LILARAM THAWERDAS Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) A rather unusual and difficult question arises for our determination on this reference. The assessee was resident of Pakistan up to 1st January, 1948, and he carried on business there and he earned income by certain business which he had in Africa. We are now concerned with the assessment year 1946 -47. With regard to this income which had accrued in Africa he was assessed by the Income -tax Officer in Pakistan on the 5th of September, 1950. On the 8th February, 1954, a notice was issued to the assessee under section 34 (1) (a) by the Income -tax Officer, Bombay. The notice was with regard to the identical amount, namely Rs. 1,05,173, with regard to which he had been assessed by the Income -tax Officer at Karachi. The Taxing Department gave him relief under the provisions of the order giving relief for double taxation as between India and Pakistan; but the contention of the assessee was that he was not liable to be taxed at all in India and that his only liability was to pay tax in Pakistan. The Tribunal held against the assessee and the assessee wants this question to be agitated before us on this reference.

(2.) NOW , what has been urged by Mr. Kolah is that the assessee was a resident of Pakistan during the year of account, and that the income which accrued in Africa was an income which the Dominion of Pakistan was entitled to tax by principles of international law. He draws our attention to the fact that it is only by a nexus provided by the residents or the citizens that a country can impose tax on income earned outside the country, and as the assessee was resident in Pakistan, if income accrued to him outside Pakistan, the after partition it would be Pakistan that would be entitled to that income and not India. The other aspect of the matter which we have to consider is this. When the notice was issued by the Income -tax Officer, Bombay, on the 8th of February, 1954, the questions that have got to the considered are : (1) Whether the assessee was liable to tax ? and (2) Whether the Income -tax Officer had jurisdiction to issue that notice ?

(3.) WITH regard to the question of jurisdiction, jurisdiction is conferred under section 64; and as admittedly the assessee carries on business and also resides in Bombay, the Income -tax Officer, Bombay, would have jurisdiction to issue notice under section 34. But the question of jurisdiction has another facet to which attention might be drawn. If the assessment proceedings were pending before the Income -tax Officer at Karachi, then that officer alone, it would seem, would be entitled to complete the assessment of the assessee, and unless there was a transfer, under section 5 of the Income -tax Act, from that officer to another officer, the Income -tax Officer, Bombay, would have no jurisdiction to assess the assessee when the assessment proceedings were properly pending before another Income -tax Officer. Now on this aspect of the matter various considerations arise. It is said that, with regard to the assessment year 1946 -47 under section 22 (1) it was obligatory upon the Income -tax Officer to issue a public notice before the 1st May, 1946; and we must presume that the Income -tax Officer discharged his statutory duty and a public notice was issued. But that does not conclude the matter, because it seems difficult to take the view that by merely issuing a public notice the Income -tax Officer became seized of the assessment with regard to the assessee. It is difficult to contend that, if nothing more had happened after the issue of the public notice and if the assessee had left Karachi and had gone elsewhere, the Income -tax Officer of the area where the assessee was resident or carried on business would not be entitled to assess the assessee. The position would be different if either an individual notice under section 23 (2) had been issued by the income -tax Officer, looking to the scheme of section 64, would become final and it would not be open to any assessee to challenge that jurisdiction. Now, our attention has been drawn to the demand notice which was issued upon the assessee pursuant to the assessment order of the 5th of September, 1950, and that demand notice makes it clear that the assessment was not a best judgment assessment under section 23 (4). If that is so, then it seems clear that a return was made by the assessee and the assessment was made pursuant to that return. Now we have nothing on record to show when this return was made. Was the return made before the 15th August, 1947, or was the return made after the 15th of August, 1947 ? It would also be material to know whether the return was made before the assessee left Pakistan or whether it was made after he left Pakistan and came here; because it will be appreciated that, if the assessee was still in Pakistan when he made the return, it may be said that the Income -tax Officer, Karachi, assumed jurisdiction with regard to the assessment of the assessee; that the assessment proceedings were pending before him; and further that that was the only Income -tax Officer to whom the assessee could possibly make a return as he was resident in Karachi at that time. But the position might assume a different complexion if the assessee made a return after he left Pakistan. Then it would be a matter for consideration whether the assessee could take away the jurisdiction of an Income -tax Officer in India under the Income -tax Act by submitting a return to the Income -tax Officer in a foreign country and giving him the jurisdiction of assess his income. From this point of view it may also perhaps be necessary to determine whether any notice had been issued by the Income -tax Officer, Karachi, under section 22 (2), and if so, when. Therefore, without deciding the question, we have merely indicated the various aspects of the matter that have been presented before us. Inasmuch as the assessee is a displaced person, and he had to leave his country and it may be that he was not in a position to bring away all the papers and it is always difficult to get any information from Pakistan, we think another opportunity should be given to the assessee to bring on record the various facts which we have indicated in this judgment. We will, therefore ask the Tribunal to submit to us a supplemental statement of the case in the light of the judgment that we have just delivered.