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Civil Revision No. 149 of 1970, decided on 5^th May 1971.

Ss. 67 & 64 (3) and Civil Proce dure Code (V of 1908), S. 9‑--Income‑tax matter--‑Jurisdiction of civil Courts‑Statute creating rights and liabilities as well as providing machinery for adjudication of such rights‑Resort must be had to forum provided by statute and not to civil Courts--- Person resident of D. I. Khan Division assessed to income‑tax by I. T. O., Sargodha Division‑Civil suit for declaration that order of assessment made by Income‑tax Officer of Sargodha Division, illegal‑--Held, barred by S. 67 of Act XI of 1922, inasmuch as grievance could be adjudicated in appeal, under S. 64(3) of Act, by Income‑tax Commissioner‑Civil Court not competent to usurp that jurisdiction.

A civil suit against the Government was instituted by an assessee against the order of assessment made by an Income tax Officer. The suit was for declaration that the order of assessment was illegal because the assessee was resident of I Division whereas the assessment was made by the Income‑tax Officer, S Division.

Held: When a statute creates rights and liabilities and also provides the machinery for the adjudication of those rights, then resort must bs made to the forum pro vided by the Act and not to the civil Courts whose jurisdic tion in such matters would be barred. It is clear that the bar of section 67 of the Income‑tax Act would be applicable in all cases in which the orders of the Income‑tax authorities could be challenged in appeal under the provisions of the Act. Subsection (3) of section. 64 of the Act shows that the grievance of the respondent, that he was the resident of I and therefore the Income‑tax Officer of S could not have assessed him to income‑tax liability, was required to be adjudi cated upon in appeal before the Income‑tax Commissioner, and therefore, the civil Court was not competent to usurp that jurisdiction.

The Punjab Province v. Federation of Pakistan P L D 1956 F C 72 distinguished.

Raleigh Investment Co. Ltd v. The Governor‑General‑in -Council P L D 1947 P C 19 ref.

Muhammad Afzal Lone for Appellant.

Respondents Nos. 1‑3: Ex parte.

Date of hearing: 5th May 1971.

This revision application under section 115, C. P. C. is directed against the order of the Senior Civil Judge, D. I. Khan, dated 26‑5‑1970, by which he rejected the preliminary objection of the petitioner‑Government that it had no jurisdiction to try the suit of the respondent, in view of the bar of section 67 of the Income‑tax Act, 1922 (hereinafter called the Act).

2. The brief facts of the case are that the respondent filed suit against the petitioner‑Government for declaration that the order of the Assistant Income‑tax Officer, Sargodha Division, dated 27‑6‑1966, by which he assessed him to income‑tax in the sum of Rs. 1,506.00 was illegal. By way of consequential relief, he prayed for permanent injunction to restrain the said officer from recovering the said income‑tax dues.

3. The petitioner‑Government, through the Income‑tax Officer, D. I. Khan, contested the suit of the respondent both on facts as well as on merits. By way of preliminary objection, it was alleged in the written statement that the suit of the respondent was incompetent in view of the bar of section 67 of the Act. This objection did not prevail with the learned trial Judge who in consequence rejected it by the Impugned order.

4. I have heard the learned counsel for the petitioner ---Government. By going through the impugned order, it is clear that the learned trial Judge was impressed by the fact that the respondent being the resident of D. I. Khan Division, the Income‑tax Officer of Sargodha had no jurisdiction over hire to have assessed him to the above income‑tax liability. Having reached this conclusion, he took the view that the bar of section 67 of the Act was not applicable to the facts of this case and the suit of the respondent was competent. For this view, the learned trial Judge sought support from the judgment of the Federal Court of Pakistan in the case of The Punjab Province v. Federation of Pakistan (P L D 1956 F C 72).

5. It seems that the attention of the learned trial Judge was not invited to subsection (3) of section 64 of the Act which for the sake of facility may be reproduced:‑

"64

(2) .

(3) Where any question arises under this section as to the place of assessment such question shall be determined by the Commissioner, or, where the question is between places in areas within the jurisdiction of more Commissioners than one, by the Commissioner concerned, or, if they are not in agreement, by the Central Board of Revenue:‑

"Provided that before any such question is determined, the assessee shall have had an opportunity of representing his views."

