1995 P T D 268
[Lahore High Court]
Before Irshad Hassan Khan, J
Sh. AKHTAR ALI
Versus
THE FEDERATION OF PAKISTAN
Writ Petition No. 3385 of 1981, decided on 15/11/1993.
(a) Income-tax Act (XI of 1922)---
---S. 34---Re-assessment---Commissioner of Income-tax, in exercise of his administrative power to control and supervise the working of his subordinate officers, could not issue instructions/directions to his subordinates during the pendency of a quasi judicial matter in relation to assessment so as to defeat the right of appeal of the assessee.
(b) Income-tax Act (XI of 1922)---
---S. 34---Re-assessment---Income-tax Officer had expressed himself in most unequivocal terms that the case could not be resurrected as the prescribed period of limitation for initiating proceedings for re-opening disputed assessment had already expired and the notice, on the basis of which the order was passed was invalid---Said opinion of the Income-tax Officer being final for all intents and purposes, the matter was intended to be consigned to the record---File of the case, however, was taken away from the said Income-tax Officer and entrusted to another Income-tax Officer, who did not even discuss or make observation regarding the opinion earlier expressed by his predecessor---Order passed by the successor Income-tax Officer, reviewing the order of his predecessor on the basis of change of opinion held, was liable to be declared as without lawful authority and of no legal effect.
(c) Constitution of Pakistan (1973)---
---Art.199---Income-tax Act (XI of 1922), S. 34---Constitutional jurisdiction of High Court---Adequate remedy not availed----Constitutional jurisdiction could be invoked notwithstanding existence of an adequate remedy where the order was wholly without jurisdiction and/or mala fide.
A1 Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29 fol.
(d) Income-tax Act (XI of 1922)---
--S.34---Constitution of Pakistan (1973),. Art. 199---Re-assessment-- Constitutional petition--- Maintainability---Income-tax Officer had not applied his mind to the facts of the case before him independently but was influenced by the various directions issued by his superior: namely the Commissioner of Income tax, thus making the right of appeal of the assessee illusory---Such order of the Income Tax Officer was without lawful authority.
Muhammad Haneef Mannoo v. Income Tax Officer, Central Circle I, Lahore 1984 PTD 171 ref.
Sh. Zia Ullah and Suhail Akhtar for Petitioner.
Muhammad Ilyas Khan for Respondent.
Dates of hearing: 13th and 14th November, 1993.
JUDGMENT
This petition under Article 9 of the Provisional Constitution Order, 1981, seeks declaration that order dated 17-6-1981 passed by the Income Tax Officer, Circle 5, Zone ' B' , Lahore, re-assessing the petitioner for the Assessment Year 1967-68 under section 34 of the repealed Income Tax Act, 1922 (hereinafter called the Act), is without any lawful authority and of no legal effect and for a direction to the respondent not to recover any income tax from the petitioner on the basis of the said order.
2. The brief facts are that the petitioner is an individual and has been assessed as such since 1949-50 under the Act and the Income Tax Ordinance, 1979 (hereinafter called the Ordinance). On 26th of August, 1967, the petitioner submitted his assessment return for the year 1967-68 showing his income from salary at Rs.18,000 plus property income Rs.2,000. The Income Tax Officer (Companies), Ward-III, Lahore, accepted the return by order dated 28-8-1967 under section 23(1) of the Act.
3. On the 10th of January, 1973, Mr. Abdul Malik, the then Income Tax Officer, in the purported exercise of his powers under section 34 of the Act, issued notice to the petitioner stating therein that he had reason to believe that his income for the year ending on 30-6-1967 did not reflect the true particulars of his income. He was, therefore, required to deliver to the said Income Tax Officer a return in the prescribed form of his total income and total world- income assessable for the said year ending 31st of March to 30-6-1967 within 35 days of receipt of the said notice. The petitioner raised objections to the said notice vide application dated 10-2-1973, raising the following pleas:---
"(i) The notice issued by you under section 34 is in a mechanical fashion and does not specify the material which has been the basis of the issuance of this notice. It was imperative for you before issuing this notice to refer to the material.
