HAIDER ALI PIRZADA, J.-Messrs Saifee Development Corporation Limited, a public Company incorporated under the Companies Act, 1913, and having its registered office at C-18, Street No. 1, South Avenue, S. I. T. E. Karachi, have filed this constitutional petition under Article 9 of the Provi-- sional Constitution Order, 1981, for a declaration that notice under section 46(5-A) of the repealed Income-tax Act of 1922, and the recovery proceedings vide notices, dated 8-5-1983 and 9-7-1983, respectively, are void and without jurisdiction.
2. The case of the petitioners in short is this.
3. The respondent No. 3 was a share-holder in the petitioners' Company.
On 16-9-1999 he and two other persons, namely, Muhammad Ali Chundrigar and Abu Saeed Khan executed an agreement to sell their shares in the peti--tioners' Company to Abbas Lakdawala and Sulaiman Ghanchi. According to clause 9 of the said agreement a sum of Rs. 15,59,730 was shown as payable to respondent No. 3 and a sum of Rs. 2,O0,000 as due to his wife Mrs. Shahnaz by the Company. It was stipulated in the said para. That purchasers would repay the said amount of loan to the sellers on behalf' of the Company.
4. The respondent No. 3 had a tax liability of Rs. 4,45,200. His wife Mrs. Shahnaz also owed a sum of Rs. 60,000 on account of tax.
5. The respondent No. 1 served a notice under section 45(5-A) of the repealed Income-tax Act of 1922, upon the petitioners' Company by their letter, dated 19-10-1977 (Annexure "H" to petition) requested the Income-tax Officer to put the collection in abeyance till 31-12-1977. Subsequently, an agreement was also executed on 7-11-1977 between the petitioners' Company and the respondent No. 3. (Annexure "A" to the petition). Relevant clauses of the agreement are as follows :- "Clause (ix).-Saifee Development Corporation Limited owes to Mr. Zia Rajput a sum of Rs. 15,59,730 and to Mr. Abu Saeed Khan, a sum of Rs. 1,06,925 which sums have been loaned to the said Company by them from time to time and are properly shown in the books of account of the Company as on the date of this agreement, and the purchasers, on behalf of the Company agree to repay the said loan after proper verification in instalments of Rs. 1,00,000 per month on the 15th of each month hereinafter called the "due date" and the first such instalment to be paid on 20th of October, 1976. The purchasers will, at the time of signing of this agreement, shall issue on behalf of the said Saifee Development Limited unconditional sad irrevocable Promissory Notes, of Rs. 1,00,000 each as collateral security against the aggregate amount of the said loans. The sellers shall return and cancel each of the Promissory Notes when the payment thereof is made. The said loan shall not carry any interest provided the instal--ments are paid on the due date the purchasers covenant that in the event of default due to non-payment on the due dates, they shall pay, in addition to the principal amount of loans then outstanding interest at the bank rate prevelent on the due date when the default occurred for the period the payment is delayed."
Clause (x). The sellers covenant that all liabilities of the Company accrued upto the date of this agreement are duly accounted for in the books of account or are shown in Annexure "B' mentioned hereunder as handed over to the purchasers on the date of this agreement."
6. The respondent No. 2 served Notice No. TRO/CZC/82-83/285, dated 30-3-1983 upon the petitioners' Company which was followed by letter, dated 8-5-1983. Copies thereof annexed to petition as Annexures "J" and "J-1". The petitioners' Company by their letter, dated 5-6-1983 requested the respondent No. 2 to furnish copies of the agreement and the undertaking to them.
The petitioners' Company by their letters, dated 15-5-1983 and 21-6-1983 wanted to resile from the earlier stand.
7. The respondent No. 2 by letter, dated 9-7-1983 issued prohibitant order under section 5 of section 39 of the Income-tax Ordinance, 1979. The Company filed this petition.
8. This Court by an order, dated 26-7-1985 issued pre-admission notice to the Deputy Attorney- General as well as to respondents and also called parawise comments from respondent No. 1. The respondent No. 1 submitted parawise comments and stated therein that the petitioners' Company under--took the liability and they cannot resile from the same.
