CHAKRAVARTTI, C.J. - This reference causes a most unpleasant impression, both because of the careless and misguided manner in which the proceedings were conducted by the legal advisers of the assessee and the carefree and inconsiderate manner in which they were dealt with by the officers of the Income-tax Department. An application, purporting to be an application for a refund, was made in August, 1945, and not till June, 1950, was it finally disposed of - the interval having been occupied by a protracted correspondence as also frequent interviews, alternating with interludes of silence on both sides.
The facts are as follows. On August 18, 1945, Messrs. S. K. Sawday & Co., a firm of income-tax practitioners, addressed a letter to the Income-tax Officer, Companies District I, regarding what was called 'Sardar Bahadur Sardar Indra Singhs Trust' and stating that the Trust being one wholly for charitable purposes its income was exempt from tax and therefore a refund ought to be granted at an early date. The refund was asked for in respect of the tax deducted at source from certain dividend amounts. The application or letter which related to the assessment year 1945-46 was accompanied by the dividend warrants concerned as also what was described as a statement of accounts.
The application appears to have been dealt with by the Income-tax Department as an application for refund, for on November 3, 1945, the Income-tax Officer, Companies District I, wrote to Messrs. S. K. Sawday & Co. to say that the matter would be dealt with by the Income-tax Officer, District III(I), to whom all papers were being forwarded for necessary action. The next letter, dated February 28, 1946, asked for the production of the Trust Deed in the original, and by a letter dated May 15, 1946, Messrs. S. K. Sawday & Co. sent to the Income-tax Officer, District III(I), a copy of the deed. Thereafter, on May 27, 1946, the Income-tax Officer informed the income-tax practitioners that they should depute a responsible representative to attend at his office on May 31, 1946, with the Trust Deed in the original for a discussion of the matter and a similar letter was written on June 3, 1946, following. Why a second letter was necessary is not clear, but, apparently, no one had attended in response to the first letter or perhaps the discussion had not been concluded. Thereafter, for two long years silence appears to have fallen on both sides. The next letter which one finds in the paper book is a letter, dated September 20, 1948, which really relates to the next assessment year, but includes in it a reminder about the claim made for earlier years. Similar letters from the assessees side were written on November 26, and December 7, 1948, and then on July 4, 1949. The next letter bears the date September 20, 1949, and it says that the writers were sending a copy of a letter from Sir Indra Singh, apparently the settlor of the Trust, in answer to the Income-tax Officers enquiry as to whether a scheme or arrangement, as provided for in the Trust Deed had actually been framed or made. Then came, at long last, a letter, dated November 24, 1949, from the Income-tax Office which purports to be an answer to all the several applications, claiming refund for the years 1945-46, 1946-47, 1947-48 and 1948-49. The applications are described as applications 'for exemption under Section 4(3) (i), Income-tax Act,' and with regard to the Trust Deed it is stated that 'the beneficiaries have not been indicated with reasonable certainty and therefore no valid trust was created by the execution of the Deed'. The letter concluded by saying, 'The income of the Trust, therefore, would not be exempted under Section 4(3) (i) of the Income-tax Act'.
This letter provoked from the assessees side a long series of letters, the purpose or utility of which it is extremely difficult to understand. The original claim for a refund was made on the basis that the income of the Trust was wholly exempt from tax, as it was a trust for charitable purposes in its entirely. The reply to that claim was that there was no valid trust at all and, therefore, the income could not be exempt from taxation. Why the assessee should have thought that this reply did not mean a refusal of the claim for a refund is not clear, but this much is clear that it considered it necessary that the Income-tax Office should state in express terms that the claim for a refund had been refused in order that it might appeal. A letter to that effect was written by Messrs. S. K. Sawday & Co. to the Income-tax Officer on November 30, 1949, and thereafter began persistent knockings at the door, if I may use that expression, of the Income-tax Officer with no response from within for about seven or eight months. There was letter after letter, interview after interview, for what practical purpose one finds it difficult to under-stand. In all these letters and during all these interviews, the representatives of the assessee were asking for a specific order in express terms that the claim for a refund was being refused. Matters went on in that fashion till May 26, 1950, when the Income-tax Officer woke up to realise that something had to be done and on that date he addressed a letter to the representatives of the assessee in which he said that a reply regarding the exemption asked for by the Trust had been issued from his office by a letter, dated November 24, 1949, and he did not know why that letter had not been received by the assessee or its representatives. Apparently, the Income-tax Officer thought that persistent enquiries made by the representatives of the assessee and the demand made by them for an order had been caused by non-receipt of the letter of November 24, 1949. He, therefore, enclosed a copy of that letter for information of the assessee.
