P L D 1954 Lahore 50 (PLP)

"The Tribunal was constituted in the second week of November 1947. `(The actual date of notification is the 18th of November 1947 but it was to be effective from the 15th of August 1947) and the fact was notified in the Gazette sometime during the last week of November. A Press Note published in December announced the location of the headquarters of the Tribunal at Lahore. In the meantime the Commissioner asked for instructions from the Central Board of Revenue, Karachi, in the matter of filing the departmental appeal. The Central Board of Revenue wrote back on the 2nd of September 1947, to say that such appeals should be kept ready and filed after the Tribunal for Pakistan was constituted. The appeal in question was accordingly made ready, signed and verified by the Income‑tax Officer concerned on the 8th of Septem?ber 1947 and was eventually filed on the 25th of November 1947. In these circumstances, and apart from the question of whether limitation would be deemed in law to have started running when in fact there was no Tribunal in existence, this Bench felt satisfied that there was sufficient cause for condoning the delay and admitting the appeal". It was contended for the assessee, however, that an Assistant Registrar to the Tribunal was posted at Lahore from the 6th of October 1947 and the Income‑tax Department ought to have been aware of this fact, relating as it did to its own department, that the first eight appeals to the Tribunal had been filed by private assessees from the 4th of November 1947 onwards and that the appeal of a certain assessee, Messrs. Thakar Das Dev Mal of Karachi, filed early in November, had been dismissed by the Tribunal as time‑barred, although lodged in circumstances similar to the present case. On these facts we receive no guidance from the statement of the case. We shall however, examine the legal aspect of the matter. To begin with, a similarity of language is noticeable between section 33, subsection (2A) of the Income‑tax Act and section 5 of the Limitation Act, both of which deal with extension of time for the purpose of appeal. Under the former‑ "The Tribunal may admit an appeal after the expiry of the sixty days * * * if it is satisfied that there was sufficient cause for not presenting it within that period". ??????????? According to section 5 of the Limitation Act.‑ "Any appeal or application for a review of judgment may be admitted after the period of limitation prescribed there?for when the appellant or applicant satisfies the Court that he had some sufficient cause for not presenting the appeal or making the application within such period". The assessee's counsel, therefore, relied‑and I think rightly on some rulings based on section 5 of the Limitation Act, in which it was held that the question whether a certain set of facts constituted " sufficient cause" was one of law. (Sec Kanshi Ram v. Rana Mal (A I R 1932 Lah. 183,) and Kishan Chand v Muhammad Hussain (A I R 1942 Lah. 94), both by Tek Chand J. and Arura v. Karam Din (A I R 1947. Lah. 76), by Abdur Rahman J.). It was held in Badri Prasad‑v. Amjad Ali (A I R 1933 All. 294,), that discretion under section 9 exercised arbitrarily without due regard to principles is not properly exercised and may be challenged in second appeal. But he relied most and again rightly on a judgment of the Privy Council in H. H. Brij Indar Singh v. Lala Kanshi Ram (104 P R 1917.), which contains an instructive exposition on the use; of discretion under section

5. In that case, the plaintiff applied for a review of an ex‑paste order against him and his application having been dismissed on the ground that the proper remedy was by way of appeal, he filed an appeal. This, however, was resisted on the ground that it was time‑barred. It would have been within time if the period spent in pursuing the review application had been excluded. John-?stone, J. who heard the appeal in the Chief Court, held (1) that a mistake in law never could be the foundation of an application for indulgence under section 5, and (2) that Karam Bakhsh v. Daulat Ram (183 P R 1883 (F. B.)), did not lay down any general rule when it said that the true guide for a Court in the exercise of discretion is " whether the appellant has acted with reason?able diligence in prosecuting his appeal" and that " he ought ordinarily to be deemed to have acted with ordinary diligence when the whole period between the date of the decree appealed against and the date of presenting tile appeal does not, after excluding the time spent in prosecuting with due diligence a proper application for review of judgment, exceed the period prescribed by law for presenting the appeal." Upon an examination of the case‑law in British India and particularly of Karam Bakhsh v. Daulat Ram (183 P R 1883 (F. B.)), their Lord?ships of the Privy Council found it impossible to agree with Johnstone J., but it was contended before them that as the power in section 5 is admittedly a discretionary power, the Board ought not to interfere with the directions exercised by Mr. Justice Johnstone. Repelling this contention, their Lord?ships observed that the discretion must be a judicial and not an arbitrary discretion, and that " if the judge who purports to exercise the discretion does so under the view that there is no general rule, when in fact there is one, if