CHATURVEDI, J. - (1.) THIS is a petition under article 226 of the Constitution. The petitioner was a partner of the firm R. B. Lachhman Das Mohan Lal & Sons. The firm had declared its principal place of business as Lahore, though it appears that its main business was of manufacture and sale of sugar and its bye-products in the district of Lucknow, U.P. The petitioner and other partners of the firm deposited certain amounts as advance tax under section 18A of the Income-tax Act in Lahore before March 31, 1947, for the assessment years 1946-47 and 1947-48. As a result of partition of the country, two Dominions were formed with effect from August 15, 1947. It is not known whether assessments were made at Lahore for the assessment years 1946-47 and 1947-48, but it is not denied that assessment with respect to some income for these years were made at Lucknow. After this, an assessment was made for the year 1948-49 and the amount assessed was Rs. 2,16,994-7-0 on all the partners of the firm. It appears from a letter of the Income-tax Officer, Lucknow, dated February 5, 1952 (marked as annexure I to the affidavit, filed along with the petition) that the petitioner had claimed an adjustment of the excess advance payments said to have been made by him in Lahore under section 18A of the Income-tax Act, in the assessment made for the year 1948-49. In this letter the Income-tax Officer in effect says that the matter regarding the adjustment of surplus money for the year 1946-47 and 1947-48 had been referred to the higher authorities and on getting instructions, credit for these amounts was to be allowed. If the higher authorities did not allow credit, a demand for the balance would then be sent to the petitioner. THIS letter was followed by another letter of the Income-tax Officer, dated June 24, 1952, in which it was stated that the liability for adjustment of advance payment of tax under section 18A rested with the Dominion which was in possession of the assessment record. THIS record had not been transferred from Lahore to Lucknow and it was, therefore, not possible to allow the adjustment of the excess amount paid under section 18A in Lahore. The petitioner was asked to pay the entire demand for which challan were enclosed. The petitioner sent a representation tot he Secretary, Central Board of Revenue, Government of India, New Delhi, on the July 16, 1952, claiming adjustment of the excess amount paid in Lahore. Another representation appears to have been sent to the Income-tax Officer tot he same effect in November, 1954, as appears from the reply sent by that Officer on the November 26, 1954 (annexure 4). In this letter the Income-tax Officer says :
(2.) THIS is to inform you that the decision of the Government in respect of adjusting the payments made under section 18A in Pakistan has not yet been arrived at. It is therefore that neither recovery of the demands for the relevant assessment years has been pursued nor can the refunds be granted to you. You may please note that the excess payments made by you for the assessment years 1946-47 and 1947-48 cannot be accounted for against the demands outstanding for the assessment year 1948-49. It was said that the demand for 1948-49 could not be kept pending and the petitioner was requested to deposit the entire amount assessed for the year forthwith, failing which provisions of section 46 of the Income-tax Act were to be invoked. The petitioner was further required to deposit the amount assessed for the year 1949-50. This was followed by another letter demanding payment, which is dated February 5, 1955. The present petition was filed on the February 21, 1955, and the main prayers contained in the petition are that a writ in the nature of certiorari be issued quashing the orders of the Income-tax Officer, Kanpur, dated November 26, 1954, and February 5, 1955, and that a writ in the nature of mandamus be issued commanding the respondent to set off, from assessments of the years 1948-49 and 1949-50, the amounts paid in excess under section 18A for the years 1946-47 and 1947-48 in Lahore. Two counter-affidavits have been filed on behalf of the respondent. In the affidavit filed on the October 31, 1955, it is stated that the assessment file of the petitioners firm has not been received from Pakistan after August 15, 1947. In the second counter-affidavit this fact is sought to be proved by copies of two letters said to have been sent by Mullik Raj one of the partners of the petitioner on June 7, 1948, and February 27, 1950. A further defence has been taken to the effect that under section 9 of the Indian Independence Act, the Governor-General issued certain Orders, including Orders known as the Indian Independence (Partition Council) Order, 1947, and the Arbitral Tribunal Order, 1947. Reference is also made to the report of the Expert Committee and to the acceptance of this report by the partition Committee. The result of these, according to the respondent, is that the Dominion of Indian was not liable for the adjustment of advance payment of income-tax in respect of payment made in the territory, which now form part of Pakistan. A rejoinder affidavit has been filed on behalf of the petition saying that he was not aware of any assessment having been made as to his income in Lahore for the assessment years 1946-47 and 1947-48 nor was any application made to Pakistan Officers by the petitioner for refund of the amounts he had paid under section 18A for the above years. The question, that arises for consideration id this petition, is whether the petition is entitled to have the amounts set off in India from the amount assessed for the year 1948-49, the amount that he paid in Lahore for the assessment years 1946-47 and 1947-48. The learned counsel for the petition has urged two grounds in support of his contention that the set-off should be allowed in India. The first ground is that the petitioner has made advance payments under section 18A of the Income-tax Act, and this section read with section 48 provides for a refund of excess amount paid, and as they payment was made under the section, the petitioner is entitled to a refund. The contention is that this Act was in force in Lahore at the time that the payment were made and it is still in force in India, and, the petitioner having made the payments under section 18A, he is entitled to have a refund of the excess amounts paid by him; and that the petitioner being entitled to the refund, he is also entitled to ask the Income-tax Officer to adjust the amount in the tax assessed for the subsequent years.
