P L D 1957 (W (PLP)

KAIKAUS, J.‑

On the 28th of June 1950, the Income‑tax officer "A" Ward, Lahore, issued a notice under section 22 (2) of the Income Tax Act to an unregistered firm, Messrs. Muhammad Idrees Barry & Co., calling upon the firm to file a return for the assessment year 1950‑

51. Messrs. Muhammad Idrees Barry & Co. (hereinafter called the assessee) is a firm whose partners reside in Karachi, but which carries on a business of sale of piece‑goods in Anarkali, Lahore The Manager of the firm in Lahore is one Manzur Ahmad, and one Habib‑ur‑Rahman is its salesman. The notice issued by the Income‑tax officer was served on the 27th of July 1950 on Habib‑ur‑Rahman. Habib‑ur‑Rahman gave the notice to Manzur Ahmad who, it appears, was not present when the Process‑Server brought the notice and Manzur Ahmad informed Mr. Muhammad Idrees Barry who was at Karachi on the receipt of notice. He received a reply that a lawyer should be consulted. The last date for filing the return which was the 1st of September 1950, expired and no return was in fact filed. On the 15th of January 1951, the Income‑tax officer issued another notice under section 22 (4) of the Income Tax Act, calling upon the firm to produce its account books by the 29th of January 1951, on which date the assessee put in an application asking for an adjournment for the production of accounts on the ground that the Accountant of the firm had been taken ill, but the adjourn ment was refused, and, on the same day, the Income‑tax officer made a best judgment assessment under section 23 (4). The assessee appealed to the Appellate Assistant Commissioner against assessment on the ground that service on Habib‑ur‑Rahman of the notice under section 22 (2) was not valid service, and, therefore, on the strength of that service, an order under section 23 (4) could not have been made. The learned Appellate Assistant Commissioner accepted the contention and set aside the assessment directing the Income‑tax officer to issue a fresh notice. Against this order of the Appellate Assistant Commissioner, there was a further appeal to the Appellate Tribunal. The appellate Tribunal, after recording the statement of Manzur Ahmad, the Manager in Lahore of the firm, held that service on Habib‑ur‑Rahman was effective and, accepting the appeal of the Income‑tax officer, it restored the order of assessment passed by the Income‑tax officer. The assessee applied to the Appellate Tribunal under section 66 (1) for referring the following question to the High Court :‑ "Is Habib‑ur‑Rahman, the Agent or Manager, empowered to accept service of the notice from the Income‑tax officer Lahore on behalf of the assessee firm of Messrs. Muhammad Idrees Barry & Co., Lahore, within the meaning of Order V, rule 9 (1) of the Code of Civil Procedure ?" The Appellate Tribunal recast this question as follows :‑ "Whether there is any material in support of thee Tribunal's finding that Habib‑ur‑Rahman was the assesses agent empowered to accept service of notice within the meaning of Order V, rule 12 of the Code of Civil Procedure read with section 63 (1) of the Income Tax Act ?" and referred it to the High Court. From what has been stated above, it would be clear that the assessee‑firm had in this case full knowledge through its own employees that a notice had been issued by the Income‑tax Officer and received on its behalf. It had accepted the notice as good and had moved the Income‑tax Officer for an adjournment. Under the circumstances, the plea of non‑service is a purely technical one, for it cannot be urged that the alleged irregularity in the service of notice caused prejudice to' the assessee. It is contended, however, on behalf of the assessee that the provisions relating to service of notices have to be strictly complied with in view of the fact that the consequences of failure to comply with the notices are very serious, It is also urged that the scope of the question which has been referred is limited and that to that question the reply can only be in the negative. Before proceeding it will be proper to reproduce here section 63 of the Income‑tax Act, Order V, rule 12 and Order III, rule 3, Civil P. C.:‑ "Section 63, Income Tax Act.‑(1) 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. (2) Any such notice or requisition may, in the case of a firm or a H1ndu undivided family, be addressed to any member of the firm or to the manager, or any adult male member of the family and, in the case of any other associa tion of individuals, be addressed to the principal officer thereof." "Order 11, rule 12, Civil P. C.‑Wherever it is practicable, service shall be made on the defendant in person, unless he has an agent empowered to accept service, in which case service on such agent shall be sufficient." "Order Ill, rule 6, Civil P. C.