KAPUR J. - Janda Rubber Works Limited, a private limited company, was incorporated under the Indian Companies Act, with its registered office in Lahore, now in Pakistan. It had certain factories in Bombay which included the Universal Rubber Works. On 2nd July, 1947, the registered office of the company is alleged to have been shifted to Amritsar. Under Section 21 of the Income-tax Act all companies have to make returns showing the names of servants in their employment, their salaries and their incomes and the amounts deducted out of the salaries as income-tax. For the assessment year 1948-49, the company made a return to the Income-tax Officer, Bombay, on 5th July, 1948. This is contained in para. 3 of the affidavit of the Income-tax Officer, Mr. Barwe. As the returns for the assessment years 1946-47 and 1947-48 had not been made under Section 21 of the Income-tax Act assessments were made by the Income-tax Officer at Rs. 50,000 per year for each of the two years on the basis of the return for the year 1948-49. It is stated in the same paragraph of the affidavit by Mr. Barwe that the company had asserted that for the assessment year 1946-47 and 1947-48 returns had been filed under Section 21 of the Income-tax Act at Lahore, but on enquiry from there the Income-tax Officer had found that no such return had been made. In para. 4 of his affidavit the Income-tax Officer claims that the company owes to the Government a sum of Rs. 1,43,342 as income-tax as assessed by the Income-tax Officer for the assessment years 1946-47, 1947-48 and 1948-49. On 19th March, 1949, the Income-tax Officer took action under Section 46 of the Income-tax Act and issued a certificate under that section to the Collector of B.S.D. Bombay requesting him to recover the sum of Rs. 1,43,342 which is made up as follows :-
Arrears of tax on salaries for the assessment year 1948-49 ...
Estimated tax on salaries unpaid by the company for the assessment years 1946-47 and 1947-48 at Rs. 50,000 for each year ...
It is also claimed by the Income-tax Officer that there is other liability of the company for income-tax with regard to which the Government reserved their right to proceed in accordance with law. On 25th March, 1949, the Collector attached certain properties belonging to the company and fixed 6th April, 1949, as the date for their sale by public auction.
One John Vasica, who is the general manager of the company and who holds a general power-of-attorney from the company, requested the Commissioner of Income-tax, Bombay City, to withhold the sale and other proceedings, promising to pay the arrears of tax. This request was made by means of a letter dated 1st April, 1949, in which inter alia he stated : 'Please therefore of not proceed with the sales of attached property and kindly issue orders upon the Mamlatdar, Andheri, accordingly. We, however, hope to get the necessary amount to pay off the whole income-tax within about three months or earlier.' The Commissioner of Income-tax Bombay, acceded to this request and the sale was postponed for a month up to 6th May, 1949, and other proceeding were stayed. On 17th April, 1949, by a special resolution the company went into voluntary liquidation. It may be noted that for the purposes of such a special resolution 21 days notice is necessary and so according to the affidavit of the Income-tax Officer the company had already made up their mind to go into liquidation and the Commissioner submits that he was really tricked in giving time to the company. On 29th April, 1949, an application was made for supervision under Section 221 of the Companies Act and also for stay of proceedings of sale under Sections 211, 216, 222 and 227 of the Companies Act, and on 2nd May, 1949, Harnam Singh J.; passed the following orde : 'Mr. Ratan Lal Chawla, Notice. Sale not to take place pending the disposal of C. M. 46-L of 1949. Order of stay to be communicated telegraphically. Copy of the stay order to be given dasti.'
On 12th May, 1949, the Income-tax Officer, Bombay, sent certain particulars to the liquidator at the liquidators request. This is by a letter No. S. B. II/B. F./J. 91-1949-50. The Income-tax Officer, Amritsar, also registered a claim with the liquidator without giving the amount.
On 25th May, 1949, John Vasica abovementioned as general manager of the company made a return to the Income-tax Officer, Bombay, for three years, i.e., 1946-47, 1947-48 and 1949-50. On 6th June, 1949, it is alleged there was a re-assessment for two assessment years 1946-47 and 1947-48. Previous to this on 27th May 1949, the Commissioner of Income-tax, Delhi, East Punjab and Ajmer-Merwara, by his letter No. T-14/48-49/7804, wrote to the liquidator informing him that all assessments had been transferred to Amritsar. On 29th July, 1949, my Lord the Chief Justice continued the operation of the order of stay. He sai : 'Interim order continued and the application is adjourned till 11th August, 1949. Written statement to be put in on behalf of the Exchange Bank of India & Africa. Copy supplied The replication, if any, to be filed by 5th August.' On 19th August 1949, supervision order was passed by this Court.
On 26th August, 1949, the Income-tax Officer, Bombay, filed an affidavit in opposition in this Court saying that this Court had no jurisdiction because of Section 226 of the Constitution Act and further that this Court should not exercise its discretion in granting stay of proceedings for the recovery of income-tax as the company had acted fraudulently qua the Income-tax Department.
Mr. Sikri who has appeared for the Income-tax Officer has submitted that because of Section 226 of the Constitution Act, the original jurisdiction of this Court concerning revenue or concerning any Act ordered or done in the collection thereof is barred. Section 226(1) runs as follow : 'Until otherwise provided by Act of the appropriate legislature no High Court shall have any original jurisdiction in any matter concerning the revenue, or concerning any act ordered or done in the collection thereof according to the usage and practice of the country or the law for the time being in force.'
The questions which arise under this section ar : (1) Is the jurisdiction that this Court exercises under the Companies Act original jurisdiction within the meaning of Section 226(1) of the Constitution Ac (2) Are the proceedings for the purpose of determining the amount of revenue matters concerning the revenu (3) Does the enforcement of payment of revenue come within the phrase concerning revenue or concerning any act ordered or done in the collection thereo (4) What is the force of the words 'according to the usage and practice of the country or the law for the time being in force ?'
