MIAN ALLAH NAWAZ, J.- This judgment will govern P.T.Rs No. 67 to 71 (five in numbers) of 198l, as the questions calling for determination in these References, is almost same.
2. The facts, briefly stated, leading to the aforenoted References, are not in dispute. These are: that Capt (Rtd) Gauhar Ayub respondents in all these References, is assessee while the Commissioner, Income Tax, Central Zone, Lahore, is the applicant. The respondent had been deriving income from various sources including dividend. He was assessed in year 1969-70,1970-71, and 1972-73. These assessm ents were - finalized by the concerned income Tax Officer on 30.5.1971,6.4.1971, 31.5.1972 and 30.6.1975, respectively. On the basis of some material (not on record), the Department re-opened the above assessm ents under Section 34 of the Income Tax Act (hereinafter called as the 'Act'), on premises that the respondent had concealed certain items of his income from his assessments.
The action pertaining to assessm ent year 1970 was commenced on 31.12.1973. The respondent, accordingly, filled return under protest on 8.5.1994. A notice under Section 23(2) of the Act, was issued against him on 4.6.1974. Amazingly enough, no proceedings were taken till 30.6.1975 for reasons best known to Tax heirarchy. It was on 9.12.1977 when notices were issued with regard to other three years. The respondent, therefore, filed returns under protest on 8.1.1976. Newly filed returns were practically the same which the assesses had filed earlier and which were finalized on 30.5.1971, 6.4.1971, 31.5.1972 and 30.6.1975. No orders were passed till 09.12.1976 when the notices under Section 22(4) of the Act were served upon the respondent in jail through the agency of Superintendent of that Jail. It is necessary, at this stage, to note that the respondent was being confined, at that time, in Central Jail, Peshawar. The Superintendent Jail, reported that respondents had refused to accept service. In the context of this factual back-drop, the Income Tax Officer, started ex-parte proceedings against the respondent and passed fresh assessment orders on 8.6.1977.
3. Feeling dissatisfied the respondent filed seven appeals which were accepted by the learned Appellate Authority vide order dated 31.1.1979/holding that the services affected upon the respondent in jail was not a service in terms of Section 23(2) of the Act and assessment made by him vide orders dated 8.6.1977 were null and void and so remitted the case to the Income Tax Officer for de-novo decision on merits. Feeling aggrieved, the respondent preferred seven appeals.
The Department, however, was satisfied with the above decision and did not challenge the same before the Income Tax Appellate Tribunal (hereinafter called as the Tribunal'). After hearing the parties and after attending to rival contentions of the parties, the learned Tribunal came to the conclusion that on the facts and circumstances of the case the first appellate authority had no justification to remit the case the first appellate authority had no justification to remit the case to the Income Tax Officer for decision afresh on merits and so closed the chapter under Section 34 of the Act. This happened vide order dated 31.1.1979. This stage, it will be useful to refer to the operative part of the order which is as follows: "The appellant rightly contends before us that under the Income Tax Act it is the notional ALV of the property that has been made the subject matter of tax on income from property. Therefore, the actual rentals, which may be less sometimes and more on other occasions, cannot form any basis for the assessm ent of the income from property. Reliance was placed on a number of decided cases in this connection but we are clear in our mind that in this case the Department has all along been accepting the appellant's share of income from the properties on the basis of the ALV although it is stated before that since 1965, the rentals always exceeded the ALV. As we have stated in some of our earlier decisions also that, unless the legislature falls in the lacuna in the Act or unless the rentals are equated to the ALV the excess cannot fall for tax under the present Income- tax Act by virtue of the clear provisions of Sections 9 of the Income-tax Act that tax is to be paid on the bonafide ALV of properties. The appellant's contention, in this behalf, must, therefore, prevail."
The above , however , did not conclude the controversy. The applicant moved an application under section 66(1) of the Act for referring the question of law to the High Court. The Tribunal vide order dated 173.1981, declined to refer the matter to this court. The applicant, thereafter, moved this court under Section 66(2) of the Act for adjudication of the following question: "Whether on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the assessm ent on the assumption that the service of notices under Sections 22(4) and 23 (2) of the Income Tax Act was not a valid sendee in the eyes of law.
