Judgment:
Per Shri K. T. Thakore, Accountant Member - By this application the Commissioner has move this Tribunal to refer certain questions of law said to arise out of the Tribunals order for the opinion of their Lordships of the Gujarat High Court. In my view no referable questions of law arise out of the order of the Tribunal. Therefore, I am of the opinion that this reference application is required to be rejected. The reasons in support of this decision are set out hereinafter.
The assessee owned certain agricultural lands which were acquired by the Government of Gujarat. The Land Acquisition Officer (LAO) awarded a compensation of Rs. 71,474 which was not accepted by the assessee who carried the matter in further appeal before the learned District Judge at Jamnagar. The learned District Judge enhanced the compensation to Rs. 1,26,299. On further appeal to the Honble High Court the compensation was raised to Rs. 2,67,667 exclusive of interest of Rs. 99,996. The ITO passed an order under section 155(7A) of the Income-tax Act, 1961 (the Act) to give effect to the order of the High Court.
2. The matter was carried in appeal before the AAC and it was contended that provisions of section 155(7A) were not applicable as the said provisions came into force with effect from 1-4-1974. The AAC, however relying on the decision of their Lordships of the Gujarat High Court in Addl. CIT v. New Jehangir Vakil Mills Co. Ltd. [1979] 117 ITR 849.
3. Being aggrieved, the assessee carried the matter in appeal before the Tribunal and reiterated the same contentions as were placed before the AAC and stated that provisions of section 155(7A) had no application so far as the assessment year under appeal, viz., 1972-73 was concerned. The department on the other hand contended that in view of the decision of their Lordships of the Gujarat High Court in Topandas Kundanmal v. CIT [1978] 114 ITR 237 the rectification was justified. The Tribunal considered this submission and held that provisions of section 155(7A) had no application so far as the assessment year 1972-73 was concerned. It however, held that in view of the decision in Topandas Kundanmals case (supra), the ITO had right to tax the additional compensation in the year of transfer. The appeal to the assessee was, accordingly, dismissed.
4. Thereafter the assessee moved a miscellaneous application stating that there was a mistake in the order of the Tribunal inasmuch as once it was held that provision of section 155(7A) had no application the appeal of the assessee ought to have been allowed and not dismissed.
The learned Judicial Member took the view that there was no mistake apparent from the record as the compensation was taxable in the year of transfer in view of Topandas Kundanmals case (supra). The Accountant Member differed from the view of the learned Judicial Member and held that the ITO had no jurisdiction to tax the compensation for the year under appeal when the provisions of section 155(7A) was found to be not applicable. According to the Accountant Member the order of the ITO was beyond the period of limitation prescribed under section 154 of the Act. He, thus held that the order was required to be rectified in favour of the assessee.
5. In view of the difference of opinion between the two Members the matter was referred by the learned President to the learned Third Member who held that on the short ground, viz., applicability of section 155(7A) the matter could be disposed of and according to him the original other required rectification by allowing the appeal.
6. The Tribunal thereafter allowed the appeal in the light of the majority view.
7. On these facts the following questions have been proposed for reference by the learned Commissioner : (four questions as per reference application will be typed at the time of finalisation).
8. So far as question No. 1 is concerned the provisions of section 254 of the Act gives power to the Tribunal to rectify a mistake apparent from the record. This question, therefore, is self-evident and does not call for reference.
9. So far as question No. 2 is concerned the same in my opinion is misconceived. The Tribunal has not revised its finding which was reached in the original appeal, viz., that he provisions of section 155(7A) had no application. It was only a matter of consequence that the appeal had to be allowed once the above finding was reached. What was sought to be corrected by the Tribunal was the conclusion which flew from its original decision which was incorrect in the light of the finding reached by it. The Tribunal has not neither permitted the assessee to reagitate the question of assessability of the compensation nor it had revised its order as sought to be made out in the above question.
10. So far as question No. 3 is concerned, as pointed out earlier, the Tribunal has merely considered about the rectification of the order and has neither decided the issue on merit of the original decision reached by it. This question also does not arise out of the order of the Tribunal.
