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(2) THE OFFICIAL LIQUIDATOR, PINDI-KASHMIR TRANSPORT Co., LTD. (IN LIQUIDATION) LAHORE-Petitioner

Versus

COMMISSIONER OF INCOME-TAX, LAHORE Respondent

Civil Original Cases Nos. 17 and 19 of 1952 and 11 of 1953, Reference answered on 5th June, 1954.

Income-tax Act (XI of 1922)----

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Ss. 3, 29 and 67-Companies Act (VII of 1913), S. 218-Company in Liquidation-Proof of claim by Income-tax Authorities relating to tax assessed- Production of assessment order enough-Jurisdiction of Liquidation Court-Liquidation Court not to go behind assessment order [I L R 1943 Lah. 706 overruled].

The Income-tax authorities can prove their claim under section 228 of the Companies Act against a company in liquida tion by the production of the assessment order of Income-tax made by them.

The Income-tax authorities on proof of their claim would be entitled to share the dividends declared after such proof but not to the dividends already declared or paid.

The company under liquidation is still an assessee and subject to Income-tax law the Liquidator can be called upon to submit the usual Income-tax return under the provisions of the Income tax Act.

In matters relating to the assessment of Income-tax the machinery that can be brought into action is the one provided by the Income-tax Act, which is a complete Code by itself. Hence the jurisdiction of the Civil Courts is impliedly barred. Section 67 of the Income-tax Act expressly bars the institution of a suit in any Civil Court to set aside or modify act assessment made under the Income-tax Act. Although section 67 expressly bars the jurisdiction of the Civil Courts in respect of suit only, on principle miscellaneous proceedings, if their object be to determine any question relating to assessment in one connection or another, would also be barred.

I L R (1943) 24 Lah. 706 overruled.

1960 P T D 981 ; 1960 P T D 870; 1950 I T R 951; 1941 Oudh 260 and (1899) 2 Q B D 145 ref.

Where an Act of the Legislature sets up a Special Tribunal and prescribes a special procedure for the determination of rights and liabilities credited by the Act, the jurisdiction of other Courts in respect of those rights and liabilities is impliedly barred, even if there be no express provision to that effect.

Per MUHAMMAD MUNIR, C. J

.-The mere fact that a winding up order has been made in respect of a company does not, in the absence of an express provision to that effect, take it out of the operation of Income-tax statutes, and neither the Liquidation Judge nor the liquidator acquires any right to question the correctness of the assessment otherwise than in the manner provided by the statute under which the Income-tax Officer has acted. The rights and liabilities of a Company in liquidation are neither more nor less than those of any other assessee and though the law for the purposes of winding up places its affairs under the special supervision of the Liquidation Judge, assessment of the company to income-tax is neither the function of the Judge nor of the liquidator but that of the Income-tax Officer whose powers for determining the liability of the company to Income-tax remain unaffected by the incident of the liquidation of the company. If therefore the liquidator of the company has any complaint in the matter of its assessment of income-tax, he must refer that complaint to the tribunal appointed for the purpose by the Income-tax Act. Being the representative of the assessee, the liquidator can neither convert himself into a revising authority of the Income-tax Officer nor ask the Li4uidation Judge to assume such role.

[Case-law referred].

A. D. Malik for Petitioner (in Case No. 19 of 1952).

Khawja Nazir Ahmad (before referring Judge in Case No. 17 of 1952).

Malik Muhammad Husain for Respondent.

ORDER OF REFERENCE

SHABIR AHMAD, J.-

The same point of law arises in this petition as well as in Civil Original No. 19 of 1952 and Civil Original No. 11 of 1953, which have, been put in the following circumstances : Civil Original No. 17 of 1952 is a petition by the Official Liquidator of the Ravi Paint Colour and Varnish Works Limited (in Liquidation), which was ordered to be wound up by this Court on the 9th of January 1948. In due course debts and claims were adjudicated upon and the dividend at the rate of As. 9 in the rupee was declared as the first and the final dividend on the 9th of June 1951 with the sanction of this Court. On the 29th of February 1952, Income-tax Officer, Companies' Ward III, Lahore, served a notice for payment of Income-tax on the Official Liquidator for the year ending with the 30th of June 1945 and 30th of June 1946. At this the Official Liquidator put in the present petition praying that the Federation of Pakistan through the Income-tax Commissioner, Lahore, be called upon to prove the assessment before this Court and the Income-tax authorities be prohibited from taking any proceedings against the Official Liquidator with regard to these assessments pending the decision of the petition.