9. Mr. Shahenshah Hussain, learned counsel for the petitioners, raised the following contentions :-
(i) That the undertaking is without consideration and was not accepted by the Income-tax Department ;
(ii) That agreement dated 7-11-1977 was collusive and designed with the object of making unlawful gain from and at the cost of the Company ;
(iii) Neither the Company owed any amount to respondent No. 3 nor to his wife;and
(iv) The procedure under rule 46(5-A) cannot be used as a process for satisfying the debt of the assessee. In support of his arguments he relied upon PLD 1969 Kar. 21.
10. The learned Deputy Attorney-General on the other hand contended that the petitioner'
Company is estopped from resiling from the undertaking and the agreement, dated 7-11-1977. It is also contended that petitioner's Company had not exhausted the alternate remedies which are available to them and, therefore, the petition is barred.
11. In order to appreciate the contentions of the parties it is necessary to reproduce section 93 of the Income-tax Ordinance, 1979, and the relevant Income-tax Rules, 1982.
Section 93.-(1) There any assessee is -in default in making payment of. Tax, the Income-tax Officer may forward to the Tax Recovery Officer a certificate in the prescribed form specifying the amount of tax due from the assessee."
(2) Where such certificate is received by the Tax Recovery Officer, he shall serve upon the assessee a notice in the prescribed form requiring him to pay the amount specified in the certificate within such time as specified in the notice.
(3) If the amount referred to in the notice issued under subsection (2) is not paid within the time specified therein or within the further time, if any, allowed by the Tax Recovery Officer, the Tax Recovery Officer may proceed to recovery from the assessee the said amount by one or more of the following modes, namely- (a)attachment and sale of any movable or immovable property of the assessee ;
(b) appointment of receiver for the management of the movable or immovable property of the assessee ; and
(c) arrest of the assessee and his detention in person for a period not exceeding six months.
"Rule 173.-An appeal from any order, passed by the Tax Recovery Officer under these rules shall lie to the Inspecting Assistant Commis--sioner of Income-tax having the administrative control of the Income--tax Recovery Officer the order.
Rule 174.-Any party whose interest is affected, may within thirty days from the date of the order passed by Inspecting Assistant Commissioner under Rule 173 file an application to the Commissioner of Income--tax for revision of such order and the Commissioner may pass any such order on the application as he thinks fit."
12. Section 93(1) to (3) of the income-tax Ordinance, 1979, is in the nature of a garnishee proceeding and it is intended to protect, the revenue and to enable the Income-tax authorities to call upon creditor of the "assessee in default" from paying over the moneys in their hands to anyone without notice to the Income-tax department or the revenue. This is one of the accredited methods by which both under the common law and under the taxing statutes moneys payable by a debtor, are secured and latter recovered.
13. After hearing the learned counsel for the parties, it seems necessary to consider all the grounds raised by the learned counsel for the petitioner, because in our opinion the petition can be disposed of only on one ground stated above.
14. The question before us is whether the petitioners having admitted the liability of the respondent No. 3 and his wife and allowed that position to remain unchanged from 1977 upto the present time, can now resile from the same.
15. 1n our opinion, since the petitioners with full knowledge of they facts undertook the liability of respondent No. 3 and his wife, and have) allowed that position to remain unchanged for nearly five years they are now debarred from setting up a different case.
16. In the instant case the petitioners' Company stated that there was a cash credit to. The tune of Rs. 16,66,656 in their books of accounts. This amount undoubtedly belonged to respondent No. 3 and his wife.
17. In Constitutional Petition No. 154 of 1976, decided on 25-5-1983 by a Bench of this Court of which one of us is a party, also repelled the con--tention of the petitioner and held as follows :- "The Income-tax Authorities can recover the dues of an assessee from a person who has undertaken or guaranteed the payment of such dues, It is not a case where the Income-tax Authorities are recovering tax of one assessee from another assessee or person. The demand has been made as the petitioner bad undertaken to discharge the liabilities."
It was further held that :- "The stand taken by the petitioner lacks liana fides arid does not entitle him to seek aid of constitutional jurisdiction of this Court."
We entirely agree with the views expressed in the above judgment.
We do not find any force in the contentions raised by the counsel for the petitioners and case cited by him is also distinguishable from the facts of this case. For these reasons by a short order, dated