SUTLEJ TEXTILE MILLS, LAHORE VS COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE
2001 P T D 2232
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
Messrs SUTLEJ TEXTILE MILLS, LAHORE
Versus
COMMISSIONER OF INCOME-TAX, CENTRAL ZONE, LAHORE
C.T.R. No.371 of 1991, decided on 24/04/2001.
(a) Income-tax Act (XI of 1922)-----
----Ss. 63(3) & 34---Income Tax Ordinance (XXXI of 1979), S.136---Validity of notice---Validity of any notice under S.22(2) or S.34 of Income-tax Act, 1922 or service of any such notice shall not be called in question after a return in response to such notice had been filed.
(b) Income-tax Act (XI of 1922)-----
----S.34---Income Tax Ordinance (XXXI of 1979), S.136---Reference to High Court ---Assessee sold out his factory but remained in possession---Sale was revoked after two years ---Assessee filed return on notice under S.34 of the Income-tax Act, 1922 declaring loss and claimed that it was Custodian of Enemy Property who was liable to be assessed---Validity---Finding of fact recorded by the Tribunal that during the period after sale of factory and its revocation, the assessee remained in possession, had not been challenged-- Contention that the Custodian of the Enemy Property should have been assessed for the intervening period was, not sustainable both legally as well as factually ---Assessee admittedly having remained in possession of the mill and having filed return, could not, in one guise or the other, claim that no income had accrued to it during the aforesaid period ---Assessee having filed returns in both the years could not be allowed to challenge the vires of the notice and having remained in possession of the mill it was the assessee who was liable to be assessed for the said period and not the Custodian of the Enemy Property.
Muhammad Iqbal Hashmi for Petitioner.
Muhammad Ilyas Khan for the Revenue.
ORDER
NASIM SIKANDAR, J.---This is a case stated by the Lahore Bench of the Income-tax Appellate Tribunal under section 136(1) of the Income Tax Ordinance, 1979. The following questions of law have been framed for our consideration and answer:---
(i) Whether on the facts and in the circumstances of this case the Company is debarred from challenging the validity of the assessment made by the Income-tax Act, 1922.
(ii)Whether on the facts and in the circumstances of this case proceedings under the Income-tax Act should have been initiated and continued against the custodian of enemy property in view of paragraph 5 of M.L.R. 119.
(iii)Whether in the facts and on the circumstances of this case, the company namely Sutlej Textile Mills Limited earned any 'income' during the period 30-12-1970 to 8-4-1972 so as to become liable to payment of income-tax under the Income-tax Act?"
2. The facts in brief are that assessee Messrs Sutlej Cotton Mills was an enemy property which was sold by the Federal Government at open auction in December, 1970. The management as well as the possession of the mill, however, remained with the assessee-company till 8-4-1972 when the Government revoked the sale of the mill under M. L. R. No. 119.
3. For the two years under review viz. 1972-73 and 1973-74 the assessee did not file a return. However, on being served with a notice under section 34 of the Income-tax Act, 1922 two returns were filed declaring loss at Rs.2,85,316 and Rs.6,11,984. The declared version was not supported by any evidence or books of accounts on the plea that due to revocation of sale all the records and books of accounts were taken into possession by the Government. Before the Assessing Officer it was also claimed that the sale having been revoked no income liable to tax accrued to the assessee. An alternate plea for acceptance of trading results was also made.
4. The Assessing Officer, however, after rejecting the aforesaid submissions proceeded to frame assessment at Rs.2,83,874 for the assessment year 1972-73 and at Rs. 4,55,795 for the assessment year 1973-74. On appeal both the assessments were, however, cancelled by the A.C. after holding that no income accrued to the assessee on account of revocation of the sale: The Departmental appeals before the Tribunal, however, were successful as the first appellate order was vacated and the order of the Assessing Officer was restored. In the process, the learned Tribunal by referring to section 63(3) of the Act concluded that the assessee having filed returns in response to the notice under section 34 of the Act could not assail the legality or challenge the validity of notice. Also a finding of fact was recorded that the assessee having remained in possession of the mill its claim that no income had accrued during this period was not acceptable. Thereafter, at the request of the assessee the aforesaid questions were framed and referred as noted earlier.
5. After hearing both the parties, we will agree with the learned Tribunal that having filed the returns in response to notice by the Assessing Officer the assessee could not turn about to deny that no income had accrued to it or that a notice under section 34 of the Act could not have been served upon it. Section 63(3) of the late Act, 1922 at the relevant time provided that validity of any notice under subsection (2) of section 22 or section 34 or validity of service of any such notice shall not be called in question after a return in response to such a notice had been filed. Apparently after declaring loss and failing to support the disclosed version the assessee sought to catch on a straw to support the novel contention that the sale in favour of new purchaser having subsequently been revoked no income liable to tax accrued to the assessee.
6. The claim that it was the custodian and not the assessee-company who was to be assessed for the period under review was also baseless on the face of it. The finding of fact recorded by the Tribunal that during the period after sale of the factory and its revocation by M.L.R. 119, the assessee company remained in possession, has not been challenged. Therefore, the contention that it was the custodian of enemy property who -should have been assessed for the intervening period is not acceptable both legally as well as factually. The assessee-company admittedly having remained in possession of the mill and having filed returns could not, in one guise or the other, claim that no income had accrued to it during the aforesaid period.
7. That being so we will hold that the assessee-company after having filed returns in both the years could not be allowed to challenge the vires of the notice issued under section 34 of the late Act, 1922. Also having remained in possession of the mill it was the assessee who was liable to be assessed for the aforesaid period and not the custodian of enemy property.
Answered accordingly
C.M.A./M.A.K./S-226/LOrder accordingly