11. So far as question No. 4 is concerned the same is also misconceived. For the simple reason that if provisions of section 155(7A) was not found to be applicable as was held in the original order there was no power with the ITO to rectify its original order inasmuch as the period of limitation prescribed under section 154 had already run out.
Per Shri P. S. Dhillon, Judicial Member - The Commissioner has made this reference application under section 256(1) of the Act, wherein he had requested that the following questions, said to be questions of law, arising out of the order of the Tribunal in Miscellaneous Application No. 8 (Ahd.) of 1983 [IT Appeal No. 2252 (Ahd.) of 1981, dated 21-4-1984] be referred to the Honble High Court for its opinion and the statement of the case be drawn : 1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in entertaining the miscellaneous application and rehear the matter and set aside its earlier decision and allowed the appeal of the assessee 2. Whether the Tribunal had the jurisdiction in law to set aside its own judgment by allowing the miscellaneous application to reagitate the question of law 3. Whether the Tribunal had power to rehear the appeal on merits after it perused its judgment and dismissed the appeal 4. Whether on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the Income-tax Officer was to justified in having revoked to section 155(7A) of the Income-tax Act, 1961 and taxed the additional amount of compensation in accordance with the decision of the District Court 2. The relevant facts, in brief, are that the lands belonging to the assessee were acquired by the Gujarat Government, and the LAO awarded compensation of Rs. 71,474 on 30-7-1974. The District Court by its judgment date 19-11-1975, on a reference being made by the assessee, increased the compensation to Rs. 1,36,299. On appeal the Honble High Court determined the compensation at Rs. 2,67,667 excluding the interest of Rs. 99,996 vide its judgment an decree dated 22-10-1980.
2.1 The ITO completed the original assessment on 25-9-1972 without including the compensation for the land. However, subsequently he made rectification order dated 28-4-1975 fixing the capital gains of the assessee on the basis of award of the LAO. Thus, thereafter on 17-10-1980 the ITO passed an order under section 155(7A) to give effect to the order of the District Court.
3. The assessee contended before the AAC that section 155(7A) came into force with effect from 1-4-1974, therefore, the ITO could not tax the New Jehangir Vakil Mills Co. Ltd. (supra) and Topandas Kundanmal (supra), rejected the contention of the assessee.
3.1 On further appeal of the assessee, the Tribunal examined the questions whether the amount could be taxed under section 155(7A), on the facts of the case and in view of the facts that the assessment year involved was 1972-73. The Tribunal after considering the judgment of the Gujarat High Court in the case of Topandas Kundanmal (supra) held that the amount into be taxed in the year of transfer, meaning the year in which the authority had taken the possession and interest was allowed from the date of possession. The Tribunal, thus, dismissed the appeal of the assessee and confirmed the orders of the authorities below on the reasons stated in paragraph 6 as under : "We have heard the rival submissions and persued the entire material on record. We find some force in the submission of the learned departmental representative. Their Lordships of the Gujarat High Court in the case of Topandas Kundanmal v. CIT [1978] 114 ITR 237 at p. 252 have observed as under : It was submitted on behalf of the revenue that if the nature of the receipt of the principal amount of compensation is found by the income-tax authority to be in the nature of capital gains, the right to such income under the express term of section 45 of the Income-tax Act, 1961, would be in the year in which the transfer is effected. We are of the opinion that this submission made on behalf of the revenue is well founded and the year of accrual or arisal of there right to the principal amount of compensation if the receipt was in the nature of capital gains would be in the year in which the transfer was effected.
From the above observations is clear that the principal amount of capital should be taxed in the year of transfer means the order from which the authority has taken the possession and interest is allowed thereon from that date. From the above facts and law involved we confirm the order of the ITO but on different grounds. It is true that the ITO has no it rightly invoked the provisions of section 155(7A) as assessment year involved is 1972-73. But following the observations of their Lordships of the Gujarat High Court the ITO had right to tax the additional compensation in the year of transfer." 3.2 However, the assessee made Miscellaneous Application No. 8 (Ahd.) of 1983 to the Tribunal under section 245(2) of the Act to rectify its order wherein the learned Judicial Member and the learned Accountant Member was of the view that the miscellaneous application is not maintainable, while the learned Accountant Member was of the view that it is maintainable. They observed as under.