‑(1) Besides the recognised agents described in rule 2 any person residing within the jurisdiction of the Court may be appointed an agent to accept service of process. (2) Such appointment may be special or general and shall be made by an instrument in writing signed by the principal, and such instrument or, if the appointment is general, a certified copy thereof shall be filed' in Court." The question, which has been referred, no doubt puts into issue only the application of Order V, rule 12, Civil P. C., and if we were to determine only whether Habib‑ur‑Rahman was the assessee's agent empowered to accept service in accordance with Order V, rule 12, the reply would have to be in the negative. The following extract from the judgment of the Appellate Tribunal gives the ground on which they accepted that Habib‑ur‑Rahman had been empowered to accept service :‑ "Having regard to the facts that the partners do not ordinarily reside in Lahore, that the business in Lahore is being looked after by their employees, that Habib‑ur Rahman is an employee of the firm, that the notice was served during office hours on the business premises of the assessee, that on various occasions in the past Habib‑ur Rahman has been receiving notices on behalf of the firm and the assessee has been acting in response to such notices, lead to the irresistible conclusion that Habib‑ur Rahman was in fact empowered to accept such notices on behalf of the firm. His authority to receive such a notice has never been repudiated in the past and even on the present occasion the assessee took steps following the service of notice under section 22 (2) on Habib‑ur‑Rahman. Manzur Ahmad admits that the notice was made over to him and that he communicated this to Muhammad Idrees Barry from whom necessary instructions were later received. The assessee's plea that, in point of fact Habib‑ur‑Rahman had no power to receive notices, is an after‑thought and has been set up as a pretence for not filing the return. As will appear from the statement of Manzur Ahmad, the reason why a return could not be filed was that the accounts were not ready at the material time and, indeed, in response to a notice under section 22 (4), an application for time to produce the accounts was made." So far as the effect of acceptance of service by the assessee as valid and his subsequent conduct in applying for adjournment is concerned, it would be dealt with later in this judgment, but an inference of authority for acceptance of service having been granted to Habib‑ur‑Rahman is not justified by the material on record. The facts on which it is based, are that even previously Habib‑ur‑Rahman had received some notices and that his authority to receive such notices had not been repudiated either in the previous cases or in the present case. These circumstances are quite capable of explanation on a basis other than the grant of authority to Habib‑ur‑Rahman to accept service. The assessee may have, considered that service on an employee who was present in the premises of the firm, and was probably the most important of the servants present at that tithe, is in law sufficient. (In fact, although this point had not been argued before us, in the case of a firm, under Order XXX, rule 3, Civil P. C., service upon any person having, at the time of service, the control or management of the partnership business, is legally valid). It should be remembered that it is only in exceptional circumstances that any person, is in this country empowered to accept service. For persons who want to avoid service, there is no benefit in empowering anybody to receive service on their behalf, and the assessee in this case is one who would, according to the Income Tax Commissioner, even repudiate service in a case where he had the full knowledge of the notice issued against him. Another difficulty in the way of the application of Order V, rule 12 is that under Order III, rule 6, an authority to accept service of process should be in writing. It has been urged before us that Order V, rule 12 does not itself mention any written authority, but if we were to accept that an g authority for the acceptance of service of process can be granted, even apart from Order III, rule 6, then this rule would be without effect. The rule says the authority "shall be in writing", and if it were to be held that the authority can be in writing or oral, the use of word "shall" in this rule becomes meaningless. Under Order XLVIII, rule 2, Civil P. C., all notices, orders etc., are to be served in accordance with the procedure provided for the service of summons, so that Order V, rule 12, would apply to the service of any, process, and to accept the argument that service in accordance with Order V, rule 12, does not need an authority in writing, would mean that for the service of no process is such an authority needed. It has also been urged that Order III rule 6 relates to the process issued during the pendency of a suit and does not relate to the first summons issued in a suit. There is no warrant in Order III for placing this limitation on the meaning of process, nor does there appear any reason able ground for the existence of different provisions with respect to the first summons and the later process. In any case, if it was the intention that the first summons was to be excluded from the application of rule 6, Order III, there should have appeared words to that effect. I would mention here that the view, we are taking with respect to the necessity of authority in writing has already been taken by a Division Bench of this Court, (consisting of Akhlaque Husain and Muhammad Yaqub Ali JJ.), in Messrs. Haji Shahab‑ud‑Din and others v. The Commissioner of Income‑tax (Civil Reference No. 8 of 1950). But, although the answer to the question as framed by the Appellate Tribunal may have to be against the Income Tax Commissioner, the answer to the real question that arises in these proceedings, should be against the assessee. The real question is whether service of notice was effective and not whether it was valid by virtue of Order V, rule

