COMMISSIONER OF INCOME TAX Versus POPULAR ENGG. WORKS

MUNAWAR ELAHEE RANA, J .‑The Commissioner of Income‑tax, Lahore, has referred the following question of law to the High Court for its opinion under section 66(1) of the Income‑tax Act (XI of 1922). This reference has arisen out of an order dated 9‑8‑1972, passed by the Income‑tax Appellate Tribunal, Pakistan, Multan in I. T. A. No. 3412 of 1971‑72, setting aside the assessment for the assessment year 1970‑71:

"Whether on the facts and circumstances of the case, the Tribunal was justified in holding that the Income‑tax Officer could resort to action under section 23 (4) of the Income‑tax Act on 28‑8‑1971 only when the default occurred and not on any subsequent date."

2. The brief facts of the case are. that the respondent‑assessee derives income from repairing Agricultural Tools and Manufacturing Engines. For the assessment year 1970‑71 the Income‑tax Officer issued notices under sections 22(4) and 23 (2) of the Income‑tax Act for 26‑4‑1971. On service of the notices the respondent appeared before the Income‑tax Officer on that date, but did not produce the accounts as the same were not main tained. The Income‑tax Officer was not satisfied, he adjourned the hearing and issued fresh notices under sections 22(4) and 23 (2) of the Act for 28‑8‑1971 which were duly served, but the respondent neither appeared on the appointed date nor produced the account books, and the Income‑tax Officer passed the following order:

"None present, please report whether any application for adjournment was received."

It was reported by the office the same day that no application seeking an adjournment was received. The Income‑tax Officer after receipt of this report on 30‑8‑1971, proceeded under section 23 (4) of the Act and passed an ex parte assessment order estimating total income of the res pondent at Rs. 8,000 and also issued notice under section 28 of the Act to the assessee.

3. Feeling aggrieved by the order of the Income‑tax Officer the respondent made an appeal (I. T. A. No. 3412 of 1971‑72) to the Income‑tax Appellate Tribunal, Pakistan, Multan. In the appeal the assessee did not dispute the validity and mode of service thus effected on him for 28‑8‑1971. He merely raised an objection to the effect that the ex parte assessment order passed under section 23 (4) of the Act was unwarranted in law as the Income‑tax Officer did not elect to proceed ex parte 'on the date of hearing i.e. 28‑8‑1971 for which date the res pondent had been served. The Tribunal gave effect to this objection and in accepting the appeal before it set aside the assessment in question to be made afresh.

4. In these circumstances the Commissioner of Income‑tax has filed this application referring the above question of law said to arise out of the appellate order passed by the Tribunal to the High Court for its opinion.

5. We have heard the learned counsel for the petitioner whereas none appeared on behalf of the respondent. According to the Tribunal, in the circumstances of the case, the procedure adopted by the Income‑tax Officer while resorting to the provisions of section 23 (4) of the Act was absolutely illegal. The Tribunal observed:‑

"If on 28‑8‑1971, when the case was fixed and for which date proper notice had been served on the appellant none attended, it was incumbent for the Income‑tax Officer to have passed the ex parte order on that very day. However, the assessment under section 23(4) could have been completed subsequently. In view of the illegal pro cedure adopted by the Income‑tax Officer the impugned order passed under section 23 (4) is liable to be set aside and is hereby vacated."

The learned counsel for the petitioner has argued that the Income‑tax Officer, while recording an order on 28‑8‑1971. "None present" actually meant that on the specified date fixed in the notices which had duly been served and the respondent was not present, was justified to proceed under section 23 (4) of the Act in completing the assessment to the best of his judgment.

6. We have given careful thought to the arguments of the learned counsel and the observations made by the Tribunal. The respondent was duly served in the first instance for 26‑4‑1971, on which date he made an appearance before the Income‑tax Officer, but did not produce any books of account in support of his return. The Income‑tax Officer adjourned the case and out of abundant caution issued notices under sections 22 (4) and 23 (2) of the Act for 28‑8‑1971. These notices were again properly served on the ‑ respondent. On that day the Income‑tax Officer wrote a short order "none present." This order signified that the respondent had defaulted on the specified date of hearing in spite of service and the Income‑tax Officer resorted to proceed ex parte with the completion of the assessment. The observation by the Tribunal that it was necessary for the Income‑tax Officer to have passed an ex parte order on that day. (Le. on 28‑8‑1971) is not warranted by any of the provisions contained in the Income‑tax Act. Although the Civil Procedure Code does not apply to the proceedings under Income‑tax Act except as provided under section 63 of the Act, ex parte proceedings, when and how, they are taken find mention in rule 6(1), Order IX. Sub‑rule (1) (a) of rule 6 reads as under:‑

"6.‑(1) Where the plaintiff appears and the defendant does not appear when the suit is called on for hearing then‑

(a) if it is proved that the summons was duly served, the Court may proceed ex parte."

Here too there is no indication made in the above‑mentioned rule that an order mentioning expression "ex parte" is necessary before proceeding with the case in the absence of the defendant. The term "ex parte" is not defined anywhere even in the Civil Procedure Code. It is a Latin expression and means "from one party or side." Its accepted meaning according to Wharton's Law Lexicon (Fourteenth Edition) is a proceeding by one in the absence of the other. In the same way the Code does not prescribe any procedure to be followed in the case of an ex parte suit. All that is required is that Court may determine to proceed with the case even though the defendant is absent. That determination may not be in writing.

It is enough that proceedings of the case should be recorded in the order sheet (I. T. 39) as provided on page 14 of the "Income‑tax Office Manual," Second Edition revised up to 1st January 1966. Therefore, when the Income‑tax Officer on 28 8‑1971, wrote a short order "none present," he meant that he had decided to proceed ex parte against the respondent.

7. In the end it shall not be out of place to make a reference to an answer returned by us in Commissioner of Income‑tax v. M. B. Oureshi (T. R. 203 of 1972) decided today, in which it is laid down as under:

"In this connection we would like to clarify here that it is not at all required of the Income‑tax Officer that he should give a notice of each and every adjourned hearing to the assessee throughout during the course of the assessment proceedings before him. In this connection section 23 (3) correctly lays down that on the day specified in the notice issued under subsection (2), or "as soon after wards as may be," the Income‑tax Officer after hearing shall finalize the assessment. This clearly postulates the power in the Income‑tax Officer to grant adjournments also during the course of the inquiry before him. Indeed at times it may be very necessary for him to allow an adjournment. But that does not mean that the assessee is always entitled to a fresh notice to issue intimating him about the next date fixed in the case. If the assessee does not appear or produce his evidence on the specified date in response to the notices, it is expected of the Income‑tax Officer to bring the default on the record, once that is done he need not proceed to judgment and complete the ex parte assessment forthwith under section 23 (4) of the Act. It may not be possible for him to do so and he may in his discretion like to adjourn the case. But after the Income‑tax Officer has once decided to proceed ex parte against the assessee for. the defaults committed by him, he is not, as of right, entitled to notices of the adjourned hearings."

8. As a result of this discussion, on the facts and in the circumstances of this case, and our own reasons given above, we find that the Tribunal was not justified in holding that Income‑tax Officer could resort to action under section 23 (4) of the Act on 28‑8‑1971, only when the default occurred A and not on any subsequent date. We, therefore, return our answer to the question referred to the High Court in the negative. There is no order as to costs.

K. B. A. Answered accordingly.