(ii) Your action is mala fide in the result of malice and personal vendetta. You are fully aware of the fact that I am a complainant against you in a criminal case filed in the Court of A.D.M., Lahore, wherein you alongwith your colleague was summoned as an accused person. Aggrieved by the order of the A.D.M. you moved the High Court and the matter is now sub judice. In the circumstances, it is not desirable that you should have retained this file with you or have initiated the action against me under section 34 of the Act. Your entire action is tainted with malice, and as such illegal and without lawful authority. It is in the fitness that you better should not deal with this matter.
(iii) Your notice under section 34 of the Act, it is obvious, is based on surmises and conjectures and it seems as a counterblast to my complaint, you have resorted to this action on the plea that certain income has escaped assessment.
(iv) Your notice does not contain the particulars of the income which are suspected to have escaped assessment and as such it is wrong on your part to have invoked section 34 of the Income Tax Act.
(v) As a law-abiding citizen and an old income tax assessee I am co operating with the Income Tax Department, despite your constant harassment and am repeating the same return which was filed by me earlier for the year 20-6-1967."
4. This was followed by a return dated 12-2-1973 and is claimed to have been filed under protest in view of the objections raised in the petitioner's application (supra). Certain correspondence ensued between Abdul Malik and the petitioner on the question that he had no definite information to re-open a decided case of the petitioner of his own without seeking prior approval of the Inspecting Assistant Commissioner before issuance of notice under section 34 of the Act. The petitioner also submitted an application on 31-5-1973 challenging the jurisdiction of the Income Tax Officer to re-open the decided case on a number of grounds. However, Mr. Abdul Malik, Income Tax Officer by order dated 29-6-1973 re-assessed the petitioner for the Assessment Year 1967-68 and imposed upon him an additional tax of Rs.3,69,431. The petitioner challenged this order before the Income Tax Appellate Tribunal, which was dismissed on 8-11-1973. The petitioner invoked the Constitutional jurisdiction of this Court through Writ Petition No.356 of 1974. He also filed a reference in this Court under section 66 of the Act. Subsequently, the petitioner withdrew the reference and pursued the writ petition, which was accepted by judgment dated 9-7-1979 passed by a Division Bench of this Court, whereby the orders of the Income Tax Officer and the Income Tax Appellate Tribunal were declared without lawful authority on the ground of bias on the part of Mr. Abdul Malik, Income Tax Officer. The direction was, however, issued by the Division Bench of this Court to the Commissioner of Income Tax (Investigation) or his successor to get decided the case afresh in accordance with law by an Income Tax Officer nominated by either of them. The petitioner was also allowed to raise all objections, including the objection to the legality or validity of the proceedings under section 34 of the Act. Operative part of this judgment dated 9-7-1979 passed in writ petition No. 356 of 1974 reads thus:---
"In the result the order dated 29-6-1973 passed by the Income Tax Officer and the order dated 8-11-1973 passed by the Appellate Tribunal are declared as without lawful authority and of no legal effect. We direct the Commissioner Income Tax (Investigation) or his successor to assign the jurisdiction over this case to any other Income Tax Officer who shall proceed to decide the case afresh in accordance with law. The petitioner shall, however, be free to raise all objections including objection to the legality or validity of proceedings under section 34 of the Income Tax Act."
5. Mr. Zulfiqar Ali, Income Tax Officer, Circle 05, Zone 'B', Lahore, vide letter No.647, dated 23-2-1981, sent attested/photostat copies of notice under section 34 for the Assessment Years 1967-68 and 1968-69, which were earlier sent to the petitioner by Mr. Abdul Malik, Income Tax Officer. On 15-9-1980, the petitioner submitted an application to respondent No.4 raising objection to the validity of the proceedings started under section 34 of the Act on the ground that the proceedings earlier initiated by Mr. Abdul Malik, the then Income Tax Officer were not maintainable. Meanwhile, the case was entrusted to Mr. Saadat Saeed, Income Tax Officer, who vide his letter bearing No. 1063/II, dated 10-6-1980 gave the following reply to the query made by the Commissioner of Income Tax in his letter No. 051, dated 20-5-1980.
"In the above-mentioned letter a detailed report about the position of the case had been sent to you and instructions were sought in the matter. As the Assessment for the assessment year 1967-68 is involved in this case, its limitation expires on 30-6-1980, therefore, you are requested to issue the necessary instructions at the earliest".
