1983 PTD 93 (PLP)

7. Mr. A. K. M. Mozammel Huq Bhuiyan, the learned counsel appear ing for the appellant canvassed that the orders of the Company Judge and the Appellate Court had been passed in excess of jurisdiction inasmuch as section 67 of the Income-tax Act has barred the jurisdiction of the Civil Court for ques tioning any assessment made under the Act. Secondly, .the Courts below have fallen into an error in treating the Company which is in liquidation as not an assessee. Thirdly, the price that has been fixed by the Arbitrator's award is the price which will be available for determination of assessment. Lastly, the assessment of tax is for the `previous year' of the assessee. " To turn to the first ground of Mr. Bhuiyan, let us see section 67 of the Income-tax Act which runs thus "

67. No suit shall be brought in any Civil Court to set aside or modify any assessment made under this Act, and no prosecution, suit or other proceeding shall lie against any officer of the Government for anything in good faith done or intended to be done under this Act."

8. In the case of Raleigh Investment Co. Ltd. v. G.-G.-in-Council their Lordships of the Privy Council considered the above action and came to a conclusion that the Income-tax Act is a self contained Code. Under the Act the Income-tax Officer is charged with a duty of assessing the total income of the -assessee. The correct meaning of the phrase "assessment made under the Act" is an assessment finding its origin in an activity of the assessing officer acting as such. Their Lordships hold that the phrase describes the proveance of the assessment it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test. The Privy Council noticed the fallacious argument that if the assessment is determined to be a right in law the jurisdiction of the Civil Court is excluded whereas the assessment if determined to be wrong the jurisdiction of the Civil Court to entertain the suit arises. It was observed :- "The result of inquiry into the-merits of the assessment is, on the appel lant's construction, to determine whether jurisdiction existed to embark on the inquiry 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." Their Lordships in conclusion observed "Jurisdiction to question the assessment otherwise than by use of machinery expressly provided by the Act would appear to be inconsis tent with the statutory obligation to pay arising by virtue of the assessment."

9. Thus the decision of the Privy Council that a suit will not lie on any ground whatsoever, to set aside or modify an assessment even on the ground that the provision of the Act is ultra virus. Their Lordships further laid great emphasis on the fact with regard to the assessment under the Act-the scheme of the Act was to exclude the jurisdiction of the Civil Courts and to establish a special machinery for hearing appeal and references when all questions could be raised and decided and expressed the view that even in the absence of section 67, Civil Courts will have no jurisdiction to set, aside or modify assessment under the Act. It was observed :- "The only doubt indeed in their lordships' mind is whether an expres sion was necessary in order to excludes jurisdiction in a Civil Court to set aside or modify an assessment." The authority is still holding the field.

10. In the case of Ravi Paint Colour and Varnish Works Ltd. v. Federa tion of Pakistan (A I R 1943 Lah. 228), in a similar situation a Full Bench of the Lahore High Court considered the case of the Company which went into liquidation and held that the production of the assessment order was enough and the Company Court has no jurisdiction to go behind the assessment order in view of section 67.

11. The Full Bench of Lahore High Court keeping in mind these principles laid down by the Privy Council that the jurisdiction of the Civil Court is barred, overruled the decision of Court in Sargodha Trading Company's case (3) and held that the Income-tax Authorities cannot be called upon to prove their claim in a liquidation case otherwise than by the production of the assessment order. It was noticed that by the mere fact that the Company has gone into liquidation it is not absolved from the liability to pay income-tax. And further a Company registered under section 23 of tae Companies Act is a Company for all purposes including that of taxation under the Income-tax Act. The next question is whether a Company under liquidation continues to be liable to pay income-tax.

12. Section 2 (5) (A) of Income-tax Act defines, "Company" means a Company as defined in the Companies Act, 1913 or a body corporate formed by or under any law for the time being in force . . . . . . . . Section 2 (9) of the said Act defines, "person" includes an individual, a Hindu undivided family, a firm, an association of persons or a body of individuals whether incorporated or not, a Company, Government of a Province, a local authority and Every other artificial judicial person." Section 3 of the said Act, the charging section, provides "that income-tax shall be charged for any year at any rate or rates according to the provisions of the Finance Act in respect of total income of the previous year of every person."

13. Thus it is clear that a Company registered under the Companies Act comes within the definitive meaning of the word "person" and for the purposes of income-tax section 3 provides that such person shall be charged at the specified rate of income-tax in respect of the total income of the previous year, if such Company becomes an assessee. The. expression "assessee" is defined under section 2 (2) of the said Act- "an assessee" means a person by whom income-tax or any other sum of money is payable under this Act and includes every person in respect of whom any proceeding under this Act has been taken for the assessment of his income or of the loss sustained by him or of the amount of refund due to him and every person who is required to file a return of income under section 2 (2)."

14. This point was considered in the Commissioner of Income-tax Official Liquidator, Agra Spinning Mills Co. (1934 ITR 79) and it was held that a Comp any 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 Liquidators to make a return in accordance with section 22 (1) of the Act. Reliance may be placed on Upper India Chamber of Commerce v. Commissioner of Income-tax (A I R 1948 All 64- 1947 I T R 263) and Baker v. Cook (1939 I T R 285). In Baker v. Cook it was held that the liquidator of a Company can carry on business so fir as is necessary for the winding up, and if he does so, the profits derived from business so carried on are assessable to income-tax in his hands.

