1988 PLP 516 (PTD)

MAMOON KAZI, J.--By this judgment we propose to dispose of I.T.R. No.45/75 and I.T.R. No.47/75 since both raise common questions of law. The circumstances under which these two references have arisen are as follows:- The respondents, which are a company were engaged in manufacturing textile goods. They were assessed for the years, 1961-62 and 1962-63 on incomes of Rs.55,35,945 and Rs.29,92,448 respectively However, on appeal the assessment orders were vacated by the learned Income-tax Appellate Tribunal. The assessments were then pending for a fresh decision when the respondent filed a return of excess income under M.L.R. 32 pertaining to nine years, that is to say from 1960-61 to 1968-69, declaring excess income of Rs.35,68,

557. This income was processed by the M.L.R. Processing Committee and with consent of the respondents the excess income was assessed a5 Rs.37,00,

000. The Committee further ordered that "the pending assessment of the company will be completed by accepting the trading results and making addition, if any, in the profit and loss account only. It may be pointed out that while submitting the return for the years, 1961-62 and 1962-63 the respondents had deducted amounts of Rs.4,92,239, Rs.21,46,176 respectively, totalling Rs.26,38,415, from the tax returns while claiming exemption under section 15-B of the Income-tax Act, 1922. This amount also formed part of the excess income declared by the respondent before the Committee. However. after passing of the order by the Committee, the learned Income-tax Officer proceeded to make fresh assessments for the two years in question and while doing so he computed the respondents income on the basis of profit and loss account, also adding the excess income of Rs.26,38,415 which was rounded off to Rs.26,50,

000. Being aggrieved by such assessments, the respondents filed appeals before the learned Income-tax Appellate Tribunal which were consolidated and disposed of by a common order, dated 28-1-1974, alongwith other appeals which had been filed by the respondents against the assessments pertaining to the subsequent years. The appeals were allowed by the learned Tribunal as it carne to a conclusion that the respondents had been taxed twice in respect of the amount of Rs.26,50,000, once through declaration filed by the respondent under M.L.R. 32 and again through the assessments made by the learned I.T.O. The reasons were state.i by the Tribunal thus:- "We find that, on the basis of the facts that have been noted above and which the Departmental Representative could not rebut, the appellant rightly or wrongly treated the inadmissible 15-B claims as suppressed incomes, although the same were not suppressed incomes and proceeding again with the profit and loss account from where these claims were taken off before the incomes for the two years were returned, the Income-tax Officer has in fact added back these inadmissible claims in the regular assessments as well whereas the computation of the appellant's excess income clearly indicates that these amounts of Rs.26,50,000 were already shown as suppressed incomes under the head 'inadmissibles' and that the allocation actually comprises these claims also. In our view, therefore, whatever may be the position of the agreement, the Income-tax Officer's action in proceeding with the profit and loss account, instead of the returned incomes for the above two years would auto matically result in the dual taxation of this sum of Rs.26,50,