(3.) THE other argument is that under article 9 of the Indian Independence (Rights, Property and Liabilities) Order, 1947, issued under section 9 of the Indian Independence Act, the liability for the repayment of this amount was imposed on the Dominion Government of India. THE Dominion Government being liable to refund the amount, article 294 of the Constitution makes the Union Government now subject to the same liability. THE learned counsel for the respondent controverts both the above contentions by saying that the amounts having been paid in Lahore, which is now a part of Pakistan, the Union Government cannot be made liable for the refund of the amounts, because the sums were paid before the Partition, and the Indian Income-tax Act would not govern such a case. Concerning the second ground, he says that a liability like this does not come within the words used in article 9 of the Indian Independence (Rights, Property and Liabilities) Order, 1947, because the payment cannot be said to be a loan, nor a guarantee nor a financial obligation within the meaning of the words as used in that article. He has further contended that the Government of the Indian Dominion was liable for the adjustment of the amounts, paid prior to Partition in the territories which now fall in Pakistan, concerning only those cases whose files have been transferred from Pakistan to India. For this assertion, the learned counsel relied on paragraph No. 9(f) of the Report of Export Committee No. III(i), dated August 1, 1947, published at page 10 of Partition Proceedings, Vol. III, a publication of 1948 by the Manager, Government of India Press, New Delhi. This clause deal with refund or adjustment of advance payments of income-tax, and it says that the liability will be on the Government to whom the assessment file is transferred. But the Muslim members made their acceptance of the agreement conditional on the corresponding deposits being transferred to Pakistan. THE argument of the learned counsel is that the file of this case not having been transferred by Pakistan authorities, the Dominion of India was not liable for the refund of the excess payments made under section 18A of the Income-tax Act. THE learned counsel further contended that the petitioner has not filed the assessment order passed in Pakistan with respect to the assessment years 1946-47 and 1947-48, and it was not known what excess payments had actually been made by the petitioner in those years. THE learned counsel further urged that the claim, if it is treated to be a claim for refund, is barred by time. I may also mention the preliminary objection taken to the maintainability of the petition, which is to the effect that the order refusing the refund is appealable and, the petitioner having failed to file an appeal, this petition should not be entertained. Coming to the first contention of the learned counsel for the petitioner that the petitioner having made an excess payment under section 18A of the Act, he is entitled to a refund under section 48 and to a consequent set-off from the assessments for the subsequent years under section 49E, he argues that the Act has made no exception in the liability of the Government to make a refund concerning those payments which were made in the territories which now constitute the Dominion of Pakistan. I think there is force in this contention. THE excess payments were made in Lahore, which was previously the principal place of the petitioners business and, under section 64 of the Income-tax Act, the petitioner was assessable by the Income-tax Officer of Lahore. At Lahore the petitioner made payments under section 18A and he was compelled to do so because of the provisions of the Act, otherwise he would have lain himself open to a liability for payment of penalty. THE amounts must have been credited immediately to the account of the Government of India. In view of the conditions that prevailed in Lahore immediately before and after August 15, 1947, the petitioners business must have suffered a set back and he has admittedly now made Lucknow as his principal place of business. THE payment was made under section 18A(1) of the Act at the time when it was applicable to the area where the payment was made and the petitioner having made payments under section 18A to the Government of India, the provisions of section 48 are attracted to the facts of the case. THE petitioner satisfied the Income-tax Officer at Lucknow that the amount that he paid under section 18A exceeded the amount with which he was chargeable under the Income-tax Act for the years 1946-47 and 1947-48, and the Income-tax Officer referred the matter to higher authorities. The petitioners case clearly comes under the wording of that section and he is thus entitled to a refund of the excess payments made for the years 1946-47 and 1947-48. According to section 49E, if a refund is found to be due to any person, the Income-tax Officer, in lieu of payment of the amount, may set off the amount to be refunded or any part of that amount, against the tax remaining payable by the person to whom the refund is due. The Income-tax Officer thus has the power either to refund the amount or to set it off against the income-tax due for the subsequent years and the petitioner requested him to adopt this latter course of setting off the excess paid under section 18A. There cannot be much doubt that, if the Income-tax Officer had decided to make the refund, he would have preferred to follow the course of setting off the excess from the amount due for the subsequent years under section 49E of the Act. But he refused to do so as, according to him, th e payment having been made in Lahore, the petitioner was not entitl ed to claim a refund of that amount from the assessments made in Lucknow.;