Commissioner of Taxes & another

 Vs.

M/S.Mullick Bro­thers

Supreme Court

Appellate Division

(Civil)

Present:

Kemaluddin Hossain CJ

Fazle Munim J

Ruhul Islam J

Badrul Haider Chowdhury J

Commissioner of Taxes & another……………………..Petitioner

Vs.

M/S.Mullick Bro­thers…………………………………………..Respondent

Judgment

February 2, 1981.

Lawyers Involved: 

T. H. Khan. Senior Advocate, with Muzammel Huq Bunyan, Rabia Bhuiyan, Advocates, instructed by B. Hossain Advocate-on-Record—For the Petitioner.

Asrarul Hossain Senior, Senior Advocate with C.R. Ali, Advocate, instructed, by Abu Bakkar, Advocate-on-Record—For the Respondent.

Civil Review Petition No. 3 of 1980.

From the judgment and order dated 30.11.1978 passed by the Appellate Division to Civil Appeal No. 108 of 1978.

Judgment:

                 Badrul Haider Chowdhury J. – This review petition by the respondents arises out of a judgment of this Division in Civil Appeal No. 108 of 1978. The appellant firm declared excess income on 15.7.69 in terms of Mar­tial Law Regulation No. 32, known as Income Tax (Correction of Return and False Decla­ration) Regulation dated 15.4.69 and the excess income declared by the appellant fish was processed by the Processing Committee and it was determined by the Committee in full agreement with Managing Partner and the authorised representative on 10.11.69 The appellant firm filed a petition under Article 102 of the Constitution calling in ques­tion the demand of arrear tax by respondent No.1. on 31.1.1974 in respect of the decla­ration of excess income on the grounds that an Administrative Review Application before the Central Board of Revenue was filed bat the result of the said application was not communicated, and that the demand on the assessment under ins said regulation it in­valid, became after the emergence of Bangla­desh, M. L. R. N.32 of 1969 ceased to be an existing law, as it does not come within the definition of an existing law. The High Court Division replied to both the contention and discharged the rub. Thereafter, by special leave the appeal was filed and this Court by its judgment allowed the appeal holding that the arrear tax assessed against the firm not being a Government debt before emergence of Bangladesh is not recoverable by any process of law. This Division observed:

“The learned Judges of the High Court Division wrongly concluded that the tax demanded from the appellants is debt due to the Government of the then Pakistan ‘and became a debit of (The Go­vernment 01 Bangladesh.”

This Division took the view:

“The imposition of the impugned tax was totally unauthorized and lacked legal foundation. It created no liability and so the question of debt does not arise,”

2. In this view of the matter, the demand notices were declared to be of no legal au­thority. The Revenue then filed the review petition and it was argued that the assessment was completed before the Liberation of Ba­ngladesh and it became a debt to the Govern­ment then functioning in Bangladesh and in view of section 1(b) of the General Cla­uses Act as amended by President’s Order No.147 of 1972, it became a Government debt and so realizable from the Assessee-respondent. The true imports of legal position were not considered in the judgment of this Division so it is to be reviewed.

3. Mr.T. S. Khan learned Counsel app­earing for the Revenue canvassed that the assessment was an agreed assessment as con­templated by M.L. R. No. 32 of 1969 and the assessee and his lawyer agreed to the assessment and demand note was issued on 29.11.69. He placed the entire order-sheet before this Court at the time of hearing which was placed before this Court on the previous occasion. In view of the important nature of the question it will be useful to place on record the entire order-sheet.

 