Civil Original No. 19 of 1952 and Civil Original No. 11 of 1953 relate to the Pindi-Kashmir Transport Limited, which was wound up by the order of this Court dated the 31st of January 1949 and the claims of the creditors were finally settled by this Court on the 15th of January 1951. On the 14th of March 1952, the Income-tax Officer, Lahore, issued a demand notice for Rs. 26,687-8-0 for the assessment year 1947-48. In Civil Original No, 19 of 1952, the position of the Official Liquidator, who is the petitioner, was that the assessment made by the Income-tax authorities was beyond the period of limitation prescribed by law and was based on a wholly incorrect data. The prayer, therefore, was that the Commissioner of Income-tax, Lahore, be ordered to prove the claim of Income-tax before this Court and the Income-tax authorities be restrained from realising the amount assessed by them. In Civil Original No. 11 of 1953 the period dealt with was the accounting year 1947-48. In that petition also the prayer was that the Federation of Pakistan be called upon to prove the correctness of the assessment made by the Income-tax authorities.

On behalf of the Income-tax authorities an objection was raised that this Court has no jurisdiction to question the assess ment made by the Income-tax authorities and on this an issue was framed with regard to the jurisdiction of this Court. On behalf of the respondent reliance has been placed mainly on a decision of Their Lordships of the Privy Council in Raleigh Investment Co. v. Governor-General-in-Council (A I R 1947 P C 78: 1960 P T D 981) wherein it was held that section 67 of the Income-tax Act barred the jurisdiction of Civil Courts to decide whether or not an assessment made by the Income-tax authorities was correct. In fact Their Lordships doubted, whether, in, view of the other provisions of the Income tax Act which provide adequate machinery enabling an assessee effectively to raise a question about the assessment before the authorities mentioned in the Income-tax Act, it was necessary to enact section 67. The same view appears to have been taken by Their Lordships of the Privy Council in Commissioner of Income tax v. Tribune Trust (A I R 1948 P C 102: 1960 P T D 870) and was clearly expressed in Janda Rubber Works v. Income-tax Officer (A I R 1950 E P 210).

On behalf of the petitioner's reliance has been placed on a decision of three learned Judges of this Court in Governor-General- in-Council through Commissioner of Income-tax, Punjab, Lahore v. Sargodha Trading Company Limited (in Liquidation) (I L R (1943) 24 Lah. 706), in which it was held that a Liquidation Court can in a proper case go behind assessment made by the Income-tax authorities though it is prima facie evidence that certain income was earned by the assessed.

It appears to me that the decision in I L R (1943) 24 Lah. 706, in so far as it holds that a Liquidation Court can question assessments made by the Income-tax authorities goes counter to the decision of Their Lordships of the Privy Council in A I R 1947 (P C) 78 : P L D 1947 P C 19. No doubt, section 67 of the Income tax Act bars only suits, but, in principle, there is no difference in a case in which the matter is taken before a Civil Court by a regular suit and the one in which it is brought before that Court by a miscellaneous petition. It is noticeable that section 67 and the other provisions of the Income-tax Act, which bar the jurisdiction of the Civil Courts, at least impliedly, to question any assessment made by the Income-tax authorities, were not even considered in I L R (1943) 24 Lah. 706 nor was section 226 of the Government of India Act, 1935, which takes away the jurisdiction of High Courts with regard to any matter concerning the collection of revenue, even mentioned in that decision.

In view of the apparent conflict between the decision of three learned Judges of this Court and that of Their Lordships of the Privy Council, I am of the view that the cases be heard by a larger Bench, and I, therefore, send them to my Lord the Chief Justice for orders.

JUDGMENT

SOOFI, J.

-This judgment shall dispose of the questions of law common to Civil Original Case No. 19 of 1952 and Civil Original Case No. 11 of 1953 which have been instituted by the Official Liquidator in connection with the claim of Income-tax against the Pindi-Kashmir Transport Company Limited in liquidation and also to Civil Original Case No. 17 of 1952 similarly instituted in respect of the Ravi Paint Colour and Varnish Works Limited in Liquidation. These cases in the first instance were heard by the learned Liquidation Judge, who considered them fit for reference to a larger Bench in view of the apparent conflict of authority on the law points involved therein, and my Lord the Chief Justice constituted this Bench to dispose of them.

The facts giving rise to these cases may briefly be stated as follows :-

The Pindi-Kashmir Transport Company Ltd. was wound up on the 31st of January 1949, by the order of the Liquidation Court. The creditors' claims were adjusted by the order of the Court dated the 15th of January, 1951.

The return for the assessment y6ar 1947-48 not having been submitted, a notice was issued by the Income-tax Officer, G' Ward, Lahore, calling upon the Official Liquidator to produce the accounts for the assessment year 1947-48. As the accounts were not produced, the assessment was made under section 23 (4) of the Income-tax Act on 14th of March 1952. The demand notice in respect of the Income-tax amounting to Rs. 26,687-8-0 was served on the Official Liquidator on the same day.

The Official Liquidator instead of challenging the assessment before the proper authorities under the Income-tax Act, instituted a petition (Civil Original No. 19 of 1952) against the Income-tax Commissioner on the 22nd of April 1952, on the allegation that the assessment was based on wholly incorrect data, with the prayer that the Income-tax Commissioner be called upon to prove the claim (i.e., the assessment) before the Liquidation Court.

