NOORUL ARFIN, J.-By this judgment, we will answer two References, No. 36 of 1968 and No. 43 of 1968. Both the references relate to the assessment to income-tax of two partners of Souvenir Tobacco Co., namely, Hassan A.I and Padruddin, and are in respect of the assessment years 1959- 60 and 1960-61. The questions of law stated by the Income-tax Appellate Tribunal are identical in both the references and read as follows: ---
(1) Whether in the facts and circumstances of the case the Tribunal is right in holding that under section 33 of the Income-tax Act no appeal lies against an order under section 35 of the Act?
(2) Whether the Tribunal is right in holding that "total income" includes income exempt under section 15-B(1) of the Income-tax Act for purposes of all the provisions of the Income-tax Act, 1922?
The first question relates to the assessment year 1959-60, and the second question to the assessm ent year 1960-61.
2. While completing the assessm ent of the firm of which Hasan A.I and Badruddin were partners, the Income-tax Officer brought in, for the determination of the total income of the firm for the assessm ent year 1959-60, the profits and gains exempted under section 15-B(1) of the Income-tax Act, 1922. But, when the Income-tax Officer came to assess the individual partners of the firm, he did not include these profits and gains in the total income of the partners. However, the Income-tax Officer later rectified the mistake made in the assessments of the partners under section 35 of the Income-tax Act. This rectification was challenged by the partners in direct appeals made to the Income-tax Appellate Tribunal. The Tribunal held that, since section 30 did not provide for an appeal to the Appellate Assistant Commissioner against an order made under section 35 of the Act, clause (a) of subsection (1) of section 33, which provides for a direct appeal to the Income--- tax Appellate Tribunal against an order of the Income-tax Officer should not be construed, so as to lead to the conclusion that, whereas an appeal under section 30 of the Appellate Assistant Commissioner is not competent against an order of the Income-tax Officer, made under section 35 of the Act, an appeal against such order would be competent to the Income-tax Appellate Tribunal in cases where direct appeals are provided for to the Tribunal itself. In the opinion of the Tribunal, such a conclusion would lead to the anomaly that an assessee, whose income is below Rs.
2,00,000.00, will have no right of appeal to the Appellate Assistant Commissioner against such an order, as against an assessee whose income is above this figure, who has 4 right of direct appeal to the Tribunal itself.
3. In our opinion, no such anomaly as is referred to by the learned Tribunal arises in the circumstances of the case. Before we give reasons for our view, we may refer to sections 30 and 33 of the Income-tax Act. For the period relevant to this case the orders which could be challenged in appeal before the Appellate Assistant Commissioner of Income-tax were orders made under sections 23, 23-A, 24, 25, 25-A, 26 (2), 26-A, 28, 44-E(6), 44-F(5), 46(1), 48 and 49. The Finance Ordinance, 1959, made amendments in section 80 by adding the following proviso after the first proviso to sub--section (1): "Provided further that no appeal shall be filed under this section in any case in which the total income of an assessee or, in the case of partners of a registered firm the total income of the firm, exceeds two lakh rupees;"
This Ordinance also made amendments in section 33, which provides for appeals to the Income- tax Appellate Tribunal, by substituting a new provision for the then existing subsection (1). This new provision read as follows: "(1) Any assessee objecting to an order passed by-
(a) an Income-tax Officer in any case to which the second proviso to subsection (1) of section 30 applies,
(b) an Appellate Assistant Commissioner under section 28, section 30 or section 31, or
(c) an Inspecting Assistant Commissioner under section 34-A, may appeal to the Appellate Tribunal within sixty days of the date on which such order is communicated to him."
Before this new provision, an appeal from an order of the Income-tax Officer of th.- categories referred to in section 30 (1) of the Act lay before the Appellate Assistant Commissioner of Income- tax and, from the order of the Appellate Assistant Commissioner, an appeal lay before the Income- tax Appellate Tribunal. This new provision made permissible direct appeals to the Tribunal in cases where the total income of an assessee, or, in the cases of partners of a registered firm, the total income of the firm exceeded Rs. 2,00,000.00. In view of this provision, the contention of the assessee before the Income-tax Appellate Tribunal was that in cases in which the total income of an assessee, or in the case of partners of a registered firm, the total income of the firm, exceeded Rs.
2,00,000.00, every order of an Income-tax Officer was appeal-able to the Tribunal, and this right of appeal was not controlled by the enumeration in section 30 (1) of categories of orders which were appeal-able to the Appellate Assistant Commissioner. The Tribunal, therefore, thought that if the construction placed by the assessee on the new subsection (1) of section 33 was accepted, then an anomalous situation would arise, in that every order of an Income-tax Officer in cases in which the total income of an assessee, or in the case of partners of a registered firm, the total income of the firm exceeded Rs. 2,00,000.00, could be challenged in a direct appeal before the Tribunal, whereas in cases where the total income did not exceed this figure, only such orders could be challenged in appeal before the Appellate Assistant Commissioner as were specified in subsection
(1) of section 30, and since an order under section 35 is not specifically mentioned in section 30, it could not be challenged before the Appellate Assistant Commissioner, but could be appealed against in a direct appeal to the Tribunal in cases in which the income exceeded Rs. 2,00,()00.(30.