000. Since the Martial Law Processing Committee has given due consideration, in arriving at the appellant's excess income, to these suppressions also we can not permit the Income-tax Officer to proceed again with the profit and loss account instead of the returned incomes and thus tax this amount a second time, once through the additions on account of the profit and loss account inadmissible claims and the second time through the allocation directed by the Martial Law Processing Committee as out of the suppressed income. To this extent, therefore, the appellant must succeed." The Commissioner of Income-tax who is the applicant herein, being aggrieved by the Order of the learned Tribunal then filed an application under section 66 (1) of the Income-tax Act, 1922 before the learned Tribunal requiring. it to refer the following questions to this Court: "(1) Whether on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in holding that the amount of Rs.4,92,239 and Rs.21,46,176 being income claimed to be exempt under section 15B of the income-tax Act in the assessments for assessment years 1961-62 and 1962-63 (which was not exempt and the taxation of which was not questioned by the assessee) was taxed twice through additions can account of inadmissible claims and for the second time through the allocation by the Martial Law Regulation Processing Committee as part of excess (suppressed) income ?" (2) "Whether the Income-tax Appellate Tribunal is competent to review, modify or amend the order of the Processing Committee in particular and any other order made, direction issued or action taken under or in pursuance of Martial Law Regulation No.32 in general ?" The request was, however, declined by the learned Tribunal as it concluded that the first question proposed by the applicant was a question of fact and the same was not referable to this Court and the second question did not arise at all under the circumstances of the case as while arriving at its conclusions, the Tribunal had not in any way sought to interfere, review, modify or amend the order of the Martial Law Processing Committee. Under such circumstances the present reference has been made by the Commissioner, Income-tax. We have heard Mrs. Rashida Patel, learned counsel appearing on behalf of the Commissioner and Mr. Iqbal Naeem Pasha, learned counsel for the respondents. It has been argued by Mrs. Rashida Patel that the fresh assessment was made by the I.T.O. in pursuance of the directions given by the Martial Law Processing Committee in this behalf, and consequently, the tribunal was not empowered to override such directions which were given in pursuance of M.L.R.32, Mr. Iqbal Naeem Pasha, on the other hand, has fully supported the learned Tribunal's order which according to him, was passed fully in accordance with the provisions of M.L.R. 32 and the circulars issued thereunder. We have, however, found the contentions of Mrs. Rashida Patel to be without merit. M.L.R. 32 which was issued on 15-4-1969, by virtue of clause (2) thereof, permitted any person who had filed a return of his income under the Income-tax Act, 1922 for the assessment year 1960-61 or any assessment year thereafter upto and including assessment year 1968-69, and who had reasons to believe that the return so filed was not correct, to file a revised return of his true income. Clause (3) of the aforesaid Regulation provided for charging of income-tax on any excess income declared by the assessee in the revised return. Clause (6) of the Regulation- empowered the Central Board of Revenue to make rules or issue orders, instructions or directions with prior approval of the Martial Law Administrator or any person authorised by him in this behalf, consistent with the Regulation, in order to give effect to the provisions of the Regulation etc. pursuant to such provisions the Central Board of Revenue issued circular No.MLR/1 of 1969, dated 17-5-1969, clauses 6(a) and (b) whereof provided as follows:- 6 (a) (i)-- Where a new assessee has filed yearwise returns of income assessment for those years will be made in the normal manner, under the Income-tax Act and tax charged at the rates applicable for those years. The investment and other allowances admissible under the Act will be allowed if the assessee can produce reasonable evidence to that effect. (ii) Where revised returns have been filed yearwise, the 'excess income' will be added to the income already assessed or declared and assessments made accordingly as indicated in (i) above. Further rebates, allowances, etc. if any, admissible as a result of the increased total income will be allowed subject to the production of evidence. In determining the tax payable credit will be given for the tax already paid. (b) Where a consolidated statement of income has been filed and it relates to more than one year, the income declared would be divided by the number of years for which it has been filed but in no case would it be allocated to more than 9 years (i.e. assessment years from 1960-61 to 1968-69). The average income so arrived at would be assessed as in sub-para. (a) above except that no rebate, deduction etc. admissible under the Act will be allowed." On 22-6-1969 another circular MLR/3 of 1969 was issued whereby clause 6 (b) of circular No. MLR/1 of 1969 was further, amended to read as follows:- "6(bb). Where the consolidated statement of income has been filed in the case of an existing assessee, the excess income, being the difference of the consolidated statement and incomes already assessed or originally returned where no assessments have been made, will be divided by the number of years to which it pertains. The average excess income so arrived at will he added to the assessed or returned income of each year and would be assessed without allowance of any_ deduction or exemption in respect of this excess income. A plain reading of M.L.R.32 and the circulars issued thereunder make it manifest that if the assessee; instead of filing a yearwise return, files a consolidated statement of his income, then the income declared is to be divided by the number of years, to which it pertains and the average income so arrived at is to be assessed according to the applicable rates. Looking at the order, dated 29-12-1969, passed by the Martial Law Processing Committee, this is exactly, what appears to have been done by the Committee. As already pointed out above, the Committee computed the total excess income for the nine years to be Rs.37,00,

000. A corollary of this would be that it allocated Rs.4,11,112 to each of the years. The matter left to the concerned I.-T'.O. to complete the assessments accordingly. Since the learned I.-T:O. proceeded to compute the income on the basis of profit and loss account for the years in question, instead of proceeding on the basis of the returned income based on suppression of concealment, the learned Tribunal set aside the assessments finding them to be against the law. It nowhere appears from the order of the Martial Law Processing Committee that the learned I.T.O had to proceed in the manner as done by him and rightly so, because otherwise the 1 assessee would have been subjected to double taxation as held by the learned Tribunal. Moreover, the consolidated amount, which was later rounded off as Rs.26,50,000 was claimed by the assessee as exemption/ rebate under section 15-B of the Income-tax Act, 1922. Consequently, we agree with the learned Tribunal that it could not have been included in the profit and loss account of the respondent. We, therefore, find that the order passed by the learned Tribunal, dated 28-1-1974, is not open to exception. As a result, the first question is answered in affirmative, as we hold that the Tribunal was fully justified in holding that the amounts of Rs.4,92,239 and Rs.21,46,176, if charged from the assessee, would amount to double jeopardy. We also further agree with the learned Tribunal that the second question referred to this Court does not arise at all in the circumstances of the present case, since we have held that there were no such directions given by the Martial Law Processing Committee to double-tax the respondent. There will be no order as to costs. M.B.A./C-37/K Order accordingly.