Full Judgment Text & Judicial Ruling

1965 P T D 428

1965 P T D 428

[Dacca (Pakistan)]

Before A. Sattar and Sikandar Ali, JJ

Petition No. 339 of 1963

MESSRS CHITTAGONG ENGINEERING & ELECTRIC SUPPLY Co. LTD.- Petitioner (in all the three Petitions)

Versus

(1) CERTIFICATE OFFICER, DACCA,

(2) CERTIFICATE OFFICER, RANGPUR,

(3) EAST PAKISTAN WATER & POWER DEVELOPMENT AUTHORITY- (Auction-Purchaser),

AND

(4) INCOME-TAX OFFICER, COMPANY'S CIRCLE IV, CHITTAGONG,

Petition No. 377 of 1964

(1) INCOME-TAX OFFICER, COMPANY'S CIRCLE II, (Now COMPANY'S CIRCLE VI), CHITTAGONG,

(2) THE DEPUTY COMMISSIONER, RAJSHAHI, AND

(3) THE CERTIFICATE OFFICER, COLLECTORATE BUILDING, DACCA,

AND

Petition No. 389 of 1964

(1) INCOME-TAX OFFICER, COMPANY'S CIRCLE II, CHITTAGONG, (Now COMPANY'S CIRCLE VI),

AND

(2) CERTIFICATE OFFICER, COLLECTORATE BUILDING, DACCA- Respondents

Petitions Nos. 339 of 1963, 377 and 389 of 1964, decided on 21st December 1964.

(a) Public Demands Recovery Act, 1913, Ss. 9 & 13--Demand relating to amount of income-tax - Certificate-debtor denying liability and filing objections with Certificate Officer-Sale of assessee-certificate-debtor's property without disposing of such objections, held, to be without lawful authority-Provisions of S. 13 mandatory-Denial of liability by certificate-debtor not affected by a prayer for adjustment of demand-Word "shall" in S.13 does not mean "may"-Certificate-debtor's omission to verify objections only a formal defect-Sale being void, bona fide auction purchaser not protected - Sale held on account of four certificates "consolidated together" has no sanction in Act.

Held, that a sale of property belonging to the assessee, certificate-debtor, without disposing of objections filed by him under section 9, Public Demands Recovery Act, 1913, is a sale without lawful authority and void ab initio.

Provision of section 13 is mandatory and subject to the proviso thereto a Certificate Officer has no jurisdiction to proceed with the execution of a certificate until and unless he has disposed of the objection, if any, filed under section 9.

The assessee, certificate-debtor, while clearly denying his liability made a prayer for adjustment of the demand against dues owing from Government:

Held, that under section 9 (1) a certificate-debtor is free to deny his liability in part and in this view of the matter the petitioner company may be said to have been rightly advised to make the said prayer for adjustment as it could not be sure whether any amount would or would not be found due from it on a proper assessment in accordance with the law.

Neither the contract nor the intention of section 13 can be said to demand that the word "shall" occurring in that section may be taken to have been used in the sense of "may".

Ram Padarath Mahto v. Mishri Sinha and another A I R 1961 S C 480 considered.

Omission to verify objection is only a formal defect.?

Syed Mohiuddin and others v. Pirthichand Lal Chowdhury 19 C W N 1159 ref.

A sale ab initio void is not protected by the plea that the vendee was a bona fide auction purchaser who was not a party to proceedings for sale.

Zain-ul-Abdin Khan v. Muhammad Asghar Ali Khan and others I L R 10 All. 166 and Piarilal v. Hanif-un-Nissa Bibi and another I L R 38 All. 240 distinguished.

There is no sanction either in the Public Demands Recover' Act, 1913 or in the Rules made thereunder for a sale for the total sum due on account of four certificates consolidated together.

(b) Constitution of Pakistan (1962), Art. 98 read with Public Demands Recovery Act, 1913, S. 23-Sale of property held to recover income-tax dues challenged as "without jurisdiction"-Assessee who does not avail of remedy under section 23, Public Demands Recovery Act, 1913, not barred from proceeding under Art. 98, Constitution of Pakistan (1962)-[Tasadduk Rasul Khan v. Ahmad Husain and another I L R 21 Cal. 66 and Roshan Lal Prithi Mal v. Shanti Lal and others A I R 1933 Lah. 186 distinguished].