The representatives of the assessee replied on the next day and they said that they thought that the Income-tax Officer and themselves were at cross purposes, because what they had been informed by the letter of November 24, 1949, was that the income of the Trust was not exempt from taxation, but they had not applied for an exemption certificate and therefore their demand for an order, refusing the refund, was in no way disposed of by the earlier letter. They therefore asked the Income-tax Officer to frame his refusal, with his reasons, in the form of a proper order, covering each respective year and to do so as soon as possible. That letter was replied to by the Income-tax Officer on June 2, 1950. The letter ought to be quoted in full. It reads as follows :-
'No application for refund as prescribed under Section 48 of the Income-tax Act read with Rules 36 and 37 of the Income-tax Rules has been submitted by the Trust so far, and as such the question of granting or refusing refund does not arise. Any application for claim of refund may now kindly be made to the Income-tax Officer, R. C. Raja Chamber, Hastings Street, Calcutta.'
On receipt of that letter which, apparently, the assessee took as a refusal of the claim for refund, obtained at long last, it preferred an appeal to the Appellate Assistant Commissioner. that Officer dismissed the appeal on the ground that from the order of June 2, 1950, no appeal could lie. According to him, the letter or application of August 18, 1945, such as it was, had been disposed of by the order of November 24, 1949, and even that order was, perhaps, not appealable in strict law, because it had merely refused the claim for exemption under Section 4(3) (i) of the Act and did not contain a refusal of a refund under Section 48. The assessee appears to have contended that Section 48 did not apply at all, but the Appellate Assistant Commissioner met that point by saying that if Section 48 did not contain a refusal of a refund under Section 48. The assessee appears to have contended that Section 48 did not apply at all, but the Appellate assistant Commissioner met that point by saying that if Section was essential for the purpose of sustaining an appeal, the was all the greater reason why an appeal should have been preferred, If any appeal lay from any order at all, from the order of November 24, 1949. In any event, the Appellate Assistant Commissioner concluded, the letter of June 2, 1950, had decided nothing and certainly had not itself dealt with the assessees letter of August 18, 1945, and the claim for a refund made therein on the basis of a total exemption from tax liability. Accordingly, he held that the appeal preferred before him was not maintainable.
Thereafter, there was a further appeal to the Appellate Tribunal. The Tribunal held that there was no proper application under Section 48 at all and, therefore, no order passed upon the letter of August 18, 1945, could be appealable. In any event, the only order passed on that letter was the order of November 24, 1949, but no appeal had been preferred against that order. The order of June 2, 1950, had merely pointed out to the assessee that no application for a refund in the prescribed form had been made and that the only application or purported application had already been disposed of by the earlier order. As before the Appellate Assistant commissioner so before the Tribunal the assessee contended that Section 48 did not apply at all, but the Tribunal overruled that contention. It held that whether a person was liable only for a portion of the tax deducted at source or not liable at all, an application would have to be made under Section 48, whenever a refund was claimed, and that application would have to be made in accordance with the rules and the form prescribed. 'There was,' observed the Tribunal, 'neither an application in the proper form, nor an order of refusal thereof by the Income-tax Officer'. The Tribunal, therefore, held that the Appellate Assistant Commissioner had been right in saying that no appeal could lie before him from the order of June 2, 1950, and also right in refusing to go into the merits of the case.
Thereafter, the assessee made an application for a reference of certain questions of law to this Court and altogether five questions have been referred. The first question is as follows.
'Was the assessees letter, dated the 18th August, 1945, a proper application for refund under Section 48 of the Indian Income-tax Act ?'
