P L D 1961 (W (PLP)

QADEERUDDIN AHMAD, J.-The Income-tax Appellate Tribunal has referred the following questions under subsection (1) of section 66 of the Income-tax Act:-- (1) Whether, in the facts and circumstances of the case, the service of notice under section 34 on Abdul Aziz was effective so as to bind the assessee? (2) Whether the notice under section 34 in respect of the assessment year 1949-50, served on the 13th April 1950 was bad in law merely because it was dated the 27th March 1950? (3) Whether, in the facts and circumstances of the case, the Tribunal was right in not entertaining the objection as to the territorial jurisdiction of the Income-tax Officer issuing the notice under section 34 or making the assessment which objection was for the first time raised before the Appellate Assistant Com missioner?" These questions have been referred 'by the Tribunal after consider ing four questions, which were proposed by the assessee, and the Tribunal has made a note in the statement of the case as follows.- "These questions were discussed at the time of hearing of the application (of the assessee) and both parties agreed that the following questions (reproduced above) may be referred to the High Court under section 66 (1) :"

2. Mr. Dingomal, learned counsel for the assessee did not press the third question. It is, therefore, not necessary to decide it.

3. The second question was half-heartedly discussed by Mr. Dingomal, who referred to the judgment. In the matter of Messrs Burn & Co. 1934 I T R (II) 30, in support of his contention that the notice was invalid as it was dated the 27th of March 1950. That judgment does not help counsel, because the questions which were referred to the High Court in that case did not include the point which has been raised in the second question in this reference. If at all, the decision of that case is contrary to the contention of counsel, because the learned Judges of the Calcutta High Court considered the form of the notice that was before them, and decided as follows:- "It is quite true that the notice was in the form of a letter instead of being in the common form prescribed by the Central Board of Revenue but it was conceded by Mr. Pugh (for the assessees) that in fact all the details provided for in the form of notice had, in fact, been dealt with in the letter and we gathered the impression that Mr. Pugh did not seriously desire to stress this particular point. It is to be observed that there is no standard form of notice prescribed in section 34 itself. All that the section requires is that a notice containing all or any of the requirements which may be included in a notice under subsection (2) of section 22 shall be served." There is no allegation that the notice, to which objection has been taken in this case, did not contain any of the material that was a necessary ingredient of the notice. The date of the notice shows that it was drafted four days before the assessment year expired. It was admittedly served after about two weeks of the expiry of the year. Counsel suggested that four days' margin excluded the possibility for the assessee to submit his return within that period, because there is nothing on the record to show that the notice had not been actually despatched immediately after it was prepared. We consider this argument to be not only far-fetched in view of the date of service, but also irrelevant because the question referred to us excludes the con sideration of the allegation of fact now made by way of a suggestion that the notice was sent before the assessment year was completed. Our answer to the question must be that the notice was not bad merely because it was dated the 27th of March 1950.