6. The Commissioner of Income Tax gave reply vide letter No.K-156(1)/ 79/80/4099/J, dated 14-6-1980 to Mr. Saadat Saeed, Income Tax Officer, Circle IX, Lahore, in the following terms:---
"Before issuing instructions, I would like to be advised whether limitation for making the assessment is available upto 30-6-1980 and what are the reasons therefor. The High Court's judgment should be closely studied in this context. What are the grounds for re-opening of the assessment, I would like to be apprised. Another effort should be made to trace out the missing miscellaneous cover. If it is not forthcoming, we may have to re-construct the same. The assessee's main objection has been the validity of the notice. Taking the adverse view that it is invalid, should it not be advisable to issue and serve fresh notice on the assessee. The assessee may be informed of the circumstances necessitating, the issue of a fresh notice. Report on the above points should be submitted to me expeditiously".
7. Mr. Saadat Saeed, vide his letter No.1107, dated 23-6-1988 expressed the following opinion on the question of re-opening of assessment:--
"The assessee purchased property at 11, Abbot Road, Lahore on 14-2-1967 for Rs.4,00,000. A further sum of Rs.2,00,000 was claimed to have been paid to get this property vacated by the then occupants. The total investment thus comes to Rs. 6,00,000 which was not disclosed by the assessee at the time of filing the original return. Instead a sum of Rs.20,000 was only declared under the head 'Salaries'. It is, therefore, prima facie a deed of concealment and can safely be re-opened. The fresh notice under section 34 of the Income Tax Act, 1922, is certainly to be issued as the assessment has been set aside. Formal approval of the I.A.C. is however, to be sought before the issuance of the said notice as required under the law."
8. The Commissioner gave no instructions regarding issuance of fresh notice but issued direction to Mr. Saadat Saeed, Income Tax Officer that pending action be finalised with the I.A.C.'s approval and the contentions raised on the assessee's behalf be duly considered. It was further observed that the order before being released may be shown to him. (Underlining is mine; here in italics).
9. The Commissioner of Income Tax issued another instruction vide letter No.K-166(1)/79-80/4306/J, dated 28-6-1980 expressing his opinion that the petitioner is precluded to call in question the validity of notice issued under section 34 of the Act. Mr. Saadat Saeed, however, vide his letter No. 1111, dated 24-6-1980 conveyed his view to the Commissioner of Income Tax in the following terms:-
"However, a perusal of the record shows that the notice under section 34 of the Income Tax Act, 1920 issued on 10-1-1973 by the then Income Tax Officer for the Assessment Year 1976-68 was invalid and secondly the prior approval of the I.A.C. had not been obtained. In view of these legal facts the assessment proceedings are to be filed in this case.
"Your valuable instructions are however, solicited. " (Underlining is mine, here in
italics).
10. Upon receipt of the said letter, the Commissioner vide his letter No.K-156(1)/79-80/4265/3, dated 25-6-1980 issued the following instructions:--
The pending action should be finalised with the IAC's approval and contentions raised on the assessee's behalf duly considered. Your report as called for vide letter referred to above is still awaited. The order before being released may be shown to me". (Underlining is mine; here in italics).
11. The Commissioner also issued instructions to the Income Tax Officer vide letter No.K-166(1)/79-80/4306/J, dated 28-6-1-980 that in view, of provisions of section 154(e) of the Ordinance, 1979, the assessee was precluded to call in question the validity of the notice issued under section 34 of the Act, in that, he had already filed the Return in pursuance of notice issued to him under section 34 of the Act. Mr: Saadat Saeed, however, sought further instructions from the Commissioner of Income Tax vide letter No.24/Il, dated 29-7-1980 with the following remarks:--
"It is submitted that there is a complete absence of notice under section 3.4 for the assessment year 1967-68. The Notice referred in the record relates to the assessment year 1966-67 and not 1967-68. No doubt under the provision of section 154(e) of the Ordinance, 1979 an assessee cannot challenge the validity of a notice if return is filed in response thereto, but for this purpose the notice under section 34 should be for the same year for which return has been filed. A perusal of the record shows that the notice in question was issued for 1966-67 whereas the return was filed for 1967-68 and re-assessment under section 34 was also completed for - 1967-68.
In view of the facts stated above the re-assessment for 1967-68 could not be made nor it can now be made in the absence of notice under section 34 for 1967-68. The Lahore High Court has vacated the previous orders of the Income Tax Officer and the Tribunal and the assessee has been allowed to raise all objections including objection to the legality and validity of proceedings under section 34 of the Income Tax Act. The assessee is not therefore, precluded to call in question the validity of the notice under section 34 of the Income Tax Act. ".
