I.TA. NO.83/HQ OF 1990-91, DECIDED ON 30TH AUGUST, 1990. VS I.TA. NO.83/HQ OF 1990-91, DECIDED ON 30TH AUGUST, 1990.
1991 P T D (Trib.) 4
[Income-tax Appellate Tribunal Pakistan]
Before Farhat Ali Khan, Chairman and Nasim Sabir Sayed Accountant Member
I.TA. No.83/HQ of 1990-91, decided on 30/08/1990.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65 & 156---C.B.R. Circular No.13 of 1986, para. 6(a)---Expression "last assessed income" occurring in para. 6(a), C.B.R. Circular No.13 of 1986-- Interpretation---No provision exists in the Income Tax Ordinance, 1979 to lay down that the moment an assessment order is challenged either under S.65 or 156 or by way of appeal it stands set aside---Assessment order would lose its existence by merger if, an appeal filed against it is decided---If the assessment order is revised either under S.65 or S.156 of the Ordinance, the original order would again stand merged in the revised order but only when it is finally made.
V. Jaganmohar. Rao and others v. CIT and Excise Profits Tax, Andhra Pradesh (1970) 75 FM 373; CIT v. Khemchand Ramdas (1938) 6 TTR 414; (1958) 34 ITR 130 and 1986 PTD 408 ref.
(b) Practice and procedure---
---- Court decides that issue which is brought before it.
Rehan H. Naqvi for Appellant.
K.A. Nomani, D.R. for Respondent.
Date of hearing: 25th August, 1990.
ORDER
FARHAT ALI KHAN (CHAIRMAN).---Mr. Rehan Hassan Naqvi, the learned counsel for the appellant has raised a quite interesting point involved in this appeal under the following facts and circumstances.
2. The appellant, .an individual maintaining no accounts, filed his return in assessment years 1983-84 and 1984-85 under section 59 of the Income - Tax Ordinance and the assessment orders were framed accordingly. However, subsequently the Income Tax Officer after reopening them under section 65 of the Income Tax Ordinance framed additional assessments but on appeal the assessment orders were set aside. I.T.O. then framed de novo assessment orders but the appellant once again went up in appeal before Commissioner and then before this Tribunal and finally on 20-8-1989 Mr. Rehan H. Naqvi, the learned counsel for the appellant has withdrawn these appeals. Similarly, assessment orders were framed under section 63 of the Income Tax Ordinance, 1979 regarding assessment years 1985-86, 1986-87 and 1987-88 but they were again set aside on appeal and the I.T.O. framed de novo assessment orders in all the three assessment years which again made the appellant aggrieved and dissatisfied and he again went up in appeal firstly before the learned CIT(A) and then has come up before this Tribunal. Here again Mr. Rehan Naqvi has withdrawn the appeals for assessment years 1985-86 and 1987-88 and thus the appeal for assessment year 1986-87 is before us.
3. Mr. Rehan Naqvi, the learned counsel for the appellant has canvassed before us that since, the income declared and tax paid stood at Rs.70,650 and Rs.4,497 respectively, his case was exempt from total audit. According to Mr. Rehan Naqvi clause (a) of paragraph 6 of the C.B.R's Circular No.13 of 1986 lays down that if the income declared of an assessee, for the assessment year 1986-87 is higher by 20 % or more as compared to the last assessed income of the tax payable or the income declared for the assessment year 1986-87 is not less than tax payable on the last assessed income his return would be exempt from total audit. The learned counsel vehemently argues that since the ITO had reopened the assessment orders for assessment years 1982-83 to 1984-85, therefore, they were set aside and the last declared income and tax paid relevant for his purpose would be assessment year 1981-82. Thus, the interesting point which has cropped up before us is as to whether issuance of notice under section 65 sets aside assessment order already completed.
4. Mr. Naqvi, the learned counsel for the appellant Ls vehemently answered this question in the affirmative and in support of his contention relies upon an observation made by their Lordships of Indian Supreme Court in a case reported as (1970) 75 ITR 373 V. Jaganmohan Rao and others v. CIT and Excise Profits Tax, Andhra Pradesh. It reads:--
" .It is, therefore, manifest that once assessment is reopened by issuing a notice under subsection (2) of section 22 the previous under assessment is set aside and the whole assessment proceedings starting afresh when once valid proceedings are started under section 34(1)(b) the I.T.O. had not only the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year ."
5. Mr. KA. Nomani, the learned D.R. on the other hand has vehemently disputed the submissions of Mr. Rehan Naqvi. According to him for the purpose of C.B.R's Circular No.13 of 1986 the last assessed income was an assessment year 1984-85 and thus the provision of clause (a) of paragraph 6 of aforesaid Circular did not come to the rescue of the appellant. According to him the provisions of section 65 have nowhere laid down that if a notice is issued under that section the assessment framed earlier would stand set aside.
