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Petitioner: BEGUM NUSRAT BHUTTO VS Respondent: INCOMETAX OFFICER, CIRCLE V, RAWALPINDI
Court Name: Lahore High Court Judge(s): Aftab Hussain Title: BEGUM NUSRAT BHUTTO vs INCOMETAX OFFICER, CIRCLE V, RAWALPINDI Case No.: Writ Petition No, 4262 of 1979 Date of Judgment:1980-03-07 Reported As: PLD 1980 Lahore 449 Result: Appeal dismissed
JUDGMENT
JUDGMENT ' This order will dispose of Writ Petitions Nos, 4262, 4263, 4264, 4265, 4267, and 4266 of 1979. The first five petitions have been filed to challenge the re-assessment of income-tax payable by Mr. Zulfiqar Ali Bhutto, former Prime Minister of Pakistan while the last petition has been filed to challenge the assessm ent made on Mr. Zulfiqar Ali Bhutto for the year 1977-78. The impugned order of re- assessm ent in the first five petitions were passed under section 34/23(4)/24-B (3) of the Income- tax Act while the assessm ent for the year 1977-78 was made under section 23 (4) read with sestion 24-B (3). Section 24-B (3) was added since the income which had escaped assessment in the first five petitions and the income which was assessable in the last mentioned petition is said to have been earned by Mr. Zulfiqar Ali Bhutto during his lifetime but despite notices served on him under section 34 in the first five cases and under section 22 in the last case and despite his having been afforded many opportunities to file the returns, he did not file them till he died on 4-4-1979. 2. Mr. Zulfiqar Ali Bhutto (hereinafter to be known as assessee) had first held the office of the President of Pakistan till the enforcement of the Constitution of 1973 and thereafter held the office of Prime Minister of Pakistan till 5-7-1977. During the period he held these offices he bad been assessed to income-tax for the income-tax years, 1972-73, 1973-74, 197475, 1975-76 and 1976-77. On 8th of May, 1978 the Income-tax Officer found that on the basis of material on record Income for the year 1972-73, to 1976-77 appeared to have escaped assessment. He passed an order directing issuance of notices to the assessee under section 34 for all these years. He sent this order for approval to the Inspecting Assistant Commissioner of Income-tax who accorded his approval on 9-5-1978. The material on the basis of which this order (dated 8-5-1978) was passed by the
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Income-tax Officer consists of a news item in the Daily Nawa-i-Waqt dated 13-9-1977 furnishing particulars of declaration filed by the assessee under M. L. R.21. 3. Consequent upon this provisional finding about the assessment for the above years having escaped and the approval of the Inspecting Assistant Commissioner, the Income-tax Officer issued notices under section 34 to the assessee requiring him to deliver not later than 27-5-1978 returns on the attached forms, of his total income and total world income assessable for the years 1972-73 to 1976-77. Prior to these notices the Income-tax Officer had already issued a notice under section 22 of the Income-tax Act to the assessee on 28-1-1978 calling upon him to file return of his income for the year 1977-78. 4. It appears from Annexure P. 5 that the notice under section 22 dated 28-1-1978 issued for the income for the year 1977-78 was served on the assessee on 1-2-1978 while notices under section 34 were served upon him on 13-5-1978. Since the assessee did not file any return, a letter was written to him on 11-10-1978 (Annexure P. 5) drawing his attention to this fact and also stating that on 29-5- 1978 Mr. Hyder Ali of Messrs Hyder Bhimji & Co. Chartered Accountants and authorised representatives of the assessee had submitted copies of a letter from Mr. G. A. Memon Advocate dated 7-5-1978 addressed to the said representatives to the effect that in view of hearing of the appeal against the conviction of the assesee on a murder charge, which was pending before the Supreme Court, it was not possible for him to have consultation on tax matters and requisite action should be taken keeping this situation in view. It was also stated that Messrs Hyder Bhimji & Co. Vide their letter dated 29-5-1978 had also informed the Income-tax Officer that in future notice should be sent directly to the assessee since power of attorney given to them stood suspended by the assessee's daughter's letter dated 22-5-1978. The assessee was, therefore, informed that the next date for compliance was fixed as 31-10-1978. 5. In reply to this letter the assessee wrote on 24-10-1978 (Annexure P. 6) that he was not in a position to comply with the notice since he was in a death cell and reasonable time and opportunity was required to comply with such an important and complicated matter. He requested that the compliance with the notice should wait till the disposal of his appeal pending before the Supreme Court. 