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Civil Appeal No. 104 of 1965, decided on 28th November 1966.

(On appeal from the judgment and order of the High Court of West Pakistan, Lahore, dated the 5th February 1957, in Civil Reference No. 5 of 1952).

Income‑tax Act (XI of 1922), Ss. 22(2) . & 63(1) read with Civil Procedure Code (V of 1908), O. III , r. 2(b) 8c 6(2) and O. V, rr. 12 & 13 (I)‑Service of notice under S. 22(2)‑Manager of assessee firm., resident within jurisdiction, carrying on firm's Business Notice to be served on such Manager‑Service of notice on salesman of firm‑Does not, in‑circumstances of case, constitute due service of notice on assessee firm.

An unregistered firm was carrying on business at Lahore but: its partners resided at Karachi. The firm had its Manager and one salesman at Lahore. The Income‑tax Officer issued a notice under section 22 (2), Income‑tax Act, 1922 calling upon the firm to file its return for certain assessment year. The notice was served on the salesman of the firm. Instead of producing the books of account as required by the Income‑tax Officer on the date fixed, the assessee firm filed an application praying for adjournment on the ground of illness of its Accountant. The Income‑tax Officer rejected this prayer and made a best judgment assessment. On appeal by the assessee, the Assistant Appellate Commissioner found that the salesman had no authority to receive notice on behalf of the firm and on this account annulled the impugned assessment. On further appeal by the Department, the Appellate Tribunal held that the service of notice on the salesman was good and proper service. Thereafter the Tribunal, at the instance of the assessee, referred the question to the High Court as to whether the salesman was the assessee's agent empowered to accept service of notice within the meaning of Order V, r. 12 of the C. P. C. The High Court having answered the reference in the negative, the Income‑tax Commissioner filed an appeal before the Supreme Court Held, that as the Manager was carrying on the business of the assessee firm, the notice should have been served on him, Hence the salesman could not be regarded as a person authorised to accept service of notice within the meaning of clause (b) of rule 2, Order 111, C. P. C.

The Manager or agent contemplated by rule 13(l), Order V of the C. P. C. is one who has an independent discretion subject to general guidance by the principal to carry on the business As Manager of the firm was resident within the jurisdiction, no question of service of notice on the salesman of the firm under this rule would arise in this case.

The salesman could not be regarded as an agent within: rule 2 (b) of Order 111 and rule 13 (1) of Order V of the C. P. C The Appellate Tribunal in the absence of an instrument in writing as required under rule 6 (2) of Order III, was therefore not entitled to infer that the salesman was in fact empowered to accept such notice on behalf of the firm. It may be that thc: Manager and even the partner had knowledge about service of notice on the salesman, but this will not debar the assessee firm challenging the said service if, in fact, the notice had not been properly served.

For the reasons stated above, service of notice on the salesman of the firm did not, in the circumstances of the case constitute due service of notice on the assessee firm.

Commissioner of Income‑tax, Burma v. Dey Brothers (1935) 3 I T R 213 and Commissioner of Income‑tax, C. P. v. Baxtram Rodmal (1934) 2 I T R 438 ref.

Jangi Bhagat Ramawtar v. Commissioner of Income‑tax, Bihar & Orissa A I R 1930 Pat. 127 distinguished.

Abdul Haq, Advocate Supreme Court instructed by H. B. Khizar Tamimi, Attorney for Appellant.

Muhammad Amin Butt, Advocate Supreme Court instructed by Maqbool Ahmad Rana, Attorney for Respondent.

Date of hearing ; 28th November 1966.

FAZLE‑AKBAR, J

.‑This certificate appeal by the Commis sioner. of Income‑tax, North Zone, West Pakistan, Lahore, arises out of a reference made by the Income‑tax Appellate Tribunal under section 66 (1) of the Income‑tax. Act to the High Court of West Pakistan.

The circumstances in which the reference came to be made, may be briefly stated.