I am clearly of opinion that the answer to this question must be in the negative. Dr. Sen Gupta contended that Section 48 gave the assessee a statutory right to apply for a refund and that right could not be virtually denied to a particular assessee by imposing on him a duty to frame his application in accordance with the prescribed form. Dr. Sen Gupta, however, conceded that the so-called application or letter, addressed by the advisers of the assessee to the Income-tax Officer, Companies District I could not be said to have been in conformity with the form prescribed. As regards Dr. Sen Guptas argument, it is only necessary to point out that Section 59 of the Act, which authorises the Central Government to frame rules itself states by sub-section (5) that rules made under the section shall, upon publication in the official Gazette, have effect, as if enacted in the Act. It is therefore not as if the rights conferred by the statute were being sought to be abridged by certain restrictions introduced for the first time by certain rules, extraneous to the Act. If the rules are to be read as a part of the Act, the conclusion is inescapable that the requirements of Rule 36 are mandatory. That rule says that in the case of a person residing in British India, an application for a refund of tax under Section 48 shall be made 'in the following form.' The assessees letter of August 18, 1945, was not in the form prescribed. The prescribed form further makes it clear that it should be signed by the claimant himself and it is also required the there should be a verification, also signed by the claimant, in which, particularly, he must declare whether he is resident or ordinarily resident, or resident but not ordinarily resident and he must also affirm that the statements contained in the application are correct. In the present case, the application or rather the letter, was sent by Messrs. S. K. Sawday & Co. who did not even say that they were acting for and on behalf of the trust, but assuming that no express statement to that effect was necessary, it seems to me that in order that the prescribed form may be complied when, it is essential that the application should be signed by the claimant himself and also must be verified by him. Then again, there is Rule 37 which provides that an application under Rule 36 shall be accompanied by a return of total income in the form prescribed under Rule 22, unless the applicant has already made such a return to the Income-tax Officer. It is true that in the present case, the assessee was not, according to its contention, liable to tax at all. But that did not, in my view, relieve it from the duty of complying with Rule 37 and filing a return of its income. It is noticeable that Rule 37 does not speak of a return of tax and, in fact, there is nothing like a tax return. Rule 37 requires only a return of income to be filed and it is clear from the language in which the rule is expressed that its provision are mandatory. It follows that because the letter of August 18, 1945, was not in the prescribed form, because it was not signed by the claimant, because it was not verified by it and because it was not accompanied by a return of the total income, it cannot be said to have been a proper application for a refund under Section 48 of the Income-tax Act.
In my opinion, if the first question be answered in the negative, as it must be, no point of any practical importance remains in any one of the remaining questions. Nevertheless, they may be answered for what they are worth.
The second question reads as follows :
'Is the letter dated 23rd November, 1949, to the effect that the appellant was not entitled to the exemption claimed under Section 4 (3) (i) an order appealable under Section 30 ?'
The date 23rd November, appears to be a mistake for the 24th November.
It was contended by Dr. Sen Gupta that the order contained in the letter of the 24th November, 1949, could not be appealable under Section 30, because it contained no refusal to allow the claim to the refund, as required by that section. He pointed out that the letter stopped at saying that the income of the Trust could not be exempt from taxation under Section 4 (3) (i) of the Act, as there was no valid trust at all, but did not proceed further to say that the application for a refund was therefore refused. Reference was made to the fact that the letter called the assessees letter 'an application for exemption under Section 4 (3) (i) of the Act' and it was submitted that the true import of the order, therefore, was that by it only the claim of exemption was negatived. The Income-tax Officer, it was said, had treated the letter only as an application for an exemption certificate. I am unable to understand how the idea of an exemption certificate, to which frequent reference is to be found in the letters written on behalf of the trust, came to possess its legal advisers, because it is clear from the proviso to Section 18 (3) of the Act that such a certificate is relevant only to interest on securities, but not relevant at all to dividend income, as the income in the present case was. Be that as it may. I can see no reason for any one thinking that the letter of the 24th November did not contain a refusal to grant the refund claimed. The letter begins by saying that it is with reference to the assessees application and that application, as I have already stated, was for a refund on the ground that the income of the trust was exempt from tax as it was a trust 'wholly for charitable purposes'. Once the reply of the Income-tax Officer said, as it did, that the income of the trust was not exempt as claimed, because there was no valid trust, it is difficult to see what remained to be said in order to refuse the claim of refund. That the advisers of the assessee also understood the letter as containing a refusal appears clearly from their reply of the 30th November, 1949, in which they said that they wanted to take the matter on appeal and would be obliged if regular order 'refusing grant of refunds' were made available to them. the short question, therefore, is, although the order clearly amounted to a refusal of the refund and was understood to be so, was it still to be regarded as an order not containing 'a refusal to allow a claim to a refund' within the meaning of Section 30, and, therefore, not appealable simply because it did not expressly say that refund was refused In my opinion, the answer must be in the negative. The fact that the letter on which the order was made was not a proper application under Section 48 is immaterial for the present purpose, because the assessee intended it to be such an application and if it did, the order rejecting it was a refusal of refund and was appealable, though in the appeal itself it might be held that the claim was not sustainable, as it had not been made in the proper form.