(c) Civil Procedure Code (V of 1908), O. XXI, r. 22-Nonservice of process in, proceedings for sale in execution-Affects jurisdiction of Court and renders proceedings including sale void-- [A I R 1930 Cal. 348 and A I R 1928 All. 74 considered.]

Hamidul Huq Chowdhury, Badrul Haider Chowdhury and M. Nurullah for Petitioner (in all the three Petitions).

M. H. Khandker with Sohrab Ali for Respondent No. 3 (in Petition No. 339 of 1963).

K. M. Subhan for Respondent No. 1 (in Petition No. 339 of 1963).

Syed A. B. M. Hossain for Respondent No. 2 (in Petition No. 339 of 1963).

Md. Nurul Huda, K. H. Rashid and KK.M. Subhan for Respondents Nos. 1-3 (in Petition No. 377 of 1964) and for Respondents Nos. 1 and 2 (in Petition No. 389 of 1964).

Dates of hearing: 23rd, 24th November and 12th December 1964.

JUDGMENT

SIKANDAR ALI, J.--These three petitions under Article 98 of the Constitution by Messrs Chittagong Engineering and Electric Supply Co. Ltd., being Petitions Nos. 339 of 1953 and 377 and 389 of 1964, have been heard together and are disposed of by this judgment.

By the first-mentioned petition the petitioner calls in question the certificates filed under section 6 of the Public Demands Recovery Act by the Certificate Officer, Dacca, for income-tax demands relating to the assessment years 1951-52 and 1950-51 in Certificate Cases Nos. 228 I. T./1954-55 and 229 I. T./1954-55 corresponding to O. D. Cases Nos. 5 and 6 of 1962-63 of the Certificate Officer, Rangpur, as well as the sale held in execution of those certificates. Writ Petition No. 389 also aims at the same relief with respect to Case No. 229 of I. T. of 1954-55, the only additional feature being that the assessment of the income-taxes in question also has been challenged as being illegal and void. Similarly the subject matter of challenge in Writ Petition No. 377 of 1964 is the assessment for the year 1952-53 together with the certificate based thereon and the notice issued under section 46 (5-A) of the Income-tax Act, which are sought to be declared as having been made, filed and issued without lawful authority and as such being of no legal effect.

The material facts, which are mostly matters of records, may be briefly stated as follows:-

On the requisition of the respondent Income-tax Officer the Certificate Officer, Dacca, filed four separate certificates, being Nos. 228/53-54, 229/54-55, 230/54-55 and 49/59/60 and caused service of the notices under section 7 of the Public Demands Recovery Act upon the petitioner-company in respect of the first mentioned two on 7-5-55. The petitioner-company thereafter entered appearance and filed written objections under section 9 of the said Act denying liability in each of these two cases on 2-8-55. The Certificate Officer then forwarded copies of these objections to the certificate-holder, i.e., the respondent Income-tax Officer, for reply, To this after repeated adjournments and reminders the latter responded for the first time on 25-2-57 with a request that the cases might be kept pending till the amount of compensation due to the assessee-company i.e., the petitioner for some of its electrical undertakings taken over by the Government of East Pakistan was finalised by the C. L. and 1. Department. That was followed by another period of no action till the Certificate Officer at the instance of the certificate holder by his order dated 2-12-58 asked for information from the C. L. and I. Department as to whether the amount of the said compensation had been assessed. There was however little or no progress till 5-4-63 when on receipt of a D. O. letter from the Government in C. L. and I. Department the Certificate Officer, Dacca, sent the certificates to his counter-part at Rangpur. The latter thereafter appears to have proceeded with the certificates, registered as O. D. Cases Nos. 5, 6 and 8 of 1962-63 of his file and taken steps to recover the dues whereon the petitioner company filed on 21-5-63 a petition before the Certificate Officer, Rangpur, objecting to the sale on the ground that the certificates in question were void and without jurisdiction. From the order dated 28-5-63 passed by the Certificate Officer, Dacca, it appears that the Certificate Officer, Rangpur, sent him intimation of the objection preferred by the petitioner-company and lie thereon requested the latter to forward a copy of the same to him. On receipt of the copy thereafter he called for a report from the respondent Income-tax Officer on the points raised therein (vide order dated 27-6-63) but in the meantime, i.e. while the Certificate Officer, Dacca was awaiting receipt of the copy of the objection petition, the Certificate Officer, Rangpur, put up the petitioner-company's electrical undertaking at Rangpur to auction at which on 15-6-63 the respondent No. 3 in Petition No. 339 purchased the same in one lot for the consolidated amount due under all the four certificates aggregating a sum of Rs. 1,21,000. This was done on rejection of, yet another petition filed by the petitioner company on that date raising objection that the sale could not be held for an unascertained amount, as explained in the petition. The petitioner-company was thus forced to prefer an appeal under section 23 before the Certificate Officer, Dacca, in whose office the original certificates had been filed for setting aside the sale on the ground inter alia that the same having been held without disposing o f the objections filed under section 9 contravened the mandatory provision of section 13 and was therefore without jurisdiction. The Certificate Officer, Dacca, thereon passed the following order:-