The respondent, Messrs Muhammad Idris Barry & Co., hereinafter called the assessee, was an unregistered firm carrying on business at Anarkali, Lahore, but its partners resided at Karachi. The Manager of the firm in Lahore was one, Manzur Ahmad and one Habibur Rahman was its salesman. On the 28th of June 1950, the Income‑tax Officer, ward A', Lahore. issued a notice under. section 22(2) of the Income‑tax Act, calling upon the firm to file its return for the assessment year 1950‑51. On 27th July 1950, the said notice was served on the salesman, Habibur Rahman, who later handed it over to the Manager, Manzur Ahmad, and he on informing one of the partners at Karachi, of the same, was directed to consult a lawyer. As no return was filed, the Income‑,tax Officer issued another notice on 15th January 1951, under section 22(4) of the Act calling upon the firm to produce its books of accounts by the 29th January 1951. On the said date the firm filed an application before the Income‑tax Officer, praying an adjournment for production of accounts on the ground of illness of its Accountant, but the said prayer was rejected. On the same day, the Income‑tax Officer made a best judgment assessment under section 23(4) of the Act.

On appeal by the assessee, the Appellate Assistant Commissioner found that Habibur Rahman had no authority to receive notice on behalf of the firm. He, therefore, upheld the contention that service of notice under section 22(2) was not valid and proper and accordingly annulled the impugned assessment. He further directed the Income‑tax' Officer to make a fresh assessment after due service of notice on the assessee.

On a further appeal by the Department, the Income‑tax Appellate Tribunal held that service‑of notice under section 22(2) on Habibur Rahman was good and proper service and that as the assessee made a default in complying with the requisition the assessment was rightly completed under section 23 (4). The Tribunal therefore remanded the case to the Appellate Assistant Commissioner as he had not dealt with it on merits. Thereafter, at the instance of the assessee, the following question was referred by the Appellate Tribunal to the High Court under section 66 (1) of the Act:‑

"Whether there is any material in support of the Tribunal's findings that Habibur Rahman was the assessee's agent empowered to accept service of notice within the meaning of Order V, rule 12 of the Code of Civil Procedure, read with section 03 (1) of the Income‑tax Act.

The High Court answered the above question in the negative and hence this appeal by the Income‑tax Commissioner.

We ‑shall now examine the relevant statutory provisions relating to service of notice. Section 63 (1) of the Income‑tax Act provides.

"A notice or requisition under this Act may be served on the person therein named either by post or, as if it were a summons issued by a Court, under the Code of Civil Procedure, 1908."

Under this section a notice may be served in one of two alter native ways, either by post or in the manner prescribed for service of summons under the Code of Civil Procedure in this case, admittedly, notice was not served by post.

The conclusion of the Tribunal that the service of notice under section 22 (2) was a valid and proper service, was based on the following facts:‑‑

(i) That the partners did not ordinarily reside in Lahore and the business was looked after by the employees;

(ii) that notices were served during office hours on the business premises on Habib‑ur‑Rahman, an agent of the Arm;

(iii) that on various occasions in the past, Habibur Rahman received notices on behalf of the firm and the fact that the assessee acted in response to the said notice led to the irresis tible conclusion that Habibur Rahman was in fact empowered to accept such notice on behalf of the firm ;

(iv) that the assessee took steps following service of the notice under section 22 (2) on Habib‑ur‑Rahman.

Now, the question that falls for determination is whether on the above facts the Tribunal was justified in holding that the notices had been served in the manner prescribed for our service of summonses under the Code of ,Civil Procedure.

The relevant provisions of the Code of Civil Procedure may now be noticed.

Order III deals with recognised agents and pleaders. Rule 1 says that appearance in or to any Court, etc., may be in person or by a recognised agent or by a pleader. Rule 2 defines the persons who could be regarded as recognised agents. Sub‑clause (b) of the said rule is as follows:

"(b) persons carrying on trade or business for and in the names of parties not resident within the local limits of the jurisdiction of the Court within which limits the appearance, application or act is made or done, in matters connected with such trade or business only where no other agent is expressly authorized to make and do such appearances applications and acts."

Rule 3 provides that "Processes served on the, recognised agent of a party shall be as effectual as if the same had 4een served on the party in person, unless the Court otherwise directs". Rules 4 and 5 deal .with the appointment of pleaders and service of processes on such pleaders. Rule 6 (1) provides that in addition to the recognised agents described in rule 2 of the Order, any person within the jurisdiction of the Court may be appointed as an agent to accept service of processes but under sub‑rule (2) such appointment must be made by an instrument in writing signed by the principal.

