MUHAMMAD AKSAKRI, J.-In this case a demand was created against the respondent-assesses for the payment of tax imposed on her on the excess income declared for the assessment year 1960- 61 to 1968-69 under the Martial Law Regulation No. 32. On the 26th January, 1970 a demand notice was issued against her requiring her to pay the tax on or before 31st January, 1970. In spite of the demand notice and repeated reminders the respondent failed to pay the tax due from her. In these circumstances on the 2nd of Maya 1972 the Income-tax Officer. Circle III, Lyallpur passed an order imposing a penalty against her under subsection (1) of section 46 of the Income tax Act for failure to pay the tax. The assesses-respondent fled an appeal (I. T. A. No. 24 of 1972-73) against the order imposing the penalty. On the 25th of October, 1973 the Income-tax Appellate Tribunal (Pakistan), Lahore; accepted the appeal. In the opinion of the Tribunal the demand created in pursuance to the Martial Law Regulation No. 32 was not a tax as defined in section 2(14) of the Income-tax Act and consequently the provisions contained in subsection (1) of section 46 of the Act were not attracted for the imposition of the tax levied and demand created under the Martial Law Regulation No. 32. The Tribunal also accepted the objection raised on behalf of the assessee against the validity of the demand notice.
2. In these circumstances the Commissioner of Income-tax, Rawalpindi Zone, Rawalpindi has made this reference application directly to the High Court under section 66(1) of the Act referring the following two questions of law said to arise out of the appellate order passed by the Tribunal : "(1) Whether on the facts and in the circumstances of the case the Tribunal was justified in setting aside the order, imposing penalty on the around that section 46 of the Income-tai Act did not apply to the recovery proceedings ?
(2) Whether on the facts and in the circumstances of the case the Tribunal's finding that a revised demand notice should have been served on the respondent before imposition of penalty, is sustainable in law ?"
3. We have heard the learned counsel. It was argued before us on behalf of the petitioner that in accordance with para. 16 of Circular No. MLR-I of 1969 as amended by Circular No. MLR-3 of 1969 issued by the Central Hoard of Revenue under the Martial Law Regulation No. 32, the provisions of Income-tax Act relating to the recovery of tax were adopted and that by virtue thereof the provisions contained in section 46 of the Income-tax Act were made applicable to the proceedings for recovery of the fax imposed under Martial Law Regulation No. 32. As such, according to the petitioner, the Income-tax officer was justified in imposing the penalty for the failure of the asseesee to pay the arrears of tax assessed against her under Martial Law Regulation No. 32. We find that under para. 16 of Circular No. MLR-1 of 1969 se amended by Circular No. MLR-3 of 1969 issued by the Central Board of Revenue under the Martial Law Regulation No. 32, the provisions of the Income-tax Act relating to the recovery of tax were made applicable to the proceedings under the Regulation. These relevant provisions are mutatis mutandis similar to those issued under Martial Law Regulation No. 43/48. In Civil Reference No 6 of 1968, In re : Commissioner of Income-tax v. Mr. Aziz-ud-Din on a consideration of the identical provision this Court has held that this adaptation of the proceedings for recovery of the income-tax under the Income-tax Act was not sufficiently comprehensive so as to also include within it the provisions for the imposition of penalty levied under subsection (1) of section 46 of the Income-tax Act for failure on the part of the assessee to pay the tax levied under Martial Law Regulation No. 43/48. For our detailed reasons recorded in that case we hold that on the facts and circumstances of this case the Tribunal was justified in setting aside the order imposing penalty on the ground that sub-section (1) of section 46 of the Income-tax Act was not applicable to the proceeding for recovery of the tax levied under Martial Law Regulation No. 32. Therefore, our answer to question No. 1 above is returned in the affirmative.
4. The second question reproduced above was raised in the amended application put in by the petitioner under the order of the High Court. But on a careful consideration this question as posed, does not strictly arise out of the appellate order passed by the Tribunal. In its order the Tribunal has noticed the objections raised before it on behalf of the assessee against the demand notice issued to her. It was contended by the assessee that the imposition of penalty also offended against the principles of natural justice as the service of the notice was not effected on bar, and that at any rate the time allowed to her for the payment was too short and unreasonable. It was further argued on behalf of the assessee that by virtue of Notification No. 6(95)-MLR, dated 13-1-15171. The time for the payment of the tax was extended up to 28-2-1972 and that, therefore, it was necessary to have served a revised notice of demand on her before imposing the penalty in question. The Tribunal disposed of all these objections with the observations reproduced below ;---- "We also uphold the contention of the appellant (assessee) with regard to the validity of the notice.
In view of our findings above we do not consider it necessary to adjudicate upon other contentions raised above."
These observations go to indicate that possibly the Tribunal had accepted contention of the aeseesee to the effect that she was not served with the notice and that in any case the time allowed by the notice for payment was too short. But in the order the Tribunal did not express any opinion on the further contention to the effect that becauseof the aforesaid notification dated 13-1- 1911 the time for the payment was extended upto 28-2-1872 and that, therefore, it had become necessary to have served the assesses with revised notice before any penalty could be imposed against him. There is no definite finding recorded by the Tribunal on this par& of the case.
Therefore, this reference to that extent is returned unanswered. This reference is disposed of accordingly and the parties are loft to bear their own costs.