1981 PLP 53 (PTD)

The petitioners have, therefore, claimed in C. P. No. D‑1043/80 the following reliefs: "It is, therefore, prayed that this Honourable Court may be pleased to issue a Writ of prohibition against the respondent by‑

(a) declaring that the sum "of Rs. 3,93,918 is only compensation for the and belonging to the petitioners received through Messrs Edu1jee Dinshaw Limited in respect of the share of the petitioners; (b) prohibiting respondent No. 1 from assessing the sum of Rs. 3,93,918 as income in the hands of the petitioners." In C. P. No. D‑1044/80 the petitioners claim the following reliefs: "It is, therefore, prayed that this Hon'ble Court may be pleased to issue a writ of prohibition against the respondents by: (a) declaring that the sum of Rs. 1,29,500 is only distribution of surplus capital assets belonging to the petitioners received through Messrs Eduljee Dinshaw Limited in respect of the share of the sale of the immovable property; (b) declaring that the sum of Rs. 1,29,500 received by the petitioners is in the nature of capital gains outside the scope of taxability by virtue of sections 2(4‑A) (iv', 2(6)(a) and 12‑B of the Income‑tax Act, 1922 being sale of capital assets; (c) prohibiting respondent No. 1 from assessing the sum of Rs. 1,29,500 as income in the hands of the petitioners; (d) declaring that Circular No. 8 of 1978 issued by respondent No. 3 is null and void and of no legal effect."

5. The facts in Constitution Petition No. D‑1450 of 1980 are slightly different. In this case the petitioners Messrs Nali Dinshaw Limited are a private Limited company and hold shares also in the same Company, namely. Messrs Eduljee Dinshaw Limited. They were also paid a share from com pensation awarded to the Company for acquisition of agricultural lands by the Government in the sum of Rs. 11,86,

012. In this case, however, the assessment order of the year 1980‑81 has been passed by the Income‑tax Officer, Companies Circle B‑3, Karachi (respondent No. 1) wherein the Contention of the petitioners that the receipt of this item was exempt from levy of income‑tax was repelled on a similar ground as is referred to earlier, namely, that the distribution out of the profit‑even though exempt in the hands of the original recipients does not entitle the subsequent recipients for exemption from tax on that income as provided by section 151 of the Income‑tax Ordinance. The said Income‑tax Officer, therefore, by his order dated 7‑9‑80 held that the receipt in question constituted income chargeable to tax. Also a penalty was imposed under section 87 of the Income‑tax Ordinance, 1979 amounting to Rs. 1,54,549 on the ground that the petitioners had failed to pay advance tax under section 53 of the said Ordinance. The petitioners, therefore, challenge this order in this petition and claim the following reliefs: "It is, therefore, prayed that this Honourable Court may be pleased to issue a writ of prohibition against the respondent by‑

(a) declaring that the sum of Rs. 11,86,012 is only compensation for the land belonging to the petitioners received through Messrs Eduljee Dinshaw Limited in respect of the share of the petitioners‑‑ (b) declaring that the petitioners are not liable to pay the sum of Rs. 1,54,549 as penalty under section 87 of the Income‑tax Ordinance, 1979; (c) directing the respondent No. 1 to cancel his orders dated 7th September, 1980 and not to make any demand with regard to the sum of money mentioned in the said orders."

6. At the very outset the learned counsel for the respondents has raised a preliminary objection challenging the maintainability of these petitions. As regards the first two petitions the argument of the learned counsel was that these petitions are premature, inasmuch as, they seek to prevent the respondents from exercise of their lawful powers and jurisdiction vested in them by law. It was contended that the Income‑tax Officer is lawfully seized with the matter in dispute in the present petitions and the petitioners are attempting to bypass the normal statutory procedures by means of these constitutional petitions before any adverse order has been passed against them. In the alternative it was urged that the petitions are not maintainable as the petitioners have other equally efficacious, alternate and adequate remedy provided by Law. Learned counsel for the petitioners, on the other hand, contended that the Income‑tax Officer has no jurisdiction to enquire into or determine the question raised in these petitions as facto. are not in dispute and amounts in question cannot constitute taxable income and, therefore, he lacks jurisdiction totally. His submission was that another Income‑tax Officer has already taken the decision treating similar receipts as taxable under the Income‑tax Ordinance in pursuance of the Central Board of Revenue Circular No. 8 of 1978 which has already decided the issue against the petitioners and has pre-empted the Income‑tax Officers from deciding the issue by their independent Judgment. He further contended that a petition in the Constitutional Jurisdiction of this Court will be maintain able even in respect of a threatened injury where a Government functionary or a tribunal of limited jurisdiction is about to do anything not permitted by law. In this behalf learned counsel referred to section 4(4‑A), clause (3) of the Income‑tax Act, 1922 which defines "capital assets" to mean property of any kind held by an assessee excluding, any land from which the income derived by the, assessee is agricultural income and any other immovable property. It was submitted that income received from immovable property has been specifically taken out from the ambit of taxation expressly and, therefore, it cannot be brought to tax by merely asserting that it was dividend. In other words, the submission was that the nature of non‑taxable capital gains cannot change in the hands of the recipients merely because it was distributed as dividend. In this connection reference was also made to section 2(6‑A) which excludes capital gains distributed in proportion to the shares held by the shareholders in the Company. On the other hand, in their counter‑affidavit the respondents have clarified the circumstances under which the petitioners in the first two petitions were required to furnish further particulars as regards the amount from which exemption was claimed. It is their case that no particulars in the relevant column or under separate Sheet were furnished alongwith the Return by the petitioners in one case and in the other the true nature of the receipt received as dividend distributed by the Company to its shareholders from the compensation was being enquired into. At the request of the counsel for the petitioners the case was adjourned by the Income‑tax Officer for final arguments, but in the meantime the present petition was filed.