"Heard lawyer. Put up with the case records. Stay confirmation of sale till 29-8-63."

Upon production of a copy of the order along with a copy of the application under section 23 before the Officer who was holding charge in the absence of the Certificate Officer, Rangpur, on leave, the petitioner was told that no action would be taken till the latter resumed duties on the expiry of his leave. Apprehending however that confirmation of the sale might not be stayed, the petitioner Co. approached this Court under Article 98 of the Constitution.

Petition No. 389 is also directed against one of the cases challenged in Petition No. 339, to wit Certificate No. 229 I. T.-54-55 for a demand of Rs. 38,873. It has been further alleged therein that originally the petitioner-Co's. total tax liability inclusive of super-tax for the year 1950-51 was assessed at Rs. 86,967 but subsequently the respondent Income-tax Officer re-opened the proceedings under section 34 of the Income-tax Act and revised the said assessment on the ground that the Service fee of Rs. 67,700 had been wrongly deducted therein. As a result of this revision the total tax liability was found to stand at Rs. 1,00,667 which after deducting the payment already made left the aforementioned amount of the certificate i.e., Rs. 38,873 as the outstanding balance payable by the petitioner-Co., as per demand notice served upon the petitioner-Co. on 31-7-53. On appeal however, the Appellate Assistant Commissioner exempted the service fees from tax liability by his decision dated 28-4-57 running as follows:-

"I hold that service fees received by the appellant were capital receipts and not revenue receipts. The amounts included in the assessments for 1950-51 and 1951-52 on account of receipts from service fees should therefore be excluded from the assessments."

In obedience to the above the Income-tax Officer on 31-12-57 revised the assessment for 1950-51 by excluding the service fee from the total income as a result of which the total demand stood at Rs. 792.

Again the petitioner-Co. had to pay a sum of Rs. 43,196 for increased cost of energy purchased by it during the accounting year 1949-50 from the East Bengal Railway Authority in pursuance of a notice served by the latter notifying such increased cost of generation on 6-11-50 and accordingly claimed the entire amount as debitable to the accounting year 1950-51 but the respondent Income-tax Officer rejected this claim on the ground that the same related to the expenses for the earlier year. The same view appears to have been taken thereafter by the Appellate Assistant Commissioner and the Income-tax Tribunal as well though the latter in its order made the following observations:-

" . . . . . However that may be the Income-tax Officer found that out of this amount a sum of Rs. 34,742 related to the relevant accounting year 1950-51 and accordingly allowed the assessee's claim to this extent. The balance of Rs. 43,196 admittedly to the accounting year 1949-50 and although the assessee knew about the demand after it had closed the accounts for 1949-50, the charge was made known to the assessee on the 6th of November 1950, that is to say, long before the assessment from 1950-51 was completed. As the amount in question does not relate to the account year under appeal the assessee's claim must fail. It however appears that the steps have since been taken to re-open the assessment for 1950-51 by initiating proceedings under section 34. The Departmental Representative has no objection to the assessee preferring a claim to the amount in dispute in connection with the assessment for 1950-51. If however there be any legal hitch, we have no doubt that the revenue authorities will by an executive order undo the mischief by allowing the expenses which constituted a legitimate charge in connection with the assessment year 1950-51."

The petitioner-Company thereon approached the respondent Income-tax Officer for giving effect to the above but the latter regretted that he was not competent to do so on the ground that the assessment for 1950-51 had since been completed. The Commissioner of Income-tax was then moved in revision and he by his order dated 28-12-55 directed the Income-tax Officer to allow the amount as legitimate trade expense for the relevant year and revise the assessment in question accordingly. In the meantime i.e. on 30-3-55 the Income-tax Officer had caused a certificate to be filed for a demand of Rs. 38,873 and that together with some claims eventually culminated in the auction sale held on 15-6-63, as already stated above. It is said that had the Income-tax Officer given effect to the order of the Commissioner referred to above, there would have been nothing due for 1950-51 at all from the petitioner-Company, which would on the other hand have been entitled to refund of a substantial sum out of the amount already paid by it.