We have heard the learned counsel for the assessee Shri Kaji and the learned departmental representative Shri Vaidya. We find some force in the submission of Shri Kaji. The ITO had passed the rectification order to add additional compensation on the basis of the order of District Judge dated 19-11-1975 and added Rs. 67,667. In view of this fact, we correct our order as under : In this case, the ITO has added Rs. 67,667 for the purpose of capital gain tax which the assessee received as additional compensation by the order of District Judge. The assessee further approached the High Court and received some more additional compensation by the High Court is no more in dispute and that has become final. Therefore, following the ratio of the decision of their Lordships of the Gujarat High Court in the case of Topandas Kundanmal (supra) the order of the AAC was confirmed. Therefore, in our view, there is no apparent mistakes on record.
At paragarph 6 of the original order of the Tribunal in IT Appeal No.2252 (Ahd.) of 1981 for the assessment year 1972-73, it was, inter alia, observed : the ITO has not rightly invoked the provisions of section 155(7A), as assessment year involved is 1972-73. It, therefore, follows that the ITO could not take recourse to the said provisions in order to rectify his original order which was made on 25-9-1972. In other words, the rectification powers were only exercisable under section 154. Now the said from the date of the original order. Thus, the original order would have been rectified on or before 24-9-1976.
Thus, even original ordre would have been rectified on or before 24-9-1976. Thus, even on the basis of the District Judges order which was made on 19-9-1975, the order for rectification under section 154 could have been made, as stated above, before 24-9-1976.
In the instant case, however, the order is made by the ITO on 17-10-1980 under section 155(7A). The said order, therefore, must be held to be without jurisdiction in the light of the finding that provisions of section 155(7A) had no application for the assessment year under appeal, namely, 1972-73.
In my opinion, therefore, the order made by the ITO which is beyond the period of limitation prescribed under section 154 is required to be quashed on this goround and the original order of the Tribunal would require modification, accordingly.
3.3 Reference was made to the President under section 255(4) of the Act to settle the difference between the learned Judicial Member and the learned Accountant Member. The President appoints the Third Member, who vide his order dated 9-3-1984 held that application was maintainable and the dismissal of the appeal was wrong, observation as under : "The parties were heard, I find that the Income-tax Officer has passed the order under section 155(7A). The portions of the Tribunals order extracted above clearly indicated that the Tribunal had come to the conclusion that for the year under appeal, viz., 1972-73 the provisions of section 155(7A) would not apply. Neither the Income-tax Officer nor the AAC or the Tribunal had made any reference to section 154 in their orders. Through the assessees miscellaneous application, therefore, has referred to this section, in my view it has no relevance in the present context. Reference is made to the Tribunals order in Gujarat High Courts decision in Topandas Kundanmals case (supra) but this laid down only a criteria for assessability of capital gains and does not refer to section 155(7A). In the above context the assessees appeal has to be allowed rather than dismissed as wrongly stated in paragarph 7 of the Tribunals order. I, therefore, agree with the learned. Accountant Member that the order of the ITO should be quashed though not for the reasons stated by him and the Tribunals orders should be corrected by substituting in paragarph 7 of its order allowd instead of dismissed.
Thus, the matter was sent back to the original Bench to dispose of it accordingly.
3.4 In pursuance of the order of the learned Third Member referred to above, the Tribunal allowed the appeal vide its order dated 21-4-1984 and set aside the order of dismissal of appeal made on 26-3-1983 supra.
3.5 The department being further aggrieved, with the majority decision of the Tribunal, has made this application. Shri Manohar, the learned departmental representative, contends that the questions raised in this application mentioned above are questions of law and, therefore, these are to be referred to the High COurt for its opinion. He further contends that question of law do arise out of the order of the Tribunal supra in view of the fact that the dispute is mainly settled by the Tribunal supra in view of the fact that the dispute is mainly settled by the majority decisions of the Tribunal and, therefore, debate was very much involved to decide the said miscellaneous application of the assessee referred to above and as such questions of law are there in view of the fact that the settled law is that if debates is involved to settle the issue raised in the miscellaneous application rectify the order of the Tribunal, then there is no basis to allow the rectification appl ication as in such situation there is no mistake apparent from the record.