Civil Original No. 11 of 1953 also rel4tes to the same company but is in respect of the assessment year 1948-49 (the accounting year being 1947-48). Here too the income-tax Officer made the assessment under section 23 (4). On the 14th of March 1953, the tax was assessed at Rs. 10,938, and a notice of demand was served on the Official Liquidator calling upon him to deposit the amount in the State Bank of Pakistan. In respect of this demand also the Official Liquidator instead of pursuing his remedy before the proper Income-tax authority, made a petition to the Liquidation Judge on the 14th of April 1953 on the same lines as in Civil Original No. 19 of 1952.

The facts relating to Civil Original No. 17 of 1952 are that the Ravi Paint Colour and Varnish Works Limited was ordered to be wound up by the order, dated 9th of January 1948 of the learned Liquidation Judge. An Official Liquidator was appointed. Debts and claims were adjudicated upon in accordance with law, and the first and so far final dividend was declared at the rate of 0-9-0 per rupee on 9th of June 1951. On 29th of February 1952 the Income-tax Officer, Companies Ward III, Lahore, served the Official Liquidator with a notice of demand for payment of income-tax amounting to Rs. 15,765-7 0 for the years ending on the 30th of June 1945 and 30th of June 1946. This assessment was under section 23 (4) of the Income-tax Act as no returns relating to the accounts for the respective years had been applied to the Income-tax authorities.

The Official Liquidator prepared account statements with the sanction of the learned Liquidation Judge and came to the conclusion that the Company had suffered losses during the said two years and was not liable to pay income-tax.

The Official Liquidator in this case too instead of pursuing the usual remedies before the Income-tax authorities applied to the Liquidation Judge that the Income-tax Commissioner be called upon to prove the assessments.

These petitions were contested on behalf of the Income-tax Commissioner; the principal objection being that this Court had no jurisdiction to re-open the question of assessment.

The main point for determination in these cases is whether the income-tax authorities can be called upon to prove their claims in a liquidation Court otherwise than by the production of the assessment order.

A cursory perusal of the Income-tax Act (XI of 1922), as amended, shows that it provides an appropriate and complete machinery for the determination of all questions relating to the assessment of Income-tax. Assessment of Income-tax is made under section 23 of the Act. An assessee dissatisfied with the assessment made by the Income-tax Officer has a right of appeal to the Appellate Assistant Commissioner under section 30. Section 33 provides for a second appeal to the Appellate Tribunal set up under the Act. If the assessee does not feel satisfied with the decision in second appeal, he can move the Appellate Tribunal under section 66 (1) of the Act, to refer any question of law involved in the case for determination by the High Court. If the Appellate Tribunal does not refer the case in the manner provided, the aggrieved assessee under section 66 (2) can move the High Court, to require the Appellate Tribunal to state the case. Section 66-A is a further safeguard in the Act by which on a certificate of the High Court that the case is a fit one for appeal to the Federal Court, the case can be heard by the said Court.

But that is not all. In the scheme of the Act there are other provisions also which are enacted to redress -the grievances of the assessees. Section 35 of the Act empowers the income-tax authorities to rectify their mistakes on their own motion or on the application of the assessees and section 33-A confers power on the Income-tax Commissioner to revise the orders of the authorities subordinate to him in certain cases.

In short the (Indian) Income-tax Act is a complete Code by itself, and it is abundantly clear that it was the intention of the legislature that all questions of law and fact arising out of the proceedings under the Act should be decided by the authorities set up and in accordance with the procedure prescribed by the Act. It is evident that the only method open to an assessee to get a redress of his grievances is to set in motion the machinery provided by the Act. That the assessee should have a right to seek his remedy in the alternative in a Civil Court, is a notion inconsistent with the elaborateness and completeness of the machinery provided by the Act. If the Civil Courts start entertain ing petitions against assessments made under the Act, the machinery setup by the Act would become useless. In some cases there may be a clash between the decisions of the Civil Courts and the Income-tax authorities and thus the collected of income-tax would become an extremely difficult matter. It would lead to anomalous results and no system of law would tolerate such a state of affairs. Again if the cases relating to income-tax are not decided in accordance with the Income-tax Act, it would become practically a dead letter.

It is, therefore, essential that all matters relating to assess ments should be dealt with by the machinery set up under the Income-tax Act. This view has the support of a ruling of Their Lordships of the Privy Council reported as Raleigh Investment Co. Ltd. v. The Governor-General-in-Council (A I R 1947 P C 78 = 1960 P T D 981). It relates to a suit instituted by Raleigh Investment Company against the Governor -General-in-Council for the recovery of a large sum of money on the grounds that in the computation of the plaintiffs' assessable income effect had been given to a provision of the Income-tax Act which was ultra vires of the Indian Legislature, and the assessment was, therefore, wrong. It was contented on behalf of the defendant that the provision in question was not ultra vires and that in any case the High Court was precluded from entertaining the suit by section 226 of the Government of India Act, 1935, and section 67 of the Income-tax Act, 1922. The High Court holding that the provision was ultra vires of the Indian Legislature and that its jurisdiction was not barred either by section 67 of the (Indian) Income-tax Act 1922, or by section 226 of the Government of India Act, 1935, decreed the plaintiff's suit. On appeal the Federal Court of India agreed that the provision that was impugned was ultra vires but held that the suit was barred by section 226 of Government of India Act. The question that the suit was barred by section 67 of the Income-tax Act was not raised before the Federal Court. On appeal from the order of the Federal Court, Their Lordships of the Privy Council did not think it proper to express any opinion on the effect of section 226 of the Government of India Act, but held that the suit was not maintainable in view of the provisions of the Income-tax Act.

