AMIR KHAN Versus K. D. A

NAIMUDDIN, J .-This is an application under section 66(2) of the Income-tax Act, 1922, filed by the Commissioner of Income-tax (East Zone) Karachi in the following circumstances:

2. The Income-tax Officer (East Zone), Karachi, assessed the respondent under section 23(3) of the Income-tax Act, 1922, for the assessment year 1973-74. The respondent had shown gross profit of Rs. 74,709, on total sale o?' Rs. 10,85,489, which gave gross profit rate at 7 per cent as against 4.2 percent disclosed in the preceding year. However, on scrutiny of Profit & Loss Accounts the Income-tax found that the Railway Freight Expenses amounting to Rs. 34,968, had been debited to Profit & Loss Accounts and, if the Trading Account was re-casted by debiting the Railway Freight Expenses amounting to Rs. 34, 968, the gross profit would come to Rs. 39,741, yielding gross profit at 3,7 percent which was very low in the line of the business by the respondent who was supplier and dealer of the food grains etc. to the Government (Pak Army). He accordingly added Rs. 10,000, to the gross profit, which consequently raised it to 4.6 percent of this sales.

3. The respondent aggrieved by the order preferred an appeal, being I. T. A. No. 38/52/KB/1973-74, with the Income-tax Appellate Tribunal. The Income-tax Appellate Tribunal while dismissing the appeal by the order, dated 20-12-1974, held that raising the Gross Profits to 4.6 per cent would not be considered high on the facts and circumstances of the case. Accordingly, the order of the Income-tax Officer was maintained.

4. Thereafter, .the respondent moved a miscellaneous application stating that in the appeal they had only pressed for deletion of expenses at Rs. 34,968, on account of Railway Freight which had already been considered by the Income-tax Officer while making addition to Gross Profits of Rs. 10,000. It was submitted that in the appellate order instead of dealing with this matter, the addition of Rs. 10,000 in the gross profit was ordered to be sustained.

5. The Income-tax Appellate Tribunal by the order dated 14-7-1975 allowed the application holding that after careful consideration it found that the mistake was apparent from the record and that the amount of Railway Freight Expenses of Rs. 34,968, which had already been taken into account by the Income-tax Officer while making addition to income the amount should be deleted from the computation of income made by the Income-tax Officer. In other words, it was found that the total income would come to Rs. 2,78,080 less Rs. 34,968.

6. This led the Income-tax Commissioner to apply to the Income-tax Appellate Tribunal for referring the following question of law said to arise from its order dated 14-7-1975.

"Whether on the facts and is the circumstances of the case, the learned Tribunal was justified in revising its own order by deleting the addition of Rs. 34,968?

7. The Income‑tax Appellate Tribunal rejected the application by the order, dated 22‑2‑1977, holding that the Tribunal did not revise their original order but only rectified the mistake in exercise of power under section 35 of the Income‑tax Act, 1922, and accordingly, refused to refer the question. Therefore, the Income‑tax Commissioner has filed the application as stated, herein before.

8. Although the Commissioner should have stated the question in the application as required under section 66(1) of the Income‑tax Act, 1922 which has not been so stated yet since the question is contained in the order of the Tribunal, dated 22‑2‑1977, therefore, we would deal with the same moreso when Mr. Iqbal Naeem Pasha learned counsel for the respondent has no objection.

9. The learned Income‑tax Appellate Tribunal refused to refer the question holding that it had not revised the order but only rectified the mistake. However, the real question which does not arise on the facts and in the circumstances of the case is "whether the Tribunal on the facts and in circumstances of the case has revised the order or teas only rectifier; the mistake and if the Tribunal has rectified the mistake the further question that would arise would be whether the Tribunals in the facts and in the circumstances of the case could rectify the mistake?" We would accordingly reframe the questions accordingly for this Court has ample power to do so and there is ample authority for the same We may here refer to Commissioner of income‑tax v. National Bank of Pakistan, Karachi (1976 P T D 237), Octavious Steel & Co. Ltd. v. Commissioner y` income‑tax, Dacca (P L D 1960 S C 371). Further the authority is now contained in section 66(2) of the Act itself, as amended by the Finance Act, 1974.

10. Now, so far as the fist ques0ort is concerned it was submitted by Mr. Waheed Faruqui learned counsel for the appellant that the only ground urged before the learned Tribunal related to the addition of Rs. 10,000. He pointed out that the learned Tribunal itself has stated in the order, dated 20‑12‑1974, that no other ground was urged in the application to the Tribunal for rectifying the mistake. However, in written reply to the application under section 66(l) of the Income‑tax Act, 1922, filed before the Tribunal, in paragraph 5 thereof, the respondent had stated that at the tune of hearing of the appeal on 20‑12‑1974 the learned Departmental Representative produced a letter before the Tribunal wherein the Income‑tax Officer had stated that the addition of Rs. 34,968, was made due to inadvertent mistake as after transfer of the said amount from the debit side of the Profit & Loss Account to the debit side of the Trading Account (reducing the gross profit rate of 3.7 percent from 7.00 percent the said amount was no longer available in the Profit & Loss Account for the purposes of add back. I ‑lie reply has been placed on record with the consent of Mr. Waheed Faruaqui as the same was not filed alongwith the application. The learned Tribunal while considering the application for rectification and dealing with the question observed as follows:‑‑

"After careful consideration we find that the mistake is apparent from record and order that the amount of railway freight at Rs. 34,968, which had already been taken into account by the Income‑tax Officer while making addition to income should now be deleted from the computation of income made by the Income‑tax Officer."

