' GUL MUHAMMAD KHAN, J.-This is a reference filed in this Court under section 66(i) of the Income- tax Act. It arises out of the order dated 31st May, 1972 passed by the Income-tax Appellate Tribunal, Peshawar, with regard to assessm ent year 1961-62. The facts leading to it are as under :- ' The petitioner which is a partnership firm, constituted on 9th May, 1960, bad its main office at Haranpur, District Jhelum. The predominant business carried on by this firm was as Contractors to the Pakistan Western Railway, supplying pitching stones and clay bricks. In the previous year closing on 31st March, 1961 the petitioner declared gross receipts at Rs, 1,97,754 for the supply of pitching stones and Rs, 26,395 for the supply of bricks to the P. W. R. An insignificant amount of sales of bricks was made to private parties. After deducting its expenses the assessee declared Rs, 17,395 as its net total income in its return submitted to the Income-tax Officer, Jhelum
2. Before this return could be completed the Commissioner of Income-tax, North Zone, Lahore, to whom the Income-tax Officer, Jhelum was subordinate, at the relevant time, issued a Notification No, K-160 (11/62-63/ 1195-J, dated 7th September 1962 creating a special charge of the Income-tax Officer, Contractors Circle, Lahore. He also assigned to this circle among others cases of assessees who were predominantly doing contractors' business with the P. W. R.
3. It, however, so happened that the return filed by the petitioner was not sent to the new circle. It was taken up by the Income-tax Officer, Jhelum, who vide his order dated 1st November, 1962, completed the same, with a net total income of Rs, 82,463. The petitioner challenged that order in an appeal before the Appellate Assistant Commissioner, B-Range, It awalpindi. Among other points raised the petitioner challenged the jurisdiction of the Income-tax Officer, Jhelum, on the basis of the notification referred to, above. However, before this appeal could be decided the territory, previously under the Income-tax North Zone, Lahore, was bifurcated into two Zones, with effect from 1st December, 1965, under a notification of the CBR No, S. R.
0. 1018 (K1/65 which provided as follows :- {{DATA MISS ARRANGED}}
(i) Commissioner of Income-tax, Lahore Shall exercise jurisdiction Zone, Lahore. Over the persons, or classes of persons, or cases or classes of cases or classes of income in the areas of the Civil Divisions of Lahore, Multan and - Bahawalpur, excepting Sialkot district of Lahore Division.
(ii) Commissioner of Income-tax, Shall exercise jurisdiction over the person, or classes of cases or classes of income in the areas of the Civil Divisions of Rawalpindi, Peshawar, D. I. Khan, Sargodha and the District of Sialkot of the Lahore Division. {{DATA MISS ARRANGED}} ' According to the notification the District Jhelum fell to the jurisdiction of Rawaldindi Zone.
4. The appeal filed by the petitioner came up for hearing before the Appellate Assistant Commissioner, Rawalpindi, who vide his order dated 27th November, 1967, set aside the order appealed against and held that as the jurisdiction vested in the Income-tax Officer, Contractors Circle, Lahore, the Income-tax Officer, Jhelum had no jurisdiction in the matter The Depatment took as appeal against this order before the Tribunal. Simultaneously, the Income-tax Officer, Jhelum served fresh notices on the petitioner under section 34(2-D) of the Income-tax Act but those were also challenged through Writ Petition No 1228/68. At the time of hearing of that petition the Department expressed its intention of not contesting the same but reserving their right to take fresh legal action against the assessee. The Department also withdrew the notices issued under section 34(2-D). The appeal filed before the Tribunal against the order of the Appellate Assistant Commissioner dated 27th November, 1967 was also withdrawn.
