TMI Blog1981 (11) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and, if so, to what effect ?" Brief facts leading to the present reference are as follows : The assessee during the account year relevant to the assessment year 1964-65 was registered firm consisting of the three partners Milkhiram, Madanlal Anand and Bramha Dutt. The original assessment of the firm was completed on a total income of Rs. 2,08,230 on January 20, 1969. The Commissioner acting under s. 263(1) of the Act considered the assessment as prejudicial to the interest of the Revenue and set it aside, vide order dated January 15, 1971, with a direction to the ITO to make afresh assessment. After remand, the facts which came to the notice of the ITO were that the partners of the firm acting under cl. (2) of the partnership deed dated June 1, 1962, had entered into an agreement dated August 24, 1963, Vide cl. 6 of the said agreement, it was decided that there would be an inter-bidding for a sale of the assets of the partnership firm and the highest bidder among the partners will be the purchaser of the entire property including its assets and liabilities and the sale proceeds were to be distributed among the, partners according to their respective shares as specified in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the assessee nor the Department filed any application under s. 256(1) of the Act requiring the Tribunal to refer to the High Court any question of law arising out of such orders. Consequently the order passed by the Appellate Tribunal in appeal became final under s. 254(4) of the Act. The assessee after the dismissal of its appeal filed a miscellaneous application under s. 254(2) of the Act seeking the rectification of a mistake said to be apparent from the record. This application was dismissed by the Tribunal, vide order dated January 18, 1980, holding that there was no mistake apparent from the record and no question of rectification arose. The assessee thereafter sought a reference under s. 256(1) of the Act on the following questions arising out of the order dated January 18, 1980, dismissing its application for rectification under s. 254(2) of the Act. The question which the assessee had formulated may be reproduced : " 1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that there was no case for rectification of the order under section 254 ? 2. Whether, on the facts and in the circumstances of the case, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no amendment of the order passed under s. 254(1) of the Act. Since no reference in the instant case was sought in respect of the appellate order passed under s. 254(1), we are of the view that no reference from the order rejecting an application for rectification of any mistake is tenable under s. 256(1) of the Act. The position obviously would have been different had the Appellate Tribunal amended its appellate order with a view to rectifying any mistake apparent from the record. In that case the amended order could be a subject-matter of reference under s. 256(1) of the Act. But if the order is not amended and the application for rectification is dismissed, the only order which stands is the order passed in appeal under s. 254(1) of the Act and if no reference has been sought in respect of such order, the same becomes final in view of the language used in s. 254(4) of the Act. No direct decision on this question was brought to our notice but it will be useful, for the purpose of analogy, to refer to the decision of the judicial Committee in CIT v. Tribune Trust [1948] 16 ITR 214 (PC). The context in which their Lordships made the observations at p. 226 of the report was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arge the scope of a reference which is subject to a particular time-limit by taking recourse to s. 254(2) of the Act seeking rectification of the order and then on refusal of the Tribunal to do so raising questions arising out of the main appellate order passed under s. 254(1) of the Act. Coming to the questions referred by the Appellate Tribunal to us we find that the Appellate Tribunal had clearly recorded a finding in its appellate order as follows: " Since the transfer of assets took place first and the dissolution later, the contention that the transaction in question was nothing but realisation of the assets of the firm after the transfer cannot be accepted." This is a finding of fact binding on this court. (See CIT v. Manna Ramji and Co. [1972] 86 ITR 29 (SC)). It was not disputed before us that if the sale in favour of one of the partners by virtue of the agreement dated August 24, 1963, had been made prior to the dissolution of the firm, recovery of the depreciation allowed in the preceding assessment years in respect of the plant, machinery, etc., could be treated as profit u/s. 41(2) of the Act. In A. S. Krishna Setty and Sons v. Addl. CIT [1975] 100 ITR 587 the Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Tribunal. It is not open to this court to exercise the appellate jurisdiction and question the findings of fact recorded by the Tribunal. Further, neither the assessee, in its application under s. 256(1) before the Tribunal, questioned the legality of the finding on this point nor sought a reference to the effect that the finding recorded on this point was perverse. We therefore, cannot go behind the finding of the Tribunal about the date of dissolution nor answer question of law by recording a finding of fact contrary to the one recorded by the Tribunal on this issue. Thus, on the facts and in the circumstances of the case, as found by the Tribunal, the Tribunal was justified in confirming the addition of Rs. 60,840 under s. 41(2) of the I.T. Act on account of the depreciation which was admittedly allowed to that extent to the assessee in the earlier assessment years. We also hold that on the facts and circumstances of the case, as found by the Tribunal, the Tribunal was justified in holding that the bidding did not amount to a distribution of assets on the dissolution of the assessee-firm. Question No. (1) is, therefore, answered in the affirmative and in favour of the R ..... X X X X Extracts X X X X X X X X Extracts X X X X
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