12. The case was, however, withdrawn from Mr. Saadat Saeed and entrusted to Mr. Saeedullah who passed the impugned order on 17-6-1987 without issuing a fresh notice under section 34 of the Act, as opined by Mr. Saadat Saeed, as also without any challenge to the said opinion having been made during the interregnum.
13. The petitioner filed writ petition No. 2718 of 1981 on 28-5-1991 seeking therein a declaration that the proceedings for re-assessment of the petitioner for the Assessment Year 1967-68 were without lawful authority and of no legal effect. During pendency of the said writ petition and interim order dated 17-6-1981 was passed to the effect that the assessment, if any made, against the petitioner shall be subject to the result of that petition. However, on the same day, Mr. Saeed Ullah Khan, to whom, the case was entrusted, passed the order dated 17-6-1991 against the petitioner, which has been challenged in this writ petition. It may be observed at this juncture that the objections raised by the petitioner to the validity of the notice and to the initiation of fresh proceedings, were repelled in the impugned order and a sum of Rs. 3,69,431 was imposed as additional tax and proceedings under section 28 of the Act were also separately initiated.
14. Sh. Ziaullah, learned counsel for the petitioner submitted that Mr. Saadat Saeed, the Income Tax Officer, has already decided the matter. The case stood concluded. There was nothing pending before him. He had already held that the notice was issued for the assessment year 1966-67 and not for the disputed year 1967-68 and even that notice was issued without approval of the Income Tax Appellate Commissioner as required under section 34 of the Act and, therefore, without issuing a valid notice, reassessment was not warranted.
15. Learned counsel for the petitioner further argued that the impugned order was passed by the Income Tax Officer at the behest of his superior officer and on instructions imparted to him from time to time. It was not warranted by any provision of the Act. Even under section 7 of the Ordinance, which is not applicable to the case of the petitioner, an Income Tax Officer is competent to seek assistance, guidance or instructions from any other Income Tax Authority to whom he is subordinate during the pendency of any matter before him in case he feels it difficult in resolving the same because of its complicated nature, but cannot be permitted to discharge his quasi-judicial functions at the behest of his superior so as to render the provision of right of appeal of the assessee as nugatory. In support of his contention reliance was placed on Al-Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal (1993 SCMR 29).
16. Mr. Muhammad Ilyas Khan, learned counsel for respondents Nos.2 to 4, rebutted the pleas raised by learned counsel for the petitioner and argued that the question of re-assessment was to be considered by the Income Tax Authority afresh after the judgment in Writ Petition No. 356 of 1974 has been rendered, in which the objection against the validity of the notice was not raised by the petitioner though it was left open to be agitated before the Income Tax Officer. As regards the observations made by Mr. Saadat Saeed, the Income Tax Officer, that the notice was invalid, it was asserted, that the aforesaid observations could not be treated as an order finally concluded in favour of the petitioner. This was at best an opinion expressed at intermediary stage of the proceedings and the same did not operate ass bar to make an independent order on merits of the case. He further argued that although Mr. Abdul Malik, Income Tax Officer, nursed a grudge and was biased against the petitioner, but that has not affected the merits of the case, in that, the order passed by Mr.Abdul Malik, was quashed- by the High Court and the case was remanded for a fresh decision. He submitted that even the instructions issued by the Commissioner were withdrawn and the impugned order was passed by the Income Tax Officer after applying his mind to the facts of the case before him. He formed his independent view while passing the impugned order. Reliance was placed on the observations in paragraph 8 of the judgment in Al Ahram Builders (supra) that where an Income Tax Officer had independently applied his mind to the case, the factum simpliciter that the Income Tax Officer has invoked section 65 of the Ordinance at the behest of Income Tax Appellate Commissioner or some body else, would not render the notice invalid.
17. It is not disputed that under the Act there was no provision corresponding to section 7 of the Ordinance for seeking guidance and instructions in case of complicated nature where the Income Tax Officer was not able to understand or decide the case in a proper manner. Section 7 appears to have been introduced in the Ordinance to fill in this lacuna. Thus visualized, the Commissioner of Income Tax, in the exercise of his administrative power to control and supervise the working of his subordinate officers, cannot issue instructions/directions to his subordinates during the pendency of a quasi judicial matter in relation to assessment so as to defeat the right of appeal of the assessee. In the case of Al Ahram Builders (supra), it was held that the assessment proceedings is quasi judicial in the nature and, the Income Tax Officer could seek assistance or guidance from his superior who may be revisional or appellate authority only in difficult and complicated cases otherwise, the sanctity of the hierarchy which provides for original and appellate jurisdiction would be completely meaningless.