5. Subsequently, the Assistant Income-tax Officer who was then posted as the Assessing Officer at Jhelum served fresh notices under sections 22(4) and 34 (2-D) of the Income-tax Act on the assessee who challenged the same again through Writ Petition No, 478/71. During the pendency of the writ petition the Assistant Income-tax Officer, Jhelum on 25th May 1971, served a notice under section 34(0 on the petitioner requiring it to file its return for the year 1961-62 as the same had escaped assessm ent. The assessee responded to the notice and filed the required return on 20th June, 1971 tinder pretext, and without prejudice to his claim in Writ Petition No, 478/71 and all other legal rights in that behalf. It may be noted here that the Writ Petition No, 478 of 1971 was later dismissed for non-prosecution;
6. 1 he Assistant Income-tax Officer proceeded to complete the fresh return filed in pursuance to notice under section 34(0 after serving notice under sections 22(4) and 23(2). On 30th Jute, 1971, be processed the return and found a sum et Rs, 81,463 as the net income of the petitioner for the assessm ent sear 1962-63. The petitioner appealed against this order to the appellate Tribunal which rejected the same vide its order dated 31st May, 1v72.
7. The petitioner has now raised the following questions of law for the consideration of this Court :-
(1) Whether the assessing officer who passed the impugned assessment order was legally vested with jurisdiction to make the assessme nt ?
(2)Whether the statutory notices issued under section 34(1) and the assessment made, on the dates on which they have been issued and made, are beyond the limitation for such notices and assessm ents, and therefore, illegal ?
(3)Whether the notice under section 34(1) has been legally issued even when there was no escapement of income-tax ?
(4)Whether the income of the assessee-firm was liable to the charge of super-tax at all under any of the provisions of the Income-tax Act or the Finance Act ?
(5)Whether the income of the assessee-firm determined under section 13 proviso was subject to the charge of super-tax ?
(6)Whether the determination of the income from brick-kiln business as made by the assessing officer is in excess of the jurisdiction vested in the assessing officer under section 13, proviso ?
(7)Whether there was material for the enhancement of sales of bricks as done by the assessing officer ?
(8)Whether the following disallowances out of the expenditure in the supply of pitching stones is in accordance with law.
8. The first question being raised is that it is only the Income-tax Officer at Lahore, who had a jurisdiction to complete the assessm ent and, therefore, the order passed by the Assistant Income- tax Officer, Jhelum, was without jurisdiction. The learned counsel placed reliance cn the notification dated 7th September, 1962 issued by the Commissioner of Income-tax North Zone, Lahore, ahead; referred to above. As noted above, the case of the petitioner had not been sent to the new circle so created and was lying with the Income-tax Officer, Jhelum, who later passed an order thereon. The North Zone was subsequently bifurcated vide notification dated 1st December, 1965. Under this split-up the District of Jhelum went out of the jurisdiction of the Commissioner of Income-tax, Lahore, to the authority of the Commissioner of Income-tax, Rawalpindi. In exercise of his power, the Commissioner of Income-tax, Rawalpindi zone also passed an order wherein under Item No, 17 the cases of all persons doing contract work predominantly with the e . W. R. Etc. From the entire Zone of Rawalpindi were assigned to the Income-tax Officer, Contractor Circle, Rawalpindi.
Thereafter on 12th May, 1966 under another Notification No, K-1C0(i)/65-66/ 5031/J, the jurisdiction with regard to the Contractors of P. W. R. Was decentralised. The result was that the Contractors Circle, Rawalpindi, was no longer authorised to assess the returns filed by the contrators based in Jhelum District. The Commissioner of Income-tax, Rawalpindi Zone then passed another Order K- 160(1)/70-71/2697/Admn., dated 3rd September, 1970 by which the cases of persons doing contract work for P. W. R. Were placed within the jurisdiction of the Income-tax Officer appointed for different areas. It may be noted here that the impugned order of the Assistant Income-tax Officer, Jhelum had been passed subsequent to this notification. The above resume of various orders and notifications would go to show that the Income-tax Officer, Contractors Circle, Lahore, bad the jurisdiction only till the bifurcation of the Zones and if it had passed an order till then it would have been with jurisdiction. However, as no order was passed by that officer for any reason whatever, his jurisdiction came to an and the moment the Lahore Zone was split up and the District of Jhelum was taken out of the jurisdiction of the Lahore Zone. The Income-tax Officer, Contractor Circle, Lahore, thus lost jurisdiction and cannot be presumed to have an existing authority with regard to all those returns which had been filed till the year 1965. The contention of the learned counsel for the petitioner that the jurisdiction with regard to all those returns was never lost is absolutely misconceived and misplaced. Further as the Assistant Income-tax Officer, Jhelum had been specifically authorised vile notification dated 3rd September, 1970, with regard to the District of Jhelum, we have no doubt that the order passed by him was within jurisdiction. The first question is, therefore, replied in the affirmative.
