1982 PLP (Trib (PTD)

These are two appeals of a private limited company deriving income from ginning of cotton. Original assessment for the year 1973‑74 was made on 1‑6‑1976. On appeal the Appellate Assistant Commissioner vide his order dated 23‑10‑1977 set aside the order of the Income‑tax Officer and remitted the case back to him for assessment. For the year 1974‑75 the assessment order was passed on 30‑6‑1977. Reassessment for the assessment year 1973‑74 was finalised by the Income‑tax Officer on 30‑11‑1977 against which appeal was filed before the Appellate Assistant Commissioner, who, vide his order dated 16‑1‑1979, dismissed the appeal for the assessment year 1973‑74 on the sole ground that assessment had been made on agreed basis. The appeal for the assessment year 1974‑75 was also dismissed on the ground that Income tax Officer had informed the Appellate Assistant Commissioner that the assessee had agreed to withdraw the appeal. The assessee filed further appeals and the Tribunal vide its order dated 4‑12‑1979 remitted the case back to the Appellate Assistant Commissioner. The learned Appellate Assistant Commissioner again dismissed the appeals of the assessee vide her order dated 9‑4‑1980 on the same ground that assessments had been made on agreed basis. The assessee had come up in appeal against that order of the Appellate Assistant Commissioner.

2. The learned counsel appearing for the assessee had raised three contentions, (1) that no agreement has been entered into by the counsel of the assessee; (2) that there was no occasion for the Agreement and (3) that in any case the counsel was not authorised by the assessee to make agreement with the department. In regard to the first contention the learned counsel argued at length and submitted that the order sheet entry dated 26‑11‑1977 for the year 1973‑74 was not made with the consent of the counsel of the assessee who appeared before the Assessing Officer. In this regard he relied upon the affidavit filed by Mr. S. A. Malik, Advocate before the learned Appellate Assistant Commissioner. The Departmental Representative has shown the order‑sheet entry dated 26‑11‑1977 which reads as under :‑ "Present‑Mr. M. A. Malik. The case discussed and examined in detail. He agrees to adoption of lint yield at 1.3‑00 seers only and allowing of manufacturing cost at Rs. 35 per bale. He also states that appeal for the year 1974‑75 shall be withdrawn". (Sd.) I: T. O." In his affidavit Mr. S. A. Malik, Advocate has categorically denied to have made any agreement with the Assessing Officer. On the other hand, is the Assessing Officer's counter‑affidavit, obtained by the Appellate Assistant Commissioner, she had reiterated that agreement was made by Mr. S. A. Malik. The learned counsel has highlighted certain circumstantial evidence in order to conclude that no such agreement was made. He submitted that order‑sheet entry was continued on the other page backward and that too after another entry of latter date. Another discrepancy pointed out by him was that the order of the Income‑tax Officer was passed on 30‑11‑1977 and thus there was no occasion for making the entry by the Income‑tax Officer on 26‑11‑1977. The third point raised by the counsel, was that the Assessing Officer in her order has discussed the case at length and then adopted certain figures in regard to the yield of lint as well as for the operating cost. As such, it was contended, there was no occasion for making agreement while the Assessing Officer was deciding the case on merits. It may be appropriate to note the following paragraph in the assessment order in regard to adoption of yield. "Before the learned Appellate Assistant Commissioner the assessee vehemently contested this addition to be excessive. Even before me it has been contended that short yield of lint was an account of poor quality of cotton purchased and ginned in the assessment year under consideration. The contention of the assessee carry some weight hence the yield is adopted at 13 seers per maund, which means that the assessee gets a relief of Rs. 82,478 worked out as under." Similarly in regard to operating cost it was observed by the Income tax Officer: "The contention of the assessee carries weight. Comparative statement showing increase in prices of iron hoops, gunny bags, wages and com mission etc. In the year under consideration as compared with the assessment year 1971‑72 (there being no ginning in the assessment year 1972‑73 has been submitted. The contention of the assessee is correct to the certain extent. However, claim of expenses at Rs. 41 per bale is excessive. The same is allowed at Rs. 35 per bale. Relief is worked out as under : ‑ Number of bales ginner : 6,959 Mds. Relief allowed @ Rs. 6 per Md. x 6859 Mds. 41,154 Total relief Rs. 1,23,632 In these circumstances, the learned counsel continued, the Assessing Officer having discussed in detail and decided the case on merits, there was hardly any occasion for the assessee's counsel to make any agreement whatsoever. It was further submitted that the alleged agreement was made on 26‑11‑1977 and the assessment order is dated 30‑11‑1977. But while, passing the order on 30‑11‑1977, the Income‑tax Officer did not make any reference to the agreement which, according to him, had taken place four days earlier. On the other hand she is receiving and discussing the contentions of the assessee in her order passed subsequent to the agreement. If any such agreement in fact has taken place there was no reason why the Income tax Officer should have recorded and discussed the counsel's contentions. Lastly it was submitted that in any case the assessee has authorised hi counsel to appear before the Income‑tax Officer and to represent his case, and not to make any agreement or compromise. It was submitted that for making an agreement or compromise specific authority is required which is wanting in this case. As such even if it is assumed that any agreement was entered into by the counsel of the assessee, he being not authorised to do so, the agreement is illegal and inoperative and, therefore, the assessee had a right to file the appeal. It was further submitted that had any agreement been made with the assessee, it would have been mentioned in the order of the Income‑tax Officer and in any case it did not require any lengthy and elaborate discussion of the case on merits.