18. In the instant case, a bare perusal of the opinion recorded by Mr. Saadat Saeed would show that no difficult/complicated question arose which necessitated guidance from the Income Tax Commissioner. On the contrary, he expressed a definite view that the notice was invalid and that further proceedings could not commence unless a fresh notice was given with the approval of Income Tax Appellate Commissioner which was never obtained in the instant case and, therefore, reference to the Commissioner and directions issued by him from time to time were wholly unwarranted. The impugned order does not appear to have been passed independently by the Income Tax Officer but he was influenced by the opinion of the Commissioner of Income Tax who clearly stated that in view of the bar contained in section 154(e) of the Act, the petitioner could not challenge the validity of the proceedings, notwithstanding finding to the contrary recorded by the High Court in the post remand proceedings that the petitioner would be at liberty to raise any objection regarding the validity of the notice. The Income Tax Commissioner having himself prohibited Mr. Saadat Saeed, Income Tax Officer ... ... ... ... ... ... ... ... ... . ...that the opinion recorded by Mr. Saadat Saeed that "As the assessment for the Assessment Year 1967-68 is invalid in this case, its limitation expires on 30-6-1980, therefore, you are requested to issue the necessary instructions at the earliest", could not have been reviewed by his successor Income Tax Officer. Mr. Saadat Saeed had expressed himself in most unequivocal terms that the case could not be resurrected as the prescribed period for limitation for initiating proceedings for re-opening the disputed assessment had already expired and even otherwise the notice sent to the petitioner by Mr. Abdul Malik on the basis of which the impugned order has been passed was invalid. This opinion for all intents and purposes was final. The matter was intended to be consigned to record which was within the competence of Mr. Saadat Saeed, but the file was taken away from him and entrusted to Mr. Saeed Ullah Khan, another Income Tax Officer, who did not even discuss or make any observation regarding the opinion earlier expressed by his predecessor. The impugned order is, therefore, liable to be declared as without lawful authority and of no legal effect.
19. Mr. Muhammad Ilyas Khan also placed reliance on Muhammad Haneef Mannoo v. Income Tax Officer, Central Circle I, Lahore 1984 PTD 171 to contend that the writ prayed for should not be granted as remedy of appeal was provided against the impugned order under the relevant statute by way of appeal/reference.
20. There is no cavil with the proposition that the writ is ordinarily not to be issued where an adequate alternate remedy is available against the order impugned. However, the Constitutional jurisdiction can be competently invoked notwithstanding existence of an adequate remedy where the order is wholly without jurisdiction and/or mala fide. Refer Al Ahram Builders (supra), wherein it was held:--
"The tendency to bypass the remedy provided under the relevant statute to press into service Constitutional jurisdiction of the High Court has developed lately, which is to be discouraged. However, in certain cases invoking of Constitutional jurisdiction of the High Court instead of availing of remedy provided for under the relevant statute may be justified, for example when the impugned order/action is palpably without jurisdiction and/or mala fide. To force an aggrieved person in such a case to approach the forum provided under the relevant statute tray not be just and proper."
In the instant case, the impugned order has been held to be without lawful authority, in that, Income Tax Officer had not applied his mind to the facts of the case before him, independently, but was influenced by the various directives issued by his superior, namely, the Commissioner of Income Tax and, therefore the right of appeal of the assessee would become illusory as the appellate authority would not be able to act justly and fairly in view of the remarks made by the Commissioner from time to time in the instant case.
21. As the writ petition is liable to be accepted on the aforementioned grounds raised by Mr. Ziaullah, it is not necessary to deal with other points argued and raised in the writ petition.
In view of the aforegoing discussion, the impugned order dated 17-6-1981 passed by the Income Tax Officer, Circle-05, Zone 'B', Lahore, respondent No.4, and initiation of proceedings against the petitioner under section 28 of the repealed Income Tax Act, 1922, are hereby declared as without lawful authority and of no legal effect. The writ petition is accepted with no order as costs.
M.B.A./A-713/LPetition accepted.