4. The first question was discussed by Mr. Dingomal with much keenness. It is necessary to appreciate the facts which form its background for finding an answer to it. We may conveniently state them by reproducing the relevant part of the order of the Appellate Tribunal by which the appeal of the assessee was dis missed. The Tribunal has stated them as follows:- " . . . . the admitted facts are that in response to the notice under section 34, and after several reminders, the assessee filed a return on the 9th February 1951. On the 12th March 1951, one Mr. Qadir Bakhsh, holding a power-of-attorney executed by Mr. S. H. Mahmood, a partner of the appellant firm, appeared before Income-tax Officer on behalf of the appellant and asked for time. Again, on the 12th April 1951 Mr. Qadir Bakhsh called at the Income-tax Office and prayed for another adjournment. The Income-tax Officer was pleased to accommodate the appellant firm on both the occasions. It is thus manifestly clear that the notice under section 34 served on Abdul Aziz reached the hands of Mr. S. H. Mahmood of the appellant firm and its authorised representative appeared at several stages in response to the requisitions made from time to time. We, therefore, find ourselves in agreement with the Appellate Assistant Commissioner's finding that the appellant was aware of the proceedings and of the service of notice under section 34 and in response thereto he appeared before the Income-tax Officer and filed a return.". The qualification of Abdul Aziz, on whom the notice was originally served, is stated by the Appellate Tribunal as follows:- " . . . . . who was found assisting the appellant's authorised representative before us, was formerly an employee of the appellant firm. When this firm closed down on the 31st of October 1949, Abdul Aziz was employed by Mahmood & Co. and has since rejoined the appellant firm." The view of the Appellate Tribunal, therefore, is not that Abdul Aziz was an authorised agent or that the service of notice on him was sufficient in terms of section 63 of the Income-tax Act. It was obviously for this reason that the first question proposed by the assessee was not referred by the Appellate Tribunal to us. That question was as follows:- "(1) Whether on the facts and circumstances of the case, the Tribunal was right in law to hold that the service of notice under section 34 of the Income-tax Act made on Abdul Aziz was sufficient service on the applicants within the meaning of section 63 of the Income-tax Act." Sufficiency of service has been changed by the Appellate Tribunal in the question referred by it to us to effectiveness of the notice. This change was apparently made in view of the judgment of the Lahore Bench of this Court in Muhammad Idrees Berry & Co., Lahore v. Commissioner of Income-tax, Punjab and N. W. F. P. Lahore (P L D 1957 Lah. 270 : 1960 P T D 240), to which reference has been made by the Tribunal in the statement of the case. The question which was referred to the High Court in that case was on the pattern of the question that was proposed by the assessee in this case. It was substituted by the learned Judges by a question which was on the pattern of the question that has now been referred by the Tribunal to us. The decision on the substituted question of the Lahore Bench was that the service of the notice, though made on a person who was not empowered to receive notices was effective and binding on the assessee because it was handed over by the recipient of the notice to the local Manager of the firm who informed a partner of the firm of it. The learned Judges held as follows: "The defect in the service was after all only an irregularity for the assessee had full knowledge that the notice had been received and accepted on his behalf by his employees . . . . Here the notice was received by Habib-ur-Rahman (a salesman) but was delivered to Manzoor Ahmad (the Manager at Lahore of the assessee), so the only irregularity is that instead of being per sonally delivered to Manzoor Ahmad by the bailiff, it delivered to him through Habib-ur-Rahman. In any case, the assessee had been fully informed, and he accepted the notice without any objection to its irregularity . . . It is open to a person to waive any irregularity in a procedure that is intended for his benefit and once having waived it, he is henceforth estopped from objecting to it. The assessee had, in this case, waived any irregularity that there was in the service of the notice by appearing before the Income-tax Officer and applying for time." The essential reason for which the above view was taken, has been explained by the learned Judge as follows:- "Keeping in view the fact that the consequences of service of notice are serious, we have no intention of encouraging laxity in the matter of service of notice. It is the duty of the Income tax Officer to see that the provisions. relating to service are strictly complied with. We are not holding that the service as such was valid apart from the question of estoppel. Had the assessee shown any prejudice or even shown that there was a reasonable opportunity of prejudice having been caused to him we would not hold service effective." The above judgment was given on the 5th of February 1957, and the reference, which is now before us, was made on the 24th of June 1957. The view of the Lahore Bench was, therefore, before the parties, as a result of which the assessee wanted the question to be framed as it was framed in the reference that was made to the Lahore Bench, but the Tribunal realising the narrowness of that question framed it on the pattern adopted by the Lahore Bench.

5. Mr. Dingomal objected to the form of the question that has been referred to us, and pressed us for remodelling it so as to change the point of reference from effectiveness of service to sufficiency of service in terms of section 63 of the Income-tax Act. After the date of the present reference, the judgment of the Lahore Bench was reviewed by the Supreme Court in an appeal from it (vide P L D 1959. S C (Pak.) 202), and the case was remanded by the Supreme Court on the ground that the substance of the question had been changed by the Lahore Bench. The request of Mr. Dingomal to us that we should remodel the question referred to us so as to change its nature will attract the same objection owing to which the Supreme Court remanded the case decided by the Lahore Bench. We are, therefore, not prepared, apart from any other consideration, to accede to the request of counsel.