3. The learned Departmental Representative on the other hand relied that signatures of the counsel appear on the order‑sheet dated 26‑11‑1977. It is only an afterthought that the assessee denied the agreement. In regard to the order‑sheet entry continued on the other page after the entry of later date, it was submitted that the entry of the later date is unsigned and since there was space available on that page, the Assessing Officer continued to write on the page. In regard to the detailed discussion of the case on merits in the body of the order passed by the Income‑tax Officer it was submitted that the Assessing Officer's orders are subject to scrutiny by the higher authorities and, therefore, notwithstanding the agreement the Assessing Officer had to justify her order on merits as well. In regard to the argument that no mention of the agreement had been made in the order of the Income‑tax Officer, it was pointed out that below the assessment order, the Assessing Officer has recorded a note that the order was passed on agreed basis. However, the learned Departmental Representative was no in a position to explain the discrepancy as to why the order sheet entry in regard to the agreement was made on 26‑11‑1977, while order in fact was passed on 30‑11‑1977. Similarly he was not able to explain in order‑sheet entry dated 27‑11‑1977 in regard to the assessment year 1974‑75 which is as under :‑ "In view of re‑assessment for the year 1973‑74 the learned counsel Mr. S. A. Malik agrees withdrawal of appeal for the assessment year 1974‑75 and demand shall be paid by 10th December." Firstly in this entry there is reference to the re‑assessment for the yea 1973‑74 which had not been made till then and in fact was made subsequent to the entry i. e. on 30‑11‑1977. Secondly the objection of the learned counsel appears to be correct that the Assessing Officer has no business to deal wit the case for the year 1974‑75 which was sub judice in appeal before the learned Appellate Assistant Commissioner, and in regard to which the Income‑to officer, was functus officio. Another circumstance which had to be taken not of is that the case of the department is that an agreement had been reached between the counsel of the assessee and the Income‑tax Officer and it was an afterthought of the assessee to wriggle out of the agreement. However, this plea of the department is belied by the facts on record. We have seen the original assessment record from which interesting facts are discovered. As has been stated above, the original order for the assessment year 1973‑74 bad been set aside by the Appellate Assistant Commissioner and for the purpose of re‑assessment, the case was first fixed on 17‑11‑1977. The order sheet indicates that the case was then adjourned to 26‑11‑1977 on the applica tion of Messrs Tax Services. However, there is an application on record from Messrs Tax Services, dated 20th November, 1977 in which it requested that the case be adjourned. On that application, the Income‑tax Officer wrote "regretted". But on the same application on the right hand side, there is an order of I. A. C. on the same date as under:‑ "I. T. O. requested to adjourn the case to 27‑11‑1977. But there is no corresponding entry in the order‑sheet on 20‑11‑1977. The case appears to have been taken up on 26‑11‑1977 which entry has already been reproduced above. Another interesting feature discovered from the assessment record is that Messrs Tax Services submitted a letter to the Assessing Officer on 27‑11‑1977 which is also signed by the Assessing Officer on the same date. In that letter the Authorised Representative of the assessee has pleaded the case of the assessee explaining cause of low yield and the increase in operating cost, a question arises if the Authorised Representative of the assessee and in fact entered into an agreement with the Assessing Officer on 26‑11‑1977 why should he on 27‑11‑1977 give explanation in regard to the low yield of lint and increase in operating cost as had been required by the Assessing Officer and why the Assessing Officer entertained the assessee's explanation of an agreement had taken place on 26‑11‑1977. If the agreement had been entered into on 26‑11‑1977 there was hardly any reason or occasion for the Authorised Representative of the assessee to submit a detailed reply of explanation to the Assessing Officer on 27‑11‑1977.