12. We propose altering the form of the question, for we are not bound by the particular form in which a question has been framed by the Appellate Tribunal, and although we cannot frame a new question, we are entitled, according to the C Full Bench judgment in Seth Gurmukh Singh v. Commissioner of Income‑tax Punjab (1944 1 T R 399) to change the form of question if we preserve the substance of it. In Seth Gurmukh Singh v. Commissioner of Income‑tax, Punjab, one of the questions which had been referred to the Full Bench, was : "whether the High Court can formulate questions at the stage of mandamus or whether the Commis sioner alone is the authority to formulate those questions while stating the case ?" The reply of the learned Judges will appear from the following extract from the judgment:‑-- "It ‑follows, therefore, that in a reference under sub section (2) the Commissioner cannot travel beyond the question originally indicated by the assessee nor can the High Court raise any question suo motu which is not covered by the reference and in case of the Commissioner's refusal the High Court is confined to the question raised by the assessee in his application to the Commissioner. The High Court may formulate the question itself but its substance must be the same though the modified either to form ma be give the question indicated by the assessee a proper shape, or to bring out most prominently the legal aspect of the case, discarding all reference to facts." In Commissioner of Income‑tax Bihar and Orissa v. Sir Kameshar Singh (I L R 12 Pat. 318), the Commissioner had made a reference to the High Court under subsection ((1936) 4 I T R 44) of section 66 of the income‑tax Act and had omitted to formulate any question of law arising out of a certain transaction which appeared material to the High Court. The High Court accordingly formulated the question itself and decided that question too along with the other questions referred by the Commissioner. On appeal to the Privy Council their Lordships did not favour this procedure and in this connection observed as follows :

'The Commissioner unfortunately omitted to formulate any question of law arising out of this transaction. The duty of the High Court under section 66 (5) is to `decide the questions of law raised' by the case referred to them by the Commissioner and it is for the Commissioner to state formally the questions which arise. Here the High Court itself formulated the questions to be decided as being Their Lordships deprecate this departure from regular procedure . . . . . . ,' This dictum of their Lordships clearly debars the High Court from taking into consideration any matter which has not been raised by the Commissioner himself while stating the case under section 66 (2). In National Mutual Life Association of Australasia Ltd. v. Commissioner of Income tax Bombay Presidency and Aden (A I R 1940 P C 158), where the High Court had decided a case on an argument submitted to them for the first time their Lordships of the Privy Council observed at page 53 that any claim as to liability to tax based on that argument was a matter outside the letter of reference and was irrelevant to the questions submitted. Similarly, in Raia Bahadur Sir Rajendra Narayan Bhani Deo v. Commis sioner of Income‑tax Bihar and Orissa (I L R 59 Cal. 1343), their Lordships observed that the function of the High Court in cases referred to it under section 66, is advisory only and is confined to considering and answering the actual question referred to it. A new question of law, therefore, cannot be raised by the High Court itself, though the High Court may restate a question propounded by the Commissioner if considered necessary. In Commissioner of Income‑tax Bengal v. Shaw Wallace & Co. (4), where the question framed by the Commissioner had not been happily worded, their Lordships did not object to the High Court having recast the question in order to make it more precise. In another Privy Council case as Commissioner of Income- tax Bombay v. Sarangpur Cotton Manufacturing Co. Ltd. (AIR 1938 P C 1), a reference had been made by the Commissioner under sub section (3) of section 66 on a question formulated by the High Court. The Commissioner in the statement of case drawn up by him suggested the substitution of another question. The High Court, without remanding the case, itself amended the question originally formulated by it and gave its decision thereon. Their Lordships of the Privy Council did not criticise this procedure and while finally disposing of the appeal themselves recast the question so as to make it conform to the true state of affairs as disclosed in the case and answered it accordingly." It would be clear from the extract that in the view of the learned judges a change of the form of the question was permissible. In the present case the real question, which was relevant for the decision of the case before the Tribunal, was whether service of notice was valid. If service was in fact effective it would be immaterial whether it was covered by Order V, rule 12 or not. In fact, the High Court decides only those questions which have a direct effect upon the result of the case before the Tribunal, and if service was effective in spite of the fact that Order V, rule 12 did