I shall take all these points separately. Section 226(1) of the present Government of India Act was first enacted as Section 8 by the Statute, 21 Geo. III, c. 70, and it is well known that the necessity for the enactment of this section lay in the historical conflicts between Warren Hastings and Sir Elijah Impay who was then the Chief Justice of the Supreme Court at Calcutta. This section had continued to be retained in the subsequent Government of India Acts and was Section 106 in the Act of 1919 (9 & 10 Geo. V, c. 101) and has found place in the present Government of India Act as Section 226(1) and although the conflict ceased long ago, this provision has continued in the Statute-Book and If I may say so with great respect -without the slightest justification. As a matter of fact Rangnekar, J., has rightly described it as 'antiquated fossil.'
The first questions that I have to decide i : 'Are we exercising original jurisdiction within the meaning of Section 226 of the Constitution Ac ?' Under the Letters Patent of this Court, extraordinary civil jurisdiction has been conferred on this Court under Clause 9 and jurisdiction has been conferred as to infants and lunatics under Clause 12. Ordinary original jurisdiction was conferred under Clauses 15 and 16 and matrimonial jurisdiction under Clause 25. It was submitted by Mr. Sikri that various types of original jurisdictions were conferred on the High Court by the Letters Patent and equally well could original jurisdiction be conferred by any other Act and he contended that by Sections 2 and 3 of the Companies Act original jurisdiction had in fact been conferred on this High Court in respect of companies the registered offices of which were situate within the jurisdiction of this Court.
Mr. Sikri drew our attention to Clause 29 of the Letters Patent which refers to 'any final judgment, decree or orders in order made in exercise of original jurisdiction' and that orders in company matters do not differ in substance from decrees in suits as is clear from Section 199 of the Companies Act, which provides that all orders made by a Court under that Act may be enforced in the same manner in which decrees of such Court made in any suit pending therein may be enforced. He relies on Governor-General in Council v. Shiromani Sugar Mills Ltd., where it was held that 226 applies to the jurisdiction conferred on the Allahabad High Court by the Companies Act. In that case the company prior to its being wound up carried on business in Basti district of the United Provinces. It went into liquidation on 17th April, 1942, and for the assessment year 1941-42 notice of demand was made on the 10th March, 1943. On 13th March, 1943, the Official Liquidator asked the Income-tax Officer to make a claim, but the latter sent a demand notice and took proceedings under Section 46 of the Income-tax Act and the Official Liquidator made an application under Sections 171, 228 and 232 of the Companies Act and the Allahabad High Court restrained the Income-tax Officer and the Collector from proceeding further, but left the Income-tax Officer free to make an application under Section 171 of the Companies Act, with leave to proceed with such recovery, and an appeal was taken against that order to the Federal Court, and in appeal one of the objections taken was that the original jurisdiction mentioned in Section 226 referred to the original jurisdiction exercised by the Supreme Court and to the ordinary original jurisdiction exercised by the High Court at Madras, Calcutta and Bombay as successors of that Court, but none of the other High Courts exercised original jurisdiction as contemplated by Section 226. This contention was overruled and it was held that the Court did exercise original jurisdiction within the meaning of Section 226. It was observed by Spens, C.J. :-
'In our opinion, the history itself of the section does not justify such a Method of construction. It was clearly re-enacted in Section 106(2) of the Government of India Act, 1915, in a setting where it was impossible to confine its operation to the High Courts of Madras, Calcutta and Bombay [vide Section 106(1)] and where [vide Section 101(5)] the High Court at Allahabad was expressly referred to amongst the High Courts. In the Government of India Act, 1935, the very opening words of Section 226 and sub-section (2) thereof show that it is no mere repetition of a section without consideration. It has again been deliberately re-enacted with appropriate provision for its repeal or modification having regard to the changes in the constitution. We note too that the Allahabad Letters Patent in Clause 30 refers to any final judgment, decree or order made in exercise of original jurisdiction. That orders in company matters do not differ in substance from decrees in suits, is shown by Section 199 of the Companies Act providing that such orders shall be enforced in the same manner in which decrees in the suits may be enforced. The present order of the High Court is thus in effect a decree in a suit granting an injunction. We are accordingly unable to accept the argument on behalf of the respondent and feel bound to hold that Section 226 applies to the jurisdiction conferred on the Allahabad High Court by the Companies Act 1913.'
These observation are binding on me and this would show quite clearly that any High Court which would include this Court will be exercising original jurisdiction when it exercised any powers under the Companies Act and I must, therefore, hold that under the Companies Act the jurisdiction this Court exercises is original jurisdiction within the meaning of Section 226 of the Constitution Act.
The next question which arises is whether the determination of the amount of income-tax are matters concerning the revenue. In my opinion it is. In Spooner v. Juddow, where an action was brought on trespass against the Collector of Revenue, Bombay, for destraining for arrears of Government 'quit-rent' and the Supreme Court at Bombay had held that quit-rent was not revenue within the meaning of the 'Charter' and the act complained of was not warranted by law and consequently the Court had jurisdiction to decide the matter. Their Lordships of the Privy Council held that quit-rent was part of the revenue of the East India Company at Bombay and that it was a matter concerning the revenue and the collection thereof and the Supreme Court had no jurisdiction which was excluded by the 'Charter.' Lord Campbell delivering the judgment of their Lordships of the Privy Council said at page 374 :-
'Therefore by statutes and charters, of which the Judges of the Supreme Court of Bombay are bound to take judicial notice, they are forbidden to exercise any jurisdiction in any matter concerning the revenue under the management of the Governor and Council or any act done according to the Regulation of the Governor and Council respecting the collection of the revenu : any such matter arising before them was declared to be coram non judice.' Their Lordships added at page 37 : 'We are of opinion that the quit-rent being part of the revenue of the East India Company the cause of action is a matter concerning the revenue under the management of the Governor and Council of Bombay, and concerning an act done according to the Regulations of the Governor and Council of Bombay. The quit-rent goes into the treasury of the East India Company ....... For this purpose no distinction can be taken between this quit-rent and rent due from the Rajah or Zamindar in respect of the land which they occupy and cultivate.'
