I.T.A. NO. 70/HQB OF 1989-90, DECIDED ON 29TH OCTOBER, 1990. VS I.T.A. NO. 70/HQB OF 1989-90, DECIDED ON 29TH OCTOBER, 1990.
1991 P T D (Trib.) 26
[Income-Tax Appellate Tribunal Pakistan]
Before Farhat Ali Khan, Chairman
I.T.A. No. 70/HQB of 1989-90, decided on 29/10/1990.
(a) Income Tax Ordinance (XXXI of 1979)---
----S.65(3), proviso [as amended by Finance Ordinance (XII of 1982) and Finance Act (VI of 1987)]---Income-tax Officer can, since 1st July, 1987, issue notice under S. 65(1) within 5 years from the end of the assessment year in which the total income of the said income year was first assessable.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 65(3), proviso [as amended by Finance Ordinance (XII of 1982) and Finance Act (VI of 1987)]---Word "issued" as used in S.65(3) was equivalent to word "served".---[Words and phrases].
Banarsi Debi and another v. I.T.O. (1964) 53 ITR 100 (SC); Indu Prasad Devshankar Bhatt v. J.P. Jani, I.T.O. (1965) 58 ITR 559; C.W.T. v. Kundan Lai Bihari Lai (1975) 99 ITR 581 (SC); C.I.T. v. Smt. Klasa Devi and Smt. Rukminit
Bai (1976) 105 ITR 479; C.I.T. v. D.V. Ghurye (1957) 31 ITR 683 and Sri Nwas v. I.T.O. (1956) 30 ITR 381 ref.
Ch. Nazir Ahmad, D.R. for Appellant.
Inam Ghori, I.T.P. for Respondent.
Date of hearing: 29th October, 1990.
ORDER
Subsection (3) of section 65 of the Income-tax Ordinance, 1979, hereinafter referred to as the `Ordinance' was substituted by the Finance Ordinance, 1982 and reads as under:
"(3) Notice under subsection (1) in respect of any income year, may be issued within ten years from the end of the assessment year in which the total income of the said income year was first assessable."
However, the Finance Act of 1987 added proviso to aforesaid subsection and it reads:
"Provided that where the said notice issued on or after the first day of July 1987 this subsection shall have effect as if for the word "10 years" the words "5 years were substituted "
Thus, since 1st July, 1987 the Income-tax Officer can issue notice under subsection (1) of section 65 within 5 years from the end of the assessment year in which the total income of the said income year was first assessable. However, the A facts of this appeal revealed that the Income-tax Officer issued notice on 29-6-1987 but the same was served on the respondent on 14-7-1987. From perusal of the assessment order it appears that, the original assessment regarding assessment years 1981-82 was framed under section 59(1) of the Ordinance but subsequently while proceeding with the return for the assessment year 1986-87 the Income-tax Officer discovered that the respondent had not declared certain investment in property and consequently he issued, notice under section 65 of the Ordinance. It further appears that in spite of service of notice under section 61 nobody turned up before the Income-tax Officer and he was constrained to frame ex parte assessment under section 63 read with section 65 of the Ordinance.
The respondent appears to have been aggrieved and dissatisfied with the assessment order and went up in appeal. It was contended before the learned CIT(A) that since the notice issued under section 65 of the Income-tax Ordinance, 1979 was served on 14-7-1990 on the respondent, it was time-barred in view of the proviso added to subsection (3) of section 65 of the Income-tax Ordinance, 1979 as reproduced above. In short the case of the respondent before learned CIT(A) was that the word `issued' was equivalent to word "served" and the learned Commissioner of Income-Tax (A) has upheld his submission by his order recorded on 10-10-1989. This time the department feels aggrieved and dissatisfied and has come up in second appeal.
2. Chaudhry Nazir Ahmad, the learned D.R. has vehemently argued that the word `issued' means issued and needs no interpretation for the simple reason that there is no ambiguity either in subsection (3) of section 65 or its proviso. Since the notice was issued on 29-6-1987, argues Ch. Nazir Ahmad, the proviso did not apply and the proceedings were not time-barred. The learned D.R. concludes that the finding of learned Commissioner of Income-tax (Appeals) to the contrary is not sustainable and his order should be reversed.
3. Mr. Inam Ghouri, the learned counsel for the respondent on the other hand relies upon the following case law:
Banarsi Debi and another v. LT.O. (1964) 53 ITR 100 (S.C.); Indu Prasad Devshankar Bhatt v. J.P. Jani, I.T.O. (1965) 58 ITR 559 Gujarat H.C.; C.W.T. v. Kundan Lal Bihari Lal (1975) 99 ITR 581 (S.C.); C.I.T. v. Smt. Klasa Devi and Smt. Rukmini Bai (1976) 105 ITR 479 (A.P. H.C.).
