1. K. E. CHAUHAN, J.-Messrs Odeon Cinema Abbot Road, Lahore, which is an unregistered firm and which under section 22 of the Income-tax Act XI of 1922 (hereinafter called the Act), was duty bound to file a return of its income for the assess--ment year 1962-63 in respect of the previous year, did not file the same. In this way as the income of the assessee-firm escaped assessment, a notice under section 34 of the Act was issued to it by the Income-tax Officer concerned, requiring it to furnish a return, and even though this notice was duly served, it was not complied with. The Income-tax Officer then issued another notice under section 22(4) of the Act, requiring the assessee to produce or cause to be produced before him the relevant accounts and documents of its income. This notice was repeated many times but was not heeded to. The details of the various dates of hearing and the dates of corresponding service of the relevant notices are given in the order of the Income-tax Officer which is reproduced in a later part of this judgment. However, it will be sufficient at this stage to state that several times such notices were served on the assessee but it showed no response. In these circumstances the Income-tax officer proceeded to make the "best judgment assessm ent" under subsection (4) of section 23 of the Act ex parte. It may be mentioned that the assessee had filed an application for registration of the firm under section 26-A of the Act.
2. In subsection (4) of section 23 of the Act, it is written that when an assessee does not file a return or does not comply with a notice under section 22(4) then: "the Income-tax Officer shall make the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment and, in the case of a firm, may refuse to register it or may cancel its registration if it is already registered: Provided that the registration of firm shall not be cancelled until 14 days had elapsed from the issue of a notice by the Income-tax Officer to the firm intimating his intention to cancel its registration."
3. Exercising his powers under the aforesaid provision of law, the Income-tax Officer while making an ex parte "best judgment assessm ent", refused the assessee's application for registration and asses3el it as a U. R. F. (i.e., un-registered firm). The order of the Income-tax Officer is dated 31-1- 1967 and a copy thereof has been filed in the form of Annex. P. I in this Court. The assessee petitioner filed an appeal which was partly accepted by reduction of the quantum of total income by the Assistant Commissioner B Range Lahore on 8-4-1967 (copy of the order is Annex P. 2). So far as the order regarding the refusal to register the firm was concerned, the same was not interfered with. The petitioner then filed a second appeal before the Income-tax Appellate Tribunal (Pakistan), but without any success as the same was dismissed on 14-4-1969 (copy of the order is Annex P. 4).
4. As a matter of fact, at this stage the Department had also filed a cross appeal against the reduction of the amount assessed and the same was taken up along with the assessee's second appeal and was also .Rejected by the same order. The petitioner then filed an application (copy Annex P. 5 and P. 5A) before the Income-tax Appellate Tribunal (Pakistan) requiring it to refer the following question to the High Court under section 66(1) of the Act :- "Question.-Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the refusal to renew registration by the Income-tax Officer purported to be under section 23(4) of the Income-tax Act was legal and proper."
5. "The only other issue raised before us by the assessee's representative related to the exercise of the power by the income-tax Officer under section 23(4) to refuse registration. By placing reliance on the decisions reported as (1963) 7 Tax--ation 289, (1968) 18 Taxation 89 and (1969) 19 Taxation 52 (Trib.), the assessee's representative contended that in the order passed under section 23(4) the Income-tax Officer had not categorically mentioned that he was exercising his discretion vested in him under section 23(4) to refuse registra--petition. This issue need not detain us long as the two orders of the assessing officer clearly show that this discretion under section 23(4) was expressly exercised by him to refuse regis--tration and the words as used are so clear that they leave no manner of doubt that the assessing officer, besides making the best judgment assessments also chose to refuse registration. Because of this exercise of powers which are vested under the provisions of section 23(4) in the Income-tax Officer's order, the ratio of the decided cases relied upon by the learned counsel for the assessee, which permits the action taken by the Income-tax Officer, we see no reason to interfere with the orders of the Officers below on this issue as well. In conse--quence the assessee's two appeals would also fail."
6. The tribunal while refusing to make reference reproduced the passage quoted above and held as follows :- "At the time of hearing of these reference applications, it was argued that the questions raised do arise whereas the representative of the Commissioner Income-tax argued that the question decided by the Tribunal related to the exercise of discretionary powers and this being a question of fact no reference to the High Court lies. However, as would appear from the quotation of the Tribunal's order, the precise issue before the Tribunal was whether the Income-tax Officer had categorically mentioned that by the exercise of his discretion, vested in him under section 23(4), he had decided to refuse registration. On this issue, the Tribunal found the assessee's contention to be incorrect as the two orders clearly and unequicably not mentioned the exercise of this discretion.