	Date	Event
(a)	15. 7.69.	M/S. Mallick Brothers, a regi­stered partnership firm filed a revised re­turn of its income for 5 yean (from 1964-65 to 1968-69) on 15.7.69 pursuant to the Martial Law Regulation No. 32 of 1969, showing total excess income of Tk. 100 000/ (one lack) at the rate of 20.000/ (twenty thousand) for each ass­essment year, duly signed by the partners.
(b)	10.11.69.	that after due notice to the assessee, the Processing Com­mittee pasted the following order:”The assessee has declared excess in­come amounting to Rs. 100.000/- for the assessment years 1964-65 to 1968-69. Mr. C. A. Ali authorised Advocate and Mr. Rajab Ali Mallick, partner appeared before the Committee. The excess income declaration was discussed with them.”
		The Committee has been pleased to determine the excess income of R 4, 00,000/- for the assessment year 1964-65 to 1968-69 in full agreement with asse­ssee. (emphasis added)
		Mohammad Sharif,
Chairman, Processing Committee; A. Taher, Member, Processing Committee; S F. Kabir, Member, Processing Committee
(c)	10.11.69.	Order No. 4″Mr C. R. Ali (authorized Advocate) and Mr. Rajab Ali Mallick (partner) appear. They were discussed in connec­tion with processing excess income declared under M.L.R. No. 32. The excess income has been determined at Tk. 400.000 (four lacs) for the assessment years from 1964-65 to 1968-69 in agreement with the Assessee.” [In the margin Mr. Rajab All Mallick and Mr. C R. All signed below the endorsement ‘agreed’]
(d)	29.11.69.	Order No.”Processed under M.L.R. 32 on excess income of Tk, 400,000/- (four lacs) for the assessment years 1964-65 to 1968-69. Issue D/N and challan. Put up on 10.2. 70″ [In the margin it was noted: Order of processing of Excess income Asst. order under M.L.R 32. D.N. and challan issued illegible 2.12.69.]
(e)		On assessment.Total demand for 5 years i.e. from 1964-6S to 1968-69 was made at Rs. 63,445/, vides the assessment order.
(f)	2.12.69.	Notice of Demand under section 29 of the Income Tax Act. 1922 in the prescribed form dated 2.12.69 notifying that for the assessment year 1964-65 to 1968-69 I.T. Re 63,446/-has been determined which should be paid by the Assessee on or before 2.2.70.[It is also mentioned therein: A challan is enclosed for the purpose.”]
(g)	25.3.70	on the same day i.e. 2.12 69 the receipt of the order of processing of excess Income and assessment order. Demand Notice, and challan was ackno­wledged by the assessee, vide Ackno­wledgement slip.[As no payment was made, by Memo-No. 2107/ICS/520 the Income Tax Officer (Mr. A. Taher) requested the assessee to pay up the tax amounting to Rs. 63,446/ by 10.4.70. On the tame day the assessee received the said memo vide Acknowledgement- slip.]
(h)	9.5.70.	The assessee made part pay­ment of Rs. 5000/ only, (out of Rs. 63,446/-).(i) 6.8.70.  As the full amount was not paid, the Income-lax Officer (Mr. A. Taher) by memo No. 2107/ICS/99 issued reminder to the assessee to pay up the balance amount of Tk. 58.446/ by 20.8.70. [The Assessee received the said memo, vide, Acknowledgement slip]
(j)	25.11.70.	By Memo No. 2107/I.C./286 the Income Tax Officer (Mr. A. Taher) again issued reminder to the assessee to pay up the balance tax of Rs. 58.446/ by 16.12.70.[The Assessee received the laid memo on tube tame day, vide. Acknowledge­ment slip.]
(k)	19.2.71	By Memo No. 2107/I.C.I/380 the Income Tax Officer (Mr. Jahedur Rahman) issued reminder for the out­standing demand.[The laid Memo was received by the Assessee on 20.2.71. vide the Acknow­ledgement slip.]

4. it will be seen from the order-sheet that the assessment was an agreed assessment and the Demand Note along with Assessment order with challan were issued on 29.11.69 which were acknowledged by the Assessee vide order dated 25.3.70. The assessee made part-payment of Tk. 5000/00 only out of Taka 63,446/00 which was assessed for the years of 1964-65 to 1968-69. This payment was made on 19.5.70. Thereafter numerous reminders were issued for the outstanding arrear e.g. dated 6.8.70 19.2.71. Mr. Assault Hossain who had been given the opportunity of going through the aforesaid order-sheet has not disputed the correctness of it. The record does not show that Assessee had made out any case that his administrative review was still pending with the National Board of Revenue. On the other hand, at it appears from the Circular No. M.L.R. No. 1 of 1969, no administrative review lay In the case of agreed assessment vide Paragraph 15.

Paragraph 15 reads as follows:

(a) “The returns/reviled returns or a con­solidated statement of Income would be examined in the light of the wealth statements. It after taking into consi­deration the personal expenses and in the case of existing Assessee inadmissible expenses which were not    allowed at the time of the original assessment, the income tax authorities find that such  returns have been filed correctly these would be accepted accordingly.

(b) If in the light of the wealth state­ments, personal expenses and other relevant facts, the returns/revised returns or the consolidated statement are not found acceptable by the Department, assessment on higher amounts would be made in agreement with the Assessee.

(c)  If in a case falling in sub-paragraph (b) above an agreement cannot be reached between the assessee and the Department then  such returns  would be assessee under the Income-tax Act and all the provisions of the Act will apply accor­dingly. The penal provisions of M.L.R 32 will not, however, be invoked in such cases.