9. Regarding the second question it was contended that as section 34(1) the notices on the basis of which the fresh return was called for was time barred, and, therefore, alt proceedings taken thereon were unlawful. The Tribunal in passing its order had relied on section 34(2-D). The learned counsel for the petitioner, however, submitted that as there was no cancellation of a previous assessm ent section 34(2-D) was not attracted. It may be noted here that the difference between the application of the two provisions lies in the fact that whereas a fresh order on a previously cancelled assessm ent could be valid and legal under section 34(2-D), no order could have been passed on the fresh assessm ent called for in the year 1971 as the same was beyond time. It is, however, admitted that the subsequent return submitted by the petitioner was the same as given before. It is also admitted that the Department had expressly, before the High Court in W. P. 1228 of 1968 as well as by its subsequent conduct and actions, withdrawn all the previous proceedings and dropped their decisions given on the first return. The notice issued under section 34(2-D), which prompted the petitioner to file W. P. 478 of 1971, however, remained in the field and was alive when the second notice under section 34(1) was served. It was held in Income-tar Officer v. Sulalman Bhai Jiwa (1) that section 34(2-D) was applicable to all assessments annulled before the Finance Act, 1964 was enacted. There were thus two notices in the field at the relevant time and the contents of the returns available in pursuance to those were the same, Whereas the assessing officer had the power to take up the original return and pass an order thereon in accordance with section 34(2-D) he had no authority because of time limitation to complete the return filed in pursuance to section 34(1). The Tribunal has taken the view that the Order of Assistant Income-tax Officer is noted in view of section 34(2-D) and we are inclined to agree with that view, in view of the following observations of the Supreme Court in the Lahore Improvement Trust's case (2) which go as follows :- "Another principle attracted in the case is that before an order passed by a public authority is struck down it is the duty of the Court to explore every possible explanation for its validity and examine the entire field of powers conferred on the authority in pursuance to which the impugned order has been passed. See The Chairman, East Pakistan Railway Board, Chittagong v. Abdul Majid Sardar, Ticket Collector its L D 1966 SC 725. It was remarked in this judgment t- ' Acts performed and orders made by public authorities deserve due regard by Courts and every possible explanation for their validity should be explored and the whole field of powers in pursuance to which the public authorities act or perform their functions examined and only then if it is found that the act done, order made or proceeding undertaken is without lawful authority should the Court declare them to be of no legal effect.'
(I) PLD 1970 SC 80 (2) PLD 1971 SC 811 ' To satisfy the requirement of this rule it is the duty of the Court to examine the entire record pertaining to the action taken, order passed and proceedings undertaken which are challenged as without lawful authority under Article 98 of the Constitution. Otherwise grave miscarriage of justice may take place in the exercise of this beneficial jurisdiction. The objection raised by Mr. Ghias Muhammad that the appellant or the Court suo motu could not make resort to any document on the record of the Collector, the Trust and the University which was not relied upon in the High Court has, therefore, no substance."
' The answer to this question will, therefore, be in the negative.
