I.T.AS. NOS. 314(IB) AND 315(IB) OF 1988-89, DECIDED ON 15TH JANUARY, 1991. VS I.T.AS. NOS. 314(IB) AND 315(IB) OF 1988-89, DECIDED ON 15TH JANUARY, 1991.
1991 P T D (Trib.) 812
[Income-tax Appellate Tribunal Pakistan]
Before Sayed Amjad Hussain Bukhari, Judicial Member and Junejo M. Iqbal,
Accountant Member
I.T.As. Nos. 314(IB) and 315(IB) of 1988-89, decided on 15/01/1991.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss. 56 & 154 (6)---Notice under S. 56---Powers of Income Tax Officer---If for any reason, the facts of issuance, service and compliance with a notice under S. 56 could not be recorded in the order-sheet or having been recorded Income Tax Officer failed to affix his signature on the order-sheet, it would not materially change the legal position, if it could be proved that a notice was validly issued and properly served on the right person/assessee---Validity of notice under S. 56 could not be called in question after a return in response to such notice had been filed.
(1946) 14 I T R 695 and (1946) 14 I T R 673 ref.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 56---Issuance of a notice under S. 56 for past assessment year conferred proper jurisdiction on the Income Tax Officer to frame the assessment for the year 1985-86.
1990 PTD (Trib.) 260 ref
Muhammad Jehangir Khan, D.R. for Appellant.
Muhammad Saeed Rana for Respondent
Date of hearing: 15th January, 1991.
ORDER
JUNEJO M. IQBAL (ACCOUNTANT MEMBER).---These are two departmental appeals, relating to the charge years 1984-85 and 1985-86 contesting the consolidated order passed by the learned C.I.T.(A) Sargodha on 23-1-1989 in Income Tax Appeals Nos.1251 and 1952.
2. Relevant facts leading to the present two appeals are that an individual was booked on the basis of information received from the Deputy Games Warden, Sanda Road, Lahore that the respondent had obtained two licences, on 25-9-1983 and 1-1-1984 for catching of falcons during the income years relevant to the assessment years 1984-85 and 1985-86. The I.T.O., therefore, issued notices under section 56 of the Income Tax Ordinance, 1979 (hereinafter referred to as the Ordinance), and after confronting the assessee-respondent, with the Inspector's report, dated 9-6-1987 estimated net total income at Rs.30,000 and Rs.40,000 for the years 1984-85 and 1985-86, respectively. This consolidated order for the two years was agitated in appeals before the learned C.I.T. (Appeals) Sargodha, who annulled the assessments for both the years on the ground that a notice under section 56 could only be issued for a current assessment year and that in the present case, notice under section 65 of the Ordinance should have been issued for each of the years under appeals which had rendered the proceedings illegal. Besides, the order-sheet entry for the relevant assessment years also did not show the signatures of the I.T.O. directing his staff to issue notice under the relevant section, which had also deprived the proceedings for the charge years under of any legal basis. It is against this decision of the learned C.I.T.(Appeals) that the department feels aggrieved and has come up in further appeal for the two years, asserting that the notice under section 56 was rightly issued on 27-2-1985 for the charge year 1984-85 and on 1-2-1987 for the year 1985-86 and that having surrendered to the jurisdiction of the I.T.O. by filing the returns for the year 1984-85 on 2-4-1985 and for 1985-'86 on 9-6-1987 the validity of the notice could not be questioned in view of the provisions of section 154(6) of the Ordinance.
3. Mr. Muhammad Jehangir Khan, the learned D.R. submitted that a larger Bench of this Tribunal, in a decision reported as 1990 P T D (Trib.) 260 had held that a notice under section 56 of the Ordinance could be issued even for the past assessments. As far as the charge year 1984-85 was concerned, a notice under section 56 of the Ordinance was issued on 27-2-1985, which was complied with by filing a return on 2-4-1985 and was within time. However, as far as the subsequent charge year was concerned, a notice under section 56 of the Ordinance was issued on 1-2-1987 and the return was filed in response thereto on 9-6-1987 but this year was covered by the decision of the larger Bench (ibid) and could not therefore be contested as illegal or without jurisdiction, as wrongly held by the first appellate authority.