he has, to use an expression often used in another class of cases, mis?directed himself as to the law to be applied to the case, he cannot exercise a judicial discretion, and the superior Court in this case the Board must either remit the case or use the discretion themselves." As I understand the case, it leads to the following result Section 5 leaves it to the discretion of the Court to admit an appeal after the expiry of limitation if it is satisfied that there was sufficient cause for delay. If the Court bases its discretion on a wrong notion of law, the use of discretion is F arbitrary, not judicial. It must be clear that their Lordships say nothing as to the sufficiency of cause. On the question of sufficiency of cause the learned counsel for the Department has referred us to Commissioner of Income‑tax, Central & United Provinces v. Laxminarain Badridas (5 I T R 171 P C 1937.), a judgment of the Privy Council dealing with section 27 of the Income‑tax Act. Section 27 is as follows: "When an assessee * * * * satisfies the Income‑tax Officer that he was prevented by sufficient cause from making the return required by section 22 * * * the Income‑tax Officer shall cancel the assessment and proceed to make a fresh assessment in accordance with the provisions of section 23." The reference in this section is to the assessment which the Income‑tax Officer makes " to the best of his judgment" when the assessee fails to make a return as required by section

22. In the case under notice, one of the questions referred to the High Court under section 66 (2) was "whether the circumstances alleged and proved by the assesses could not, in law, be deemed to be 'sufficient cause' under section 27 of the Income‑tax Act." Their Lordships observed : "If the assessment in this case was made by the officer to the best of his judgment, it must stand unless the assesses succeeds in satisfying the officer that he had not a reasonable opportunity to comply or was prevented by sufficient cause from complying with the terms of the notice under section 22 (4), requiring him to produce or cause to be produced his accounts for three years. This he failed to do, and upon the undisputed and indisputable facts of the case he necessarily so failed. His application under section 27 for cancella?tion of the assessment was doomed to failure, and his appeal to the Assistant Commissioner under section 30, was equally incapable of success. There the matter should have ended, unless the Commissioner chose to proceed under section

33. The questions involved were purely questions of fact, indeed one might say of self‑evident fact, and no reference in regard thereto should have been made under section 66 (2). No question of law was involved : nor is it possible to turn a mere question of fact into a question of law by asking whether as a matter of law the officer came to a correct conclusion upon a matter of fact." Their Lordships repelled the argu?ment that there was a wrongful exercise of judicial discretion and observed that it did not appear to be a case of exercising a discretion : if the officer was not satisfied that the assessee was prevented by sufficient cause from complying with the notice, the assessment must stand. In other words, the satisfaction was essentially that of the Income‑tax Officer. A similar view was taken by a Bench of five Judges including Sir Arthur Page in 1931 in Abdul Bari Chowdhury v. Commissioner of Income‑tax, Burma (I L R Rang. 281.). When, however, on the question of the exercise of discretion their Lordships of the Rangoon Bench were referred to section 5 of the Limita?tion Act, Sir Arthur Page observed : "But in section 5 of the Limitation Act a discretion is expressly confided to the Court to grant or refrain from granting an extension of time." As to the sufficiency of cause, the language employed in sections 27 and 33 (2A) of the Income‑tax Act and section 5 of the Limitation Act is similar. In both Acts, the provision as to extension of limitation involves the use of discretion. In section 27 of the Income‑tax Act there is no room for the exercise of discretion. If the Income‑tax Officer is satisfied as to the sufficiency of cause he must cancel the assessment. In the matter of his satisfaction, he is guided by his own honest intelligence and has no two courses open to him. If his intelligence is at fault, it is matter for appeal, but his finding is undoubtedly one of fact. In the same view, the Appellate Tribunal, when deciding whether there is sufficient cause fox delay, is deciding a question of fact. If, however, any part of its decision is based on an incorrect appreciation of law, the use of discretion which section 33 (2A) involves will not be judicial, and a question of law would necessarily arise. Thus, if the Department were misled by instructions from the Central Board of Revenue at Karachi into believing that an appeal could be lodged only on the day when the Appellate Tribunal was notified in the Gazette, and the Tribunal treated this as a sufficient cause for delay, it was not exercising its discretion on a wrong appreciation of law. But the Tribunal having been constituted on the 18rh November 1947, and the appeal having been filed on the 25th November, the Tribunal failed to take notice of the established rule of law that the delay of every day after the expiry of limitation should be explained (A I R 1934 Lah. 617, A I R 1927 Lah. 717). As it is not clear from the statement of the case whether the delay between the 18th November and the 25th November 1947 has been explained, we cannot say whether the Tribunal has exercised its discretion judicially. We, therefore, require the Tribunal, under section 66 (2), to state the case on this point and refer it to us. To the question actually referred by the Tribunal, we reserve our answer. The costs will abide the result. KAYANI, J.