6. We have heard both the learned counsel for the appellant as well as learned D.R. Before proceeding further let us reproduce hereinbelow the provisions of clause (a) of paragraph 6 of Circular No.13 of 1986 for easy reference and they read:--
"6. The following categories of cases shall be exempt from selection for total audit subject to the fulfilment of conditions specified against each:--
| (a) Cases of existing tax-payers: | If the income declared for the assessment year 1986-87, is higher by 20 per cent or more as compared to the last assessed income and the tax payable on the income declared for the assessment year 1986-87 is not less than the tax payable on the last assessed income. |
| (b) Cases of new tax-payers: | If the tax-payers is an individual and the income declared for assessment year 1986-87 exceeds Rs.24,000 .." |
7. From its perusal it appears that the fate of the case hinges on the interpretation of the expression "last assessed income". Mr. Rehan Naqvi, the learned counsel for the appellant, as pointed out earlier, has submitted that since the assessment order for assessment year 1984-85 was reopened under section 65 of the Income Tax Ordinance on 18-2-1986, it therefore, stood set aside in view of the case of Jaganmohan Rao (supra) when return for assessment year 1986-87 was filed. However, with due respect to him I do not see any substance in his submission. Starting with Jaganmohan Rao's case (supra) it appears from its perusal that a Spinning Mill belonged to a person called Appalaswamy who sold it to the assessee while a dispute was pending between him and his sons. The District Judge held that the entire property belonged to aforesaid Appalaswamy but the High Court held that it belonged to the extent of 1/3rd to him whereas 2/3rd belonged to his sons. However, ultimately the Privy Council upheld the order of District Judge holding that the entire Mill belonged to aforesaid Appalaswamy. Meanwhile the assessee had offered for tax his income from the property as was held by the Higher Court but when the matter was finally decided by the Privy Council, the I.T.O. issued notice under section 34 alleging that he was under-assessed and after considering his reply assessed his income derived from whole of the mill. Before their Lordships of Privy Council it was firstly argued that the decision of Privy Council could not serve as a definite information for purpose of reopening an assessment under section 34 of the I.T. Act, hence the proceedings were void. Their Lordships, however, repelled this contention. It was further argued before their Lordships that in any case the I.T.O. could have legitimately assessed 1/3rd share of the income which was due to the assessee according to judgment of High Court and there was escapement only to the extent of 2/3rd share of the income. This argument was also repelled with the following observation:--
" .This argument is not of much avail to the appellant because once proceedings under section 34 are taken to be validly initiated with regard to 2/3rd share of the income the jurisdiction of the I.T.O. cannot be confined only to the portion of the income. Section 34 in terms states that once the I.T.O. decides to reopen the assessment he could do so within the period prescribed by serving on a person liable to pay tax a notice containing all or any of the requirements which may be included in the notice under section 22(2) and may proceed to assess or re-assess such income profit or gains .."
8. It is in this context that the observation which is relied upon by the learned counsel Mr. Naqvi has been made and it reads:--
"It is, therefore, manifest that once assessment is reopened by issuing a notice under subsection (2) of section 22 the previous under assessment is set aside and the whole assessment proceedings starting afresh .
Thus, it is clear that their Lordships of Indian Supreme Court repelled the argument that by reopening assessment order the entire assessment order did not stand reopened. The observation relied upon by Mr. Rehan Hassan Naqvi, therefore, is to be read in this context. Our this conclusion further gathers support from the following observation which is made immediately after the paragraph reproduced above; and it reads:--
" .when once valid proceedings are started under section 34(1)(6) the I.T.O. not only had the jurisdiction but it was his duty to levy tax on the entire income that had escaped assessment during that year ..:
It is trite law that a Court decides that issue which is brought before it. Before their Lordships of Indian Supreme Court it was not anybody's case that the assessment order framed earlier stands vacated the moment a notice under section 34 is issued and we are not prepared to hold that their Lordships have answered the issue involved in this appeal in favour of the appellant. As far back as 1938 their Lordships of the Privy Council held in a case reported as (1938) 6 ITR 414 CIT v. Khemchand Ramdas that once an assessment was made it was final and conclusive unless there was some provision of law which permitted its finality to be disturbed. Now if we read our Income Tax Ordinance we find sections 65 and 156 which, for instance, permit interference with the finality of an assessment order. However, no provision has been made in the Income Tax Ordinance to lay down that the moment an assessment order is challenged either under section 65 or 156 or by way of appeal it stands set aside. In a decision reported as (1958) 34 ITR 130 their Lordships of Indian Supreme Court have also explained the concept of finality of an assessment order and the circumstances under which it loses its entity. Their Lordships have observed:--
............If the appellate authority modifies or reverses the decision of the Tribunal it is obvious that it is the appellate decision that is effective and can be enforced in law, the decision would be just the same even if the appellate decision merely confirms the decision of the Tribunal. As a result of the confirmation or affirmation of the decision of the Tribunal by the appellate authority the original decision merges and derive decision alone which subsists and is operative and capable of enforcement .........
From this passage it is clear that an assessment order would lose its existence by merger if an appeal filed against it is decided. Similarly, if it is revised either under section 65 or 156 of the Income Tax Ordinance the original order would again stand merged in the revised order only and only when it is finally made. Let us mention here at this juncture that the concept of merger has been discussed at length in a Full Bench decision of this Tribunal reported as 1986 P T D 408.
9. Moreover, we also feel that if we accept the submission of Mr. Naqvi it would not fit in the general pattern of Income Tax Ordinance for the simple reason that it would provide a very big stick in the hands of an Income Tax Officer who can make any assessment order set aside by just issuing a notice under section 65 of the Income Tax Ordinance, 1979. It is to be kept in mind that the word "assessed" has been used in various sections of the Income Tax Ordinance, the Rules framed thereunder and various Circulars and S.R.Os and thus, the concept of finality would be destroyed everywhere. We are, therefore, of the considered view that both the officers below rightly declined to accept the submission of Mr. R.H. Naqvi.
10. Since the learned CIT(A) has again set aside the assessment order for the relevant assessment year we hereby confirm his order. The Income Tax Officer subject to our finding on the issue discussed above shall frame de novo assessment orders according to law.
11. The appeal stands disposed of accordingly.
M.BA./935/T Order accordingly.