According to this case, quit-rent was included in the word 'revenue' and the proceedings for determination would be included within the matter concerning the revenue and any act done respecting the collection would also be excluded from the jurisdiction of the Supreme Court.
The next case which deals with this matter is Govindarajulu Naidu v. Secretary of State. There, goods were seized outside the local limits of the ordinary original jurisdiction of the High Court by a subordinate customs officer as being smuggled into British India without payment of the duty lawfully leviable and the Collector of Customs, Madras, thereupon, passed an order directing the confiscation of those goods and the said order was communicated to the subordinate customs officer. In a suit for conversion by the owner of the goods against the Secretary of State for India filed on the original side of the High Court at Madras it was held that money derived from the sale of smuggled goods, seized and confiscated, was revenue and the seizure and confiscation was an act done or ordered to be done in the collection of revenue and was therefore barred under barred under Section 106(2) of the Government of India Act, 1915.
The next case that I have to consider in this connection is Dewarkhand Cement Co. Ltd. v. Secretary of State. There a suit had been brought to determine stamp duty on a transfer of a lease and an objection was taken to the maintainability of the suit on the suit on the ground of Section 106(2) of the Government of India Act, 1919, and it was held that the first part of the section referred to proceedings taken for the purpose of determining the amount of the revenue and the second part to the machinery to enforce payment of the revenue so determined. At page 325 Rangnekar J., said :-
'It is admitted by Mr. Maneckshaw that the duty paid in respect of stamps to the stamp authorities goes to Government, and when the contention is that the stamp authorities were not entitled to charge any particular duty, it must be a matter concerning the revenue. Similarly, it seems to me that any act ordered to be done in the collection of the revenue would be a matter concerning the revenue.' The learned Judge then referred to Alcock Ashdown Co. v. Chief Revenue Authority, Bombay, and quoted the following passage from that judgmen :- 'In their Lordships view, the order of a High Court to a revenue officer to do his statutory duty would not be the exercise of 'original jurisdiction in any matter concerning the revenue, and the latter part of the clause need not be considered, for the proceedings in this case had not to do with the collection of the revenue but, with the preliminary assessment of ascertain what that revenue was.' The learned Judge then sai : 'It seems to me however, that the object of the statute plainly was to bar the jurisdiction of the Courts in any matter concerning the revenue and for the purpose of protecting the revenue. Therefore, in a protective statute of this nature it is difficult to construe the words in the latter part of the section in their literal and etymological meaning.'
In Dinshaw Darabshaw v. Commissioner of Income-tax the petitioner was assessed to Income-tax for the assessment year 1937-38 and the tax was duly paid. Later on, the Income-tax Officer, City Provincial Circle, issued a notice under Section 34 of the Income-tax Act calling upon the petitioner to make a return of his income from all sources for the assessment of the year 1937-38, on the ground that he had reason to believe that the petitioners income from business which arose, accrued or was received in British India in the previous year had wholly escaped assessment and that he proposed to assess the said income that had escaped assessment. On 20th May, 1939, Mr. A. J. Shaw who was then Income-tax Officer (Section 3, Central) reminded the petitioner to make a return for the year 1938-39 and also for the year 1937-38 (under Section 34 of the Act). The petitioner questioned the jurisdiction of the Income-tax Officer to assess him having regard to the letter of the Commissioner of Income-tax, Bombay, dated 9th March, 1939, whereby his assessment was transferred to the officer who had originally initiated the proceedings. The matter having been decided against him the petitioner submitted his return under protest. The petitioner then filed a petition for the issue of a writ of certiorari for the purpose of getting an enquiry made into the legality of the assessment made by him for the year 1937-38. He also asked that the Assistant Commissioner be ordered to forbear from continuing any proceedings for the purpose of levying any penalty or otherwise taking or continuing any proceedings or exercising any jurisdiction or passing any orders in respect or arising out of the said assessment order. The grounds on which the petitioner based his claim were that the assessment made for the year 1937-38 was made by an officer who had no jurisdiction to assess him and secondly that the proceedings before the Income-tax Officer were so grossly irregular as to offend against the principle of natural justice. The Crown took a preliminary objection that the Court had no jurisdiction to issue a writ by reason of Section 226(1) of the Government of India Act, and it was held that as assessment order had in terms been made even if by the wrong officer it was impossible to say that in taking cognizance of this the High Court would not be exercising the original jurisdiction in a matter concerning the revenue and also that a writ of certiorari could not properly issue to challenge the validity of an income-tax assessment purporting to be made under the Income-tax Act. At page 162 Beaumont, C.J., referred to passage from Halsburys Laws of England which was to the following effect :-
'The writ can only be issued in respect of matters which are within the jurisdiction of the High Court of Justice, for proceedings will not be removed into the superior Court unless they are capable of being determined there.' He went on to sa : 'It seems to me clear that we are not capable of determining in this Court any question as to the validity of an assessment to income-tax under a writ of certiorari...... Assessees have various right under the Income-tax Act, right of appeal and other rights with which we are not concerned in this case...... As we think that the relief claimed is barred by Section 226 of the Government of India Act, 1935, it is not necessary to consider whether Section 54 or Section 67 of the Income-tax Act affords further bar.'
In Alcock Ashdown & Co. v. Chief Revenue Authority, Bombay, the appellate was assessed to excess profits tax by the Collector and they applied for reference to the High Court which was refused. They then applied to the High Court for writ of certiorari, but this was refused by the High Court. The judgment was reversed by their Lordships of the Privy Council on the ground that the order of a High Court to the Revenue Officer to do his statutory duty would not be the exercise of original jurisdiction in any matter concerning the revenue but the latter part of the section was not considered because the proceedings in the case 'had not to do with the collection of the revenue'.
