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Income‑tax Case No. 351 of 1963, decided on 25th January, 1967.

---S. 66(1)‑Question of law‑‑Assessee, raising question of law -Tribunal, held, not justified to dismiss such application under S. 66(1) Tribunal directed to refer question of law for opinion of High Court.

M. B. Ahmed for Applicant.

S. A. Nusrat for Respondent.

Date of hearing: 24th January, 1967.

‑This is an application under section 66(2) 9f the Income‑tax Act relating to the assessment years 1956‑57, 1957‑58 and 1958‑59. The facts which give rise to this petition are that the petitioner is a partnership business of manufacturers of aluminium utensils. The business was initially started in the status of an individual and was subsequently converted into that of a firm. The assessment against which the petitioner has been trying to seek relief related to the business period from 1st July, 1954 to 12th September, 1956 which fell within three assessment years, namely, 1956‑57, 1957‑58 and 1958‑59; and the returns of income for these three years had been filed by the assessee before 3rd November, 1958. In accordance with the directions contained in para 7 of the Central Board of Revenue Circular dated 18th November, 1958 issued in conjunction with Martial Law Regulation No. 43, namely the Income‑tax (Correction of Returns) Regulations, 1958, the assessee filed on 31st December, 1958 two consolidated revised statements of income as the assessments for the year 1956‑57, 1957‑58 and 1958‑59 were still pending. In one of these the assessee disclosed "excess income" of Rs. 7,235 and this related to the period beginning with the assessment year 1954‑55 and ending with the year 1957‑58. A note was added to the effect that the income assessed for the year 1954‑55 and 1955‑56 having been computed at Rs. 39,324 "excess income" for the period is nil. The other statement related to the year 1958‑59 and it showed an "excess income" of Rs. 16,000 because the net income for this period was declared to be Rs. 1,03,678 while previously the income of Rs. 87,678 was shown in the return.

2. It is alleged by the petitioner that on the refusal of the Income‑tax Officer to accept the said two statements of "excess income" as basis for computing the tax, the assessee's authorised representative, at the suggestion of the Income‑tax Officer agreed on 10th June, 1959 to the following proposal:-

"It is requested that the assessments pending for 1956‑57 and onwards may be made in the normal course after making any adjustment with regard to the gross profit etc, as the declaration filed under the Martial Law is nil excess."

The assessments for the said three periods were made under separate orders dated 8th March, 1960 and for each year the Income‑tax Officer computed the assessable income under proviso to section 13 of the Income‑tax Act. The allegation of the petitioners is that besides making lump sum additions towards sales and arbitrarily increasing the gross profit, heavy disallowances were made for each year. It is contended on behalf of the petitioners that as the method adopted by the Income‑tax Officer for determining the assessable income resulted in heavy assessments and was inconsistent with the directions contained in the Martial Law Regulations 43/48 and was also contrary to the letter and spirit of the aforementioned agreement, the assessee took up the matters in the first instance to the Appellate Assistant Commis sioner, but his appeal was dismissed on 9th August, 1960. The matter was than taken before the Income‑tax Appellate Tribunal who also dismissed the appeal by order dated 13th July, 1962. The Income‑tax Tribunal came to the conclusion that there never existed any agreement between the Income tax Officer and the appellant's representative that the normal assessment would be completed in any qualified manner. Thereupon the petitioners moved an application under section 66(1) for referring the following questions to this Court for its opinion:‑‑

"Was there any justification to hold the assessment made by ignoring the directions contained in the Martial Law Regulations 43/48, valid and proper in the facts and circumstances of the case "

The Department did not oppose this application, and on 7th December, 1962 admitted that the facts stated by the assessee are as found by the Tribunal and the question as, framed is a question of law arising out of the Tribunal's order dated 13th July, 1962. In spite of this the Tribunal by its order dated 19th February, 1963 rejected this application on the ground that the question is misconceived and does not arise from the Tribunal's order which is based on the clear facts that assessments were made and completed under normal law, It is in these circumstances that the petitioners have moved this application.

3. Mr. M. B. Ahmed, the learned counsel for the petitioner, has contended that the provisions of Martial Law Regulations Nos. 43/48 were overriding provisions and under them the ordinary provisions of the Income tax Act were not applicable. The learned counsel further contended that even if it is accepted that the petitioners agreed that the assessments for the above‑mentioned years might be made in the normal course, it was not open to the Department to by pass the Martial Law Regulations and to assess the petitioner according to the ordinary law. Mr. Nusrat, the learned counsel for the Department has however contended that since the petitioners had agreed that the assessments for the above‑mentioned years may be made according to the normal law it was not open to them to agitate this question.

4. After hearing the learned counsel for the parties, we are satisfied that the learned Tribunal was not justified in dismissing the application under section 66(1) of the Income‑tax Act: The point raised by the assessee is a question of law and ought to have been referred to this Court. We would, therefore direct the Tribunal to refer the following question for the opinion of this Court under section 66(1).

" Was it open to the Department to bypass the provisions of Martial Law Regulations in view of the statement of the assessee

The Income‑tax Appellate Tribunal is directed to refer the above question to this Court with full facts material for its decision.

5. In the result, the petition is allowed with no order as to costs.

Petition allowed.

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