6. The Income-tax Officer vide his letter dated 30-10-1978 (Annexure P. 7) informed the assessee that he had already been given the facility of consultation with the Tax Advisor, vide Governor of Punjab Memorandum No, 13/122-50/MS-11. HS/78 dated 9-5-1978. He also informed him that the date of compliance had been extended to 30-11-1978. While receiving this letter on 15-11-1978 at 4- 30 p. m. The assessee wrote for a reasonable opportunity for consultation and joint sitting with his Advisor at a place other than the death cell. 7. The Income-tax Officer wrote back on 4-12-1978 (Annexure P. 8) extending the period of compliance of all the statutory notices till 15-1-1979. As regards the difficulties mentioned in the remarks referred to above, he advised the assessee to take up this matter with the authorities concerned. 8. On 14-12-1978 the assessee wrote (vide Annex. P. 9) to the Income-tax Officer to arrange meeting between him and his Tax Adviser in a separate room and also insisted that a number of meetings would be required with the Tax Adviser and with the Estate Manager for this purpose. 9. Despite these extensions given on different occasions and the facility of assessee's meeting with his Tax Adviser granted by the Governor of Punjab vide his Memorandum No, 13/122-50/MS-11. HS/78 dated 9-5-1978 no return was filed. The assessee died on 4-4-1979. It was thereafter that ex parte orders of assessm ent, Annexure P. 2 in each case were passed by the Income-tax Officer on 28-6-1979. 10: It appears from these orders that in all the cases of re-assessment previously the assessee had been assessed to income-tax on the basis of his salary and allowances as Member of the National
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Assembly and the royalty on a book. In the re-assessment orders he was assessed on sumptuary allowance, the amount of benefit of free conveyance, the amount of benefit of free electricity, gas and water bills as well as free furnished accommodation and the money spent by the Exchequer on three houses owned by the children of the assessee i. e. (i) 70 Clifton, Karachi, (ii) 71-Clifton, Karachi, and (iii) Almurtaza, Larkana, which had been declared his official residences. 11. The Income-tax Officer under the last head separated the amount spent on repairs and maintenance of these three houses and the amount spent on additions and alterations which according to him benefited the members of the assessee's family. He made no assessment on the amount spent on account of repairs and maintenance but held the assessee liable to tax on the amounts spent on additions and alterations in the three said houses. Which had benefited the members of the assessee's family. In fact the bulk of the amount of income added to the credit of the assessee was part of either this item or of sumptuary allowance. In the assessment for the year 1977 also the same principle was kept in view. 12. As a result of these orders demand notices (Annexure P. 1 in each case) were issued on 28-6- 1979 for payment of the following amount by 27-7-1979: {{TABLE}} Rs, 1972-73 58,356 1973-74 9,35,987 1974-75 5,76,057 1975-76 7,20,507 1976-77 3,61,398 1977-78 8,27,870 Total: 34,80,175 {{TABLE}} 13. These cases were admitted on first impression whether in the circumstances of these cases assessm ent against a dead person was legally justified. 14. It was conceded that appeals had been filed by the petitioner against all these orders and the same were pending before the Appellate Assistant Commissioner of Income-tax. It was, therefore, urged by the learned counsel for the respondent, though at the close of the arguments of the learned counsel for the petitioner, that there being an adequate remedy in the form of appeal, these petitions were not competent. 15. The learned counsel for the petitioner relied upon a number of cases of the Supreme Court of Pakistan in which the filing of the writ petition was held justified despite the provisions of appeal in the relevant statute and notwithstanding the pendency of appeal. 16. The purport of all the ,authorities produced by the learned counsel for the petitioner is that where a question of jurisdiction of the authority passing the impugned order is raised it is a question which can pre-eminently be decided by the High Court in the exercise of writ jurisdiction. I Messrs S. A. Haroon and others v. The Collector of Customs, Karachi the extraordinary jurisdiction of the Court was exercised since a question of jurisdiction was raised that the Collector of Customs had no authority to seize any particular goods, unless there was prima facie evidence to suggest at least that the goods were covered by a notification imposing any restriction or ban on its import. In Lt.-Col. Nawabzada Muhammad Amir Khan v. The Collector of Estate Duty the point was whether section 74-A of the Estate Duty Act was a complete bar to the Controller of Estate Duty taking any further action. It was held that the pendency of appeal was no bar to the entertainment of a writ petition in the ordinary circumstances on the ground that the order was wholly without authority. In another case Premier Cloth Mills Ltd., Lyallpur v. The Sales Tax Officer, the Supreme Court allowed1 2 3