11. It was open to the Tribunal to refute the claim that the appellant had only urged the round addition of Rs. 10,000, and not the ground of deletion of Rs. 34,968. The Tribunal by considering the ground impliedly agreed that the stand of the respondent was correct. Now, the renders it purely a question of fact and therefore, cannot be dealt with in these proceedings. However, the question "whether the Tribunal on the facts and in the circumstances, could rectify the mistake is a question of law, arid accordingly we proceed to answer the same.

12. It is well settled that in ascertaining whether there is a mistake apparent from the record the Income‑tax Officer or for that matter the Income‑tax Appellate Tribunal need not confine itself to the order of assessment alone. Alai proceedings which constitute evidence on which the assessment order is passed must be regarded as record for the purpose, of section 35 of the Income‑tax Act, 1922. The Income‑tax Officer and for that matter the Income‑tax Appellate Tribunal is not prohibited' from looking at the evidence to ascertain whether a mistake has been committed. However, if any precedent is needed reference may be had to Arvind N. Mafatlal v, Income‑tax Officer, North Satara ((1957) 32 I T R 350). In this case on hand we find that the Income‑tax Office; a t page 2 of the order in Column No. 3, relating to the year 1973‑7 4 stated its follows:‑

1973‑74

"Sales

10,85,488

G. P. 7

After adjustment of Railway Freight 3.7%.

Yet at page 3 Sr. No. 6, he has added back the amount of Rs. 34,968, in the income of the assessee. This is obviously a mistake, which is apparent on the face of the order and which in our opinion, could be legitimately rectified moreso when the Income‑ tax officer in the letter had admitted that he had committed a mistake inadvertently. It may be useful it' we state that in the case of Khalid Adamjee v. Commissioner of Income‑tax (West), Karachi ((1963) 48 Tax 56), this Court considered the scope of powers conferred on the Income‑tax Officer under section 35 of the Act. It may be stated that the, powers of the Tribunal are co‑extensive with the powers of the Income‑tax Officer in view of the provisions of subsection (2) of sec lion 35 of the Income‑tax Act, 1922. In that case it was argued that the powers of the Income‑tax Officer was analogous to the powers conferred on the Civil Court under Order XLVII, rule 1, C. P. C. Rejecting the contention it was observed by Saeeduzzaman, J. as follows:‑

"We have carefully considered the contentions advanced by the learned counsel for the parties and are of the view that the power conferred on I. T. O. under section 35 of the Income‑tax Act is not analogous to the power conferred on the Civil Court by Order XLVII, rule 1, C. P. C. In our view the power conferred on the I. T. O. under section 35 of the Income‑tax Act to rectify an error or mistake in the assessment or refund order is much wider in scope than the power available to a Civil Court under Order XLVII, rule 1, C. P. C. while reviewing a judgment or order. Therefore, the Income‑tax Officer while rectifying a mistake or error in the assess ment or refund order under section 35 of the Income‑tax Act need not confine himself to the consideration of only those errors which are apparent on the face of the order but could also refer to the record of the proceedings of the assessment or the refund order as the case may be to discover the error which is noticed by him or which is pointed out to him by the assessee."

Reference may also be made to the following observation of the. Supreme Court of India in the case of Asoka Textile Mills v. Income‑tax Officer ((1956) 29 I T R):

"The learned Judges of the High Court seem to have fallen into an error in equating the language and scope of section 35 of the Act with that of Order XLVII, rule 1, Civil Procedure Code. The language of the two is different because according to section 35 of the Act which provides for rectification of mistakes the power is given to the various income‑tax authorities within four years from the date of any assessment passed by them to rectify and mistake "apparent from the record and in the Civil Procedure Code the words are "an error apparent on the face of the record" and the two provisions do not mean the same thing. This Court, in Maharana Mills (Private) Ltd. v. Income-tax Officer, Porbandar 36 1 T R 350 has laid down the scope of section 35 at page 356 in the following words:

"The power under section 35 is no doubt limited to rectification of mistakes which are apparent from the record. A mistake contem plated by this section is not one which is to be discovered as a result of an argument but it is open to the Income‑tax Officer to examine the records including the evidence and if he discovers any mistake he is entitled to rectify the error provided that if the result is enhancement of assessment or reducing the refund then notice has to be given to the assessee and he should be allowed a reasonable opportunity of being heard."

We may also quote a passage from the law and practice of Income‑tax by Kanga and Palkhivala, Vol‑I, 4th Edn., page 716, which as follows:‑

"Rectification may be made under this section not only of a mistake in a final order but also in any part of the record of proceedings in the case. But it must be a case of "mistake," and the mistake must be "apparent from the record" Arvind Mafatlal v. I. T. O. (1957). The "record" consists not merely of the assessment order but includes all proceedings and materials on which the assessment is based Arvind Mafatlal v. I. T. O. (1957). A clerical or arithmetical mistake would amount to a mistake apparent from the record Jessa Ram v. C. I. T. I. T. C. 342. If in making an assessment or a demand for tax the Income‑tax Officer overlooks the fact that the registration of a firm has been cancelled C. I. T. v. Khemchand Ramdas 1938, or that a particular date does not fall in the relevant accounting year (Sidhramappa Andannappa v. C. I. T. (1952), that would be an error apparent from the record. The Andhra Pradesh High Court has held that even overlooking a mandatory provision of law, which leaves no option or discretion to the taxing authority would amount to an error apparent from the record Meka Venkatap paiah v. I. T. O. (1957).

13. Accordingly, we answer the said question in the affirmative.

M. Y. H. Question answered in the affirmative.