In Petition No. 377, which is directed against the assessment for the assessment year 1952-53, i.e. the certificate filed in Case No. 230 I. T. of 1954-55, the case made by the petitioner is that in assessing the tax liability of the petitioner-company for the said year at Rs. 2,61,805 the respondent income-tax Officer did not deduct from the taxable income the service fee of Rs. 1,04,051 which is a capital receipt and after deducting therefrom the amount already paid caused the above-mentioned certificate to be filed for the balance of Rs. 1,68,024 during the pendency of the appeal preferred before the Appellate Assistant Commissioner against his assessment. On service of notice under section 7 in connection with that certificate the petitioner-company filed on 4-6-55 written objection under section 9 denying liability and challenging the legality of the demand on the score of inclusion of the service fee in the taxable income. The petitioner company also moved the different Authorities of the Income-tax Department variously but to no purpose. Ultimately the Certificate Officer, Dacca, by his order dated 3-11-55 rejected the aforesaid objection filed under section 9 and the application filed under section 53 for revision of that order also proved abortive. Thereafter on 24-8-57 the Appellate Assistant Commissioner disposed of the appeal preferred before him holding that the amount included in the assessment on account of receipt from service fees should be excluded had directed the Income-tax Officer to revise the assessment accordingly. The latter however, did not give effect to that order and proceeding instead with the certificate cases on the basis of the original demands caused the assets of the petitioner-Company to be sold on 15-6-63 as already stated above. Even after that the respondent Income-tax Officer issued on 14-7-64 another notice under section 46 (5-A) for realisation of the tax dues of Rs. 1,68,024 for 1952-53. In those premises the petitioner Company impeaches the Certificate (No. 230 I. T./1954-55) as well as the said notice under section 56 (5-A) as illegal and void on the grounds that the order of the Appellate Assistant Commissioner has not been given effect to and that the liability has not been legally determined.

Three separate affidavits-in-opposition have been filed in Petition No. 339, one on behalf of the respondent Income-tax Officer (respondent No. 4), the second on behalf of the Certificate Officers, Dacca and Rangpur (Respondents Nos. 1 and 2), and the third on behalf of the E. P. WAPDA (respondent No. 3). In the affidavit on behalf of the Certificate Officers, which has been affirmed by Mr. A. B. M. A. Aziz, the then Joint Deputy Commissioner, Rangpur, it has been asserted that the petitions filed by the petitioner Company on 4-6-55 in Certificate Cases Nos. 228 and 229 could not be said to come within the provision of section 9 inasmuch as the liabilities were rot denied and there were prayers for adjustment of the dues against the alleged dues of the Provincial Government to the petitioner. It is further said that this is also shown by its petition dated 18-11-55 admitting the liabilities and praying for adjustment of the same against the amount due to the Company from the Government. Reference has then been made to the difficulty felt by the Government in acceding to the prayer of the certificate holder i.e. the respondent Income-tax Officer, for adjusting the petitioner-company's liabilities against the income-tax payable by one of its Directors viz. Mr. K. K. Sen, in his personal capacity and it has also been pointed out that the objection under section 9 filed in Certificate Case No. 49/1959-60 beyond the statutory period was rejected by the Certificate Officer and the appeal preferred against it also was dismissed for non-prosecution. The deponent has then stated that on receipt of a telegram from the learned counsel of the petitioner the Certificate Officer, Rangpur, wrongly stayed the proceedings before him under intimation to the Certificate Officer, Dacca, but that was later vacated by the learned Additional Deputy Commissioner in revision under section 53 and in this view of the matter the order of the Certificate Officer, Dacca, dated 28-5-63 asking for a copy of the objection filed under section 9 before the Certificate Officer Rangpur, was invalid and without jurisdiction. Further contention of the deponent in this connection is that the petition filed on the date of the sale i.e. 15-6-53 objecting to the sale had no legal sanction as it did not come under any provision of the Public Demands Recovery Act and as such the Certificate Officer, Rangpur, rightly rejected the same and held the sale as he did. Similarly the other averments made by the petitioner-company in its affidavit have been traversed after pointing out that the sale was duly confirmed on 15-8-63. It has been finally asserted that the certificates were executed in accordance with the law and the proceedings were legal, valid and bona fide.