In Governor-General in Council v. Raleigh Investment Co. Ltd., an appeal was taken to the Federal Court against a decree of the Calcutta High Court passed in the ordinary original jurisdiction declaring that Section 4(1)(c) of the Income-tax Act and Explanation 3 to the section were ultra vires the Indian Legislature; and also holding that the claim of the Crown to levy income-tax and super-tax on the dividend paid to the plaintiff by sterling companies was ineffectual and directing the refund to the plaintiff of a sum of about Rs. 4,00,000 which had been paid under protest. It was contended on behalf of the Crown that the suit was not maintainable and the impugned provisions of the Income-tax Act were intra vires the Indian Legislature. It was held that the suit was barred and that Section 226 applied equally to the demand or assessment as to the steps taken in collection of revenue. Spens, C.J., observed :-
'The learned Judges say that where the law imposing the revenue is itself illegal, a dispute in relation to it cannot be said to concern the revenue. This argument, if pursued to its logical limits, will prove too much. If even under a valid revenue law a person who is not liable to be assessed is sought to be assessed to revenue, that claim may well be described as an illegal claim against him. Again, there may be a dispute between a taxpayer and the revenue authorities as to whether the taxpayer has or has not paid what was due him and if on investigation it should be found that he had paid what was claimed as still due, the claim as against him for further payment might well be described as illegal. If in such cases the Court should be called upon to decide whether the claim was well-founded in law before applying the bar under Section 226, the provision would be practically rendered nugatory. In Spooner v. Juddow, the Judicial Committee held that the section would apply to all cases in which parties bona fide and not absurdly believed that they are acting in pursuance of statutes and according to law........ Section 226 is obviously not limited to steps taken in the collection of revenue. It equally applies to the demand or assessment.' At page 55 it was observe : 'Mitter, J., refers to the analogy of cases where a Court has power to determine what are called jurisdictional facts, if the jurisdiction of the Court depends on the existence of certain facts. In such cases, the jurisdictional or exclusionary provisions will ordinarily be of a qualified character and indicate what facts must be found before the jurisdiction can attach or be excluded. But as we read Section 226, the bar is absolute, if the dispute concerns revenue, taking the word revenue in its ordinary sense.'
The case which was strongly pressed to our attention by Mr. Sikri is Governor-General in Council v. Shiromani Sugar Mills Ltd. It is a case that I have already referred to. But the learned Judges did not give any decision on this question and therefore at this stage I need not discuss it.
In reply to this argument, Mr. Chawla for the respondent company submitted that Section 21 of the Income-tax Act requires only a return to be made and the duty imposed is on the principal officer to file his annual return. He further submitted that under Section 51 the penalty is imposed on such principal officer and not on the company.
He also drew my attention to Section 18 of the Income-tax Act and his submission was that if any deduction was not made the liability to pay the amount which should have been deducted is on the principal officer and not on the company. According to him, Section 18(2) which says that 'any person responsible for paying any income chargeable under the held salaries shall, at the time of payment, deduct income-tax . . . at a rate representing the average of the rates applicable to the estimated total income assessee under this head' refers only to the principal officer, and he supported his argument by reference to sub-section (7) of Section 18 which says :-
'If any such person does not deduct or after deducting fails to pay the tax as required by or under this section, he, and in the cases specified in sub-sections (3D) and (3E) the company of which he is the principal officer shall, without prejudice to any other consequences which he or it may incur, be deemed to be an assessee in default in respect of the tax :
'Provided that the Income-tax Officer shall not make a direction under sub-section (1) of Section 46 for the recovery of any penalty from such person unless satisfied that such person has wilfully failed to deduct and pay the tax.'
His submission amounts to this that the mention of the person and the company in sub-section (7) implies that where the default is in regard to matters given in sub-sections (3D) and (3E) the liability is of the principal officer as well as of the company, but in other matters the liability is only of the principal officer. I am unable to agree with the contention of Mr. Chawla. In my opinion, even though this point is not strictly before me, the submissions of Mr. Chawla cannot be given effect to. The opening words of sub-section (2) ar : 'Any person responsible for paying any income chargeable under the head Salaries shall, at the time of payment, deduct income-tax.' The person who is responsible for paying the amount is the company and not the principal officer and the person within the meaning of the General Clauses Act includes a company and the proviso to sub-section (7) also, in my opinion, contemplates that the company has to deduct and is liable if it does not do so. The penalty contemplated by sub-section (7) is to be imposed upon the payer if he does not make deduction, and if after deducting fails to remit the amount within the time fixed.
In support of his argument that the person responsible for paying mentioned in sub-section (2) of Section 18 means the person responsible for making the payment and not the person responsible for bearing the official liability, Mr. Chawla relied on the opinion of Sundaram in his Law of Income-tax in India, 6th Edition, page 793. If the contention of Mr. Chawla was correct, then all that a company has to do is to make an impecunious person the principal officer and then with impunity either to misappropriate the tax which has been deducted from the salaries of its servants or not to make any deductions at all and thus nullify the law and the liability being only of such an impecunious person the object of the legislature will be defeated. This, in my opinion, cannot be a correct view of the law.
It was further contended by Mr. Chawla that the Income-tax Officer has imposed upon the Janda Rubber Works tax which was leviable on three companies. This is a matter which is not proved on the record, and even if it were, because of the view I am taking that such matters are barred by the provisions of Section 226(1) of the Government of India Act, I am unable to go into the matter. The rule seems to me to be clear that if the matter concerns revenue or the collection thereof the jurisdiction of this Court is barred if the action of the officer is bona fide, and not absurd even though it may be an erroneous order.
It was next submitted that there is no assessment subsisting not even for the year 1947-48; but this again is a matter which, in my opinion, concerns the revenue and my jurisdiction is barred. The liquidator is not without any remedy; the Indian Income-tax Act provides the remedies which are open to an assessee and it is that remedy which has to be pursued by a person who is aggrieved against an order passed by an Income-tax Officer.