7. The present questions, therefore, as framed do not arise as the exercise of discretion alone was the subject-matter of dispute before the Tribunal. In this view of the matter, we see no reason to refer any of the two questions which are not question of law that arise from the order of the Tribunal.
8. After taking the view mentioned above, the Tribunal rejected the application of the assessee-firm by its order, dated 24th of March 1970 (Copy Annex P/6). The petitioner has now filed the present application before us under subsection (2) of section 66 of the Act with the following prayer:- "It is, therefore, humbly prayed that the Income-tax Appellate Tribunal be directed to state the case and to refer to this learned Court the following question of law arising out of their order dated 14th April 1969:- 'Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the refusal to renew registration by the Income-tax Officer purporting to be under section 23(4) of the Income-tax Act was legal and proper?"
2. At this stage, it may be mentioned that similar orders were passed against the petitioner with regard to the assessm ent year 1963-64 and case with regard to that year has also passed through the same stages as for the earlier year and on ward from the stage of the Income-tax Officer, cases for both the years were dealt with by joint and same orders. A similar application requiring the reference with regard to second year (1963-64) has also been filed before us being C. Misc. No. 5195/70. The present judgment and order will dispose of that application also.
3. Before proceeding further, it is necessary to reproduce subsections (1) and (2) of section 66 of the Act. They read as follows:- "Section 66(1) within sixty days of the date upon which he is served with notice of an order under subsection (4) of section 33, the assessee or the Commissioner may by application in the prescribed form, accompanied where application made by the assessee by a fee of one hundred rupees, require the Appellate Tribunal to refer to the High Court any question of law arising out of such order, and the Appellate Tribunal shall within ninety days of the receipt of such application draw up a state--ment of the case and refer it to the High Court: Provided that if, in the exercise of its powers under sub--section (2), the Appellate Tribunal refuses to state a case which it has been required by the assessee to state, the assessee may, within thirty days from the date on which he receives notice of the refusal to state the case, withdraw his application and, if he does so, the fee paid shall be refunded.
(2) If on any application being made under subsection (1) the Appellate Tribunal refuses to state the cases on the ground that no question of law arises, the assessee or the Commis--sioner, as the case may be, may within six months from the date on which he is served with notice of the refusal, apply to the High Court, and the High Court may, if it is not satisfied of the correctness of the decision of the Appellate Tribunal, require the Appellate Tribunal to state the case and to refer it, and on receipt of any such requisition, the Appellate Tribunal shall state the case and refer it accordingly.
9. (3)
10. (4)
11. (5)
12. (6)
13. (7)
14. (7-A)
4. A perusal of the subsections reproduced above will show that before a High Court requires a Tribunal to submit a reference to it, the following conditions must be fulfilled, namely :--
(i) That the initial order of the Tribunal should be under section 33(4) of the Act,
(ii) that against the order the applicant should have moved the Tribunal under subsection (1) of section 66 for making a reference to the High Court,
(iii) that reference claimed should be with regard to any question of law arising out of the Tribunal's initial order, referred to in point No. (i) above,
(iv) that the Tribunal should have rejected that application and refused to state the case on the ground that no question of law arises from its initial order passed under section 33(4), and referred to in point No. (i) above, and
(v) if the High Court is not satisfied with regard to the correctness of the decision of the Tribunal in the matter of refusing to make a reference, then the High Court may enquire the Tribunal to state the case and refer the same to it.
5. In the earlier paragraphs of this judgment we have reproduced the relevant extract from the initial order of the Tribunal, dated the 14th of April 1969 (Copy Annex P.4), passed under section 33(4) of the Act. We have also reproduced at the same place the relevant portion of the decision dated the 24th of March 1970 (copy Annex P. 6) of the Tribunal, refusing to make a reference. We are now to see as to whether the grounds given by the Tribunal for refusing to make a reference in its decision dated the 24th of March 1970, are correct or not. The Tribunal has given the following grounds in that behalf :-
(a) That at the time of arguing the second appeal before the Tribunal, the only point which was pressed was that in the order of the Income-tax Officer, dated the 31st of January 1967 (Copy Annex P. 1), there was no express mention of the fact that he had at all exercised the discretion vested in him by law to refuse the registration of the firm. The Tribunal said that this discretion had been definitely exercised inasmuch as an order to this effect was categorically passed by the Income- tax Officer refusing registration and quoting section 23(4) in that behalf and it was with this reply that the Tribunal had disposed of the point raised before it at the relevant time.