3.6 On the other hand, Shri Kaji, the learned counsel for the assessee contended that the mistake was apparent from record, in view of the fact that the Tribunal observed that the ITO has rightly invoked the provisions of section 155 as the assessment year involved was 1972-73.
3.7 In rebuttal, the learned departmental representative states that no doubt, it is there, but the Tribunal has held that in the case of Topandas Kundanmal (supra), the decision of the Honble Gujarat High Court is to be applied to the facts and circumstances of the case and, therefore it cannot be held that the mistake committed was prima facie there and in particular when the matter has gone to the learned Third Member to decide that whether mistake is apparent from the record or not. When this is the position, then the reference application of the revenue cannot be rejected on the ground that the questions farmed are to be i.e. whether the Tribunal was justified in holding that the mistakes apparent from the record are there and, therefore, the order of the Tribunal supra was the subject-matter of section 254(2). Further section 256(1) casts duty on the Tribunal to frame and refer question which in its opinion is question of law worth reference to the High Court. Therefore, reference application is not to be rejected on the ground that the questions not properly farmed or not arising out of the impugned order : rather the Tribunal is to refer the questions if in its opinion is, so arising out of the order of the Tribunal.
4. We have heard the rival submissions and gone through the record before us. No doubt, it is within the powers of the Tribunal to make rectification suo motu or on the application of the parties if the mistake is apparent from the record. But if it is not there as such and the debate involved is there to find the mistake, then the jurisdiction of the Tribunal is ousted. In this case, it is proved beyond doubt that the debate is there in view of the fact that the learned Judicial Member and the learned Accountant Member have differed with each other.
The learned Accountant Member held that mistake apparent from the record is there on account of reasons assigned by him, while the learned Judicial Member, who is the author of the order in appeal, wherein the learned Accountant Member also agreed with him, but they differed in the miscellaneous application holding therein different views, on the issue that whether mistake apparent from the record is there or not which is to be rectified under section 254(2). In consequence of it, reference was made to the President to settle the difference between the two learned Members on this issue. The learned Third Member agreed with the learned Accountant Member on his own reasons, different than that the learned Accountant Member. This does not mean that on account of majority decision the debate is not involved, rather it is manifest and is proved that it is there, otherwise there should have no difference between the two Members-the authors of the appeal. Further, the question raised i the reference application though may not be properly farmed or even may not be arising out of the order of the Tribunal, but in cases of reference under section 256(1) it is the duty of the Tribunal to refer the question if so arising out of the impugned order and, therefore, it is within the jurisdiction of the Tribunal. Thus, in this view of the matter, we hold that the contentions of the learned counsel for the assessee that as the questions framed and raised are not properly framed, therefore, the reference is to be rejected has no substance.