Mr. Chawla relied on Governor-General in Council v. Sargodha Trading Co. Ltd., and contended that the liquidator can go behind the order. That is a Full Bench judgment of the Lahore High Court, but there the question of Section 226 was not gone into and it was held that like any other decree which is passed in favour of an insolvent before the insolvency or in the case of a company before liquidation the liquidator can go behind it and enquire into it. The order of assessment of an Income-tax Officer is also of the same category. With great respect I am unable to agree with this judgment even though it was delivered by a very learned Chief Justice of the Court, Sir Trevor Harries, C.J. As I have shown above, the proceedings to ascertain what the revenue is are equally screened from the jurisdiction of this Court as steps taken to collect the same. Besides the decision in this case goes counter to In re Calvert, where it was held that such a power did not exist in the case of assessed taxes, which I would prefer to follow.
On the second point, therefore, my opinion is that Section 226 of the Government of India Act has taken away the original jurisdiction of this Court in any matter concerning the revenue and determination of the amount of income-tax is a matter concerning the revenue and once an assessment under the Income-tax Act has been made this Court cannot exercise any jurisdiction in regard to it and I cannot question the validity of an assessment made under the Act.
This brings me to the determination of the third question which is, whether any matter which pertains to the collection of revenue is a matter concerning the revenue within the meaning of Section 226 of the Government of India Act. In Spooner v. Juddow, it was held by their Lordships that any act done according to the regulations of the Governor and Council respecting the collection of revenue would be a matter declared to be 'coram non judice.'
The next case I was referred to is Best and Co. Ltd. v. Collector of Madras. There an agreement was entered into by the plaintiffs with the Collector of Madras and a suit was brought because the Collector purporting to act in consequence of the Income-tax Act of 1916 declared that the agreement was no longer binding on him and repudiated it. A preliminary objection was taken that the matter was one which pertained to the collection of revenue and the original jurisdiction of the High Court was expressly barred. This objection was given effect to and Coutts Trotter, J., held that the prohibition under the Act was absolute and he had no jurisdiction to entertain the suit.
In Govindarajulu v. Secretary of State, it was held that any act done or ordered to be done in the collection of revenue was a matter concerning 'any act ordered or done in the collection thereof (the revenue)'; and the same was held in Thyagaraja Chettiar v. Collector of Madura.
In Alcock Ashdown and Co. Ltd. v. Chief Revenue Authority, Bombay, any jurisdiction in regard to matters connected with the collection of revenue was held to be barred by this section and Rangnekar, J., in Dewarkhand Cement Co. Ltd. v. Secretary of State held that any process taken for the purpose of enforcing the payment of duty is excluded from the jurisdiction of the High Court because of Section 106(2) of the Government of India Act, 1919. He sai : 'It seems to me the any act ordered to be done in the collection of revenue will be a matter concerning the revenue.' The Federal Court have held in Governor-General in Council v. Raleigh Investment Co. Ltd., that Section 226 is obviously not limited to steps taken in the collection of revenue, it equally applies to the demand or assessment. And the same was held in Governor-General in Council v. Shiromani Sugar Mills Ltd.
Mr. Chawla also relied on Dayaldas Khushiram v. Commissioner of Income-tax. There the question was that a person who is to be assessed has a right to be assessed by a particular officer exercising jurisdiction within the meaning of Sections 5 and 64 of the Income-tax Act and that right is a personal right within the meaning of Section 45 of the Specific Relief Act and therefore the High Court has jurisdiction to entertain an application by an assessee under that section for an order directing the Income-tax authorities to forbear from exercising jurisdiction and passing orders in the matter of assessment in spite of Section 226 of the Constitution Act. Whether that judgment is right or wrong, here the question is quite different and, in my opinion, this case is not applicable to the case as will be clear from the latter part of my judgment.
The liquidator also relied on Chief Controlling Revenue Authority, Bombay v. Maharashtra Sugar Mills Ltd., where the question was the power of the High Court to issue mandamus under Section 45 of the Specific Relief Act. It was held there that under Section 59 of the Stamp Act when the High Court hears a case referred to it by the Chief Controlling Revenue Authority and decides it, it is not exercising original jurisdiction, but its jurisdiction is essentially advisory in character, and in determining that question the High Court would not be interfering with the collection of revenue even if the machinery for collecting the stamp duty had been set in motion. That case again does not apply to the facts of this case.
Chapter VI of then Stamp Act empowers the Chief Controlling Revenue Authority to state any case to the High Court for its opinion, and the High Court has to decide the question raised, and has then to give its judgment and therefore in giving its opinion under Section 59, the High Court acts in the exercise of statutory duty imposed by the legislature and the application of section 45 of the Specific Relief act would not be exercising jurisdiction in contravention of section 226(1) of the Constitution Act. None of these cases therefore goes against the submission of Mr. Sikri that Section 226 is applicable equally to the demand or assessment as to the steps for collection.
Coming to the next point which deals with the construction of the words 'according to usage and practice of the country or the law for the time being in force' the question to be decided i : 'Was the action of the petitioner which is challenged in this case in so far that he issued a certificate under Section 46(2) of the Income-tax Act an act done in the collection of revenue according to the usage and practice of the country or the law for the time being in force within the true meaning to be given to these words in the second part of Section 226(1) of the Constitution Act.' Nothing has been proved in this case which would show that the Income-tax Officer was guilty of any mala fides or has acted in a manner which may be termed 'absurdly.' 'There is no difference between an official believing bona fide and not absurdly that some illegal step which he takes in executing legally authorised proceedings as itself according to law and that of another official believing bona fide and not absurdly that procedure which he adopts in a particular case is itself according to law for the time being in force', and this was the opinion of the Federal Court in Governor-General in Council v. Shiromani Sugar Mills, Ltd., and the learned Chief Justice there relied on the following passage from Spooner v. Juddow :-
'The point, therefore, is whether the exception of jurisdiction arises where the defendants have acted strictly, according to the usage and practice of the country, and the Regulations of the Governor and Council. But upon this supposition the proviso is wholly nugatory; for if the Supreme Court is to inquire whether the defendants in this matter concerning the public revenue were right in the demand made, and to decide in their favour only if they acted in entire conformity to the Regulations of the Governor and Council of Bombay, they would equally be entitled to succeed, if the statutes and the charters contained no exception or proviso for their protection. Our books actually swarm with decisions putting a contrary construction upon such enactments, and there can be no rule more firmly established, than that if parties bona fide and not absurdly believe that they are acting in pursuance of statutes and according to law, they are entitled to the special protection which the legislature intended for them, although they have done an illegal act. In this case, it may well be that the warrant against the goods of Tookaydass did not authorize the taking of the goods of Hargovundass, or even that Hargovundass might not be liable for the arrears of quit-rent which accrued before he became owner of the house. Still the Collector was evidently of opinion, that a distress might be made for the whole of the arrears due, and that it was sufficient to introduce into the warrant the name of Tookaydass, in whose name the house continued to be registered. The other defendant never could have doubted the sufficiency of the warrant. If Indian Revenue Officers have fallen into a mistake, or without bad faith have been guilty of an excess in executing the duties of their office, the object of the legislature has been, that they should not be liable to be sued in a civil action before the Supreme Courts. Liability to be prosecuted criminally stands upon a totally different foundation.'