6. Taking up the question as it has been framed by the Appellate Tribunal, we feel that there are certain difficulties in the way of the Income-tax Department which can be distinctly seen if a reference is made to the judgment of the Supreme Court. Their Lordships have commented on subsection (l) of section 66 of the Income-tax Act and referred to the order of the Tribunal which was before them, and have distinguished ` service ' of a notice, from the ` conduct ' of an assessee. In this connection the following observations need attention "Further what is provided for in section 66 (1) is not a reference of any question arising on the facts of the case, but only a reference of a question or questions which arise out of the order of the Appellate Tribunal . . . . On an examination of the order of the Appellate Tribunal we find ourselves unable to agree with the above observations (of the judgment of the High Court). It is clear from pare, 3 of the order that the contention raised by the departmental representative had no reference to the conduct of the assessee . there was no argument before the Tribunal that the Conduct of the assessee estopped it from questioning the validity of service of notice. It is true that reference is made in the next paragraph to the effect that Manzoor Ahmad, the Manager admitted that the notice received by Habib-ur-Rahman was made over to him and that on his informing one of the partners about it he gave him certain instructions but from what follows in that paragraph it is clear that the reference was made in support of the view that Habib-ur-Rahman had in fact authority to accept notices from the firm. The order of the Tribunal does not indicate that it considered the question before it from the point of view that the appellant firm waived its right to object to the service of the notice . . . . . It may well be that when the question referred is con sidered some point may emerge with regard to the assessee's liability which should have been raised before the Tribunal and dealt by it, but as long as that matter is not covered by the reference, the High Court cannot formulate a new question and deal with it, for, as pointed out by their Lordships of the Privy Council in Raja Bahadur Sir Rajendra Narayan Bhanj Deo v. Commissioner of Income-tax, Bihar and Orissa (A I R'1940 P C 158 at 151). ` the function of the High Court in cases referred to it under section 66 of the Act is advisory only and is confined to considering and answering the actual question referred to it'." These observations apply to the present case because there is nothing in the order of the Appellate Tribunal to show that the conduct of the assessee and the resultant estoppel was considered by the Appellate Tribunal. The discussion of the Appellate Tribunal merely shows that the notice ultimately reached the proper person and that, therefore, it became effective. This is an argument that has been repelled by the Supreme Court as follows:- "The question referred by the Tribunal relates only to the validity of the service of notice under section 22 (2) with reference to Order V, rule 12 of the Civil Procedure Code . . . . . If the answer to this question is in the negative the assessment would become void as the fact that the notice in some way or other reached the person authorised to receive it is not sufficient to bind the firm. Therefore it is open to an assessee to contest the assessment on the ground that he was not served in accordance with law and that was what the appellant firm did. It is true that it is equally open to an assessee on whom notice was not duly served, to ignore that fact and act as if the service was according to law, and in such a case his conduct might estop him from contesting the assessment on the ground of service not being according to law, but that would be a different matter not covered by the question referred by the Tribunal."

7. Mr. Dingomal argued that the emphasis of the Appellate Tribunal on the effectiveness of the service of the notice restricts the scope of our enquiry to the delivery of the notice to one person or another and its effect, but leaves the con sideration of the conduct of the assessee out of it. The latter aspect of the situation was not before the Appellate Tribunal and was not considered by it.

8. We may note here that there is an observation of the. Supreme Court in the above-mentioned judgment which may possibly be pressed into use by the department to meet the above argument of counsel. Their Lordships have observed while distinguishing the question referred by the Tribunal in that case with regard to the validity of service under section 63 of the Income-tax Act and the question framed by the High Court regarding the effectiveness of the service, as follows:-- "As indicated already, the question referred deals only with the validity or otherwise of the service, while in the other question the position of the assessee is to be considered irrespec tive of the service of the notice not being according to law and, therefore, invalid." The considerations relevant to the effectiveness of the notice "irrespective of the service" have, however, been limited in the judgment by excluding from consideration the conduct of the assessee on the ground that there was no argument before the Appellate Tribunal that the conduct of the assessee estopped-it from questioning the validity of the service of notice. It is clear from the order of the Appellate Tribunal, which is before us, that the representative of the Income-tax Department was not thinking of the principle of estoppel. His line of thought merely led him to press the Tribunal to the conclusion that the appearance of an authorised agent of the assessee firm and the submission of the return was proof that the assessee was aware of the proceedings and of the service of the notice. The Appellate Tribunal accepted this argument and decided accordingly. The question of estoppel by conduct was neither placed before it nor was it considered and decided by it.

9. If we exclude from consideration, as we must, the conduct of the assessee and its consequences, then the answer of the question referred to us has to be that the service of the notice being bad, the fact that "the notice in some way or other reached the person authorised to receive it", is not sufficient to bind the firm. Our answer to the question, therefore, is that the service of notice under section 34 on Abdul Aziz was ineffective and not binding on the assessee. M. N.