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the appeal against the order of the High Court dismissing the writ petition and remanded the matter for consideration of the following questions which went to the root of jurisdiction:- (1) Whether the assessm ent was not barred by time? (ii) Whether the Sales Tax Authority was justified in imposing a penalty upon the appellant without affording him an opportunity? ' In that case the writ petition had been dismissed by the High Court on ground of appeal providing a more efficacious remedy. In Salahuddin and others v. Frontier Sugar Mills, temporary injunction was refused by the civil Court For this reason the pendency of the civil suit was held to be no bar to the entertainment of a petition for exercising the writ jurisdiction. 17. These are cases in which the appeal or civil suit was pending but there are a number of other cases in which an alternative remedy was provided for but the Court held that the writ jurisdiction was attracted where the complaint was against the exercise of a jurisdiction not vested in the authority. The Burmah Oil Co. (Pakistan Trading) Ltd., Chittagong v. The Trustee of the Port of Chittagong, Pakistan and another v. Qazi Ziauddin, Nagina Silk Mill, Lyallpur v. The Income-tax Officer and another, Abdul Ghani and another v Subedar Shoedar Khan Company and others, Messrs Usmania Glass Sheet Factory Ltd., Chittagong v. Sales Tax Officer, Chittagong and The Murree Brewery Co. Ltd. v. Pakistan etc.. 18. Learned counsel for the respondent placed reliance upon Batala Engineering Co. Ltd., Raja Habib Ahmad Khan v. Income-tax Officer, Nizamuddin Ahmad v. Commissioner of Sales Tax and 3 others and Messrs The International Body Builders v. Commissioner of Income-tax, Lahore and another for the proposition that no writ is competent without exhausting any legal remedy provided by the concerned legislation. Thus the writ is not competent where an appeal is pending or where a reference under the provisions of the Income-tax Act can be made to the High Court. 19. I agree with the learned counsel for the respondent that where there is another adequate and efficacious remedy open to the petitioner, a petition under Article 199 of the Constitution of 1973 would be incompetent unless the legal remedies including remedies as provided in the Income-tax Ac are exhausted. But one essential condition for applicability of this rule I that the alternative remedy should be adequate and efficacious. It appear clear from the authorities cited at the Bar that where the question of jurisdiction of the Authority passing the impugned order is raised, the remedy o appeal is not as adequate or efficacious as the writ jurisdiction of the High Court and consequently in such cases a petition under Article 199 would be competent. 20. Though the learned counsel in the present cases raised a number of points legal as well as on merits but ultimately he confined his arguments to questions which were about the Income-tax Officer having acted without lawful authority or without lawful jurisdiction. He conceded very fairly that the other points were points which could be urged only before the appellate authority and he reserved those points for raising them there. The preliminary objection, therefore, fails. 21. The learned counsel for the petitioner has confined his arguments to the following questions:- (i)Whether under the provisions of the Income-tax Act, 1922, an assessment or re-assessment can be made on a person who is dead and if so whether it can be made without notice to the legal representatives? (ii) Whether the notice under section 34 was a valid notice although it did not communicate either the particulars on the basis of which the respondent had formed his opinion about the fitness of the case for re-assessm ent or the fact that he (respondent) had obtained the approval of the Inspecting Assistant Commissioner of Income-tax as alternatively required by section 34? (iii) No reasonable opportunity was afforded even to the assessee before the re-assessment or assessm ent was made. 22. The learned counsel also raised a point that the proceedings were entirely tainted with mala fide but when I pointed out to him that this point was not raised in the letter dated 9-7-1979 (copy4 5 6 7 8 9 10 11 12 13 14