(d) where the income-tax authorities have evidence to show that the declaration (s) made be the assessee under this Regula­tion are false these will be rejected. The Assessee will have, however, the right to ask for an administrative review of this decision by the Central Board of Reve­nue. If his prayer is accepted his return etc, will be processed under sub-paragraph (b) or (c) above. If the Central Board of Revenue are however convin­ced that the assessee has deliberately died a wrong declaration the penal provisions of M.L.R 32 will also be invoked and shall apply accordingly. [emphasis added]

 

5. It is clear that Circular No.M.L.R 1 of 1969 contemplated three different stages namely(1) where the Income-tax Officer is satisfied that such returns have been filed correctly, these would be accepted accordingly (clause 15(a). But if the revised returns are not found acceptable by the Department “assessment of higher amount would be made in agreement with the Assessee”. vide Clause (b) and (c) but if no agreement can be reached and if the income-tax Authorities have evi­dence to show that the declarations are false then the return will be rejected. Clause (d) stipulated ”the Assessee will have, however, the right to ask for an administrative review of this decision by the Central Board of Revenue, if his prayer is accepted his return etc. will be processed under paragraph (b) or (c).

6. In the instant case the Assessment was made under clause (b) because the assessment was made “in agreement with the assessee”. It is only in case where a declaration is rejected on the ground of falsity that the assessee can file an administrative review. Therefore, the administrative Review that was provided for by clause (d) does not come into play at all. It is available only when clause (d) it attracted namely when the income-tax Autho­rities have evidence to show that the declara­tions made by toe assessee are false and when therefore, it is rejected. The present did not come within the clause (d) as such the contention of the Assessee that his administra­tive review was pending does not merit any consideration.

7. As, is evident from the order-sheet the demand note along with assessment order and Challan were sent to the assesses and it was received by him in pursuance whereof he made part payments before 1971. Mr. Asrarul Hossain argued that the assessment had not achieved finality. This contention also does not bear scrutiny in view of Circular No. M.L.R 3 of 1979 whereby paragraph 16 of Circular No. M.L.R 1 of 1969 was amended and read as follows:

“Every person who has declared excess income shall compute the tax on the bails of returns/revised returns or the consolidated statement filed by him. The tax to computed shall be payable by 15th January, 1970. If this tax or any part of it is paid by 30th September, 1969, a rebate of 15% on such amount will be allowed. If the tax is paid after 10th September, 1969 but before 15th January, 1970, a rebate of 10% annume shall be charged on the amount which remains outstanding on 15 January, 1970. All the provisions of the Income-tax Act relating to recovery of tax will apply in respect of any tax which remains outstan­ding after the lapse of a period of 18 month from 15th July, 1969 i.e. after 15th January, 1971. No extension of time for payment of thus outstanding tax will ordinarily be allowed after this date. Only in very genuine cases an extension of time may be allowed by the Central Board of Revenue but not by any other authority lower than Central Board of Revenue. Even in such cases, the addi­tional tax at the rate of 8 percent will continue to be payable for the extended period of time”.

If as a result of proceeding declaration the ‘excess income’ is enhanced agree­ment with the assesses, thereby cresting a further demand, it shall be payable within a period of two months of the service of the Notice of Demand. No rebate shall, however be admissible. In case of default additional tax at the rate of 8 per cent shall be payable and the provisions for recovery referred to above shall apply.”

8. It is clear that the law has not provided for any extension of time for payment of the outstanding tax after 15th January 1971. Ex­ception was made only in very genuine cases “an extension of time may be allowed by the Central Board of Revenue but not by any other authority lower than Central Board of Revenue.” No rebate, however, would be admissible. In case ‘excess income’ is enhan­ced in agreement with the assesses, thereby creating a further demand the law says “it shall be payable within the period of two months of the service of the notice of demand.” In the instant case the excess income it enhanced in agreement with the assessee and the only time that has been granted is a period of two months from the services of the notice of demand which was issued on 2-12-69. In any case the assessee was required to make the payment be 2-2-70 at the latest. It may by presumed as per as paragraph 16(a) some latitude could be given to the assessee that again could not be beyond 15th January 1971. In negative language it stipulated that extension will not ordinarily be allowed after that date. Then again in very genuine cases extension could be given by the Central Board of Revenue and by any other authority lower than it. The assessee has not made out any case that such extension has been given by the Central Board of Revenue. Therefore, the contention that the assessment had not achieved finality is bereft of any substance.

Again, reference to Income-tax Act, shows that section 29 says:

“When any [Tax, penalty or interest] is due in consequence of any order passed under or in pursuance of this Act, the Income fax Officer shall serve upon the assessee or other person liable to pay such [tax, penalty or interest] a notice of demand in the prescribed from specifying the sum so payable]”

9. In the case of Doorga Prasad vs. Secretary of State, 13 ITR 285, the Privy Council observed that “in their Lordships’ opinion, although income-tax may be popu­larly described as due for a certain year, it is not in law so due. It is calculated and assessed by reference to the income of the assesses for a given year, but it is due when demand is made under section 29 and section 45. It then becomes a debt due to the Crown, but not for any particular period.”