Hence we reject it. Accordingly, we further hold that since under section 254(2) on giving effect to the majority decision of the learned Accountant Member and the learned Judicial Member, the Third Member which is based on different reasons, though there is unanimity in conclusion. In view of our above discussions and reasons thereto, we hold that on the facts and circumstances, certain questions of law do arise out of the impugned order of the Tribunal, which we frame as under and refer these to the Honble High Court for its opinion : "1. Whether, on the facts and in the circumstances of the case, debate is involved and if so then whether the Tribunal has acted without jurisdiction in passing the order under section 254(2) of the Income-tax Act, 1961, in Miscellaneous Application No. 8 (Ahd.) of 1983 2. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the ITO was not justified in revoking the provisions of section 155(7A) of the Income-tax Act, 1961 and thereby taxing the additional amount of compensation of Rs. 67,667 on the basis of order of the District Judge dated 19-11-1975 on following the decision of the Honble Gujarat High Court in the case of Topandas Kundanmal v. CIT [1978] 114 ITR 237 ?" Per Shri K. T. Thakore, Accountant Member-In my opinion the real point of difference is whether any questions of law as framed by the learned Commissioner arise out of the order of the Tribunal in Mescellaneous Application No. 8 (Ahd.) of 1983. It must be remembered that no reference application was filed against the original order by the learned Commissioner. Therefore, the questions of law proposed for reference must arise out of the order in miscellaneous application as filed by the learned Commissioner. In the above view of the matter, therefore, in my opinion the following point of difference is required to be referred to the learned President under section 255(4) : "Whether, on the facts and in the circumstances of the case, any question or questions of law as set out in Reference Application No.554 (Ahd.) of 1984 could be said to arise out of the order of the Tribunal in Miscellaneous Application No. 8 (Ahd.) of 1983, dated 21st April, 1984 ?" As there is difference of opinion amongst us both (the Members) in this case and, therefore, we make reference to the Honble President of settle the difference of opinion among us. Hence, we frame the following questions for the determination of the Third Member : "1. Whether, on the facts and in the circumstances of the case, the debate is involved, which is apparently there on account of defference of opinion among the Members in deciding the Rectification Application No. 8 (Ahd.) of 1983, which was settled by the Third Member on the different reasons and grounds than that of the Accountant Member, with whom the Third Member agreed in allowing the rectification and thereby passing a rectified order by the Tribunal on account of majority decision and, therefore, certain questions of law do arise out of the order of the Tribunal, as framed by the Judicial Member by allowing the Reference Application No. 542 (Ahd.) of 1984 arising out of Miscellaneous Application No. 8 (Ahd.) of 1983, if not, whether the reference application is fit and proper for making reference on any questions arising out of the order of the Tribunal to the Honble High Court or not 2. Whether, on the facts and in the circumstances of the case any question or questions of law as set out in Reference Application No.542 (Ahd.) of 1984 could be said to arise out of the order of the Tribunal in Miscellaneous Application No. 8 (Ahd.) of 1983 datded 21st April, 1984 ?" Per Shri A. Krishnamurthy, Vice President-The following are the points of difference between the Members referred to for decision of the Third Member in regard to the Reference Application No. 542 (Ahd.) of 1984 : "1. Whether, on the facts and in the circumstances of the case, the debate is involved, which is apparently there on account of difference of opinion among the Members in deciding the Rectification Application No. 8 (Ahd.) of 1983, which was settled by the Third Member on the different reasons and grounds than that of the Accountant Member, with whom the Third Member agreed in allowing the rectification and thereby passing a rectified order by the Tribunal on account of majority decision and, therefore, certain questions of law do arise out of the order of the Tribunal, as framed by the Judicial Member by allowing the Reference Application No. 542 (Ahd.) of 1984 arising out of Miscellaneous Application No. 8 (Ahd.) of 1983, if not, whether the reference application is fit and proper for making reference on any questions arising out of the order of the Tribunal to the Honble High Court or not 2. Whether, on the facts and in the circumstances of the case, any question or questions of law as set out in Reference Application No.542 (Ahd.) of 1984 could be said to arise out of the order of the Tribunal in Miscellaneous Application No. 8 (Ahd.) of 1983, dated 21st April, 1984 ?" The learned Accountant Member has also separately set out the point of difference which reads as follows : "Whether, on the facts and in the circumstances of the case, any question or questions of law as set out in Reference Application No.542 (Ahd.) of 1984 could be said to arise out of the order of the Tribunal in Miscellaneous Application No. 8 (Ahd.) of 1983, dated 21st April, 1984 ?" 2. At the outset I must own, it was not easy task to make out the exact point of difference contained in the first question stated above in view of the complex nature of the sentence in which the point of difference is framed. However, the substance of the question appears to be whether the original order of the Tribunal could be said to contain any apparent mistake capable of rectification calling for a revision of that order.