In Shaikh Ali Ahmed v. Collector of Bombay, the assessee was assessed to income tax, super-tax and surcharge at about 10 lacs and he did not pay the tax. The Income-tax authorities sent a certificate to the Collector of Bombay under Section 46(2) of the Income-tax Act. Besides attaching the bank accounts of the assessee, the Collector arrested him and detained him in a civil jail for a period of six months under Rule 40 of Order 21 of the Civil Procedure Code. Subsequently the assessee was adjudicated an insolvent and as the Collector was of the opinion that the income-tax dues would not be realised if the assessee was released he passed an order under Section 13 of the Bombay City Land Revenue Act, 1876, that the assessee should continue to be detained in prison until further orders and the assessee applied to the High Court under Section 491 of the Criminal Procedure Code. It was held that under Section 13 of the Bombay City Land Revenue Act the assessees properties should in the first instance be sold before he could be arrested and confined in a civil prison, and as this had not been done the order of the Collector was unsustainable in law. But because of the provisions of Section 226 of the Constitution Act the application under Section 491 of the Criminal Procedure Code was not maintainable because (a) the High Court was exercising original jurisdiction, (b) in ordering the arrest of the assessee for failure to pay the income-tax dues, the Collector was doing an act in the collection of revenue, and (c) the Collector had passed an order for the detention of the assessee in prison under the bona fide belief that he had authority to make such an order under Section 13 of the Bombay City Land Revenue Act. At page 392 it was said :-
'It will, therefore, be seen that the provisions of Section 226 of the Government of India Act, 1935, and similar provisions contained in the earlier statutes, have always been interpreted to mean that if an officer does any act concerning the revenue or in the collection of revenue, bona fide and honestly believing that he is acting in accordance with his statutory powers, no suit or application in respect of such act can be entertained by the High Court, while exercising its original jurisdiction, even if such act is illegal or even if in doing the act the officer has not followed the procedure prescribed by law.'
In Thin Yen v. Secretary of State, the Customs authority had confiscated goods under the Sea Customs Act and the owner brought a suit for declaration that the order was illegal and prayed for the return of the goods or in the alternative for a decree for their value and it was held that Section 106(2) of the Government of India Act was a bar to the suit and it was further held that the words' according to the usage and practice of the country or the law for the time being in force' in sub-section (2) of Section 106 which qualified the words 'any act ordered or done in the collection of revenue' does not empower the Court to examine the circumstances of a case in order to ascertain whether the act ordered or done by the revenue authorities was lawful, or whether there was any irregularity in the procedure followed by them, or any error in the decision reached by them, unless it is alleged that the act in question was ordered or done by such authorities mala fide.
In Wan Ten Lang v. Collector of Customers, the bill of entry in respect of a consignment of miscellaneous goods misdescribed an article of silk which had been imported. The customs authorities detained the goods and seized them for duty at a higher rate and imposed a penalty. An application was made by the importer for an order upon the customs authorities to proceed under Section 32 of the Sea Customs Act. It was held that the High Court had no original jurisdiction to interfere in the matter and that the action of the customs authorities was not outside revenue or collection of revenue, and until the applicant had exhausted his right of appeal under Sections 188 and 191 the Court will not interfere by way of mandamus and this in spite of the fact that the assessment of duty was not warranted by any provisions of the Act.
These cases all go to show that even where the order of the Collector in the matter of collection is not in accordance with law, so long as he is acting bona fide and not absurdly the High Court will have no jurisdiction to interfere. Reliance was placed on Howells v. Inland Revenue Commissioners, but that was a case of a person who received money as agent for another and, therefore, is not of much assistance in this case. Therefore, if a certificate under Section 46(2) of the Income-tax Act was forwarded to the Collector under the provisions of that section by the Income-tax Officer bona fide and not absurdly believing that the machinery under Section 46 of that Act was proper and was usable for the purpose of collection of the arrears of income-tax in question from the respondent company, then Section 226(1) would apply to this case and therefore our jurisdiction would be barred as we would be exercising original jurisdiction concerning an act ordered or done in a matter concerning the collection of revenue and therefore relying on Spooner v. Juddow and Governor-General in Council v. Shiromani Sugar Mills Ltd., I hold that the High Court has no jurisdiction in the matter.
Another point submitted by Mr. Sikri for the petitioner was that this Court had no jurisdiction to issue an injunction at the stage that it did. He drew my attention to Section 169 of the Companies Act and his submission was that this section applied at a stage previous to the winding-up order and is not applicable to a stage after the winding-up order is made, and he therefore submitted that the order of Harnam Singh, J., was without jurisdiction. He relied on Governor-General in Council v. Shiromani Sugar Mills, at page 18 where it was observed by Spens, C. J : 'Section 169 of the Companies Act, 1913, only authorises the Court to restrain proceedings at any time after the presentation of the petition for winding-up a company under this Act, and before making an order for winding up the company. In view of the fact that the winding-up order had already been made, no injunction in this case could be granted under Section 169.' Learned counsel also supported his argument by relying on Nazir Ahmed v. Peoples Bank of Northern India Ltd., where Section 171 was interpreted. This case does support his argument that after a winding-up order had been made the Court does not have any power to stop the commencement or continuance of proceedings and the effect of that section would I think be that proceedings will not be allowed to commence or to go on expert after leave is obtained.