The third question reads as follows :
'Is the Income-tax Officers letter dated 2nd June, 1950, an order refusing to grant the refund under Section 48 and therefore appealable ?'
It was contended that the order contained in the letter of the 2nd June, 1950, was appealable, because it embodied a refusal to grant the refund. To mention only a small point, the contention was somewhat inconsistent, because if the absence of specific words of refusal prevented the letter of the 24th November, 1949, from taking effect as an order refusing the refund, the letter of the 2nd June, 1950, could not have a different effect, because express words of refusal were absent from that letter as well. Be that as it may, to the point made by the Tribunal that even if the letter contained an order of refusal, it was not a refusal of a proper application under Section 48 and, therefore, was not appealable, the strange reply of the assessee was that Section 48 did not apply to the case at all. Dr. Sen Gupta saw the consequence of that contention and stated frankly that if Section 48 did not apply and the application was under the general law, if there could be such an application at all, there could be no question of any appeal from the order passed on it, because no section in the Act provided for such an appeal. The Tribunal held that Section 48 did apply and proceeded to hold that no appeal lay before the Appellate Assistant commissioner, because the letter of the 18th August, 1945, was not a proper application under the section. I do not consider that ground to be correct for the reasons I have already given when dealing with the order of the 24th November, 1949, under the preceding question. But the other ground given by the Tribunal in the first part of its order appears to me to be unassailable. The letter of the 2nd June, 1950, did not contain any order at all and was not a pronouncement on the letter of the 18th August, 1945, or any other letter. Previously, on the 26th May, 1950, the Income-tax Officer had pointed out that the assessees letter of the 18th August, 1945, had been disposed of by the Income-tax Officers letter of the 24th November, 1949, and when the advisers of the assessee that the letter of the 18th August had already been disposed of, he was only informing it, by the letter of the 2nd June, 1950, that there was nothing before him on which he could pass an order. The letter of the 2nd June, 1950, therefore, does not contain any order of any kind and there could be no question of any appeal from it. The only order that was ever passed on such a claim as was made for a refund by the assessees letter of the 18th August, 1945, was contained in the letter of the 24th November, 1949. The letter of the 2nd June, 1950, was only a communication that there had not been any proper application for a refund by the Trust. I am of opinion that form that communication no appeal lay.
The fourth question reads as follows :
'If so, is the assessee debarred from filing an appeal against the order dated 2nd June, 1950, on the ground that he did not file an appeal against the order dated 24th November, 1949 ?'
The question appears to me to be perfectly meaningless. It asks whether, if an appeal lay from the order of the 2nd June, 1950, it was still barred, because there had been no appeal from the earlier order of the 24th November, 1949. Why, if the order of the 2nd June, 1950, was in fact appealable, the omission to prefer an appeal from the earlier order should bar an appeal, is not clear. Nobody had ever said that an appeal from the order of the 2nd June, 1950, was barred, because the order of the 24th November, 1949, had been left unchallenged. What was said was that there was nothing in the later order to appeal against and that the only order which had dealt with the assessees application and that the only order which had dealt with the assessees application and affected it was the earlier order, against which the assessee might have appealed, although whether an appeal would succeed or not was a different matter. The question appears to me to be based on a misconception that it has not been held that the order of the 2nd June, 1950, was non-appealable, but it had only been held that the assessee was debarred from preferring an appeal from that order, because it had not appealed from the earlier order. In my opinion, on the assumption made in the question in the introductory phrase, no question arises at all, but if it is to be answered, the answer must be in the negative.
