purports to have been issued under Section 35, it is in substance and effect an order under section 33(4) for it is by that order that liability has for the first time been imposed upon the stranger. An order of that kind cannot, however, be made at all for Section 35 empowers the appropriate authority to rectify a mistake a parent from the record of the appeal and cannot impose new liabilities on new parties. The facts of the present case, however, are completely different. No effort is being made to substitute a new party for an old party. All that is being done is that the description of the old party is being corrected and brought into accord with new circumstances. The real respondent in the present appeal was the Government of India which was acting through different agents on different occasions. On one occasion it was acting though the Income-tax Officer of Delhi. When the rectification was ordered under the provisions of Section 35, liability was not transferred from bone party to another. The liability remained on the same party although the agent through which it purported to act became different. When the rectification was made. 'the Income-tax Officer concerned' was the Income-tax Officer of Delhi and not the Income-tax Officer of Lahore for the assessment file was in the possession of the Income-tax Officer of Delhi. The order under section 33(4) was passed against the Government of India through the Income-tax to Officer, Lahore, on the 30th October, 1949, and this order was served on the Government of India through the commissioner of Delhi on the 15th December, 1949. As the period of sixty days set out in sub-section (1) of Section 66 must be computed from the date on which the notice is served on the commissioner the application for stating a case should have been made within a period of two months from the 15th December, 1949 i.e., on or before the 15th February, 1950. In actual fact this application was not present ed till the 16th November, 1950, i.e., more than either months after the expiry of the period of limitation. There is abundant support for the proposition that when an application under Section 66(1) requesting the Tribunal to state a case to the high court is presented after the period of limitation has expired. neither the appellate tribunal nor the high court has any power to condone the delay in any circumstances either in favour of the assessee or the commissioner.
For these reason, it seems to me that the right which vested in the commissioner to require the tribunal to state a case for the decision of the high court has been extinguished to efflux of item. This application must, therefore, be dismissed with costs.
WESTON, C.J - A statement of law referred under Section 66 of the Income-tax Act must arise from an order under Section 33(4) of that Act and an application for reference under Section 66 must be made within sixty days of the date on which service of the order is effected. I agree that a further order made under Section 35 of the Act rectifying a mistake apparent on the record would not in most case give a fresh starting point of limitation for a reference under Section 66. Under Section 35 rectification may be made any time within four years from the date of the original order. As was pointed out by the Madras High Court it would be a startling result that an amendment of the original order, however unsubstantial that amendment might be, could enlarge the period of sixty days under Section 66 to a period of years. It is not necessary, however, to consider whether in cases where the rectification substantially affects the rights of the assessee he would not be able to claim that the rectification in effect is a new order under Section 33(4) and therefore a new right under Section 66 arises from the rectification itself.
It is plain that in the present case the rectification was not a matter of substance. The appeal before the Tribunal was defended by the Department and it is not disputed before us that the department must have been fully aware that the payment of tax which the assessee sought to recover had been made at Lahore before partition. The naming of the Income-tax Officer. Lahore, as a respondent was not more than a formality. The real nature of the contest was in no way obscured thereby. The assessee was resident of Delhi, his papers had been transferred to Delhi and the appeal before the tribunal had been filed before what was then the Bombay Tribunal. The Department moreover had been given notice, within sixty days from the service of the original order, that formal change in the designation of the respondent had been asked for and was likely to be made. It would seem the the Department had not case on the merits for a reference and sough to take advantage from the formal designation of the respondent to avoid a liability which could not otherwise be avoided.
In the the present case therefore I consider that limitation must run as from the original order under Section 33(4). No question of reference from the order made under Section 35 can arise. I, therefore, agree with order proposed.