P L D 1973 Lahore 870 (PLP)

The matter went up before a different Appellate Assistant Commissioner who by his order dated 25‑4‑63 held that the assessee was in default and that the excuse under which the books had been withheld attracted the provisions of section 23(4) of the Income‑tax Act. The appeal of the assessee was thus rejected. The Tribunal was again moved and by its order dated 14‑10‑63 it held that the theft story was quite believable the appellant Assistant Commissioner, should instead of canceling the assessment order, changed he label of assessment from subsection (4) to subsection (3) of section

23. It, therefore, vacated the assessment made under section 23, subsection (4) and held that the assessment should have been claimed under section 23, subsection (3). The Department has felt aggrieved and on being moved by it has referred the following two questions of law to us for opinion ; (1) Whether on the facts and in the circumstances, the Tribunal was right in holding that the assessment of the charge year 1957‑58 should be framed under subsection (3) of section 23 of the Income‑tax Act. (2) Whether on the facts and in the circumstances, the Tribunal was right in allowing renewal of registration of the charge year 1957‑

58. The books having been hold to have been stolen, by the Tribunal, a finding of fact which is conclusive and binding upon us, we have only to consider the effect of the non production of books assuming that they bad been stolen and to determine whether in these circumstances it is correct to brand the assessee as having "failed to comply with all the terms of a notice". Precisely speaking, the question is as to what is meant by "failure". Learned counsel for the Department has relied on several cases in support of its contention. He refers to Savaji Ram, Gaikwar of Baroda v. Madhavrcp Raghunathran Dhavale (A I R 1929 Bom. 14) The plaintiff in that case sought to recover possession of a certain parcel of lard from the defendant. One of the questions was whether the suit was not time‑barred? The cause of action arose out of the dispossession of the plaintiff in 1910, the suit consequently fell under Article 142 of the Limitation Act. The finding of the civil Court was that the dispossession took place In 19061907 and it was not disputed. The limitation, therefore, expired in 1918 or 1919 but the suit was filed In June 1922. The plaintiff had claimed that he was entitled to deduct a period of four years three months and twenty‑one days from 25‑7‑1916 to 15‑11‑1920, the period having been spent in obtaining permission to file a suit under section 86 of the C. P. C. The plaintiff relied upon the fact that he was "disabled to conform to that limitation, without any default in him, and he has no remedy over, the law will ordinarily excuse him". The Bombay High Court rep‑lied this contention on the ground that it was nothing more than an application of a maximum, but that cannot prevail against the express provisions of section 3 of the Limitation Act. Their Lordships referred to other cases also and observed:‑ As pointed out in that case, there was really no hardship or impossibility and the plaintiff bad time to bring his suit in spite of the suspension. Similar remarks apply in the present case. There was no real hardship or impossibility in this case. No doubt four years is an extraordinary time for the plaintiff's application to have been under the consideration by the Government of India. But the plaintiff could have applied very much earlier than he did, for instance, in 1910, and so obtained permission in plenty of time to bring his suit within 12 years. He allowed 9 years to pass before applying for permission and 18 months after getting permission before he brought the suit. The facts of that case were, therefore, entirely different from those that we have before us. There it was the negligence of the plaintiff which delayed the filing of the suit. It was nobody's case that it was impossible for him to have filed the suit earlier. In the case before us, the books having been found to be stolen, it was not possible for the assessee to have produced them. The dictum of A I R 1929 Born. 14, therefore, not at all attracted to this case by any stretch of imagination. Learned counsel for the Department also placed reliance upon Messrs Tulsi Das‑Nagina Chand v. Commissioner of Income‑tax, Punjab (A I R 1938 Lah. 551). In that case, the assessee did not produce certain books of account as he thought that they were irrelevant to the inquiry and since the Income‑tax Officer was in a position to make the assessment on Information furnished by the account books which were actually produced, the assessee claimed it cannot be said that there was any non‑compliance with the terms of the notice under subsection (4) of section

22. That case was entirely on a different footing because it was not that the assessee was not in possession of the books that were being demanded or that it was impossible for him to produce them. He had the books but he obdurately maintained that they were Irrelevant to the inquiry and therefore did not produce them. It was, therefore, certainly a failure on his part to produce the books. Reliance was also placed on The River Wear Commissioner v. William Adamson and others ((1877) 2 A C 743). In this case it was held that where damage to the pier had been occasioned by a vessel through the violence of the winds and waves, at a time when the master and the crew had been compelled to escape from the vessel and had, consequently, no control whatever over it, the owners were not liable. This is, in fact, a ruling in favour of the assessee. Learned counsel for the Department, however, insisted that it was not so because the decision was based on the finding that it was only a procedural matter. This makes no difference. Their Lordships have not said that it would have been otherwise if it was not a procedural matter. They, in fact, held agreeing with the Court of Appeal that‑

"The Court of Appeal has been of opinion, and I think rightly that the injury was not in this case occasioned by the voluntary act or by the negligence of the respondent, or, indeed, of any person on his part or, or connected with, the ship; that it could not have been prevented by any human instrumentality; but that it was occasioned by a via major, namely, by the act of God in the violence of the tempest." Their Lordships went on to say that "no man is compelled to do that which is Impossible". We have a decision of our own Supreme Court In Ghulam Muhammad Khan Lundkhor v. Safdar Ali (P L D 1967 S C 530) where it has been held that‑-- The word "default" in legal terminology necessarily imports an element of negligence or fault and means something more than more non‑compliance. To establish default one must show that the non‑compliance has been due to some avoidable cause, for, a person ought not to be made liable for a failure due to some cause for which he is, in no way, responsible or which was beyond his control. It is not lightly to be presumed that the law intends to cause injustice or hardship, thus unless the Legislature has made its intention clear that construction must be preferred which will prevent manifest injustice and obviate hardship. On this principle too the word "default" should mean an act done in breach of s duty or in disregard of an order or direction. It consequently follows that if a person is required by law to do something which becomes impossible for him to do not o n account of his own negligence or fault, but on account of something which was unavoidable and in any case not subject to his control, he cannot be said to have failed to perform that which the law or an order passed under the law required him to do. Failure being an essential condition for proceeding under section 23, subsection (4) and the same being absent in this case, it was not open to the I. T. O. to have proceeded to frame the assessment under section 23(4) of the Income‑tax Act. The Income‑tax Officer should have proceeded under section 23 (3 of the Act which enjoins upon the Income‑tax Officer to assess the total income of the assessee "after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified points". This brings us to the second question. The learned I. T. O. by his order dated 23‑2‑58 refused to grant registration to the assesses in exercise of the discretion conferred upon him under section 23(4). We have already found that the circumstances necessary for proceeding under that section did not exist in the case before us. The refusal to grant registration to the assessee is, therefore, not in accordance with law and the Tribunal was right in allowing what the I. T. O. refused to do with regard to the renewal of the registration. Our answers to both the questions posed by the Tribunal are, therefore, in the affirmative. The assesses shall get his costs from the Department. Reference answered.