4. Mr. Muhammad Ilyas Khan, Senior Advocate, while appearing for the applicants, frankly conceded that the Income Tax Department had accepted the finding of the first appellate authority on the question of service of notice on respondent and had not filed an appeal before the Tribunal that on account of the above circumstance, he was not in a position to urge that this point under Section 66(2) of the Act on the principle of estoppel as laid down in Jam Pallo Vs. Bashir Ahmad (PLD 1993 Lah.168). He, however, vehemently represented that the order of the Tribunal dated 31.1.1979 suffered from error of law which was apparent of the face of record/calling for decision under Section 66(2) of the Act. According to him, it was clear that the first Appellate Authority had power to set aside the decision of the income Tax Officer and remit the case to Income Tax Officer for decision afresh on merits; that the Tribunal , on the facts of the case, had no power to drop proceedings against the respondent. Ora the strength of this circumstance, it was emphatically suggested that order of the Tribunal dated 31.1.1979, was clearly destitute of legal authority and merited to be interfered. On the above view, it was suggested that the Court had jurisdiction to decide this question under section 66 of the Act. Continuing further, the learned counsel contended that this being a pure question of law, he was entitled to raise this question before this court under Section 66(2) of the Act and this court was obliged under the law to answer this question.
5. The learned counsel for the respondent, on the other hand, resolutely, defended the impugned order by saying that the question raised by the learned counsel for the applicant, was neither raised before the Tribunal nor in the reference application before this court and so this court had no jurisdiction, whatsoever, to decide and determine this question.
6. From the foregoing narration of the facts, circumstances of the references and rival contentions of the parties, the only question emerging for consideration is whether this court, under Section 66(2) of the Act, has the jurisdiction to decide any new question of law which was neither raised in the application moved under Section 66(1) of the Act ahd which was not argued before examined by the Tribunal under Section 66(1) of the Act.
7. This has been vexed question which has been subject to divergent interpretation by superior judiciary before the partition of Sub-continent. In Abbey chetty and Co., Vs. Commissioner of Income Tax (1947,(15) ITR.442), the application of the Assessee under Section 66(1) of the Act, required the Tribunal to refer the question of res-judicata to the court. The Tribunal declined to do so on the premises that the questioh had not been argued before it. The assessee filed a petition in the High Court under Section 66(2) of the Act for an order requiring the Tribunal to refer that question. Dismissing that application, Patran Jali Sastri, (as he then was) said: "Mr Radhakrishayya for the petitioner contends that a question, though not raised before the Appellate Tribunal, can well be said to 'arise out of its order' if, on-the facts of the case appearing from the order, the question fairly arises. I am una$le to agree with that view. I am of opinion that a question of law can be said to arise out of an order of the Appellate Tribunal only if such order discloses that the question was raised before the Tribunal." Adverting to the contention that the Privy Council had in Moola Sons Ltd. V. Burjorjee (1932) ILR.10 Rang.242) allowed a question of law arising on the facts found to be raised for the first time before it the learned Judge observed: "The case furnishes no Useful analogy as the scope of the remedy under section 66 of the Indian Income Tax Act has to be determined with reference to the language of the statute"
This decision was followed by the Madras High Court in Commissioner of Income Tax Vs. Modern Theatres Ltd (1951) 20.I.T.R.588) and in Trustees, Nagorte Durgah Vs. Commissioner of Income Tax (1954) 26ITR. 805)
It was accordingly held that only question of which had been actually raised before the Tribunal or actually dealt with by it that could be referred under Section 66(1).
This is also the view consistently held by the Calcutta High Court. In Commissioner of Excess Profits Tax Vs. Jeewanlal Ltd. (1951)-20 I.T.R 30), it was held, agreeing with the decision in Abboy Chetty and Cp Vs. Commissioner of Income Tax (1947) 15 I.T.R 444), that a question of law not raised before the Tribunal could not be said to arise out of its order even if on the facts of the case appearing from the order the question fairly arise. In Chainrup Sampatram v. Commissioner of Income Tax (1951) 20 I.T.R. 484) the assessee had applied under Section 66(1) of the Act to refer the question whether a sum of Rs. 2, 20, 887/-was on a true construction of section 14(2)(c) of the Act assessable to tax.
The Tribunal dismissed the application on the ground that the question sought to be raised had not been mentioned at the hearing of the appeal and had not been dealt with by the Tribunal and was, therefore, not on which arose out of its order. The question having been brought up before the Court under section 66(2), Chakravarti J., held that under section 66(1) it was only a question that arose out of the Tribunal's order that could be referred and that must be some question which was actually raised before the Tribunal and dealt with by it; and that under Section 66(2) the words, "no question of law arises", could only mean that the question of which reference had been asked for by the applicant did not arise, and that the High Court could not require the Tribunal to refer some question, which was not proposed before it. The learned Judge then went on to observe: "The Indian Income-tax Act has not charged the High Court with the duty of setting right in all respects all assessm ents that might come to its notice; its jurisdiction is not either appellate or revision; nor has it a general power of superintendents under section 66. Its sole duty is to serve as the appointed machinery for resolving any conflict which may arise between an assessee or the Commissioner on the one hand and the Tribunal on the other regarding some specific question or questions of law. If, on an application under section 66(2), the High Court finds that the question which the applicant required the Tribunal to refer was not a question that arose out of the Tribunal's appellants order, it ought, in my view, to refuse to require the Tribunal to refer any such question."