(emphasis added)

Section 45 is in the following terms;

“Any amount specified as payable in a notice of demand [* * *] under section 29 or an order under section 31 [*] or section 33, stall be paid within the time, at the place and to the person mentioned in the notice or order, if a time is not so mentioned, then on or before the first day of the second month following the date of the service of the notice or order, and any assessee failing so to pay shall be deemed to be in default provided that when an assessee has presented an appeal under section 30 [*  *]  [*    *] the income tax officer may [*  *] in his discretion treat the assessee as not being in default as long as such appeal is indisposed of.(emphasizing added)

10. It is clear that, the assessee shall be deemed to be in default if he failed to pay the amount mentioned in the notice of demand if the payment is not made before the first’ day of the second month following the date of the service of the notice “If a time is not so mentioned but the relevant Assessment was made under MLR 32 of 1969 and the Circular No. 3 clause 16 has provided a Special time limit. In terms of section 45, therefore, since the assessee failed to pay within the time limit given in said paragraph 16, he shall be deemed to be in default. Section 46 provides recovery procedure aid the Income-tax Officer may issue certificate “specifying the amount of arrears due from an assessee” and, the Collec­tor on receipt of much certificate” shall proceed to recover from such “assessee, the amount specified therein as if it were an arrear of land revenues”. The proviso adds that the Collector shall have the powers which under the Code of Civil Procedure, 1908, the Civil Court has for the purpose of recovery of an amount due under a decree. Explanation No. 2 to the section is in the following terms:

For the removal of doubts it is hereby declared that the several model of reco­very specified in this section are neither mutually exclusive nor effect in force relating to the recovery of debts due to Government and it shall be lawful for the income-tax Officer, if for any speci­al reasons, to any inch mode of recorded to be recorded he so thinks will to have recourse to any much mode of recovery notwithstanding that the tax due U being recovered from an essence by any other mode”.

11. Explanation quoted above makes It clear that the powers of recovery mentioned in the section are neither mutually exclusive nor affect in any law” relating to the recovery of debts due to the government.” (emphasis added)

It is that tube amount mentioned in section 29 read with 54 becomes a debt due to the Government.

The next question which is crucial in this case whether such debt can be said to be a Government debt, Section 3(21) is follows:

“Government” or “the Government” shall mean (a) in relation to anything done before the 26th day of March, 1971, any Government which functioned within the territories now comprised in Bangladesh ; and”

(b) In relation to anything done or to be done after the 25th day of March, 1971, the Government of the People’s Repub­lic of Bangladesh.”‘

12. So the Government which functioned within the territories now comprised in Ban­gladesh is also included in the definition sec­tion. The Government of Pakistan functioned within the territories now comprised in Ban­gladesh. It was in pursuance of MLR 32 promulgated by the Government of Pakistan that the assessment had been made and De­mand Note issued. This assessment had att­ained finality and there was no appeal agai­nst such assessment. The Administrative Re­view does not lie as mentioned above because it does not fall under paragraph 15 (d).There­fore, the amount was due to Government of Pakistan (Expel, 2, Section 46).

13. The next question is whether this amo­unt due to Government of Pakistan can be realised by the Government of Bangladesh. Section 21 (b) defines Government debts as follows:

“Government debts” and equivalent expressions shall include debts due to the Government of the People’s Republic of Bangladesh and any debt due to any Government that functioned within the territories comprised now in Bangladesh.”

14. Thus, any debt due to any Govern­ment that functioned within the territories comprised now in Bangladesh is also debt to the People’s Republic of Bangladesh. The as­sessment that was made final by issuance of notice of demand under section 29 read with section 45 has become a debt due to the Government under section 46 of the Income-tax Act. The assessee had made part-payment only. Since fresh notice of demand was issu­ed to pay and the assessee failed to do so he will be deemed to be in default and section 46 provides for the recovery of debt due to the Government. By the amendment of the defi­nition in General Clauses Act, tibia abet due to the Government of Pak instant has become a debt to the Government of the People’s Republic of Bangladesh. This idea to the conclusion that the legislative amendment in the General Clauses Act by President’s Order No. 147 of 1972 was not considered in its perspective. Mr. T. H. Khan is perfectly cor­rect that had the true import been taken into consideration the judgment would have been otherwise. It is irrelevant to consider as to how this debt was created. The validity of MLR 32 is not an issue nor can it be ma­de an issue, because, the tax assessed by ope­ration of law already became a debt to the Government of Pakistan by 15.1.71 and the appellant firm accepting the assessment as fin­al made part payments. This debt is now be­ing realised by the Government of Bangladesh. So, the demand made by respondent No.1 for payment of outstanding tax does not suff­er from want of legal authority.

In the result, therefore, this review appli­cation is allowed and the appeal is dismissed without any order as to costs.

Ed.

Source: , 1981, (AD)