According to the respondent Income-tax Officer, most of the allegations averred in the petitioner-Company's affidavit are matters of record relating to the certificate proceedings on which he has no comment to make. As to the demands that led to the impugned sale, he has, however, asserted that requisitions for realisations of the outstanding Government revenue by way of income tax for the assessment years in question had been issued by the then Income-tax Officer, Companies Circle IV as in spite of demands the petitioner did not pay a single farthing towards the satisfaction of those dues and as such it is not correct to say that the action of the Certificate Officer in those circumstances was without jurisdiction or without any lawful authority.

The affidavit-in-opposition filed on behalf of the Auction Purchaser i.e., the respondent No. 3 representing the E. P. WAPDA is more or less a traverse of averments made in the affidavit of the petitioner-company coupled with the contention that the E. P. WAPDA is a bona fide purchaser whose interest cannot be affected in any view of the matter.

The other two cases also are resisted by the respective respondents therein i. e., the Income-tax Officer and the Certificate Officer, Dacca in Petition No. 389 and the Deputy Commissioner, Rajshahi in addition to the said two officers in Petition No. 377 and in each of them the affidavit-in-opposition has been affirmed by the respondent Income-tax Officer. In relation to the demand and proceedings challenged in the former he has admitted that through oversight the revisional order could not be given effect to adding, however, that the assessment has since been revised and the refundable amount adjusted against the assessment year 1960-61. In reply to this the petitioner-company has pointed out by this revision made on 17-9-64 in respect of the assessment order for 1950-51 a sum of Rs. 23,506 was determined to be refundable and that in view of this revised assessment the Certificate Case No. 229/I. T/54-55 ceased to have any basis and as such the sale held in pursuance thereof is illegal and liable to be set aside. As to Petition No. 377 the affidavit in-opposition recites inter alia that due to a misreading of the assessment order for 1952-53 as well as the order passed in the appeal preferred against the same, it was presumed through mistake that the service fees were not included in the income assessed till the position became clear on receipt of the detailed notice demanding justice but before the correction could be made on collection of all the relevant papers, the petitioner-company had moved this Court under Article 98. It has then been stated that the demand in question as well as the notice under section 46 (5-A) has since been revised and the petitioner-company accordingly can have no further cause for grievance.

Mr. Hamidul Haq Chowdhury, appearing on behalf of the petitioner-company has taken just one short point in impeachment of the sale held in executing of Certificates Nos. 228 and 229 and it is that the said sale having -been held in contravention of the mandatory provision of section 13 is a nullity. In amplifying the contention he has pointed out that in respect of both the Certificates Nos. 228 and 229 which were filed on 30-3-55 by the Certificate Officer, Dacca, notices under section 7 were served on his clients on 7-5-55 and the latter thereon filed separate written objections denying its liability on 2-8-55 but the impugned sale was eventually held on 15-6-63 without disposing of those petitions as enjoined under section 13. In this connection, learned Advocate has involved our attention to certain sections of the Public Demands Recovery Act. A Certificate Officer is authorised on receipt of a proper requisition to file a certificate under section 4 or 6 according as the demand is due to the Collector or to a person other than the Collector. Duty of the Certificate Officer on the filing of a Certificate is enjoined under section 7 which provides

"When a certificate has been filed in the office of a Certificate Officer under section 4 or section 6, he shall cause to be served upon the Certificate debtor, in the prescribed manner, a notice in the prescribed form and a copy of the certificate."

Section 8 deals with the effect of this service while the next following section, i.e. Section 9, provides opportunity to the person affected thereby to object to the certificate denying liability. Subsection (1) of this section is couched in these terms :-

"(1) The Certificate debtor may, within thirty days from the service of the notice required by section 7 or, where the notice has not been duly served, then within thirty days from the execution of any process for enforcing the certificate, present to the Certificate Officer in whose office the certificate is filed, or to the Certificate-Officer who is executing the certificate, a petition, in the prescribed form, signed and verified in the prescribed manner, denying his liability, in whole or in part."

The provisions as to the obligations and powers of the Certificate Officer in relation to an objection petition filed under this section are to be found in section 10 which reads

"The Certificate Officer in whose office the original certificate is filed shall hear the petition, take evidence (if necessary), and determine whether the Certificate…

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