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of which is Annexure P. 10) written to the Commissioner of Income-tax for stay of demand and it appeared to be an after thought, he did not address any argument on it. 23. The primary argument of the learned counsel for the petitioner was that 'person' as defined in section 2 (9) of the Income-tax Act, 1922 included only an individual and this definition could not be strained to include a dead person who was a non-entity for purpose of income-tax. Section 3 or 4 the only charging sections do not allow either specifically or even impliedly the tax to be charged against a dead person. Section 24-B even if it allows action to be taken under the Income-tax Act against a dead person is only a machinery section as distinguished from the charging section and could not confer any jurisdiction upon the respondent to assess a dead person unless he was assessable to Income-tax under the charging section 3. Since section 3 of the Income-tax Act is not applicable to a dead person no action could be taken by resort to section 24-B to assess a deceased assessee. 24. The learned counsel also submitted that section 24-B on its own language was not applicable to a case of re-assessm ent under section 34. It could at most apply to case of first assessment made on notice served under section 22 (1-A) of the Income-tax Act. In any case no assessment under section 24-B can be made without service of notice upon the heirs of the deceased assessee. 25. He further submitted that the notice issued under section 34 was not a valid notice in so far as it did not disclose that there was any material before the Income-tax Officer to infer escapement of assessm ent, nor did it indicate that the necessary. Approval of the Inspecting Assistant Commissioner had been obtained. He also submitted that there was no material on the record to prove that any income of the assessee had escaped assessment. When his attention was drawn to the order of the Income-tax Officer dated 8-5-1978, on which the Inspecting Assistant Commissioner had put the seal of his approval on 9-5-1978, the learned counsel argued that the material on record consisted only of a news-item in the Daily Nawa-i-Waqt about the alleged declaration filed by the assessee in compliance with the provisions of Martial Law Regulation 21. Lastly the learned counsel denounced as grossly insufficient the opportunities given to a person confined in jail, to file the return. 26. On the first point whether the word 'person' as defined in section 2(9) of the Income-tax Act includes a deceased person the learned counsel relied upon the Commissioner of Income-tax v. Mr. Elis C. Reid and The Punjab Province v. The Federation of Pakistan. The learned counsel also referred to Salmond on Jurisprudence XI, Edn., para. 113 which deals with the legal status of a dead man. The principle is stated there as follows :- "Dead men are no longer persons in the eye of the law. They have laid down their legal personality with their lives, and are now as destitute of rights as of liabilities. They have no rights because they have no interests. There is nothing that concerns them any longer, neither have they any more a portion for ever in anything that is done under the sun. They do not even remain the owners of their property until their successors enter upon their inheritance." 27. The learned counsel pointed out the distinction between the provisions of the Income-tax Act of 1922 and the Act of 1979. He submitted that in the present Act care has been taken to include the liability of a deceased person in the charging section also, because the definition of 'assessee' in section 2(6) of the Act of 1979 also includes a person who is deemed to be an assessee and section 74 specifically deals with the liability of a dead person. He submitted that though section 74 is on the same lines as section 24-B but while in the new definition of 'assessee' even a person who is deemed to be an assessee is included, this deeming clause was not added to the definition of 'assessee' in the Act of 1922 and this made all the difference because the charging section would not be applicable under the old Act to a person "who is deemed to be an assessee". He also referred to another case, Commissioner of Income-tax v. Amarchand N. Shroof.15 16 17
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28. The quotation relied upon by the learned counsel belongs to the realm of jurisprudence and abstract law and cannot be applied to Statutes which inhere a deceased person also with rights and liabilities. This would be clear from the footnote of section 113 of Salmond on Jurisprudence where an example is given which is as follows : "(j) The concept of hereditas iacens in Roman law made some approach to the idea of continuing the deceased's personality. It was said that the inheritance, in the interval between the death and the entry of the heirs, represented a persona (personae vice fungitur : 46.1.2?. After some disagreement it became settled that the persons represented was that of the deceased ; but it was so only for some purposes, not for all. See Buckland, Text Book of Roman Law (2nd Edn. 1932), 306 ff. ; Buckland and McNair. Roman Law and Common Law (2nd Edn.) 154-5 ; Duff, Personality in Roman Private Law (1938), Chap. VII. ' A good example of this is found in the amendment of Order XXII of the Code of Civil Procedure by the Law Reforms Ordinance, 1972. Under the pre-amendment law a suit or appeal abated on the death of a plaintiff or defendant if the right to sue or be sued did not survive to the plaintiff (plaintiffs) or defendant (defendants). The suit or appeal could not, therefore, proceed unless the legal representatives of the deceased were brought on record within the time fixed by the Limitation