A perusal of the judgment of their Lordships and particularly of Paras. 19 and 24 which are quoted below would show that it is based mainly on the ground that an effective and appro priate machinery has been provided by the Income-tax Act itself for modifying or setting aside an assessment :-

Para. 19-"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 section 30 and Secretary of State for India in Council through Collector Ramnad at Madura v. Meyyappa Chettiar (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 provisions 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 ground of law of any assessment. It is in that setting that section 67 has to be construed."

Para. 24-"In conclusion Their Lordships would observe that the scheme of the Act is to set up a particular machinery by the use of which alone total income assessable for Income tax is to be ascertained. The Income-tax exigible is deter mined by reference to the total income so ascertained and only by reference to such total income. Under the Act (Section 45) there arises a duty to pay the amount of tax demanded on the basis of that assessment of total income. Jurisdiction to question the assessment otherwise than by use of the machinery expressly provided by the Act would appear to be inconsistent with the statutory obligation to pay tax arising by virtue of the assessment. The only doubt, indeed, in Their Lordships' mind, is whether an express provision was necessary in order to exclude jurisdiction in a Civil Court to set aside or modify an assessment."

In another case reported as Commissioner of Income-tax, West Punjab v. Tribune Trust (A I R 1948 P C 102: 1960 P T D 870) Their Lordships of the Privy Council again considered the provisions of the Income-tax Act very minutely and approved the proposition laid down by Their Lordships in Raleigh Investment Co. v. Governor-General-in Council (A I R 1947 PC 78 : 1960 P T D 981) that the remedies open to the tax-payer are to be found only within the four corners of the Income-tax Act.

The facts in the Tribune Trust case were that the Tribune Trust in respect of the assessment for the year 1932-33 raised an objection that its income for that year was exempt from income tax by virtue of section 4 (3) (i) of the Income-tax Act. The High Court on reference under section 66 held that there was no such exemption. Their Lordships of the Privy Council, in 1939, on appeal held that the said income was exempt- from Income-tax and reversed the decision of the High Court. In the meanwhile the Income-tax Commissioner had made assessments in accordance with the decision of the High Court. The assessee asked for the assessments to be quashed. The Income-tax Commissioner would not agree on the ground that the assessee had not availed of the remedies provided by the Income-tax Act and hence the assessment had become final. On reference the High Court held that in view of the Privy Council decision in 1939 the assessments made by the Income-tax Commissioner were a nullity. On appeal, Their Lordships of the Privy Council held that the stand taken by the Income-tax Commissioner was correct. The words of Their Lordships may well be quoted:

"Upon this footing then the argument must be that the assessee has a right enforceable against the Commissioner to require refund of tax paid by him upon ground of equity and good conscience, though the assessment has been made and the tax received in good faith."

Their Lordships cannot accept this argument. They have reviewed the Code of Income-tax law for the purpose of show ing that it exhaustively defines the obligations and remedies of the tax-payer. It would be wholly incompatible with this that he should have a collateral right, necessarily vague and ill-defined, founded on the principles of equity and good conscience. Their Lordships are of the opinion that the only remedies open to the tax-payer, whether in regard to appeal against assessment or to claim for refund are to be found within the four corners of the Act. This view of his rights harmonises with the provisions of section 67, to which reference has already been made, that no suit shall be brought in any Civil Court to set aside or modify any assessment made under the Act. It is the Act which prescribes both the remedy and the manner in which it may be enforced".

In Janda Rubber Works v. Income-tax Officer, Salaries Section ((1950) I T R 951), a case relating to the affairs of a company in liquida tion, the High Court of the East Punjab relying upon Raleigh Investment Co. Ltd. v. Governor-General-in-Council (A I R 1947 P C 78 : 1960 P T D 981), held that in respect of an assessment made by the Income-tax authorities the jurisdiction of the Civil Court was barred that even if the High Court was not exercising original jurisdiction within the meaning of section 226 (1) of the Government of India Act, 1935, its Jurisdiction was completely barred because of the special machinery having been provided by the Income-tax Act for the determination of all matters coming within the scope of that Act. The legality or propriety of an assessment under the Act is to be determined by setting that machinery into motion and not through any other tribunal.