The same question cropped up before the Full Bench of Punjab High Court in 'Mash Trading Co. Vs. Commissioner of Income Tax (1956(30) I.T.R 388).Speaking for the Bench Kapur, J (as he then was) said: - "....That under Section 66(1) it is only questions which had been raised before and dealt with by the Tribunal that could be referred to the High Court, that the power of High Court under Section 66(2) to direct a reference is limited to questions which could be referred under section 66(1) and which the applicant required it to refer, that the Tribunal has no power to raise a question suo motu, and likewise the High Court cannot raise any question which had not been referred to it either under Section 66(1) or Section 66(2), but when once a question is properly raised and referred to the High Court, the High Court is bound to answer that question. In this view, it was held that a reference to the High Court on a question which was not raised before or considered by the Tribunal was not competent. Falshaw J while generally agreeing with this view, considered that there might be cases in which a strict adherence to this view might work injustice, as for example when a point raised before the Tribunal had not been dealt with by it owing to mistake or indadvertence, or when its jurisdiction itself was questioned. The learned Judge added that in the former case the point might be deemed to have been decided against the assessee in the order, thereby attracting Section 66. It should be noted that all the judges agreed in holding that the reference in question was incompetent as the point had not been raised before the Tribunal."
The same point came up for consideration in somewhat different circumstances before the Lahore High Court in Grumukh Singh Vs. Commissioner of Income Tax (AIR 1944 Lah. 353). His lordship Mr. Justice Din Muhammad (as he then was), while delivering opinion said: "It is obvious that in the first instance it is the assessees who indicated a question of law arising out of an order with which he is dissatisfied and the Commissioner if agreeing to make the reference is required to draw up a statement of the case evidently in respect of the question only and refer it with his own opinion thereon to the High Court. In case of refusal by the Commissioner to state the case on the ground that no question of law arises, the assessee is permitted to apply to the High Court and here too the application is evidently confined to the question of law which the assessee had raised in the first instance and on which the Commissioner had refused to state the case. If the High Court is not satisfied of the correctness of the Commissioners decision, it would require the Commissioner to state the case and to refer it and this requisition will necessarily relate to that question only which was originally indicated by the assessee's application. It follows, therefore, that in reference under sub-S (2) the Commissioner cannot travel beyond the question originally indicated by the assessee nor can the High Court raise any question suo motu which is not covered by the Reference and in case of the Commissioner's refusals the High Court is confined to the question raised by the assessee in his application to the Commissioner. The High Court may formulate the question itself but its substance must be the same though the form may be modified either to give the question indicated by the assessee a proper shape, or to bring out most prominently the legal aspect of the case, discarding all reference to facts.
In 12 Pst.318, the Commissioner had made a reference to the High Court under Subs(2) of S.66 Income Tax Act and had omitted to formulate any question of law arising out of a certain transaction which appeared material to the High Court. The High Court accordingly formulated the question itself and decided that question too alongwith the other questions referred by the Commissioner. On appeal to the Privy Council, their lordships did not favour this procedure and in this connection observed as follows: The Commissioner unfortunately omitted to formulate any question of law out of this transaction.
The duty of the High Court under Section 66 (5) is to decide the question of law raised by the case referred to by the Commissioner and it is for the Commissioner to sate formally the question which arise, Here the High Court itself formulated the question to be decided as being....Their Lordships deprecate this departure from regular procedure... "This dictum of their lordships clearly debars the High Court froth taking into consideration any matter which has not been raised by the Commissioner himself while stating the case under Section 66 (2). In 1936.IT.R. 44, where the High Court had decided a case on an argument submitted to them for the first time, their lordships of the Privy Council observed at p.53 that any claim as to liability to tax based on that argument was a matter outside the latter of reference and was relevant to the question submitted. Similarly in AIR 1940 P.C. 158, their lordships observed that the function of the High Court in case referred to it under Section 66 is advisory only and is confined to considering and answering the actual question referred to it.