not cover the case, the answer to the question as framed would not affect the result of the case. The reference to Order V, rule 12 in the question framed by the Appellate Tribunal, is unfortunate, for the Appellate Tribunal had not even in its judgment relied upon this rule. It had only held that service was valid. It is true that the finding in the judgment is that Habib‑ur‑Rahman had been empowered and it is urged before us by the assessee that as it is only with this aspect of the matter that the Tribunal dealt and also it is on this aspect of the matter that they sought our advice, we should not travel beyond the strict words of the question. Now, it is true that the Tribunal held that Habib‑ur‑Rahman was empowered and their finding seems to have been based mainly on this ground, but they have also referred to the other facts, i.e., acceptance by the assessee of the notice as valid and to his subsequent conduct in appearing before the Income- tax Officer and applying for adjournment. It cannot, there fore, be contended that their finding as to service was exclusively based on the authority which they presumed in Habib‑ur‑Rahman to accept service and, in any case, as the Tribunal had relied upon the conduct of the assessee too, it would be open to the High Court to hold service effective on the basis of the facts found by the Tribunal even though the High Court does not agree with the reasoning on which the conclusion of the Tribunal is based. Considering then that the true question to be decided is whether there was effective service, we would recast the question thus:-- Whether in the circumstances of the case, service of notice on Habib‑ur‑Rahman was effective so as to bind the assessee ? The answer to this question should be in the affirmative for the simple reason that the assessee accepted it and acted on it. The defect in the service was after all only an irregularity, for the assessee had full knowledge that a notice had been received and accepted on his behalf by his employees. Manzur Ahmad was the Manager of the assessee with respect to the business at Lahore and, in accordance with Order III, rule 2 which authorises persons carrying trade or business in the name of persons not resident within the jurisdiction of the Court to receive processes relating to proceedings in respect of such business, a service of notice on Manzur Ahmad would have been quite regular. Here the notice was received by Habib‑ur‑Rahman but was delivered to Manzur Ahmad, so the only irregularity is that, instead of being personally delivered to Manzur Ahmad by the bailiff, it was delivered to him through Habib‑ur‑Rahman. In any case, even the assessee had been fully informed and he accepted the notice without any objection to its regularity. After the second notice under section 22 (4) was received, the assessee appeared before the Income‑tax Officer and prayed for time. It is to be remembered that a notice under section 22 (4) could, in this case, be valid only if the earlier notice under section 22 (2) had been served. So when the assessee applied for time to produce accounts, he accepted that he had been validly served under section 22 (2). It is open to at person to waive any irregularity in a procedure that is intended for his benefit and once having waived it, he is henceforth estopped from objecting to it. The assessee had, in this case. waived any irregularity that there was in the service of the notice by appearing before the Income‑tax Officer and G applying for time. Can it reasonably be urged that even after the assessee appeared before the Income‑tax Officer he should, if he examined the record and found that service was not quite regular, have issued a notice under section 22 (2) again ? We do not think such a contention can be put forward, unless some case of prejudice to the party is made out. Keeping in view the fact that the consequences of service of notice are serious, we have no intention of encouraging laxity in the matter of service of notice. it is the duty of the Income‑tax Officer to see that the provisions relating to service are strictly complied with. We are not holding that the service as such was valid apart from the question of estoppel. Had the assessee shown any prejudice or even shown that there was a reasonable possibility of prejudice having been caused to him, we would not hold service effective. But there is no suggestion of prejudice and we are not prepared to accept that technical compliance with the provisions relating to service, is so essential that the defect cannot be waived. It is only provisions relating to policy which cannot be waived, It had been urged before us by learned counsel for the assessee that when the assessee appeared before the Income -tax Officer and prayed for time, his acceptance of validity of service was conditional on his being granted time for producing the documents. But if that is what the assessee meant, he should have so stated before the Income‑tax Officer. Learned counsel makes a request that the application of the assessee for time be summoned and examined, for it may contain this condition. But learned counsel is unable to make a statement at the Bar that there is any such condition mentioned in the application and we do not think any useful purpose will be served by summoning the application. The question is answered in the affirmative. Reference answered.