In Messrs Dinshaw & Company v. Income-tax Officer, Lucknow (A I R 1941 Oudh 269), it was held by a Division Bench that as a special procedure had been provided by the Income-tax Act for the assessment of Income-tax, the appellant's contention that the assessment can be re-opened in insolvency proceedings and a fresh inquiry can be made by the insolvency Court could not be accepted.

It is thus perfectly clear that in matters relating to the assessment of Income-tax the machinery that can be brought into action is the one provided by the Income-tax Act, which is as complete Code by itself. Hence the, jurisdiction of the Civil: Courts is impliedly barred section 67 of the Income-tax Act, expressly bars the institution of a suit in any Civil Court to set aside or modify an assessment made under the Income-tax Act.

Although section 67 expressly bars the jurisdiction of the Civil Courts in respect of -suit only, on principle miscellaneous proceedings, if their object be to determine any question relating to assessment in one connection or another, would also be barred.

The learned counsel for the petitioner has mainly relied on Governor-General-in-Council through the Commissioner of Income tax v. Sargodha Trading Co. (I L R 24 Lah. 706.), in which the judgment with which Abdul Rashid and 'Beckett, JJ. agreed, was delivered by Chief Justice Sir Trevor Harries. It was held there that the true rule of law is that a judgment is a prima facie evidence of a debt but is not conclusive and the Court can go behind the judgment or decree where facts give rise to a suspicion that there was no real debt. It was further held that this rule applied with equal force to assessments and a liquidation Court can, in proper cases, go behind assessments, though the latter are prime facie evidence that certain income was earned and that an amount of Income-tax was due, the onus of proving that the assessment did not represent the real taxable income being on the liquidator.

The facts of this case were as follows :-

The Sargodha Trading Company did not make a return of their income to the Income-tax Officer for the assessment year 1938-39. The Income-tax authorities served a notice on the Company under section 22 (4) of the Income-tax Act calling upon the Company to produce its account on the 7th of July 1938. The manager of the Company appeared before the Income-tax Officer on the said date and secured an adjournment till the 14th of July 1938. He was required by the Income-tax Officer to produce the accounts on the adjourned hearing i.e., the 14th of July 1938. In the meanwhile on the 12th of July 1938, an order was made by the learned Liquidation Judge to wind up the Company and a provisional Liquidator was appointed.

On 14th of July 1938, the manager filed a return showing that the Company had incurred a loss of Rs. 22,052 for 1937-38, which was the accounting year for the assessment year 1938-39. The return was not accompanied by a balance sheet or a copy of the profit and loss account and it was conceded that it was not a return contemplated by Income-tax law. The Manager of the company was called upon to" file copies of the profit and loss account and the balance sheet by the 28th of July 1928. He was warned that if the copies were not filed, an assessment would be made by the Income-tax authorities under section 23 (4) of the Act.

Since no one appeared on the 28th of July 1938, the Income tax authorities made an assessment under section 23 (4) of the Act. The Income-tax thus assessed was Rs. 3,814-3-0.

On the 5th of August 1938, the Provisional Liquidator, who had by that time become aware of the proceedings, applied to the Income-tax authorities for a further adjournment to file the necessary documents, but the application was refused and he was informed that an assessment had already been made.

On the 13th of August 1938, a notice was served on the Provisional Liquidator demanding, Rs. 3,814-3-0 as tax for the assessment year 1938-39 due from the company. On the 3rd of September 1938, the Provisional Liquidator applied for inspection of the assessment records which was allowed. On the same date he filed an application under' section 27 of the Income-tax Act praying that the assessment which had been made under section 23 (4) should be set aside or cancelled. In this application it was stated that the company had gone into liquidation while these proceedings were going on. The application was rejected. The liquidator did not pursue the matter further and did not institute an appeal from the decision of the Income-tax Officer, nor did he apply for any revision or review of the order.

On the 23rd of March 1939, the Income-tax Officer moved the Collector to recover the amount of the tax as arrears of land revenue. On the Nth of June 1939, the Liquidator applied to the Liquidation Judge to restrain the Collector and the Income-tax Officer from effecting recovery of, the debts and to direct them to put in a formal claim for the amounts of the tax. The matter again came before the Liquidation Judge on the 8th of November 1940, when counsel for the Commissioner of Income-tax said that he was prepared to prove his claim only by production of the assessment order. The learned Judge held that the mere produc tion of the assessment order was not sufficient and as the Commissioner of Income-tax was not prepared to prove his claim otherwise, it was rejected. Against that decision an appeal was preferred to a Division Bench, which referred the question of law involved in the case, i.e., whether the liquidator can call upon the Income-tax authorities to prove their claims, to a Full Bench for an authoritative decision.