(b) That the point now sought to be referred, namely, regarding the manner of exercise of jurisdiction by the Income--tax Officer in refusing registration was not the subject of dispute before the Tribunal.
15. We find that the reasons given by the Tribunal are quite sound and are supported from the impugned orders themselves. It has been held in numerous cases that no reference could be claimed from the Tribunal on a point which was not raised before it. When confronted with the above situation, learned counsel for the petitioner argued that the wording of subsection (1) of section 66 shows that a reference could be claimed from the Tribunal about "any question of law arising out of such order", and regardless of the fact whether the point was directly raised or not, if it was otherwise "arising" out of the Tribunal's order passed under section 33(4), then an applicant was within his right to claim a reference. This point has been the subject of consideration in a number of cases and it is not necessary to quote all of them over here. In Commissioner of Income-tax, Bombay v. Scindia Steam Navigation Co. Ltd. ((1961) 4 Taxation 103) of the head-note, it was held that :- " . . Those questions must arise out of the order of the Tribunal. It is, therefore, clear that under section 66(2), the Court cannot direct the Tribunal to refer a question unless it is one which arises out of the order of the Tribunal and was specified by the applicant in his application under sec-- petition 66(1).
(1) When a question is raised before the Tribunal and is dealt with by it, it is clearly one arising out of its order.
(2) When a question of law is raised before the Tribunal but the Tribunal fails to deal with it, it must be deemed to have been dealt with by it, and is, therefore, one arising out of its order.
(3) When a question is not raised before the Tribunal but the Tribunal deals with it, that will also be a question arising out of its order.
(4) When a question of law is neither raised before the Tribunal nor considered by it, it will not be a question arising out of its order notwithstanding that it may arise on the findings given by it."
16. Similar views are expressed in The Scindia Steam Navigation Co. Ltd. v. Commissioner of Income- tax (PLD 1959 Kar. 527), Messrs Muhammad 1drees Barry & Co. v. The Commissioner of Income-tax, Punjab and N.W.F.P. (PLD 1959 SC (Pak.) 202), Commissioner of Income-tax Madras v.
17. Arunachalam Chettiar (AIR 1953 SC 118), and Oriental Investment Co. Ltd. v. Commissioner of Income-tax, Bombay (AIR 1957 SC 852), Proceeding to apply the above tests to the facts and circumstances of the present case, since the case was argued before the Tribunal only on the factual aspect of discretion having been exercised or not (and not on the legal place which is now sought to be introduced), the Tribunal was justified in holding that the question was not one arising out of its order.
6. Even otherwise it is well-settled that the jurisdiction of the High Court under section 66(2) of the Act is discretionary as is clear from the use of the word "may" therein, and is very limited in scope and merely advisory in nature. In the exercise of such a special jurisdiction and discretion, a High Court is not to answer purely hypothetical and academic questions which are not material for the case and on the facts found will be of no help to the applicant; nor a reference should be called for when the answer to the alleged question of law is self-evident or is already covered by decisions of Courts on the subject. These are sound principle; which inter alia regulate the discretion of the High Court in declining to call a reference from the Tribunal. See The Provincial Library v. The Commissioner of Income-tax, East Pak. (PLD 1958 SC (Pak.) 81), M. E. R. Malak v. Commissioner of Income-tax C.P. And Bahar (AIR 1932 Nag. 68), Mathuraprased Motilal & Co. v. Commissioner of Income-tax, Madhya Pradesh and Bhopal, Nagpur (AIR 1957 Nag. 6), Abdul Kadir Sahib v.
18. Commissioner of Income-tax Mysore, (AIR 1953 Tra. Coch. 526), Vithal Reddy Rangareddy v. Hyd.
19. Government through The Commissioner, E. P. T. (AIR 1953 Hyd. 250) and Chaturbhuj v.
20. Commissioner of Income-tax, U. P. And C. P. (AIR 1941 Oudh 445
7. Examining the present case in the light of the above principles, we may refer to the order of the Income-tax Officer, dated the 31st of January 1967 (Copy Annex. P. 1), wherein he refused registration of the firm. Its relevant portion reads as follows :- "This is the case of a firm exhibitor who owns Odeon Cinema, Lahore.
21. No return was filed under section 22(1). A notice under section 22(2) was issued on 1-1-1963 which was served on 24-1-1963. Even then the assessee filed no return.