6. It would be seen that by the language of this subsection, the respondent was obliged to go in appeal against the order of the Income‑tax Officer, Sargodha to establish his contention that he was the resident of D. I. Khan, and therefore the Income‑tax Officer, Sargodha had no jurisdiction over him to assess him to Income‑tax liability. After all, it is well established that when a Statute creates rights and liabilities and also provides the machinery for the adjudication of those rights, then resort must be made to the forum provided by the Act and not to the civil Courts whose jurisdiction in such matters would be barred. If any authority is needed for this assumption reference may be made to the well known judgment of the Privy Council in the case of Raleigh Investment Co. Ltd. v. The Governor‑General- in‑Council (P L D 1947 P C 19) in which the following observation of their Lordships, in regard to the scope of section 67 of the Act, are, instructive:‑

"In their Lordships' view it is clear that the Income‑tax Act, 1922, as it stood at the relevant date, did give the assessee the right effectively to raise in relation to an assessment made upon him the question whether or not a provision in the Act was ultra vires. Under section 30, an assessee whose only ground of complaint was that effect had been given in the assessment to a provision which he contended was ultra vires might appeal against the assessment. If he were dissatisfied with the decision on appeal the details relating to the procedure are immaterial the assessee could ask for a case to be stated on any question of law for the opinion of the High Court, and if his request were refused, he might apply to the High Court for an order requiring a case to be stated and to be referred to the High Court (See S. 30 and 4 I T R 341; I L R 1937 Mad. 211). It cannot be doubted that included in the questions of law which might be raised by a case stated is any question as to the validity of any taxing provision in the Income‑tax Act to which effect has been given in the assessment under review. Any decision of the High Court upon that question of law can be reviewed on appeal. Effective and appropriate machinery is therefore provided by the Act itself for the review on grounds of law of any assessment. It is in that setting that section 67 has to be construed.

In their Lordships' view the construction of the section is clear. Under the Act the Income‑tax Officer is charged with the duty of assessing the total income of the assessee. The obvious meaning, and in their Lordships' opinion the correct meaning, of the phrase. Assessment made under the Act' is an assessment finding its origin an activity of the assessing officer acting as such. The circumstance that the assessing officer has taken into account an ultra vires provision of the Act is in this view immaterial in determining whether the assess ment is made under the Act'. The phrase describes the provenance of the assessment it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test."

7. The facts in that case, as would be seen from the above observations, where that the assessee‑company filed suit on the original side of the High Court of Calcutta for the refund of a large amount from the Governor‑General in Council, on the ground that the provision of the Act, under which the said amount had been recovered from him as income‑tax, was ultra vires the Indian Legislature, and therefore the assessment order of the Income‑tax Officer was illegal. In the written statement filed on behalf of the Governor‑General in Council an objection was taken to the competency of the suit in view of the bar of section 67 of the Act, but this objection did not prevail with the High Court of Calcutta, who tried the suit on merits and granted a decree to the assessee‑company. This decree was challenged by the Governor‑General in Council at the Bar of the Federal Court of India, which in the result was set aside. As a last resort, the assessee‑company went in appeal before the Privy Council, but his appeal was dismissed principally on the ground that under section 67 of the Act the suit of the appellant's company was incompetent and the High Court of Calcutta had no jurisdiction in the matter.

8. By keeping the above observations of the Privy Council in view, it is clear that the bar of section 67 of the Act would be applicable in all cases in which the orders of the Income‑tax Authorities could be challenged in appeal under the provisions of the Act: I have already referred to subsection (3) of section 64 of the Act to show that the grievance of the respondents, that he was the resident of D. I. Khan, and therefore the Income‑tax Officer of Sargodha could not have assessed him to income‑tax liability, was required to be adjudicated upon in appeal before the Income‑tax Commissioner, and therefore the civil Court was not competent to usurp that jurisdiction.

9. It seems to me that the learned trial Judge was influenced principally by the aforesaid judgment of the Federal Court of Pakistan, but had failed to comprehend the ratio of that case. In that case the Province of Punjab disputed its liability to pay certain income‑tax to the Federation of Pakistan and the said dispute, in view of section 204 of the Government of India Act, 1935, which was Constitutional Act, was to be adjudicated upon by the Federal Court. It was in this context that the objection in regard to the jurisdiction of the Federal Court under section 67 of the Income‑tax Act was repelled because the provision of the Income‑tax could not override the express provisions of the Act of 1935, which was a constitutional enactment.

10. In view of this discussion, the impugned order of the learned trial Judge was passed in clear violation of section 67 of the Act, and is therefore without jurisdiction. This revision application is accordingly allowed, but under the circumstances there would be no order as to costs. The result would be that the learned trial Judge would return the plaint to the respondent for presentation to the proper forum, if he so desires.

K. B. A. Petition accepted.

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