It was contented on behalf of the Commissioner before the learned Judges that although an insolvency Court or a Liquidation Court can go behind a decree, it cannot go behind an assessment, as a decree does not stand on the same footing as an assessment. To support this contention reliance was placed on lure Calvert (L R (1899) 2 Q B D 145). While dealing with this authority the learned Chief Justice made the following observations :-

"Even if the case of In re Calvert correctly states the law in England, I would hesitate to apply the same rule in India. In this Province in particular a very large number of companies have been formed in recent years and experience has shown that directors and responsible officers of these companies have not fully realised their duties arid obligations. At present there is a real danger; when a company is in financial difficulties, that demands for returns of income may be completely ignored with the re3ult that assessments under section 23 (4), Indian Income tax Act, might well be made when no income had been earned. Balance-sheets are often negligently and sometimes fraudulently prepared and cases have occurred in this Court when for fraudulent purposes purely imaginary profits have been shown as having been earned and Income-tax paid upon such profits. Such cases are referred to in the judgment in the case of In re Diamond General Insurance Company to which reference will be made later in this judgment."

Without meeting the argument of Wright, J., which drew a sharp distinction between a judgment and an assessment, the learned Chief Justice went on to say that the rule enunciated by Wright, J., in In re. Calvert (supra) was not in accordance with other English cases, which the learned Judges proposed to follow. Those cases related to judgment' and not assessments' and included 1875-10 Ch. A. 379 which was described as the leading authority as it was followed in some subsequent cases. In that case an infant, before the passing of the Infants Relief Act, gave a bill of exchange, payable after his majority, to a Jeweller in payment for jewellery. After his majority, and after the Act came into operation, the creditor obtained judgment by default against the infant in an action on the bill of exchange and then took out a debtors summons and, on his failing to comply with it, filed a petition for adjudiction of the debtor. Section 2, Infant's Relief Act, provided that no action could be brought on any ratification made after full age of a contract made during infancy. The Court of Appeal in England held that the Court of Bankruptcy would look into the consideration for the judgment and that if the conduct of the debtor, in allowing the judgment to go by default against him, operated as a ratification of the bill of exchange, such ratification was rendered void by Section 2 of the Act and the petition for adjudication was consequently dismissed.

The learned Chief Justice then referred to Ex parte Revell In re. Tollemache ((1884) 13 Q B D 720) and Ex parte Lennox In re Lennox ((1885) 16 Q B D 315) in which Ex parte Kibble In re. Onslow ((1876) 10 Ch. A 373) was followed, and held that the Court of Bankruptcy had the power to go behind a judgment and enquire into the consideration of the judgment debt.

Applying the principle relating to a judgment' enunciated in the said English cases by analogy to an assessment' the learned Chief Justice came to the conclusion that an assessment was a prima facie proof of taxable income, but the Court can go behind it if there are suspicious circumstances.

It is noticeable that in the decision of the Sargodha Trading Company case, the existence of an appropriate and complete machinery provided by the Income-tax Act for the decision of all questions relating to assessment of Income-tax was not considered. Nor has the question whether in the presence of the elaborate machinery the Civil Courts should also have jurisdiction to adjudicate on the same matters been referred to m their judgment. Nor is there any reference in the judgment to Section 67 of Income-tax Act.

As discussed above, it should be taken as a settled proposition that where an Act of the Legislature sets up a Special Tribunal and prescribes a special procedure for the determination of rights and liabilities credited by the Act, the jurisdiction of other; Courts in respect of those rights and liabilities is impliedly barred, even if there be no express provision to that effect: The approach to the problem not having been made from this angle, the result is that the judgment of the, learned Judges is in conflict with the views expressed by Their Lordships of the Privy Council in Raleigh Investment Company v. Governor-General-in-Council (A I R 1947 P C 78 : 1960 P T D 981).

The learned Judges in Sargodha Trading Company's case have observed that a large number of-companies have come into existence in this Province and their Directors and responsible officers have not yet fully realised their, obligations and duties and that in these circumstances it would be dangerous to apply the rule laid down In re. Calvert (supra) that an Insolvency or Liquidation Court cannot go behind an assessment. With all respects, We would say, however, desirable it may be that a Liquidation or an Insolvency Court should have jurisdiction to go behind assessments in certain cases, unless jurisdiction is conferred on it by law, it cannot assume jurisdiction on the grounds of expediency.

The proposition laid down by the learned Judges towards the end of the judgment that a Court can go behind an assessment if there are suspicious circumstances, would give the Court jurisdiction to go into every case brought before it to ascertain whether the facts connected with the assessment disclose any suspicious circumstances. If suspicious circumstances are found the Court will continue the inquiry, but if they are not' found it will drop the proceedings. In other words it will have power to go into the facts of every case in order to find out whether it has jurisdiction to deal with that case. A similar proposition having been submitted to Their Lordships in Raleigh Investment Company v. Governor-General-in-Council (supra), was disposed of by them with the following remarks:-

"On the appellants construction, in order to ascertain whether a Civil Court is barred by the section from reviewing an assessment brought before it the legal merits of the assessment have first to be considered and decided. For if the assessment is determined to be right in law the jurisdiction of the Civil Court to entertain the suit is excluded. The assessment is on the appellant's construction made under the Act. If, on the other hand, the assessment is determined to be wrong, the jurisdiction of the Civil Court to entertain the suit arises. The result of an inquiry into the merits of the assessment is, on the appellant's construction, to determine whether jurisdiction existed to embark on the enquiry at all. Jurisdiction is made to depend not on subject-matter but on the correctness of the suitor's contention as respects subject-matter. The language of the section is inapt to justify any such capricious method of determining jurisdiction."