3. To appreciate the point of difference certain basic facts may be stated. It appears that lands claimed to be agricultural belonging to the assessee were acquired by the Government of Gujarat by order dated 10-3-1971. The exact date of taking over possession of the land does not appear to be available on record but there is no dispute that it falls in the previous year relevant to the assessment year 1972-73, under consideration. A compensation for the land acquired was awarded by the LAO by his order dated 30-7-1974 the amount being Rs. 71,474.
The compensation award was enhanced in further proceedings before the District Judge who by his judgment dated 19-11-1975 awarded a compensation of Rs. 1,36,299. It appears that in the further proceedings the High Court by its judgment dated 22-10-1980 fixed the further compensation inclusive of the interest at Rs. 2,67,667.
4. The original assessment in this case was completed by the ITO for the year under reference, viz., the assessment year 1972-73 on 25-9-1972 which did not include any compensation for the land and capital gains tax charge thereon. In a rectification order under section 154 dated 28-4-1975 the ITO fixed the capital gains with reference to the composition so received on the basis of the award of LAO. Later, by an order under section 155(7A) dated 17-10-1980 the ITO revised his earlier order to include the capital gains charge with reference to the award of the District Judge. That order passed by him under section 155(7A) was confirmed in appeal by the AAC by his order dated 24-8-1981. When the matter was carried further in appeal before the Tribunal the latter by its order dated 26-2-1983 upheld the order of the AAC and dismissed the assessees appeal. In this order of the Tribunal which was subject-matter of revision or rectification at the instance of the assessee by his petition two findings have been given.
They are : (1) after considering the submissions of the assessee that the new sub-section (7A) of section 155 enacted by the Legislature with effect from 1-4-1974 could not apply to the assessment year 1972-73, it was held that the ITO was not right in invoking section 155(7A) as the year involved is 1972-73, and (2) however, in view of the decision of the Gujarat High Court in Topandas Kundanmals case (supra) having regard to the observations extracted in the order the ITO had right to tax additional compensation in the year of transfer.
5. It appears that the assessee preferred a reference application under section 256(1) in Reference Application No. 542 (Ahd.) of 1984, dated 4-5-1983 and also preferred a miscellaneous application on the same date. The assessees reference application was heard in the meantime and a draft statement was drawn on 24-8-1983 seeking to refer question No.2 framed by the assessee reading as under : "Whether, the Tribunal was right in law in upholding the order of the Income-tax Officer who had computed capital gains on the footing of the amount awarded by the District Court, Jamnagar, though the said decision had not become final ?" It appears that before the final statement came to be heard there was a request on behalf of the assessee for withdrawal which was not objected to by the department and the Tribunal by its order dated 20-6-1984 dismissed the application as withdrawn. This fact is stated only for setting out the sequence of events but nothing turn on it for the purpose of the present reference application.
6. In the miscellaneous application preferred by the assessee on 4-5-1983 it was claimed firstly, that the Tribunal in its order originally passed on 26-2-1983 had wrongly assumed that the ITOs order under section 155(7A) was to give effect to the award of the High Court; secondly, the Tribunal has not considered the question of limitation in respect of the order of the ITO section 155(7A) and also the question whether the said proceedings were premature; and thirdly, the Tribunal has not considered the contention whether the consideration or compensation on acquisition of agricultural land was taxable or was exempt as agricultural income in respect of the land acquired by the Government.
7. In regard to this miscellaneous application the learned Judicial Member in his order while agreeing that the mention of High Court is a mistake and it should be read as District Judge, however proceeded to hold that although the ITO had added Rs. 67,667 for the purpose of capital gains tax which the assessee received as additional compensation by the order of the District Judge the assessee further approached the High Court and received so more additional compensation and that compensation determined by the High Court is no more in dispute and had become final and, therefore, following the ratio of the decision of the Gujarat High Court in Topandas Kundanmals case (supra), the order of the AAC was confirmed.