Act. By the amendment a concept of treating the dead person as alive in the absence of his legal representatives, has been introduced and it is now provided that the Court may continue with the suit or appeal notwithstanding the death of the plaintiff/appellant or the defendant/respondent and proceed to announce the judgment which will take effect as if it had been announced before the death took place. Similar is the effect of section 24-B (3) of the Income-tax Act. 29. It is unnecessary to add illustrations. The power of authority of the present day Legislature is not limited to the following of principles of jurisprudence and treat a dead man as a non-entity which in actual fact is the legislature can treat the dead man as alive as for certain purposes, it can treat a living human being as dead for example in cases of bankruptcy or insolvency. 30. In Commissioner for Income-tax v. Mr. El. C. Reid a notice was served under section 22(2) before the death of the person earning the income. The return was filed by Mr. Reid as administrator after the death of Sir Henry and Mr. Reid was assessed to income-tax in his capacity as administrator. The Bombay High Court held that the definition of 'assessee' in the Income-tax Act applied only to a living person. It was held that where an assessee is served under section 22 of the Income-tax Act requiring him to make return for income-tax and he dies before making the return of his income, it is not legal for the Income-tax Officer to make an assessment under section 23(4) of the Act on the deceased assessee. 31. Considering the definition of 'assessee' which means "a person by whom income-tax is payable it was held that the definition applied only to a living person. After going through the relevant provisions of the Act it was held that it is to be noticed that there is throughout the Act no reference to the decease of a person on whom the tax has been originally charged, and it is very difficult to suppose the omission to have been unintentional and as such a deceased person cannot be held liable without doing violence to the language of section 23(4) and section 27. 32. It was in view of this judgment of Bombay High Court that section 24-B was inserted by section 11 of Act 18 of 1933 known as the Income-tax (Second Amendment) Act, 1933. This section was thus introduced to remove the difficulty pointed out by the Bombay High Court in the above case. Its last two subsections underwent slight change by virtue of Act VII of 1939 and Ordinance XV of 1959 but those changes are not for the present material. It is, therefore, not necessary to refer to them at this stage. However in view of the amendment of law by introduction of section 24-B the difficulty as pointed out in the Bombay authority was removed. The principle of that authority can no longer be applied to the interpretation of Income-tax Act, 1922.
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33. The case of Punjab Province v. Federation of Pakistan, is not relevant since in that case what was held was that the Punjab Province though it might be a person was not an association of persons for the purpose of Income-tax Act. 34. Section 24-B as it stands at present is as follows :- "24-B.-(1) Where a person dies, his executor, administrator or other legal representative shall be liable to pay out of the estate of the deceased person to the extent to which the estate is capable of meeting the charge the tax assessed as payable by such person, or any tax which would have been payable by him under this Act if he had not died. (2) Where a person dies before expiry of the time limit prescribed under subsection (1-A) of section 22 or before he is served with a notice under subsection (2) of section 22 or section 34, as the case may be, his executor, administrator or other legal representative shall, on the serving of the notice under subsection (2) of section 22 or under section 34, as the case may be, comply therewith, and the Income-tax Officer may proceed to assess the total income of the deceased person as if such executor, administrator or other legal representatives were the assessee. (3) Where a person dies, without having furnished a return which he has been required to furnish under the provisions of section 22, or having furnished a return which the Income-tax Officer has reason to believe to be incorrect or incomplete, the Income-tax Officer may make an assessment and for this purpose may, by the issue of the appropriate notice which would have had to be served upon the deceased person had he survived, require from the executor, administrator or other legal representative of the deceased person any accounts, documents or other evidence which he might under the provisions of sections 22 and 23 have required from the deceased person." 35. All the three subsections start with the words "where a person dies" making it perfectly clear that section 24-B in all these three subsections deals with a situation where a person dies and…
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