A direct authority holding a view contrary to the view in Sargodha Company's case is Messrs Dinshaw & Company v. The Income-tax Officer, Lucknow (A I R 1941 Oudh 260). The facts were that the firm Dinshaw & Co. came under liquidation c n the 15th of October 1935. The firm had been assessed to pay Income-tax, surcharge and penalty under Section 23 (4) of the Income-tax Act, as no return had been sent to the Income-tax Department, and a notice to produce accounts had not been complied with. No appeal was preferred against the order of assessment, which accordingly became final as against the firm. For some years the Official Liquidator put off the payment of Income-tax on the plea that payment would be made when funds were available. When another Official Liquidator was appointed an attempt was made to reopen the assessment. It was held by a division Bench in the first appeal against the order of the Chief Judge that an assessment of Income-tax does not stand on the same footing as a judgment. The reason for allowing a Court to go behind a judgment given by a Civil Court is to see that there is a real debt in existence and to prevent fraudulent judgments. This is not the case with assessment of Income-tax, hence where a company has been assessed under Section 23 (4) of the Income-tax Act on the basis of estimated income of the previous year and the order of assessment is not appealed against, the assessment becomes final and cannot be challenged or re-opened in liquidation proceedings. In arriving at this conclusion the learned Judges followed the rule in In re. Calvert ((1899) 2 Q B D 145), and overruled Income-tax Officer, Lucknow v. Lucknow Sugar Works Limited (A I R 1935 Oudh 451), a previous authority of their own Court. The passage in In re. Calvert which was quoted in Dinshaw's case is a classic one and can well be reproduced :-

"It seems to me that this assessment is not like a judgment, nor within the principle which is applied to judgments. It is absolutely necessary in order to prevent fraudulent proofs and fraudulent bankruptcies to adopt the rule that judgments should not of themselves be conclusive. That rule appears to be founded on necessity. Here there is no such necessity. It is quite inconceivable that a man should act in the way that is suggested he might act in order to spite his creditors. But if he did, I am not sure that the bankruptcy law is not strong enough to reach the case within certain limits of time-possibly as a fraudulent preference of the Crown. If not within those limits of time, I should think very likely on common law principles it might be possible for the Court to deal with the matter. In the case of an assessment there is no question of consideration as there is in the case of a judgment : there is a mere administrative assessment with a special mode of appeal provided which must be followed. I cannot think it possible that it is competent to the Bankruptcy Court, on the invitation of the trustee in bankruptcy or of the debtor, to reopen questions of that kind on a motion to expunge."

Some argument was addressed in respect of the original jurisdiction of the High Court being barred in matters relating to revenue, by Section 226 of the Government of India Act, 1935, but we find it unnecessary to express ourselves on this point.

That the jurisdiction of the Civil Court is barred is established by the three points discussed above; viz., (i) the implied bar by the special and elaborate machinery set up by the Income-tax Act for determining question relating to assessment and the provisions for safeguarding the interests of the assessee, (ii) the express provision of Section 67 of the Income-tax Act barring such jurisdiction and (iii) the principle of English Law enunciated in In re. Calvert, followed in Dinshaw's case which we have respectfully viewed with approval.

We consequently overrule the decision of the learned Judges of this Court in Sargodha Trading Company's case (A I R 1943 Lah, 228), and answer the question before us in the following words :-

The Income-tax authorities cannot be called upon to prove their claim in a Liquidation Court otherwise than by the production of the assessment order.

Now we propose dealing with one or two comparatively minor points involved in this case.

It was contented on behalf of the Liquidator that as the Income-tax authorities had not proved their claim within the time fixed for the purpose by the Liquidation Court, they were not entitled to any benefit from the distribution of the assets of the Companies. It was, however, conceded by the Liquidator that part of the assets of the Rawalpindi-Kashmir Transport Company had not been distributed so far. The relevant provision of law is Section 191 of the Companies Act which reads as follows:

"The Court may fix a time or times within which the creditors are to prove their debts or claims or to be excluded from the benefit of any distribution made before these debts are proved."

On the true construction of the wording of this section, the only penalty for failure to prove a debt or claim within the time fixed by the Court is that the claimant is excluded from the benefit of any distribution made before such debt or claim is proved, that is to say, he can only claim a share in such assets as may remain undistributed at the time when the proof is claimed and without disturbing any distribution made before such proof. There is no reason why a creditor should not be given dividend, if this can be done without disturbing the dividend already declared or paid.

