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Miscellaneous Application (Stay) No.63/LP of 1986-87, decided on 13th May, 1987.

---Ss. 135(9) & 136 (5) & (7)--Civil Procedure Code (V of 1908), O.XLI, R.5--Jurisdiction of High Court and Appellate Tribunal--Tax liability, determination of--Appeal to the Tribunal--Reference to the High Court--Effect on recovery proceedings--By filing mere References Application by assessee before High Court, Income-tax Officer would not be diverted of his jurisdiction to start reassessment proceedings- Notwithstanding an appeal filed in the Tribunal or a Reference Application made to the High Court, the proceedings for recovery of tax were not automatically stayed but the tax remains payable in accordance with the assessment made in the case.

'Tribunal has got inherent powers of staying the recovery of tax proceedings.

Tribunal has also got inherent jurisdiction to order expunction of uncalled for remarks. Civil law does not like multiplicity of proceedings, However in fiscal matters and particularly under the provisions of Income-tax Ordinance, the position is altogether different. Section 135(9) of the Income-tax Ordinance, 1979 lays down that the order of the Tribunal shall be final subject to the provisions of section 136 which deals with the Reference to the High Court. On perusal of section 136 of the Ordinance, one comes across its subsection (5) which lays down that the decision of the High Court shall be communicated to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to the order recorded by the High Court in a Reference Application which means that the decision of the Tribunal is final for all practical purposes till the High Court records an order in the Reference Application. If the finding of the High Court is, in any way, different from the finding of the Tribunal, the latter would have to revise its order to make it conformable to the order of the High Court. In these circumstances the Tribunal may fix the case for rehearing, if necessary, and after affording adequate opportunities to both the parties of being heard could reframe its order in conformity with the decision of the High Court. Thus, it is clear that section 136(5) of the Ordinance confers a special jurisdiction on the Tribunal for giving effect to the order of the High Court regarding a Reference Application. It actually provides a statutory basis for the appeal being reopened or revived for disposal in the light of the judgment on the Reference. The decision of the Tribunal is otherwise final. In other words, if a Reference Application is filed it does not mean that the appeal before the Tribunal continues to remain pending Thus it is clear that pendency of a Reference Application is wholly immaterial as far as the Tribunal is concerned. Of course, it has to give effect to the order of the High Court as and when it is communicated to it.

As far as the I.T.O. is concerned,' the order of the Tribunal is final and he has to give it effect. If the I.T.O. fails to comply with the Directions of the Tribunal, a writ of mandamus can be issued to compel him to carry out the directions of the Appellate Tribunal, which have become final because the officer is duty bound to carry out the orders of the superior appellate authority. In such a case the writ is to be issued because the I.T.O. fails to carry out a legal duty imposed on him and such failure is destructive of a basic principle of justice. Thus it is clear that the order of the Tribunal is binding on the I.T.O. and he has to carry out the directions given to it by the Tribunal. This principle is equally applicable if the direction is issued to the I.T.O. by his A.A.C.

Notwithstanding an appeal filed in the Tribunal or a Reference Application made to the High Court, the proceedings for recovery of tax are not automatically stayed but the tax remains payable in accordance with the assessment made in the case. Definition of assessment includes reassessment as well, which means that the tax demand could be made. Since assessment leads to determination or quantification of tax which ultimately ends in recovery of tax proceedings, the use of word 'assessment' in subsection (6) of section 134 and subsection (7) of section 136 of the Ordinance means that the I.T.O. is competent to quantify the tax thus, thereby leading to recovery of tax proceedings notwithstanding the fact that an appeal has been filed before the Tribunal or a Reference has been made to the High Court under section 136(1) or (2) of the Ordinance.