22. The case was fixed for the first time on 29-4-1966 for hearing on 6-5-66. The notice under section 22(4) was properly served upon the assessee on 30-4-1966. The assessee's A. R. Appeared and requested for adjournment. The case was accordingly adjourned to 21-5-1966. No one attended on this date.
23. The case was again fixed under section 22(4) for 30-5-1966 and the notice was duly served on the assessee on 25-5-1966. None appeared and the case was fixed again under section 22(4) for 7-6- 1966. The notice was properly served on 1-6-1966. This notice was again not complied with. The case was then re-fixed on 28-12-1966 for hearing on 18-1-1967. The notice was served on 9-1-1966 under section 22(4) of the Income-tax Act. No one appeared on this date. Finally a notice under section 22(4) was issued on 20-1-1967 for hearing on 31-1-1967. It was served on 24-1-1967. None has appeared to day even. In these circumstances, I complete the assessment ex parte under section 23(4) of the Income-tax Act in the status of U. R. F. Ant refuse the assessee's application under section 26-A."
24. The order with regard to assessm ent year 1963-64 is as follows :- "This is the case of a firm exhibitor who is running Odeon Cinema, Abbot Road, Lahore. No return was filed under section 22(1). A notice under section 34 was issued and served on the assessee on 27-5-1965. Even this notice has remained un-complied with notice under section 22(4) was issued for the first time on 29-4-1966 for hearing on 6-5-1966. This was served on 30-4-1966. No one attended on the fixed date. The case was again fixed for 30-5-1966 under section 22(4) and the notice was served on 25-5-1966. None appeared. On 28-12-1966, the case was refixed for 18-1-1967.
25. This notice was served on 9-1-1967. No one attended. Finally, the case was fixed for 31-1-1967 and notice was properly served on 24-1-1967. None appeared even to day. In view of the above facts and circumstances, I complete the assessment ex parte under section 23(4) of the Income-tax Act in the status of U. R. F. And refuse the assessee's application under section 26-A. From the Inspector's report dated 28-12-1962, it will appear that the books are never written in due course and accounts are not properly maintained. This is also patent from the report of the Inspector who visited the Cinema on 1-8-1966.
26. These orders show that the Income-tax Officer had complied with all the necessary requirements of law before making ex parte best judgment assessment. He bad issued the necessary notices and on factual plan the grounds and reasons given by him have not been taken exception to before us. The stage was ripe for him, therefore, while making the ex parte best judgment assessm ent to refuse registration of the firm under section 23(4) of the Act, already reproduced above. The same grounds on the basis of which he proceeded to make the ex parte best judgment assessm ent could constitute the basis for refusal of registration. This was so held in Firm- Raghunandan Prasad Manohar Lal v. Commissioner of Income-tax U. P. Lucknow (AIR 1957 All. 75)
27. The actual passage in the judgment reads as follows :- "8. The applicant's next contention that in the present case the Income-tax Officer has not exercised his discretion at all, is based upon fact that in refusing to register the firm, he had merely repeated the arguments upon which he based his assessment to the best of his judgment. The section does not lay down that the refusal to register may not be based upon any one or more of the grounds which led to the assessm ent being made to the best of the judgment of the Income- tax Officer."
28. No law to the contrary has been brought to our notice. Our own reading of subsection (4) of section 23 also shows that it provides two penalties against a delinquent assessee. One is of making an ex parte best judgment assessm ent and the other is (confining to the facts of this case) of refusing registration. Once he had made out a ground for proceeding ex parte, that was enough for refusing registration as well. The case is just like a situation, where, for instance a law says that for a creation act of omission or commission, the delinquent may be imprisoned and also fined. Now when the charge is proved then if the Court while passing an order of sentence also passes an order of fine, it is not required to give separate reasons for the same. The commission of the offence is sufficient by itself to warrant both the penalties. In the instant case as well, since omission to file return and produce accounts was there, an order for refusal to register the firm could well be passed. Learned counsel submits that since in a case of contem--plated cancellation of registration, the proviso to subsection (4) of section 23 provided a further separate notice, a similar additional notice regarding intention to refuse registration should have been issued to the assessee. This cannot be accepted. The very fact that the Legislature while mentioning both these situations at one and the same place provided for an additional notice with regard to one and not with regard to the other, shows that in cases where no such additional notice was provided, for, it did not desire the issuance of such further notice.
9. From what has been written above, it is clear that this is not a fit case in which this Court should exercise its discretion under section 66(2) of the Act and call for a reference from the Tribunal. The applications are rejected in limine.