8. The learned Accountant Member after noting the finding in the original order of the Tribunal dated 26-2-1983 that the ITO had not rightly invoked the provisions of section 155(7A) as the assessment year involved is 1972-73, has stated that it followed from the finding that the ITO could not take recourse to the said provisions [section 155(7A)] in order to rectify his original order which was made on 25-9-1972. He further observed that if at all, the rectification powers were only exercisable by the ITO under section 154 which permits the ITO to rectify the order within a period of four years from the date of original order and, therefore, the original order could have been rectified only on or before 24-9-1976 even on the basis of District Judges order which was made on 19-9-1975. As in this case the order is made by the ITO on 17-10-1980 under section 155(7A), he held that the order made by the ITO is beyond the period of limitation prescribed under section 154 and is, therefore, required to be quashed on this ground and the original order of the Tribunal required modification accordingly.
9. As there was difference of opinion between the two Members reference to the Third Member under section 255(5) was made on the point stated as follows : "Whether, on the facts and in the circumstances of the case, the miscellaneous application filed by the assessee bearing No. 8 (Ahd.) of 1983, dated April 1983 deserves to be allowed on the ground stated therein ?" The learned Vice President as the Third Member found that the ITO has passed order under section 155(7A) and the portion of the Tribunals order considered by him showed that the Tribunal has come to the conclusion that for the year under appeal, viz., 1972-73, provisions of section 155(7A) would not apply. He further observed that neither the ITO nor the AAC nor the Tribunal has made any reference to section 154 and though the assessees miscellaneous application makes reference to said section, in his view, it had no relevance to the present context.
He then held that in the context of these facts, the assessees appeal has to be allowed rather than dismissed as wrongly stated in paragraph 7 of the Tribunals order. He agreed with the learned Accountant Member that the order of that ITO should be quashed though not for the reason stated by the learned Accountant Member and the Tribunals order should be corrected by substituting in paragraph 7 of the order allowed instead of dismissed. He also observed in his order that though reference is made in the Tribunals order to the High Court decision in Topandas Kundanmals case (supra) that decision lays down only the criteria for assessability of capital gains and does not refer to section 155(7A). He further observed that though at the time of original appeal and along with the appellate grounds the assessee has made three prayers, viz., section 155(7A) was not applicable until the matter became final, that rectification proceedings had becomes time barred and capital gain derived from agricultural land should not be taxable, since the Tribunal did not apply its mind to these questions, appeal having been disposed of on the short ground as to the applicability of the provisions of section 155(7A), it is not necessary to deal with the same referred to in the miscellaneous application.
Pursuant to the Third Members order in conformity with the majority view, the appeal of the assessee in IT Appeal No. 2252 (Ahd.) of 1981 was held to be allowed and, thus, the miscellaneous application was allowed by the Tribunal by its order dated 20-4-1984.
10. The Commissioner by his application dated 28-6-1984 has sought reference of the following questions : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in entertaining the miscellaneous application and rehear the matter and set aside its earlier decision and allowed the appeal of the assessee 2. Whether the Tribunal had the jurisdiction in law to set aside its own judgment by allowing the miscellaneous application to reagitate the question of law 3. Whether the Tribunal had power to rehear the appeal on merits after it perused its judgment and dismissed the appeal 4. Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in coming to the conclusion that the Income-tax Officer was not justified in having recoked (sic) to section 155(7A) of the Income-tax Act, 1961 and taxed the additional amount of compensation in accordance with the decision of the District Court ?" There was difference of opinion between the Members who heard the reference application as to whether any question of law arises out of the order of the Tribunal. This is how the two questions set out earlier at the beginning of this order has been referred to the Third Member.
11. At the time of hearing of this reference application, the learned departmental representative submitted that the questions framed by the Commissioner do arise out of the order passed by the Tribunal on the miscellaneous application and in particular the question in regard to the applicability of section 155(7A) on the facts of the case. The learned counsel for the assessee, however, submitted that any reference of the question as to applicability of section 155(7A) is academic on the facts of the particular case because even taking into account the provisions of section 155(7A) the time limit provided therein for rectification under the said section has expired before the ITO passed the impugned order under section 155(7A). It is pointed out that four year period of limitation for the purpose of the said section has to be reckoned from the end of the previous year in which the additional compensation or consideration was received by the assessee. In this case, the additional compensation was awarded by the District Judge by his order dated 19-11-1975 and, therefore, the inclusion of the additional compensation by recourse to section 155(7A) could have been made by the ITO only before 31-3-1980 whereas the order of the ITO under section 155(7A) is passed on 17-10-1980, clearly beyond the period of limitation.