Where the I.T.O. has imposed a tax which has been confirmed on appeal by the A.A.C./C.I.T.(a) but on further appeal it has been vacated by the Tribunal but a Reference has been made to High Court the I.T.O. has nothing to start recovery proceedings. Hence no question of stay arises. But where the I.T.O. has imposed certain tax but on appeal the A.A.C./C.I.T (A) annuls it and on further appeal the Tribunal restores the I.T.O s order and at the same time makes a Reference to the High Court. Here since the order of the assessment has been restored by the Tribunal and since the Tribunal's order is final the I.T.O. would proceed for recovery of tax and if the assessee wants it to stay, he would have to seek a stay order from the High Court under section 136(7) of the Ordinance. Where the tax is imposed by the I.T.O. and it is partly confirmed by the A.A.C./C.I.T.(A) and on further appeal the order of A.A.C./ C.I.T. (A) is confirmed and both the assessee as well as the Department go in a Reference to the High Court. Here the tax, which has been partly confirmed could be recovered by the I.T.O. and if the assessee wants to get the stay order, he would again move the High Court under section 136(7) of the Ordinance. Where the tax has been imposed by the I.T.O. but his order has been set aside by the A.A.C./C.I.T. (A) but on appeal the tax imposed by the I.T.O. is cancelled but Reference is made to the High Court, here, since there is no tax outstanding in view of the Tribunal's order, therefore, no recovery proceedings could be initiated. But in a case where the tax is imposed by an I.T.O. but his order is set aside by the A.A.C./C.I.T.(A) and on further appeal the order of A.A.C./C.I.T. (A) is confirmed by the Tribunal but reference is made to the High Court the Income-tax Officer, pursuant to the order of the Tribunal, would be entitled to proceed with reassessment proceedings which would ultimately end in recovery proceedings. By filing mere Reference Application, the I.T.O. would not be divested of his jurisdiction to start reassessment proceedings. When he creates a tax liability and recovery proceedings are started the assessee would have a right to apply to the High Court under section 136(7) of the Ordinance for stay of the recovery of tax proceedings. Thus, it is clear from all these illustrations that the order of the Tribunal is final for all practical purposes and by filing Reference Application, the jurisdiction of the I.T.O. regarding initiating recovery proceedings is not taken away. On the other hand, if the I.T.O. declines to give effect to the Tribunal's order, the assessee may seek the writ of mandamus from the High Court.

Execution proceedings are never stayed simply by filing an appeal. If the appellant wants to ensure that execution of the decree appealed against is stayed he has to move an application to the appellate authority and it can be stayed.

Mst. Inayat Begum v. Commissioner of Income-tax 1985 P T D 375 distinguished.

(1973) 28 Tax 114 (Trib.); (1980) P T D (Trib.) 99; (1981) 43 Tax 92; 1986 P T D 26 (Trib.); Miscellaneous Application No. 198 of 1982-83, dated 7th June, 1983; Petlat Turkey Red Dye Works Company Limited v . C.I.T. (1963) 48 I T R 92; Poul Mathews and Co. v. I.T.O.(1984)148 ITR 629 & Bhopal Sugar Industries v. I.T.O. (1960) 40 IT R 618 ref.

Siraj-ud-Din Khalid for Applicant.

Saqib Bashir, AC/DR for Respondent.

Date of hearing: 9th May, 1987.

This Miscellaneous Application has been moved with the allegation that the applicant, an individual, file her return for assessment year 1977-78 declaring her income at Rs.51,900 from performance in film and from property which was, however, assessed at Rs.1,97,600 by the ITO on 30-6-1979. Having been aggrieved and dissatisfied the applicant went up in appeal before the learned A.A.C. who set aside the assessment order on 13-1-1980. The applicant, however, still remained aggrieved and came up in second appeal before the Tribunal. While the appeal before the Tribunal was still pending, the Income Tax Officer, pursuant to the order of learned A.A.C. dated 13-1-1980, proceeded with the matter and finalized reassessment on 31-1-1983 at an income of Rs.1,18,195 from both the sources. Against this reassessment order the applicant filed yet another appeal before the learned A.A.C. contesting the competency of the Income Tax Officer to proceed with the reassessment when the matter was still pending before the Tribunal. The learned A.A.C. was again pleased to set aside the reassessment order vide his order dated 29-5-1986. Finally, the Tribunal by its order dated 15-8-1984 confirmed the order of the learned A.A.C. recorded by him on 13-1-1980 whereby he had set aside the assessment order. The applicant was still aggrieved and moved a Reference Application before the Tribunal on 22-10-1984 which was ultimately dismissed on 28-1-1985. The Applicant, however, took the matter to the High Court by way of direct Reference Application dated 24-9-198.5 moved under section 136 (2) of the Income Tax Ordinance; 1979, hereinafter referred to as the Ordinance, which is still pending there. Having' been not satisfied with direct reference, the applicant moved a Miscellaneous Application also before the Tribunal for rectification of the reference order whereby her Reference Application was rejected. According to Mr. Siraj-ud-Din Khalid, Advocate, the learned counsel for the applicant, the Miscellaneous Application was taken up on 1-10-1985 and it was ultimately allowed. Consequently, a reference was made to the High Court. Mr. Siraj submitted that on 24-9-1985 the Reference Application filed by the applicant under section 136 (2) of the Ordinance was withdrawn. Thus presently the Reference Application under section 136 (1) of the Ordinance was pending before the High Court and the ITO pursuant to the second order of the learned A.A.C. recorded on 29-5-1986 had taken up the case to finalize the reassessment. The applicant has, therefore, moved this Application with the prayer that the ITO be directed not to proceed with the reassessment proceedings till the matter was finally decided by the superior courts. Mr. Siraj Khalid, Advocate, has relied heavily on a Lahore High Court case reported as 1985 P T D 375, Mst. Inayat Begum v. Commissioner of Income Tax. He further cited before us the following authorities:

(1) (1973) 28 Tax 114 (Tribunal)

(2) 1980 P T D (Trib.) 99

(3) (1981) 43 Tax 92 (Karachi High Court)

(4) 1986 PLD 26 (Tribunal) and

(5) an order of this Tribunal recorded in the Miscellaneous Application 198 of 1982-83 dated 7th June, 1983.

Mr. Saqib Bashir, the learned D.R. on the other hand submitted that simply by filing a Reference Application, the ITO is not divested of his jurisdiction to comply with the directions of his appellate authorities. He further contended that since the tax was already paid by the applicant the issue appears to be rather academic. He also submitted that if the reassessment was framed, the tax liability of the applicant might further be reduced.

2. We have heard both the learned counsel for the applicant as well as learned D.R. at length. Undoubtedly, this Tribunal has got inherent powers of staying the recovery of tax proceedings. (1973), 38-Tax-119 (Tribunal) and (1981)-43- Tax-92 (Karachi High Court) laid down the same proposition of law. Surely this Tribunal has also got inherent jurisdiction to order expunction of uncalled for remarks. 1980 P T D (Trib.) 99 (Tribunal) is an authority on this point similarly, we also agree with the learned counsel for the applicant that civil law does not like multiplicity of proceedings. However, in fiscal matters and particularly under the provisions of Income Tax Ordinance, the position is altogether different. Section 135 (9) of the Income Tax Ordinance lays down that the order of the Tribunal shall be final subject to the provisions of section 136 which -deals with the Reference to the High Court. If we peruse section 136 of the Ordinance, we come across its subsection (5) which lays down that the decision of the High Court shall be communicated to the Appellate Tribunal which shall pass such orders as are necessary to dispose of the case conformably to the order recorded by the High Court in a Reference Application which means that the decision of the Tribunal is final for all practical purposes till the High Court records an order in the Reference Application. If the finding of the High Court is in any way, different than the finding of the Tribunal, the latter would have to revise its order to make it conformable to the order of the High Court. It has been held by Indian Supreme Court in the case of Petlat Turkey Red Dye Works Company Limited v. C.I.T. (.1963) 48-ITR-92 that in these circumstances the Tribunal may fix the case for rehearing, if necessary, and after affording adequate opportunities to both the parties of being heard could reframe its order in conformity with the decision of the High Court. Thus, it is clear that section 136 (5) of the Ordinance confers a special jurisdiction on the Tribunal for giving effect to the order of the High Court regarding a Reference Application. It actually provides a statutory basis for the appeal being reopened or revived for disposal in the light of the judgment on the Reference. The decision of the Tribunal is otherwise final. In other words, if a Reference Application is filed it does not mean that the appeal before the Tribunal continues to remain pending. Before a Division Bench of Kerala High Court the game questions came up for consideration but in a different form. In that case it was contended that stay of the recovery of tax ordered by the Tribunal during pendency of the appeal would continue to be operative until the Reference Application moved to the High Court was disposed of. But their Lordships turned down this submission. (Please see (1984) 148-ITR-629, Paul Mathews & Co. v. I.T.O. Thus it is clear that pendency of a Reference Application is wholly immaterial as far as the Tribunal is concerned. Of course, it has to give effect to the order of the High Court as and when it is communicated to it.

3. Now as far as the I.T.O. is concerned, the order of the Appellate Tribunal is final and he had to give it effect. If the I.T.O. fails to comply with the Directions of the Tribunal, a writ of mandamus can be issued to compel him to carry out the directions of the Tribunal, which have become final because the officer is duty-bound to carry out the orders of the superior appellate authority. The Indian Supreme Court held in (1960)-40-ITR-618, Bhopal Sugar industries v. I.T.O. that in such a case the writ is to be issued C because the I.T.O. fails to carry out a legal duty imposed on him and such failure is destructive of a basic principle of justice. Thus it is clear that the order of the Tribunal is binding on the I.T.O. and tie has to carry out the directions given to it by the Tribunal. This principle is equally applicable if the direction is issued to the I.T.O. by his A.A.C.