4. Similar is the case for the assessment year‑1974‑75 where, in the order sheet is following entry dated 27‑11‑1977. "In view of reassessment for the assessment year 1973‑74, the learn counsel Mr. S. A. Malik, agrees to withdrawal of appeal for the assessment year 1974‑75." This entry occurs after the entry dated 30‑6‑1977 but before another entry dated 27‑9‑1977. It is really surprising how any entry of 27‑11‑1977 has been made between entries 30‑6‑1977. Another circumstance which is discovered from the assessment file for 1973‑74 is a letter from the I. A. C. addressed to the Income‑tax Officer. This letter is No. 1054 and is dated 14th December, 1977. In that letter it has been pointed out by the learned I. A. C. that the assessee bad contacted him and had requested him that the assessments for the charge years 1975‑76 and 1976‑77 should not be finalised till the decision of the appeal for the assessment year 1974‑75 which was then pending before the Appellate Assistant Commissioner. The learned I. A. C. in his concluding sentences observed as under: "Keeping these things in view I am of the opinion that the pending two years should not be decided till the decision of the appeal for the assessment year 1974‑75 is received. It is further requested that these orders should not be passed."

5. If the counsel for the assessee had really made an agreement even relating to the assessment year 1974‑75 how could he contact the I. A. C. and made the above request. In any case the Department's case that it was an afterthought of the assessee is completely demolished by the two fact namely ; the reply of the counsel dated 27‑11‑1977 relating to the assessment year 1973‑74 and the letter of the I. A. C. noted above. These circumstances of the case do lead to the conclusion that some confusion is there though it may not be a case of malice of the Assessing Officers as the assessee wants us to believe. It is settled law that malice has to be specifically proved. Notwithstanding the confusions and the above discrepancies particularly in regard to the assessment year 1974‑75, we are not inclined to hold that there was any mala fide on the part of the Assessing Officer. However, we are constrained to hold that the Assessing Officer had no lawful authority to make any agreement .for the year 1974‑75 and the order passed by her contained in the order‑shit dated 17‑1‑1977 is wholly without jurisdiction. Consequently the letter addressed by the I.‑T. O. to the A. A. C. on 6‑12‑1977 that the appeal was to be withdrawn, is wholly beyond her authority and jurisdiction and so is the order of the A. A. C. on the basis of such letters. We accordingly hold that the order of the A. A. C. in regard to assessment year 1974‑75 on the basis of alleged agreement is illegal and the apneal should be decided by the A. A. C. on merits.

6. In regard to assessment year 1973‑74, last point urged by the learned counsel has considerable force. A power of attorney authorises a person to act wholly within the four corners of the power of attorney. In the income‑tax case when the assessee authorises his representative to plead and act on his behalf it is presumed that the Attorney or the Representative is bang required to represent the case of the assessee as made up by him in his return. Therefore, the Attorney or Authorised Representative has authority to do all acts specifically mentioned in the power of attorney and allied and incidental acts, which are in line with the case of the assessee as envisaged in his return. If any other action is to be taken by the A. R. which is contrary to what was disclosed in his return. He has to obtain specific authority of the assessee to do so. In the file cover for the assessment year 1973‑74 no power of attorney of the assessee is on record. However, there is printed' power of attorney in favour of Messrs Tax Services on the file cover relating to the assessment year 1974‑