12. On a consideration of the facts, circumstances of the case and the submissions of the parties, I agree with the learned Judicial Member that questions of law do arise out of the order passed by the Tribunal revising its earlier order at the instance of the assessee by miscellaneous application.
13. It will be seen from the facts narrated above that in the original order dated 26-2-1983 dismissing the assessees appeal there were two findings. One is that the ITO has not rightly invoked the provisions of section 155(7A) as the assessment year involved is 1972-73. The second is that the observations of the Gujarat High Court in Topandas Kundanmals case (supra) gives a right to the ITO to tax the compensation in the year of transfer. The purport of the finding is that irrespective of whether section 155(7A) applies or not the ITO was right in charging the compensation received by the assessee in the year of receipt by virtue of the ratio of the decision of the Gujarat High Court in Topandas Kundanmals case (supra). It, therefore, appears that it does not automatically follow from the finding that section 155(7A) is not applicable to assessment year and that the order of the ITO, according to the original finding of Tribunal, must necessarily be quashed. Though it is not possible or open to me to pronounce on the correctness or otherwise of the orders of the learned Accountant Member and the Third Member holding that the ITOs order should be quashed and the appeal should be allowed, it is necessary for me to point out that there is another possible view which would show that there is no apparent or obvious mistake in year original order which needs rectification or revision. According to me the learned Third Member hearing the miscellaneous application has virtually overruled the unanimous finding in the original order of the Tribunal that according to the ratio of the Gujarat High Court decision in Topandas Kundanmals case (supra) compensation is chargeable to tax in the year of transfer irrespective of whether section 155(7A) applies or not. It is not possible or necessary to consider whether such a finding is correct or not because if it is not a correct view in law it can only be corrected by appropriate proceedings such as by way of reference application. The learned Accountant Member also in his order in appeal merely states that once it is held that section 155(7A) does not apply the order has to fall, and the rectification can, if at all, be sustained only under section 154, but he does not say what would happen to the finding that save apart from section 155(7A) the ratio of decision of Topandas Kundanmals case (supra) makes the compensation chargeable in the year of transfer. It is also to be noted that the earned Vice President has not endorsed the reasoning of the learned Accountant Member in regard to the provisions of section 154. It further appears to me that the order passed on the miscellaneous application does not with the point raised by the assessee in the miscellaneous application but on totally different ground. In these circumstances, I am positively of the view that questions of law do arise out of the order of the Tribunal passed in appeal read with its order on the miscellaneous application. The following are the two question that arise out of the order of the Tribunal according to me : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified by its subsequent order dated 9-3-1984 in revising its original order dated 26-2-1983 dismissing the assessees appeal, and allowing the assessees appeal on the ground that there was apparent mistake in the original order 2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income-tax Officer has not rightly invoked the provisions of section 155(7A) of the Income-tax Act, 1961 ?" 14. I do not consider it possible to accept the convention of the learned counsel for the assessee that the second question will be of academic interest as the limitation period has expired because although the assessee has raised such a contention no authority including the Tribunal has found that the action under section 155(7A) is time barred and, therefore, section 155(7A) is not correctly invoked. The sole ground on which the Tribunal held that section 155(7A) is not attracted is because that section has no retrospective effect to govern the assessment year 1972-73. Further more, section 155(7A) lays down the period of limitation of four years from the end of the previous year in which the additional compensation or consideration was received by the assessee. It does not refer to any date of award. At any rate the question as to what is the date of receipt would require to be gone into before the question of limitation can be decided. In my view, the two questions set out above, bring out the controversy sought to be agitated by the questions set out by the Commissioner is his reference application under section 256(1).
15. In the result, I hold that questions of law do arise out of the order of the Tribunal on the miscellaneous application and the same are required to be referred. The matter will now go to the regular Bench for fresh disposal as required under section 255(4).