The learned counsel next submitted that the Court should not stay proceedings because a trick had been played on the Income-tax Officer. The submission was that on 25th March, 1949, because of a certificate sent by the Income-tax Officer under Section 46 of the Income-tax Act, the authorities attached the property of the company and fixed 6th April, 1949, for sale, and then on 1st April, 1949, John Vasica on behalf of the company asked for and obtained stay of sale and during the period of stay a resolution for voluntary liquidation was passed, i.e., on 17th April, 1949, for which according to the learned counsel notice must already have been given, and then he obtained a stay of sale. This, it was submitted, amounted to a trick and, therefore on that ground the stay should now be discharged. He relied very strongly on Armorduct . v. General Incandescent Co. Ltd., where the plaintiff obtained judgment against the defendant company on 24th February, 1911, and on 25th February, 1911, the judgment creditors solicitor applied to the companys solicitor (judgment-debtor) to obtain satisfaction and asked him to send a cheque in payment of the judgment debt. The companys solicitor and a director of the company led the plaintiffs solicitor to believe that a cheque would be sent in a few days and in consequence issuing of execution was delayed. On 25th February, a notice had not been sent out convening a meeting of the company for 6th March for the passing of a resolution for voluntary liquidation of the company on the ground of inability to pay the debts. A meeting was held on that date and the resolution passed and on the same day, because the judgment debt had not been paid, the plaintiff issued execution. It was held that the postponement of the execution had been obtained by a trick on the part of the defendant company and that the plaintiffs should, therefore, not be prevented from proceeding with their execution. The facts of the case now before us are very much similar and the question before us is whether in these circumstances we should permit the petitioner to obtain the benefit which the law gives him or we should not. In my opinion, the petitioner is entitled to have the discretion exercised in his favour, and I would, therefore, on this ground alone discharge the rule issued by my learned brother Harnam Singh, J., and would permit the Income-tax Officer to proceed with the collection of revenue as allowed to him under Section 46 of the Income-tax Act, and if it is necessary for that purpose I give him leave under Section 171 of the Companies Act as was suggested by the learned Judges of the Allahabad High Court who decided the case which was appealed against in Governor-General in Council v. Shiromani Sugar Mills Ltd.
In Armorduct . v. General Incandescent Co. Ltd., it was observed by Farwell, L.J : 'I am not aware of any case in which it has been suggested that if the creditor has been prevented by force, as in In re London Cotton Co., or by fraud or trickery, from issuing execution the Court will not exercise its discretion in favour of the creditor. . . . .' Dealing with the rights of the other creditors the learned Judge observe : 'The creditors cannot set up any right as third parties to take advantage of the trick of the company.' With this view Kennedy, L.J., expressed his concurrence, and I must respectfully agree with these observations and hold that the liquidator of the company is not entitled to get the assistance of this Court in the present case, even if this court could exercise jurisdiction in spite of Section 226(1) of the Constitution Act.
Finally, it was submitted by Mr. Sikri that the jurisdiction of this Court is barred under Section 67 of the Income-tax Act. At any rate, when a procedure has been prescribed by statute and a special Tribunal appointed under the Income-tax Act the question as to the rights which are the creation of that Act have to be determined by such Tribunal and the jurisdiction of this Court is impliedly barre : see Mulla, Civil Procedure Code, page 31. He also relied on Raleigh Investment Co. v. Governor-General in Council, which was an appeal from the case I have already mentione : Governor-General in Council v. Raleigh Investment Co. Ltd. Dealing with section 67 of the Income-tax Act their Lordships held that the scheme of the Act was to set up a particular machinery by the use of which alone total income assessable for income-tax was to be ascertained. Under Section 45 a duty arose to pay the amount of deduction demanded on the basis of assessment made by the Income-tax Officer and jurisdiction to question the assessment otherwise than by use of the machinery expressly provided by the Act was in the opinion of their Lordships inconsistent with the statutory obligation to pay arising by virtue of the assessment. Their Lordships went further and observed :-
'The only doubt, indeed, in their Lordships mind is whether an express provision was necessary in order to exclude jurisdiction in a civil Court to set aside or modify an assessment.' At a previous page (p. 336) their Lordships observed as follow : 'In construing the section it is pertinent, in their Lordships opinion, to ascertain whether the Act contains machinery which enables an assessee effectively to raise in the Courts the questions whether a particular provision of the Income-tax Act bearing on the assessment made is or is not ultra vires. The presence of such machinery, though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to enquire into the same subject-matter. The absence of such machinery would greatly assist the appellant on the question of construction and, indeed, it may be added that, if there were no such machinery, and if the section affected to preclude the High Court in its ordinary civil jurisdiction from considering a point of ultra vires, there would be a serious question whether the opening part of the section, so far as it debarred the question of ultra vires being debated, fell within the competence of the legislature.' Their Lordships then went on to sa : 'Under Section 30, an assessee whose only ground of complaint was that effect had been given in the assessment to a provision which he contended was ultra vires might appeal against the assessment. If he were dissatisfied with the decision on appeal...... the assessee could ask for a case to be stated on any question of law for the opinion of the High Court and, if his request were refused, he might apply to the High Court for an order requiring a case to be stated and to be referred to the High Court (see Section 30 and Secretary of State v. Meyyappa Chettiar). It cannot be doubted that included in the questions of law which might be raised by a case stated is any question as to the validity of any taxing provision in the Income-tax Act to which effect has been given in the assessment under review. Any decision of the High Court upon that question of law can be reviewed on appeal. Effective and appropriate machinery is therefore provided by the Act itself for the review on grounds of law of any assessment. It is in that setting that Section 67 has to be construed.' Their Lordships further observe : 'Under the Act the Income-tax Officer is charged with the duty of assessing the total income of the assessee. The obvious meaning and in their Lordships opinion, the correct meaning of the phrase assessment made under this Act is an assessment finding its origin in an activity of the assessing officer acting as such. The circumstance that the assessing officer has taken into account an ultra vires provision of the Act is in this view immaterial in determining whether the assessing is made under this Act. The phrase describes the provenance of the assessmen : it does not relate to its accuracy in point of law. The use of the machinery provided by the Act, not the result of that use, is the test.'