75. Since this has never been the case of the assessee that he had never authorised Messrs Tax Services to represent his case, therefore, notwithstanding the absence of power of attorney, we presume that such authority was given for assessment year 1973‑74 as well. Since a printed power of attorney in the file cover of 1974‑75 is available we further presume that the wording of the vakalat Nama would be the same as in the assessment year 1973‑

74. In that Vakalat Nama, Messrs Tax Services had been authorised to represent the assessee in tax proceedings. However; there is no power given in that Vakalat Nama to make a compromise or to enter into an agreement by the aforesaid A. R. on behalf of the assessee. The D. R. has laid considerable stress on the wordings of the Vakalat Nama, their interpretation. These words have to be read in context of the earlier wording of Vakalat Nama which is in regard to representing the case of the assessee, to produce the accounts, documents, evidence, and to do other things necessary or incidental thereto. From the text of these wordings, it cannot be spelled out that the assessee had also authorised Representative to make an agreement with the I: T. O. In tax cases an A. R. has to represent the case of the assessee as has been made out by him in his return. If an A. R. makes any statement which is contrary to the case of the assessee he cannot be said to represent the assessee and would travel beyond the power given to him. It may be noted that a Vakalat Nama given to a counsel or an A. R., is a special power of attorney in nature which empowers him to act within the limited sphere mentioned in the power of attorney. The power to enter into an agreement with the assessing officer cannot be implied. Such a power should be specific and categorical. In the absence of such a power, if any A. R. enters into an agreement it would be without lawful authority and therefore, cannot bind the assessee. In a case Pijahram Badaldas and others v. Withaldas Jethanaru and others (A I R 1947 Sind 4) the following paragraph of an earlier decided case of the Privy Council cited in 84 I C 721 was approved which is reproduced below:‑‑‑ "It is quite clear that before so important a matter as a compromise of a suit can be recorded by the Court when the parties do not themselves notify it to the Court or give their written consent then if the pleaders are to act as agents for the parties to compromise, it is clear that their authority must be clear and unequivocal. The Vakalat Nama authorises them to compromise. All have upon the record is their written statement that they have this special power. We do not think under the circumstances that this is sufficient, and we think that we should act wrongly and against the interest of justice if we did anything either by word or act to encourage so casual a procedure as has been followed in this case."

7. In subsequent case Din Muhammad and another v. Farooq Mirza (P L D 1955 Sind 62), the Sind High Court relying upon the aforesaid case held as under :‑ "It would therefore appear clear that in case of Vakalat Nama the power of the Advocate depends on its terms. He can enter into compromise only when the Vakalat Nama empowers him to do so. In the present case the Vakalat Nama empowered Mr. Abdul Kadir Mirza merely to appear, act and plead. It gives him no authority to compromise." Consequently the compromise was held by the High Court to be illegal and their Lordships set aside the case and remanded it back to the trial Court for re‑decision.

8. Farooq Mirza's case was followed by the Tribunal in a subsequent case reported as (1970) 22 Taxation

25. It was held in that case : "In the absence of any specific authority to agree, the A. R. cannot agree to an assessment of the assessee to any particular determined figure. In the absence of any authority any such agreement would be illegal and without effect." This decision of the Tribunal is on all fours in the present case. In that case too the power of attorney authorised the A. R. to give explanation and statement. The exact words in the power of attorney in the case were his explanation and statement is binding on me/us". Referring to these words the Tribunal observed as under :‑ "An A. R. appearing before the Income‑tax Authorities on behalf of the assessee is merely an agent acting on behalf of the assessee, His authority to represent the assessee only extends to do only those acts which he might have been authorised to do by the principal and also those incidental acts which he may be required to do in order to do the acts authorised to be done."

9. Respectfully following the aforesaid decisions and in view of the peculiar circumstances of the case discussed above, we feel that no legal compromise or agreement have been entered into which could bind down the assessee and thus debar him from filing the appeal. We, therefore, set aside the order of the Appellate Assistant Commissioner and remit the case back to him for deciding the appeal on merits. Appeal allowed.