4. I have heard both the learned D.R. as well as learned counsel for the respondent. The precise question which has sprung up in those proceedings is as to whether the word "issued" as used in subsection (3) of section 65 is to be equated with the expression "served". Let me therefore answer this question.
5. From perusal of the case-law it appears that Chagla, C.J., an eminent Judge, was also called upon to answer the same question in the case reported as (1957) 31 ITR 683 CIT v. D.V. Ghurye. In that case a notice under section 34(1)(a) of the repealed Income-tax Act was served after 8 years though it was issued before eight years. The Revenue advanced the same argument but Chagla, C.J. rejected it with the following observation made at page 686:
" ..In other words the attempt is to equate the expression "served" used in section 34 with the expression "issued" used in the proviso to subsection (3). Now we must frankly confess that we find it difficult to understand why legislature has used in the proviso the expression "where a notice under subsection (1) has been issued within the time therein limited". In subsection (1) no time is limited for the issue of notice: time is only limited for the service of notice and therefore it is more appropriate that the expression "issued" used in the proviso to subsection (3) should be equated with the expression "served" rather than that the expression "served" used in subsection (1) should be equated with the expression "issued" used in the proviso to subsection (3) .."
It also appears that the Allahabad High Court also arrived at the same conclusion in a decision reported as (1956) 30 ITR 381 Sri Nwas v. I.T.O. Similarly the Gujarat High Court also appears to have arrived at the same conclusion in the case of Indu Prasad (Supra) but under somewhat different circumstances. In this case the question before their Lordships was as to whether proceedings under section 34 were pending at the time of promulgation of the New Indian Income tax Act and their Lordships held that they were not for the reason that the notice issued under section 34 was not validly served. The case of the Department was that since the notice issued under section 34 was valid, therefore, all the proceedings started thereafter were legal and consequently the provisions of New Indian Income-tax Act were applicable. The case of the assessee on the other hand was that in order to extend the provisions of the New Income-tax Act the Department had to establish that valid proceedings were pending at the time of promulgation of the New Income-tax Act and since the notice under section 34 was not validly served therefore no proceedings could be deemed to be pending so as to make the New Act applicable. But in the case of Banarsi Debi and another v. I.T.O. (Supra) their Lordships of Indian Supreme Court were also called upon to answer the same question. In this case section 4 of the Amending Act (1) of 1959 was introduced so as to protect those assessments or re-assessment orders which were framed pursuant to a notice issued under clause (a) of subsection (1) of section 34 of the Repealed Income-tax Act after expiry of the period of limitation prescribed therefor. In this case the assessment year involved was assessment year 1947-48 and the date of service of notice was 2-4-1956 whereas the date of issuance of notice was 19-3-1956. Since the Amending Act became effective from 1st April it was contended that as the notice under section 34(1) of the Indian Income-tax Act was issued on 19-3-1956, the provision of section 4 of the Amending Act did not apply to it because the notice was served on 2-4-1956. Their Lordships of Supreme Court after considering various decisions of the High Courts including the case of Ghurye (supra) and Sriniwas v. I.T.O. (supra) came to the conclusion that the expression "issued" as used in subsection (4) of Amending Act was interchangeable with the expression "served" hence it saved the validity of the notices and in turn the validity of proceedings. It is pertinent to note that in this case it was the assessee who raised just the opposite argument that the expression "issued" could not be equated with word "served". Their Lordships of Indian Supreme Court did not like to depart from the interpretation ascribed to word "issued" as used in subsection (3) of section 34 while interpreting the same expression used in section 4 of the Amending Act. Similarly Andhra Pradesh High Court following Banarsi Debi's case (supra) extended the same meaning to the word "issued" as used in section 148 of the Indian Income Tax Act of 1961 in a decision reported as (1976) 105 ITR 479 CIT v. Smt. Kailasa Devi and Smt. Rukmini Bai. Let me mention here that their Lordships of Indian Supreme Court have also applied the case of Banarsi Devi (supra) in the wealth-tax proceedings started under Wealth Tax Act. In a case reported as (1975) 99 ITR 581 CWT v. Kundan Lal Bihari Lal originating from Allahabad High Court their Lordships of Indian Supreme Court affirmed the decision of said High Court by holding that a notice could not be said to have been issued to a person unless he was served with it. Their Lordships were called upon to decide as to whether the assessee who had made full disclosure of his wealth before a notice under section 17 of the Wealth Tax Act, 1957 was served on him was entitled to the benefit of section 18(f) and the same was answered in the affirmative.
6. Thus in view of the discussion made above the case-law appears to be overwhelmingly in favour of Mr. Ghouri. As such the learned CIT(A) appears to have arrived at correct conclusion hence his order calls for no interference. The departmental appeal therefore stands dismissed accordingly.
M.BA./936/TAppeal dismissed.