Relying on these observations of their Lordships, I am of the opinion that if the assessment is determined by the Income-tax Officer the jurisdiction of the Civil Court to entertain a suit and of any other Court to entertain any other proceedings is excluded, and as I have said before, their Lordships were of the view that a proper machinery having been provided under the Income-tax Act the legality or illegality of the assessment is to be determined by setting in motion the machinery provided by the Income-tax Act not through any other Tribunal.
Under the law in England also it has been held that where there is a right of appeal and the person assessed fails to avail himself of it he cannot afterwards bring a petition of right to recover the money overpaid. An assessment not appealed against cannot be challenged in bankruptcy proceedings. In In re Calvert, it was held that on a proof for a judgment debt the Court will go behind the judgment and ascertain whether there is a provable debt but it does not apply to a proof for assessed taxes. Therefore a debtor, who had carried in a scheme of arrangement, applied to expunge a proof for an assessment to income-tax under Schedule J which had not been appealed against, on the ground that he had made no profits assessable to duty, the application was dismissed. It was observed by Wright, J : 'It seems to me that this assessment is not like a judgment, nor within the principle which is applied to judgments...... In the case of an assessment there is no question of consideration as there is in the case of a judgmen : there is a mere administrative assessment with a special mode of appeal provided which must be followed. I cannot think it possible that it is competent to the Bankruptcy Court, on the invitation of the trustee in Bankruptcy or of the debtor, to reopen questions of that kind on a motion to expunge.' It has also been held that remedy for any person aggrieved by an assessment by reason of his not being chargeable at all is by appeal and case stated, his remedy is not by prohibition (see the Law of Income Tax by Konstam, Edn. X, page 390).
In In the matter of the Janda Rubber Works on the application of the Assistant Custodian of Evacuee Property, Bombay, my learned brother Khosla, J., and myself have held that where the legislature has passed a new statute imposing new liabilities in giving a new remedy, that remedy is the only one which can be pursue : see also Thin Yen v. Secretary of State.
In The King v. Bloomsbury Income Tax Commissioners, it was held by Lord Reading, C.J. :-
'In my view an examination of the Income Tax Acts shows that the scheme of the legislature is to entrust the decision of the facts to a tribunal of persons specially selected for the locality, and who are often in a better position than the Courts to determine the questions of fact, sometimes very complicated, which may arise. The exigencies of the State require that there should be a tribunal to deal expeditiously and at comparatively little expenses with all such questions and to decide them finally reserving always to the individual the right to have the Commissioners decisions on points of law reviewed by the Courts. The obligation is placed, for reasons of expediency, upon the person assessed to appeal to the Commissioners if he wishes to rid himself of an assessment which is, in his view, based upon wrong conclusions of fact, and this obligation rests equally upon a person who contends that he is not chargeable as upon a person who admits that he is chargeable but not to the extent of the assessment made upon him.' His Lordship went on to observ : 'I am therefore of opinion that it is for the Commissioners to decide whether or not a person assessed by the Additional Commissioners, after discovery by the surveyor, is in fact chargeable.'
In the end it was held by the Court that a writ of prohibition could not be granted to restrain the Commissioners from proceeding upon the assessment unless it could be shown that there were no grounds upon which the surveyor or Commissioners could honestly believe that the person assessed is chargeable.
In The King v. General Commissioner of Taxes for the District of Clerkenwell, it was held that the Commissioners having jurisdiction under the Income Tax Act to assess the English company to income-tax in respect of profits of a business, they had jurisdiction to decide all questions of fact necessary for a ascertaining the amount of those profits and therefore prohibition would not lie, the proper remedy, if the decision of the Commissioners were wrong in point of law, being by appeal upon a case stated. At page 886 it was observed by A.L. Smith, M. R. :
'Now, what is it that the General Commissioners of Taxes have to ascertai Surely they have to ascertain what trade a taxpayer who is assessable to income-tax is carrying on, and to do this it is within the jurisdiction of the Commissioners to ascertain what is the connection between the Kodak Company in this country and the Rochester business in America. This is what the Commissioners are doing, and I agree with the Kings Bench Division that the assertion that the Commissioners have gone, or are going, wrong in determining this question gives no ground for prohibition. There is clearly evidence of a connection between the Kodak Company and the Rochester Company, and, if the Commissioners go wrong, this is a matter for appeal as provided by the Taxes Management Act, 1880, and not for prohibition.'
In view of these authorities, I am of the opinion that the jurisdiction of this Court is impliedly barred.
For the reason given above, I hold that, exercising original jurisdiction under the Companies Act, this Court has no power to interface with any assessment arrived at by the Income-tax Officer or his putting into operation the machinery for the collection of the revenue and we cannot issue any injunction to the Income-tax Officer not to proceed with his statutory duty of collecting the revenue.
Even if this is not original jurisdiction within Section 226(1) of the Constitution Act, the jurisdiction of the High Court is impliedly barred because of the special machinery provided by the Income-tax Act for the determination of matters falling within that Act, the present matter being one of them. And in the circumstances of this case I would not be prepared to issue any injunction even if I could do so because of the trick played on the Income-tax Officer. Should it be necessary so to do, the circumstances of this case are such that I would give leave under Section 171 of the Companies Act to the Income-tax Officer to proceed to collect the tax due from the company under the Income-tax Act.
I must, therefore, allow the objection of the Income-tax Officer, discharge the injunction issued by Harnam Singh, J., and dismiss the petition of the liquidator asking for injunction. The respondent will have his costs which I assess at Rs. 250.
KHOSLA, J. - I agree.