In Isack Jesudasen Pillai v. Divan Bahadur Ramasamy Chetty (I L R 27 Mad. 496), a creditor of a company in liquidation failed to bring his claim by the date fixed by the Official Liquidator for making claims. He subsequently applied that his claim be admitted. It was held that the creditor was not precluded from coming in at a later stage. The only penalty for failure to apply within time stated in the notice was that prescribed by the latter part of Section 158 of the Companies Act (VI of 1882), viz. that the claimant would be excluded from the benefit of any distribution made before his debt was proved. The same pro position was laid down by the Madras High Court in T. R. Rajkumari v. Motion Picture Producers Combine Ltd. (in liquida tion) (A I R 1942 Mad. 349), with reference to Section 191 of the Companies Act (VII of 1913). This proposition also finds support in several English authorities. Reference may be made to In re. General Rolling Stock Company ((1872) Ch. Ap. 646), In re Kit Hill Tunnel Ex : parte William ((1881) 16 Ch. D. 590), and In re. Matcalfe ((1880) 13 Ch. D. 236). In the last mentioned authority, it was clearly laid down that a creditor may come in as long as there are assets undistributed.

Lastly it may be added that by the mere fact that a Company has gone into liquidation, it is not absolved from the liability to pay Income-tax. According to sub-section (6) of Section 2 of the Income-tax Act--

" Company' means a company as defined in the Companies Act, 1913, or formed 'in pursuance of an Act of Parliament or of Royal Charter or Letters Patent, or of an Act of the Legislature of a British possession or of a law of an Acceding State or a non-Acceding State, and includes any foreign associa tion, whether incorporated or not, which the Central Board of Revenue may, by general or special order, declare to be a company for the purposes of this Act."

It is provided by Section 3 of the Income-tax Act that where any Act of the Central Legislature enacts that income-tax shall be charged for any year at any rate, the tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of the Income-tax Act in respect of the total income of the previous year of every individual, Hindu undivided family, company and local authority, etc.

A company registered under Section 23 of the Companies Act is a company for all purposes including that of taxation under the Income-tax Act. When it is registered under the Companies Act, it comes within the definition of a Company as given in subsection- (6) of Section 2 of the Income-tax Act.

The question whether a company under liquidation continues to be liable to pay Income-tax, was discussed by the learned Judges of Allahabad High Court in Assam Railways and Trading Company Ltd. v. Commissioner of Island Revenue ((1934) I T R 79), and it was held that a company in liquidation is a company within the meaning of Section 3 of the Income-tax Act and the Income-tax authorities can call upon the liquidator to make a return in accordance with Section 22 (1) of the Act. The other authorities on the subject are Upper India Chamber of Commerce, Cawnpore v. Commissioner of Income-tax ((1947) I T R 263), and Baker v. Cook ((1939) I T R 285).

We, therefore, hold that each petitioner company under liquidation is a company liable to pay Income-tax under the Income-tax Act.

The summary of the conclusions reached by us is-

(1) that the Income-tax authorities can prove their claim under Section 228 of the Companies Act against a company in liquidation by the production of the assessment order of .Income-tax made by them;

(2) that the Income-tax authorities on proof of their claim would be entitled to share the dividends declared after such proof but not to the dividends already declared or paid ; and

(3) that the company under liquidation is still an assessee and subject to Income-tax law the Liquidator can be called upon to submit the usual Income-tax return under the provisions of the Income-tax Act.

As a result of these conclusions we dismiss Civil Original Nos. 19 and 17 of 1952 and Civil Original No. 11 of 1953, but in view of the fact that these petitions were competent under the rule in the Full Bench judgment in Governor-General-in-Council through Commissioner of Income-tax v. Sargodha Trading Com pany (I L R 34 Lah. 700), which was then the governing authority and which we have overruled, we leave the parties to bear their own costs.

MUMAMMAD MUNIR, C. J.

-I agree with Soofi, J. and, wish only to make one observation. Once it is conceded, as it was in the course of arguments in this case, that an Income-tax Officer has jurisdiction to assess to Income-tax a company in liquidation, it must follow that the company, if it is aggrieved by the assessment, must pursue the same remedies as are open to any other assessee. The mere fact that a winding up order has been male in respect of a company does not, in the absence of an express provision to that effect, take it out of the, operation of Income-tax statutes, and neither the Liquidation Judge nor the liquidator acquires any right to question the correctness of the assessment otherwise than in the manner provided by the statute under which the Income-tax Officer has acted. The rights and liabilities of a Company in liquidation are neither more nor less than those of any other assessee and though the law for the purposes of winding up places its affairs under the special supervision of the Liquidation Judge, assessment of the company to Income-tax is neither the function of the Judge nor of the liquidator but that of the Income-tax Officer whose powers for determining the liability of the company to Income tax remain unaffected by the incident of the liquidation of the company.

If therefore the liquidator of the company has any complaint in the matter of its assessment to Income-tax, he must refer that complaint to the tribunal appointed for the purpose by the Income-tax Act. Being the representative of the assessee, the liquidator can neither covert himself into a revising authority of the Income-tax Officer nor ask the Liquidation Judge to assume such role.

Petitions dismissed.

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