10. In question No, 3, it is contended by the learned counsel that in fact there was no occasion for the Department to say that the income of the petitioner had escaped assessment in view of the fact that the same Income has been duly returned. The assessment could not be completed, however, due to technical reasons within the time stipulated by law. The Department, after having failed in a few proceedings, tried to have recourse to their entire store of powers to ensure that it was able to get its due share of tax from the petitioner. It was in this endeavour that notices under section 34(2-D) as well as section 34(1) were issued. However, as we have held &erne that the assessm ent was validly made under section 34(2-1)) the notice under section 34(1) was superfluous. This question, therefore, does not arise in the circumstances of this case.
11. Question No, 4.-The learned counsel for the petitioner submitted that as this question stands already concluded by a judgment in Sh. Ihsan Ilahi & co. v. C. I. T., Rawalpindi (1), he does not want to press the same. This question, therefore, does not require any answer.
12. Answer to question 5 as it is, worded will be in the affirmative, in view of the explicit provisions of section 55 of the Income-tax Act. The learned counsel, however, contended that there is no provision for assessm ent of super-tax. In his view the application of section 13 because of section 58 of the Income-tax Act does not solve the problem. The argument was that section 13 deals only with quantification of income and does not deal with assessment. The contention being raised is entirely misplaced. Section 55 is the charging section for superatax. This tax is leviable on the total income of previous year which is computed under section 13. Section 58 also makes applicable section 13 and the computation made under section 13 forms the basis for levy of super-tax.
13. Question No, 6.-It is admitted by the learned counsel that the Income-tax Officer illegally rejected the petitioner's account about the income from the brick-kiln The income-tax Officer had found that according to his account the petitioner had produced 15,25,877 kacha bricks. The kiln was, however, charged only with 11,86,278. There war, therefore, a short-fall of 3,42,599 kacha bricks.
According to the Income-tax Officer such a shortage was unheard of, The petitioner did not supply any acceptable explanation for it. Out of the bricks loaded in the kiln the assessee showed a further shortfall of 1,56,520 burnt bricks. This shortage also was not explained to the satisfaction of the Income-tax Officer. In the circumstances we do not think that the Assistant Income-tax Officer committed any illegality in rejecting the petitioner's accounts. While determining the quantity of the bricks produced by the petitioner he relied on the quantity of the coat
(1) (1974) 29 Taxation 64 consumed. Admittedly the petitioner was doing no other business requiring the consumption of the coal. The Income-tax Officer estimated that one lac bricks could be burnt with 20 tons of coal and he worked out the output to 18,70,000 burnt bricks for 370 tons of coal. The Income-tax Officer thus, adopted a valid basis for his conclusions and we do not think he has committed any illegality in arriving at the results. We, therefore, reply question No, 6 in the negative. Question No, 7 is replied in the affirmative as there was material for the enhancement of the sales.
' Alongwith it the learned counsel challenged the competence of the Assistant Income-tax Officer, Jhelum, to assess as according to him this function of making assessments tad not been assigned to him by the Income tax Authority under whom he had been appointed to work. The learned counsel has not placed on record or produced the order of appointment of this Officer which would have shown the assignment that was given to him on, this appointment. It is, however, admitted that there was no Income-tax Officer appointed to this Circle at the relevant time. According to the definition as given in section 2(7) of the Income-tax Act, an 'Income-tax Officer' includes an 'Assistant Income-tax Officer'. We, therefore, have no doubt. That the essessment was made by a competent officer. A similar view was taken by this Court in the case of Mumtaz Industries in Writ Petition No, 1181 of 1971, decided on 27th November, 1975.
14. As regards question No, 8, the objection of the petitioner was that the sum of Rs, 5,342 for the pitching stores and a sum of Rs, 12,055 in carriage account was not in accordance with law. The learned counsel, however, has not been able to show as to what illegality was involved or as to which particular provision of law had been contravened. We have gone through the facts to find that the question involved is a pure question of fact and, therefore, no answer to it is necessary. The petitioner shall bear the costs of this reference.