‑By our order of the 14th June 1951, we required the Income‑tax Appellate Tribunal under section 66 (3) of the Income‑tax Act to make a statement of the case relating to the question of limitation and refer it for decision. The Tribunal has now referred the following question :‑ "Whether in the circumstances of the case of Tribunal exercised its discretion judicially in condoning the delay and admitting the time‑barred appeal preferred by the Income‑tax Officer, 'E' Ward Lahore ?" ??????????? In our last order we pointed out that if the Department were misled by instructions from the Central Board of Revenue at Karachi into believing that an appeal could be lodged only on the day when the Appellate Tribunal was noti?fied in the Gazette, and the Tribunal treated this as a sufficient cause for delay, the exercise of discretion by it was not based on a wrong appreciation of law ; but that the Tribunal having been constituted on the 18th November 1947, and the appeal having been filed on the 25th November the Tribunal failed to take notice of the established rule of law that the delay of every day after the expiry of limitation should be explained. The Tribunal has now disclosed the following facts. An Assistant Registrar had taken over charge of the office of the Tribunal with effect from the 16th of October 1947. The Income‑tax Appellate Tribunal, however, is a body unconnected with the Income‑tax Department whereas the Income‑tax Department is under the Ministry of Finance, the Tribunal is under the Ministry of Law. No appeal or application either on behalf of the assessee or on behalf of the Income‑tax Department was filed before the 30th of October 1947. Between that date and the 25th of November 1947, sixteen appeals and three reference applications were filed, all at the instance of private assessees. Thus in our last order we laboured under a mistake of fact in assuming that the Board of Revenue from which the Income? tax Commissioner received instructions was a different body from the Department itself. In effect these were not different from the instructions given by an employer to an employee that the latter was not to file an appeal until a certain date. If they misled the Department, other parties who were affected by them should not be made to suffer. It is not a sufficient explanation of the delay that the Income‑tax Department was asked by its superiors not to institute the appeal until the personnel of the Tribunal should be formally appointed. That the Tribunal itself existed is clear from section 9 of the Pakistan (Adaptation of Existing Pakistan Laws) Order, 1947, which states that "any reference in an existing Pakistan Law to a tribunal, authority, officer or official body whose jurisdic?tion or authority immediately before the appointed day extends to the whole of India or British India or over parts of British India which on the said day (15th August 1947) fall partly within the Dominion of India and partly within the Dominion of Pakistan . .? . . . . . . shall be construed as reference to such tribunal, authority, officer or official body as the appropriate Government may by notification in the Official Gazette constitute or appoint in that behalf, and any such direction may be given so as to have retrospective effect from the appointed day." The notification of the 18th November 1947 (No. F. 14/47‑Law) assumed that a tribunal existed and appointed to it two persons as President and Member " in exercise of the powers conferred by section 5‑A of the Indian Income‑tax Act, 1922 . . . . . . . . . . with headquarters at Lahore, with effect from the 15th August 1947'. We have been informed by the Registrar of the Income? tax Tribunal and the Commissioner of Income‑tax that the Assistant Registrar on his appointment had been instructed to report himself to the Commissioner of Income‑tax and that this report had been made by him to the Commissioner on the 16th of October 1947. Even, therefore, if the Central Board of Revenue had instructed the Commissioner on the 2nd of September 1947 that appeals should be kept ready and filed after the Tribunal had been constituted, the appointment of an Assistant Registrar should have reasonably led the Commis?sioner to believe that at least for the purpose of filing appeals the office of the Tribunal had started functioning. We are, therefore, of the opinion that the delay in filing the appeals after the appointment of the Assistant Registrar has not beer: explained and that in these circumstances the appeals should not have been admitted. In this view of the case it is unnecessary to answer the first question referred by the Tribunal, namely, whether there was material justifying the Income‑tax Officer to make an order refusing renewal of registration of the firm. The reference is answered accordingly. Reference answered.