15. In view of the above it is to observed that the Income-tax Act is a complete code by itself and all questions of law, facts arising out of the proceedings under that Act should be decided by the authority set up in accordance with the procedure described by the Act. The Act has provided the method open to an assessee to get redress of his grievance by way of setting in motion the machinery provided by the Act.

16. Assessment is made under section 23 of the Act. An assessee has a right of appeal under section

30. Then, if he is not satisfied he can move the Appellate Tribunal under section

33. Tribunal may refer any question of law involved in the case for determination by the High Court and if the Tribunal does not refer, the aggrieved party can move the High Court to require the Tribunal to state the case. Further, in the scheme of the Act there are other remedial measures. Section 33 of the Act empowers the Income-tax Authorities to rectify their mistakes on their own motion or on application of the assessee and section 33-A confers power on the Income-tax Commissioner to revise the orders of the authorities subordinate to him in certain cases. It is, therefore, that all matters relating to assessment should be dealt with by the machinery set up under the Income-tax Act and this was pointed out by the Privy Council in the case of Raleigh Investment Co. Ltd.

17. The alternative argument that an assessee should have a right t seek his remedy as an alternative in a Civil Court is a notion inconstant with the elaborateness and completeness of the machinery provided for in the Act. As the Full Bench observed, "if the Civil Court starts entertaining petitions against assessment made under the Act, the machinery set up by the Act would become useless."- In some cases there may be clash between the decisions of Civil Courts and the Income-tax Authorities which are affirmed by the High Court and thus the collection of income-tax would become not only an extremely difficult matter but a subordinate Civil Court will sit in judgment of a decision affirmed by the Supreme Court. This upsetting cal, the judicial standard cannot be allowed. It would lead to an anomalous result and no system of law would tolerate such 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."

18. We are in agreement with the above observation. We therefore held that the High Court on appeal had fallen into an error in not holding that the Company Judge cannot challenge the validity of a bona fide income tax assessment order and in not entertaining the claim of the Income-tax Authorities which can be proved under sections 191 and 228 of the Companies Act.

19. Further, the Appellate Bench had fallen into error that the Company which had gone into liquidation is no longer an assessee, inasmuch as AP. had ceased to function. This view is difficult to accept in view of decisions in 1934 I T R 79 and A I R 1948 All. 64 and 1939 I T R 285 referred to above.

20. Next point that the High Court held the finality of price was not reached at a time when the Company ceased to be an assessee, and therefore, it is not liable to be taxed under section 2 (10) (vii). The High Court took the view that finality of the price was not reached until the disposal of the appeal by the Supreme Court and so the transaction could not be made a subject - matter of an assessment of income - tax. This point was considered in the case of Chittagong Engineering, etc. v. I.-T. Officer (22DLR443(SC)) where the Supreme Court of Pakistan considered the question "Whether there being no sale by the Company of its assets the provision of section 10 (2) (vii) of the Income-tax Act were attracted to this case," held on consideration of the facts that the Electrical undertaking was taken over by virtue of the provisions of Electricity Act by way of compulsory purchase. "Thus even under the Electricity Act the sale does not become effective or title vest in purchaser until the ascertainment of price as under the general law." It further considered ""The apprehension expressed by the Income-tax Officer of the amount escaping assessment altogether does not appear to us to be genuine for in the view that we have taken the amount will be deemed to be a part of the profits of the assessee of the year in which it is ascertained or fixed." In this view of the matter it is to be held that the High Court has fallen' into an error that the price which is being paid for compulsory purchase is not taxable within the meaning of section 10 (2) (vii). The price under the Electricity Act is fixed when the Arbitrator makes his award. The question F of the retrospectivity does not arise because this income will be income of the previous year of the assessee when the price is fixed under the Electricity Act.

21. To sum up our conclusions (1) Section 67 of the Income-tax Act bars the jurisdiction of the Civil Courts from questioning the assessment made under the Act. (2) Income-tax Act is the special law on the subject and has set up Tribunals, etc. reaching up to the Supreme Court and any other Court becomes a Court of general jurisdiction qua Income-tax Act. As such, the Company Judge had no jurisdiction to question the assess ment order as was done in the case. (3) Notwithstanding that a Company goes into liquidati3n the Liquidator is to work for winding up of the Company and carries on business to that extent for the purpose of liquidation and as such the Company, until it is wound up, continues to remain as a Company within the meaning of the Companies Act and, therefore, a "person" for the purpose of Income-tax Act and an assessee liable to be taxed for his total income of the previous year. (4) In the case of compulsory acquisition, the provisions of section 10 (2) (vii) are attracted and the amount of price will be part of the profits of the assessee of the year in which it was ascertained or fixed. In this case it was fixed by arbitration award. In the result, thereof, this appeal is allowed without any order as to costs. The orders of the Courts below are set aside, the proceedings of claims of the appellant before the Company Judge will proceed according to law.