4. Mr. Siraj Khalid relied heavily on Mst. Inayat Begum's case (supra). However, it revolves around its own facts. Otherwise if we peruse section 134 (6) and 136 (7)) of the Ordinance it would appear that notwithstanding an appeal filed in the Tribunal or a Reference Application made to the High Court, the proceedings for recovery of tax are not automatically stayed but the tax remains payable in accordance with the assessment made in the case. If we read the definition of assessment, it includes reassessment as well, (please see section 2 (7) which means that the tax demand could be made. Since assessment leads to determination or quantification of tax which ultimately ends in recovery of tax proceedings, the use of word 'assessment' in subsection (6) of section 134 and subsection (7) of section 136 of the Ordinance means that the I.T.O. is competent to quantify the tax thus thereby leading to recovery of tax proceedings notwithstanding the fact that an appeal has been filed before the Tribunal or a Reference has been made to the High Court under section 136 (1) or (2) of the Ordinance.

5. We can explain our view point by following illustrations also. The first case might be where the I.T.O. has imposed a tax, which has been confirmed on appeal by the learned A.A.C./ C.I.T. (A) but on further appeal it has been vacated by the Tribunal but a Reference has been made to High Court. Here the I.T.O. has nothing to start recovery proceedings. Hence no question of stay arises however but take a case where the I.T.O. has imposed certain tax but on appeal the A.A.C./C.I.T. (A) annuls it and on further appeal the Tribunal restores the I.T.O.'s order and at the same time makes a Reference to the High Court. Here since the order of the assessment has been restored by the Tribunal and since the Tribunal's order is final, the I I.T.O. would proceed for recovery of tax and if the assessee wants it to stay, he would have to seek a stay order from the High Court under section 136 (7) of the Ordinance. In the third case suppose the tax is imposed by the I.T.O. and it is partly confirmed by the learned A.A.C/ C.I.T. (A) and on further appeal the order of learned A.A.C/C.I.C. (A) is confirmed and both the assessee as well as the Department go in a Reference to the High Court. Here the tax which has been partly confirmed could be recovered by the I.T.O. and if the assessee wants to get the stay order, he would again move the High Court under section 136 (7) of the Ordinance Fourth type of case might be where the tax has been imposed by the I.T.O. but his order has been set aside by the learned A.A.C/C.I.T. (A) but on appeal the tax imposed by the I.T.O. is cancelled but Reference is made to the High Court. Here since there is no tax outstanding in view of the Tribunal's order, therefore, no recovery proceedings could be initiated. But there might be a case in which the tax is imposed by, an I.T.O. but his order is set aside by the learned A.A.C/C.I.T. (A) and on further appeal the order of learned A.A.C/C.I.T. (A) is confirmed by the Tribunal but reference is made to the High Court. Now, here pursuant to the order of the Tribunal, the I.T.O. would be entitled to proceed with reassessment proceedings, which would ultimately end in recovery proceedings. By filing mere Reference Application, the I.T.O. would not be divested of his jurisdiction to start reassessment proceedings When he create; a tax liability and recovery proceedings are started the assessee would have a right to apply to the High Court under section 136 (7) of the Ordinance for stay of the recovery of tax proceedings. Thus it is clear from all these illustrations that the order of the Tribunal is final for all practical purposes and by filing Reference Application, the jurisdiction of the I.T.O. regarding initiating recovery proceedings is not taken away. On the other hand, as we have mentioned above if the I.T.O. declines to give appeal effect to the Tribunal's order, the assessee may seek the writ of mandamus from the High Court. In support of this proposition of law, we have cited no less an authority than the Indian High Court in Bhopal Sugar Industries case (Supra). Incidentally we may mention that same is the position under Order 41, Rule 5 of C.P.C also. It is clearly laid down that execution proceedings are never stayed simply by filing an appeal. If the appellant wants to ensure that execution of the decree appealed against is stayed he has to move an application to the appellate authority and it can be stayed.

6. Thus in view of the discussion made above, we find no force in this application and it stands rejected accordingly.

M.B.A./398/T Application rejected.

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