This argument was brought to the notice of the Karachi Bench of the former High Court of West Pakistan in The Commissioner of Income-tax, Karachi v. Adam Limited, Karachi (1). A Division Bench in that case held that the language of section 33 (1) which has been referred to above, did not impose the condition that an order passed by the Income-tax- Officer, directly appeal-able to the Income-tax Appellate Tribunal, should also be otherwise appeal-ableunder section 30 in order that an assessee may prefer an appeal against it. According to the Division Bench, any order passed by as Income-tax Officer was appeal-able under subsection (1) of section 33 of the Income-tax Act directly to the Tribunal if it is an order to which the second proviso to subsection (1) of section 30, inserted by the Finance Ordinance, 1959, applied, and that there was nothing in subsection (1) of section 33, as substituted by the Finance Ordinance, 1959, which restricted the right of appeal to the Tribunal in cases where direct appeals are provided for to this forum. Thus, according to this decision, an order made under section 35 of the Income-tax Act by the Income-tax Officer was appeal-able to the Tribunal in direct appeals, though not appeal-ableto the Appellate Assistant Commissioner as being an order of the nature referred to in subsection (1) of section 30. In our view, however, subsection (1) of section 30 itself did not preclude an appeal against an order made under section 35 of the Income-tax Act. Now, what is, after all, the nature of an order made by an Income-tax Officer under section 35 of the Act, relating to the assessment of an assesseee to income-tax. For the purpose of this case, we consider only two subsections of this section to be relevant, that is, subsection (1) and subsection (5). Under subsection (1) an Income-tax Officer may, at any time within four years from the date of any assessment order passed by him, rectify any mistake apparent from the record of the assessment, even though such rectification may result in enhancing or reducing an assessment. Under subsection (5), if it is found in respect of any completed assessm ent of a partner in a firm that the share of the partner in the profit or, loss of the firm has not been included in the assessment of such partner or if included, is not correct, the inclusion of the share in the assessment or the correction thereof, as the case may be, shall be deemed to be rectification of a mistake apparent from the record. In our view, an order made under subsection (1) and subsection (5) of section 35, in effect, partakes the character of a fresh assessm ent order and is referable to section 23 of the Income-tax Act, and therefore such an order, being in the nature of an order of assessment, would be appeal-able under section 30 (1) of the Act to the Appellate Assistant Commissioner. When we refer to subsections (1) and (5) of section 35 of the Act, we find that the Legislature has not used the expression "original assessment", but only "assessm ent" in relation to section 23 of the Act. Therefore, as the Income-tax Officer in the present case included in the assessm ent of the individual partners the profits and gains exempted under section 15-B ((1970) 21 Taxation 137) of the Act, by rectifying the mistake in his first assessment, he enhanced the assessm ent of the individual partners. This order was, in effect, an order of assessm ent referable to section 23 and was appeal-able under subsection (1) of section 30. If this be not the correct view, then an order which has the effect of enhancement of assessment by inclusion of additional profits and gains therein should not be appeal-able at all, either to the Appellate Assistant Commissioner, or to the Income-tax Appellate Tribunal. To us this does not appear to be the intention of the Legislature. It would appear that it was not necessary to make a specific mention of section 35 in subsection (1) of section 30, because an order of the Income-tax Officer rectifying a mistake in the assessment is, in effect, an order under section 23 and is, therefore, appeal-ableunder subsection (1) of section 30.
4. With regard to the second question, the answer is obvious. Section 15-B(4) read as follows during the relevant period: "The profits and gains of an industrial undertaking to which this section applies shall be computed in accordance with the provisions of section 10, and the amount exempt under the provisions of this section shall be included in the total income of the assessee."
No doubt, it would have been preferable and more appropriate to incorporate this provision in section 16, which provides for exemptions, exclusions and inclusions for the purpose of determination of the total income. But there is no substance in the argument that no effect should be given to section 15-B(4), B merely because the draftsman made provision for inclusion in the assessm ent of the exempted profits and gain'9 in the total income of an assessee in section 15-B itself, and not in section 16. We must confess that we have not been able to appreciate the assessee's contention that the provision contained in section 15-B(4) should not be given effect to, because the appropriate place for it was section 16 of the Income-tax Act, and not section 15-B.
5. Thus, for the reasons stated above, we answer the questions in the two references before us as follows:
(1) Our answer to the question No. 1 is in the negative.
(2) Our answer to the question No. 2 is in the affirmative.
K. B. A.