The last question reads as follows :
'Whether on the facts and circumstances of this case the Tribunal was right in refusing to go into the merits of the case as to whether the assessee Trust is a public charitable trust ?'
It will be noticed that the question asks not whether the Tribunal was right in holding that no appeal lay before the Appellate Assistant Commissioner, but whether it was right in refusing to go into the merits of the claim. Really, however, the Tribunal did not refuse to go into the merits of the claim, but simply did not do so, because the only matter which it appears to have been invited to consider was whether an appeal lay to the Appellate Assistant commissioner. Having held that no such appeal lay, it had nothing further to do and in fact it did nothing. Quite obviously, the assessee misread the last sentence in the Tribunals order, where it said that the Appellate Assistant Commissioner was right in saying that no appeal could lie before him and in refusing to go into the merits of the case. The assessee obviously took it as the Tribunal itself having said that it would not go into the merits of case, but the meaning of the sentence is clear. All that the Tribunal held was that the Appellate Assistant Commissioner was right in taking the view that no appeal lay before him. If it came to the conclusion that the Appellate Assistant Commissioner was wrong, it might have directed that Officer to rehear the appeal on the merits, but no question of the consideration of the claim on the merits by the Tribunal itself arose. The question seems to me to be misconceived.
I shall, however, take the assessees contention to be, first, that the Tribunal ought to have held that the appeal to the Appellate Assistant Commissioner was competent, and, secondly, that it ought to have thereafter itself decided the case on the merits as all the materials were on the record. Even such a contention, in my opinion, cannot be sustained. I have already pointed out that one of the reasons given by the Tribunal for the view taken by it was that the letter of the 18th August, 1945, was not a proper application under Section 48. That might not be a good reason for holding that no appeal to the Appellate Assistant Commissioner lay, but the finding that the letter could not be held to be and acted on as a proper application under Section 48 is, nevertheless, a good finding, as I have shown in the course of my discussion of the first question. If that be so, once it was held that there was never any proper application under Section 48, there could no longer be any question of considering the assessees claim for refund on the merits. Besides the letter of the 18th August, 1945, there was no other application for a refund. Not having any proper application before it on which a claim for a refund could be considered, the Tribunal was not required by law and not even in a position to consider any such claim. Dr. Sen Gupta contended that the Income-tax Office should have pointed out the defect in the application to the assessee when he received the letter of the 18th August, 1945, and either the Appellate Assistant Commissioner or the Tribunal should have given an opportunity to the assessee to remove the defects in the application. It would certainly have been more graceful on the part of the Income-tax Officer, as Mr. Meyer himself observed, if he had pointed out the defects in the application and invited the assessee to remove them or to make a fresh application in a proper form. But the assessee is not entitled to such assistance as of right and it cannot make out a legal objection from the fact that the Income-tax Officer did not make good the shortcomings of the advisers of the assessee and guide them into the proper course of action when they were misguiding themselves. Nor can the assessee sustain an objection that the Appellate Assistant Commissioner or the Appellate Tribunal did not give it an opportunity to remove the defects from the application. No prayer for such an opportunity was ever made, as Dr. Sen Gupta had to concede. On the contrary, it was insisted on behalf of the assessee that Section 48 did not apply to the case at all and therefore the Department was bound to grant refund on the letter of 1945, as it was. In any event, what we are considering here is a question of law and it can by no means be said that either the Appellate Assistant Commissioner or the Appellate Tribunal was bound, as a matter of law, to offer an opportunity to the assessee to bring its application into order. As I have pointed out, quite apart from there being any legal obligation on the Tribunal to give such an opportunity, there was even no room for the exercise of discretion in that behalf, because the assessee was taking its stand on its alleged right to have a refund on the letter of the 18th August, 1945, such as it was, since in the view of its advisers, Section 48 had not application. In my opinion, no appeal lay to the Appellate Assistant Commissioner from the letter of the 2nd June, 1950, because it contained no order on the assessees letter of the 18th August, 1945, at all, and there could be no question of the Tribunal going into the merits of the assessees claim, because it had no appeal before it arising from any order passed on the letter was not a proper application under Section 48, as contemplated by the Act. There was, therefore, before the Tribunal not only no order passed on a claim for refund, but there was no proper claim in the case at all.