A new question of law, therefore, cannot be raised by the High Court itself, though the High Court may restate a question propounded by the Commissioner if considered necessary "
The survey of case law will not be complete without the mention of the case reported as Commissioner of Income Tax Vs. Scindia Steam Navigation Co. Ltd (1961)43, ITR 589), wherein after the complete survey of case law it was held: The result of the above discussion may thus be summed up:
(1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.
(2) When a question of law is raised before the Tribunal But the Tribunal fails to deal with it, it must be deemed to have been dealt with by it and is, therefore, one arising out of its order.
(3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.
(4) When a question of law is neither raised by the Tribunal nor considered by it, will not be question arising out of its order notwithstanding that it may arise on the finding giving by it."
The view, taken above, was noted with approval in Scindia Steam Nevigation Co Vs. Commissioner of Income Tax (PLD 1959(WP) 527), Commissioner of Income Tax Vs. Postonji Bhieaji, Stevedores & Bubashes (PLD 1969 Kar. 540) and Walayat Flour Mills Vs. Commissioner of Income Tax (1973 PTD 530). Contrary view was however taken in National Mutual Life Association Commissioner of Income- taxi 1936)
41. T.R. 44), by the Division Bench of Calcutta High Court; From the aforesaid discpssion, the following is dudcible.
(i) Section 66(1) vests the assessee and the Commissioner with a right to move the Tribunal in order to refer any question of the rising out of its order for decision of this Court. If the Tribunal forms an opinion that the question of law arises then it has to draw up a statement of the case and refer it to the High Court for decision, but, if it comes to conclusion that no question of law arise from its order and dismisses the application under Section (1), then the assessee or the Commissioner(as the case may be has a right to file a petition under Sectioq 66(2) and if this Court is not satisfied about the correctness of the decision of the Tribunal, it can require it to state the case and refer such question to it for decision under Section 66(4) the High Court can for the purpose of disposing of the Reference which comes to it under Sections 66(1) and 66(2) calls for additional statement from the Tribunal. Section 66 (5) enables the High Court to decide the question of law raised in the case and send a copy of the judgment to the Tribunal which is to pass appropriate order for giving it effect to;
(ii) That the jurisdiction of this Court, under Section 66, is special in nature. It is neither akin to appellate jurisdiction nor to revisional jurisdictions of supervisory jurisdiction. This Court, while dealing with the Reference under Section 66(1) Section 66(2) of the Act, acts in advisory capacity, it gives the Tribunal an advice and it is for the Tribunal to pass an appropriate order in order to give effect to it. In short this Court can answer the question which are referred to it and not any other question. It clearly follows that it is the Tribuanl which must have the occasion; in the first instance, to consider the question so as to decide whether it should refer any such question of law to this Court. The power of the Court under Section 66(2) so is analogous to writ of mandamus. It is settled that no order in form of mandamus can be issued by this Court, unless and until the aggrieved person shows that h$ had made the demand from appropriate authorities for relief which Ee seeks to obtain through the mechanism of the Court. This power is subject to further imitation i.e. The question raised before this Court must be that question which was raised before the Tribunal.
Section 66(i) and Section 66(2) of the Act are co-extensive and the Court, while hearing the Reference under Section 66(2) of the Act, cannot travel beyond parameters of Section 66(1) of the Act.
(iii) That this Court can only deal with the questions of law arising out of the other of the Tribunal passed under Section 34 of the Act. The question arising out of the order of Tribunal is that question which was raised before the Tribunal and which was dealt with by the Tribunal, or that question which was not raised before the Tribunal but was dealt with by it or that question which was raised and alleged before the Tribunal but was not dealt with by the Tribunal. All such questions are questions of law arising from the order of Tribunal;
(iv) That a question of law referred to this Court under Section 66(1) may be argued and looked through different angles. This Court, in such a circumstances, had to decide such question.(v) That the question, which was neither raised in the application under Section 66(1) of the Act by the aggrieved party, nor was dealt with by the Tribunal in its order, nor it was claimed in the petition under Section 66(2) of the Act, is a question, outside the Reference and this Court had no jurisdiction to deal with it.
9. Applying these principles to the facts and circumstances of this case, it is quite that the question which was raised by the learned counsel for the applicant/Commissioner was neither raised before the Tribuanl in the petition under Section 66(1) or the Act, nor it was dealt with by the Tribunal while rejecting the application under Section 66(1) of the Act, nor it was alleged in the application filed under Section 66(2) of the Act in this Court, Resultantly the applicant is precluded to raise this question and this Court had no jurisdiction to answer this question. In result, we find no merit in these References and accordingly dismiss them, the applicant shall bear the costs of the proceedings throughout.