Reference may also be made to the relevant provisions of Order V of the Code of Civil Procedure,. which deals with issue and service of summons. Rule 11 provides for service in person unless the person to be served has an agent empowered to accept service. Rule 13 provides for service of summons on agent through whom defendant carries on business in these terms:‑

"13 (1) In a suit relating to any business or work against a person who does not reside within the local limits of the jurisdiction of the Court from which the summons is issued, service on any manager or agent, who, at the time of service, personally carries on such business or work for such person within such limits, shall be deemed good service."

Mr. Abdul Haq the learned counsel for the Income‑tax Commissioner, has contended that on the facts and circumstances of this case it should be held that Habibur Rahman had authority to accept notice on behalf of the firm. In support of his conten tion, he has relied on rule 2(b) of Order III and rule 13 (1) of Order V of the Code of Civil Procedure.

These two rules deal with the circumstances in which persons outside the jurisdiction can be affected by the acts of their agents. Clause (b) of rule 2 states that the act of the manager or agent will bind the principal if during the absence of the principal from the local limits of the jurisdiction of the Court the agent carries on trade or business in his name, provided that no other agent was expressly authorised to do the acts.

In this case, Manzur Ahmad was the Manager of the firm. It is therefore obvious that as he was carrying on the business as agent of the assessee firm the notice should have been served on him. Hence, Habibur Rahman, the salesman, could not be regarded as a person authorised to accept service of notice within the meaning of clause (b) of rule 2.

Similarly, rule 13 (1) of Order V is also not applicable to the present case. Under this rule a person who does not reside within the local limits of the jurisdiction of the Court will be bound by the service of notice on his manager or agent provided at the time of service such manager or agent personally carries on such business or work for such person'. The manager or agent contemplated by this rule is one who has an independent discretion subject to general guidance by the principal to carry on the business. As manager of the firm was resident within the jurisdiction, no question of service of notice on the salesman of the firm under this rule would arise in this case. It appears from the order of the Appellate Tribunal that on various occasions in the past Habibur Rahman had received notices on behalf of the firm and the assessee had also complied with such notices. This fact alone would not justify the conclusion that the firm or the manager had been duly served. As already pointed out, Habibur Rahman could not be regarded as an agent within rules 2 (b) and 13 (1). The Appellate Tribunal in the absence of an instrument in writing as required under rule 6 (2), was therefore not entitled to infer that Habibur Rahman was in fact empowered to accept such notices on behalf of the firm. It may be that the Manager and even the Partner had knowledge about service of notice on Habibur Rahman, but this will not debar the assessee firm challenging the said service if, in fact, the notice had not been properly served.

While dealing with a similar question in the case of Commis sioner of Income‑tax, Burma v. Dey Brothers ((1935) 3 1 T R 213) the Court held that the mere fact that the notice had in some way reached the person upon whom it was to be served was not sufficient compli ance of the mode of service as prescribed in section 63 (1) of the Income‑tax Act.

Similarly, it was held in the case of Commissioner of Income tax; C. P. v. Baxiram Rodmal ((1934) 2 1 T R 438) that the mere fact that a person had accepted notices on behalf of the assessee on previous occasions and appeared for the assessee would not constitute him an agent on whom a notice or requisition under the Act could be validly served; nor would any statement made by him bind the assessee.

The case of Jangi Bhagat Ramawtar v. Commissioner of Income tax, Bihai and Orissa (A I R 1930 Pat. 127) on which the learned counsel relied is not of much assistance in the present case. In the above case it was held that service of notice on a. gomastha was a valid and proper service. From the said decision it is not clear whether the said gomastha was a recognised agent or had authority in writing to accept service. The Court did not discuss these points.

In this connection we may also refer to rule 17 of Order V which lays down procedure to be adopted when personal service could not be effected under rule 12. If the Manager was not available the process server could have served notices in the manner prescribed. in the above rule after observing necessary formalities, but this was not done.

For the reasons stated above, we are of the opinion that) service of notice on Habibur Rahman did not in the circumstances of the case, constitute due service of notice on the assesses‑firm.

The High Court therefore rightly answered the question referred to it, in the negative.

In the result, this appeal fails and is hereby dismissed with costs.

S. Q. Appeal dismissed.

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