The answers to the questions referred must, therefore, in my opinion, be as follows :
Question (1) : No.
Question (2) : Yes.
Question (3) : No.
Question (4) : On the assumption made - 'No'.
Question (5) : YES.
I cannot part with this case without making some observations on the regrettable manner in which the officers of the Department handles the proceedings. The assessee might have made a misconceived application and it might be no part of the Departments duty to point out the errors of its advisers or to suggest the manner in which a proper application in a proper form would have to be made. But if the so-called application was a bad application, bad, as it appears, on the face of it, there was no reason why the Department should have taken five or, at least, four years to say so and should have kept the assessee waiting all that time for a disposal of its application, while the time limit for making a proper application expired. Again, as regards the merits of the claim, if the Trust Deed showed that there was no valid trust, there was no reason why the Department should not have said so immediately after the 15th May, 1946, when a copy of the deed was produced, but should have lingered on till the 24th November, 1949. If after, the production of the Trust Deed towards the middle of 1946, the Income-tax Officer felt that further information as to the scheme or arrangement mentioned in the deed was required, there was no reason why he should not have called for such information till over two years later. If the application was not a proper application, because the most vital requirements under Section 48 were not complied with, there was no reason why the first Income-tax Officer should have treated it as such, as he undoubtedly did, up to the time when he dismissed it on the merits. Then again, if the other Income-tax Officer, who wrote the letter of the 2nd June, 1950, thought that there was no proper application for a refund by the trust at all, there was no reason why he should not have said in November or December, 1949, what he ultimately said in December, 1950, and why he should have gone on causing an almost endless correspondence and granting endless interviews. The five year long harassment caused to the assessee is writ large on the face of the proceedings and for that harassment there was no excuse at all. The assessee might have deserved a dismissal of its application, but it certainly did not deserve the protracted harassment. It is difficult to regard with patience or pronounce with becoming restraint on the callousness and want of consideration shown by the officers of the Department in sending no reply whatever to a long series of reminders in relation to a pending case, and the want of - I had almost said efficiency, but shall say-care exhibited by the holding of interviews and discussion regarding an application which was ultimately declared to be no application at all or regarding a trust which was ultimately declared to be palpably an invalid trust. I can only hope that the methods illustrated by the proceedings in this case are not typical of the methods followed by the Income-tax Department in dealing with applications for refund.
I have remarked on this matter at such length, because it appears to me to be a matter of public importance. The citizens of a State are entitled to expect reasonable treatment at the hands of the public servants to whom their affairs take them on official business. Improprieties on the part of an individual assessee or defects in the manner in which he conducts his own affairs, affect him alone, but improprieties on the part of public officials affect the quality of the manner in which public business of the country is done and react on the good name of the Department which they serve. It is of the utmost importance that such good name should be preserved and even of greater importance that the members of the public should receive from the officers of the State prompt attention to their business and reasonably courteous treatment. The officers of the Income-tax Department have to perform an unpleasant task, inasmuch as they have to make members of the public pay out of their earnings an onerous levy, raised at rates which are perhaps the highest in the world. Attentions from the officers of the Income-tax Department cannot therefore be welcome to the public, but such unwelcomeness is inherent in the nature of the duties they have to perform and for it they are not responsible. But to such unwelcomeness they ought not to add harassment by the methods followed by them in dealing with the cases in their charge. I am making these observations in the hope that they will receive the attention of the Commissioner of Income-tax, so that he may keep a watch over his Refund Circles and over other Departments, if any, which may require such a watch. So far as the present case is concerned, we shall express our displeasure at the manner in which the officers of the Department handled the proceedings by refusing the Commissioner the costs of the reference, although he succeeds.
LAHIRI, J. - I agree.
Reference answered accordingly.