7. We are unable to accept the contention .of the learned counsel for the petitioners at this stage that the Income‑tax Officer lacks jurisdiction to adjudicate upon and determine the question whether the amounts in respect of which the exemption from taxation is claimed constitute taxable income. The fact remains that in the first two petitions no final orders have been passed and the Income‑tax Officer in his counter‑affidavit has declared that all the contentions, submissions, authorities and law placed before him in support of the petitioners' contention will be taken into consideration duly by him in finalizing and framing the assessment order strictly in accordance with law. In effect he has assured this Court that he has not prejudged the issue. Be that as it may, under subsection (6) of section 5 of the Income‑tax Ordinance, 1.979 every Income‑tax Officer has all the powers conferred by or under the Ordinance on an Income‑tax Officer in respect of any income accruing or arising or received or deemed, under any provision of the Ordinance, to accrue or arise or be received within the area assigned to him. Whether a particular item of income of an assessee who his filed a Return of his income is chargeable to tax under section 9 of the said Ordinance is clearly a matter within the jurisdiction of the Income‑tax Officer before whom a Return is filed. Therefore, merely because en a proper interpretation of the relevant provisions of the Income tax Ordinance a particular amount received as income by the assessee is not computable as income of chargeable to tax, cannot deprive the Income tax Officer of his jurisdiction to determine the question. A decision by an Income‑Officer wrongly including a particular item of receipts as taxable income, is clearly, therefore, an erroneous decision in the exercise of his jurisdiction and cannot be called an act totally lacking in jurisdiction. This distinction has been succinctly in this case of Muhammad Hassain v. Sikandey P L D1974 S C139.

8. On the other contention, namely, that the petitions are not competent under Article 199 of the Constitution as petitioners have other alternate and equally efficacious remedy, the learned counsel for the respondents is on much firmer ground. In the first two petitions the petitioners have still an opportunity to raise their plea before the Income‑tax Officer and in case of an adverse decision file an appeal before the Appellate Tribunal and eventually the matter come up before the High Court in a reference under section 136 of the Income‑tax Ordinance. Learned counsel for the petitioners invited our attention to Burmah Oil Co. v. Trustees of the Port of Chittagong P L D1962 S C113 in which a question of certain exemptions refused by the respondent in respect of due upon goods re‑exported from Chittagong Port was raised' One of the grounds on which the High Court had dismissed the writ petition filed by talc appellants before the Supreme Court was that a suit would have been more convenient and beneficial remedy. Their Lordship of the Supreme Court, however, held that "since the question which arose was one of fiscal right based upon a statutory instrument, it was as easily and conveniently determinable in a writ petition as by means of a suit". On the strength of this dictum it was contended on behalf of the petitioners that the present case is also of a similar nature and the statutory remedies provided in the Income‑tax Ordinance are, therefore, no bar to the filing of the present petitions. Additionally the submission was that in case of rejection of the contention advanced by the petitioners they will be exposed to financial loss, inasmuch as, they would be required to pay income tax on the disputed amounts until the final decision of the question under the statutory procedure. In the first place the learned counsel for the petitioners has placed before us an order passed by the Appellate Assistant Commis sioner of Income‑tax, `B' Range, Karachi dated 23‑10‑80 in the case of the petitioner in C. P.D.‑1450/80 in respect of Assessment year 1978‑79 where the contention of the petitioners on the question of law has been accepted and it has been held that the capital gains on the sale of immovable properties being exempted from tax under the Income‑tax Act, the dividends received out of this by the shareholders will also be exempt. This clearly demonstrates that the higher authorities in the income‑tax hierarchy have already independently decided the question in favour of the view canvassed by the petitioners. As regards the case cited by the learned counsel for the petitioners, we may point out, that no statutory remedies seem to be to have been provided in that case and the question before their Lordships was whether a suit before a civil Court was an adequate alternate remedy. Additionally we may refer to the case of Bashir & Co. v. Income‑tax Officer, B Ward 1968 S C M R 997 in which instead of applying for a reference under section 66(1) of the Income‑tax Act to the High Court the petitioner had moved a writ petition on the ground of want of competence in the Examining Officer. It was held that "since the petitioner had not availed of the special remedy provided in the Income‑tax Act under section 66(1), he was not entitled to move the High Court in writ jurisdiction. Such a course not only amounts to by‑passing the jurisdiction vested by law in the Special Tribunal, but also fails to comply with the requirement of Article 98 as it cannot be said that no other adequate remedy was available to the petitioner" Similarly in Habib Ahmed v. Income‑tax Officer 1972 S C M R 631 which was a case in which an order of the Income‑tax Officer was called in question on the ground that the same was passed without jurisdiction as no notice was served on the assessee. Their Lordships dismissing the petition made the following observation:

"It is now well‑settled that where a special law or a special right is created by statute which also prescribes a special remedy for the enforcement of that right or liability, then it is that remedy which must be adopted and not any other remedy. The special jurisdiction under Article 98 of the Constitution of 1962 could not be treated as a substitute for an appeal or revision. It was only an extraordinary remedy available to extraordinary circumstances where the orders sought to be challenged was wholly without jurisdic tion. This was not the case here." Lastly we may refer to a case reported as Colony Textile Mills Ltd. v. Income tax Appellate Tribunal P L D 1971 Lah.

861. The facts of this case bear striking resemblance with the facts of the present petitions. The petitioner‑Company had redeemed in entirety' its preference shares and the Income‑tax Officer held that the entire amount so paid to the preference shareholders was dividend within the meaning of section 2(6‑A)(d) of the Income‑tax Act and that the amount received by the shareholders will be taxable in their hands. In appeal the Tribunal ordered that show‑cause notice be issued to the Company as to why the said income should not be included in the taxable income and assessment increased accordingly as the Income‑tax Officer had not included the same in the assessment. This show‑cause notice was challenged in a writ petition before the High Court. On an exhaustive review of cases the learned Judges of the Division‑Bench came to the conclusion that the question of absence of jurisdiction did not arise in the case because in order to see that there is an absence of jurisdiction it is necessary to establish that the Authority or the Court bad not been constituted as required by the statute or the person proceeded against was not subject to the jurisdiction of the Court or the Authority or the ground on which action is taken was not within the grounds stated by the statute. The learned Judges were of the view that none of these conditions were fulfilled in the case. A similar argument as is being advanced in this case was also made in that case to the effect that the Tribunal had already made up its mind in another case that the amount paid by the Company to the preference Shareholders for redeeming the shares is dividend within the meaning of the relevant provision and that the notice was a mere formality. This contention was repelled on the ground that the Tribunal was constituted of responsible persons and there was no reason or basis to doubt that its members will not apply their minds objectively to the points which may be raised before them and that the Tribunal performing as it does judicial or quasi judicial functions has to be open to conviction and may revise its opinion. But in any case if then followed the same opinion the petitioner had ample remedy available to it under the law as he can apply under section 66(1) for a reference to the High Court. In this connection it was observed: "The Income‑tax Act provides a complete machinery for assessment of tax and. for obtaining relief in respect of any improper or illegal order passed by the Income‑tax Authorities and assessee cannot, unless the order impugned, is without jurisdiction, or in excess of jurisdiction invoke the jurisdiction of the High Court under the Article 98 of the Constitution when he had adequate remedy open to him under the Act itself." Even the contention that if no interference is made in the writ jurisdiction the petitioner would be exposed to a demand for payment of tax was repelled. These are, if we may say so with respect, very forceful grounds fully applicable to the present case and we agree with them entirely. Further we may point out that under the present state of law as contained in section 134(6) of the Income‑tax Ordinance, 1979 the Appellate Tribunal has power to stay the payment of the tax assessed in the assessment order which in our view is an adequate remedy available to the petitioners in case of an adverse order.

9. So far as Petition D‑1450/80 is concerned, we understand that an appeal has already been filed and we have no reason to doubt that on a proper consideration of the matters the petitioner can obtain relief sought in this petition by or through the statutory remedies.

10. For the foregoing reasons, we have reached the conclusion that all these petitions are premature and accordingly we dismiss the petitions as incompetent in law. We, however, leave the parties to bear their own costs. Petition dismissed.