4. As regards the observation of the learned C.I.T.(A) that the issuance of notices under section 56 was not authenticated by the I.T.O. as his signatures did not appear under section 56, it was a fact that the notices under section 56 of the Ordinance were duly issued and served on the respondent and if for any reason, the ITO failed to affix his signature on the relevant entry in the order-sheet regarding the issuance of the notice it did not make any difference. Continuing further, the learned D.R. submitted that the order-sheet merely records the proceedings held in a case datewise. It is not a legal requirement that the entry should be made in the order-sheet regarding the issuance of a notice under section 56 of the Ordinance. If a notice had been signed, issued and served and duly complied with by the respondent, any omission to record its issuance on the order-sheet becomes irrelevant. There was, therefore, no vacuum, as wrongly observed by the learned C.I.T.(A). The learned D.R. vehemently urged that the order of the first appellate authority, being based on misinterpretation of law, required to be vacated and that of the I.T.O. restored for both the years.
5. Mr. Muhammad Saeed Rana, Advocate appearing on behalf of the respondent submitted that before the issuance of any statutory notices, an entry has to be made in the order-sheet by the Assessing Officer on the basis of which the staff working for the Assessing Officer prepares the notice and gets his signature which is then served on the assessee. In the present case, there was no such mention in the relevant order-sheet by the Assessing Officer. Non-signing of the order-sheet deprived the Assessing Officer of the jurisdiction. It is a valid and correct order if order-sheet entry is signed and is accordingly complied with. Where any order-sheet does not bear the signature of the Assessing Officer, it has no legal sanctity, the learned counsel contested. Concluding his arguments, the learned counsel for the respondent supported the order of the lower appellate authority and prayed that the impugned order may be confirmed.
6. After hearing the averments made at the Bar by both the learned representatives of the contesting parties and after perusal of the record, we are of the view that there are two issues involved, which are to be resolved. Firstly, whether in spite of issuance, proper service and compliance with the notice under section 56 failure to affix the signature on the relevant entries in the order-sheet would render the proceedings illegal, and second, whether issuance of a notice under section 56 for past assessment year conferred proper jurisdiction on the I.T.O. to frame the assessment for the year 1985-86 not to mention the fact that the notice for 1984-85, was issued during the current assessment.
7. As far as the order-sheet is concerned, it is prescribed under the Income Tax Office Manual falling at S.No.39 of IT series where certain forms and documents have been indicated. An order-sheet is intended to be a complete record of the proceedings of the case from the stage of receipt of a return right upto the stage of collection of taxes. All orders directing the issuance of notice like notices under sections 56, 61, 62, 65, 85 etc. have to be recorded on the order-sheet. All the entries have to be serially numbered and dated. However, the consequential effect for failure to maintain the order-sheet in the prescribed manner has not been indicated in the Income Tax Office Manual. It, therefore, appears to be an administrative/procedural requirement, but not a legal requirement as such.
8. There is no definition of the expression `order' in the Ordinance. This only shows that the Legislature did not intend to exclude from their reckoning anything which may fairly be regarded as an order. Under the C.P.C., an order is defined as formal expression of the decision of a Court, other than a decree. The idea behind is simple. A decision must always originate in the mind' of the presiding Judge. A decision is a decision, even if outward expression is not given to it. The order only gives an expression to what is already in the Judge's mind. This formal expression is necessary both as a matter of record and as a matter of communication. But if, for any reason, the facts of issuance, service and compliance with such a notice could not be recorded in the order-sheet or having been recorded, the ITO failed to affix his signature on the order-sheet it would not materially change the legal position, if it can be proved that a notice was validly issued and properly served on the right person/ assessee.
9. The Income Tax assessment proceedings commence with the issuance of a notice generally. The issue or receipt of a notice is not however a foundation for the jurisdiction of the I.T.O. to make an assessment for the liability of the assessee to pay tax. The jurisdiction to (sic) assessee and the liability to pay the tax, are not conditional, on the validity of the notice as such. The liability to pay the tax is founded on section 9 of the Ordinance, which is the charging provision. Section 56 is merely a machinery section. 1f the assessable income of the assessee exceeds the taxable limit, it is his legal duty to file a return under section 55 of the Ordinance. However, if the I.T.O. is of the opinion that a particular assessee is chargeable to tax for any income year, and he should furnish a return of his total income for such a year, then the I.T.O. is empowered under section 56 of the Ordinance to issue a notice under that section in writing requiring the assessee to file a return within 30 days from the date of service of such a notice or by such longer or shorter period as may be specified in the notice. The validity of any notice issued under the Ordinance cannot be called in question after a return in response to such a notice has been filed. This is crystal clear from a plain reading of that proviso, which is reproduced hereunder for the facility of ready reference:--
"154(6). Service of notice--(1)
(2) .........................................................................................................
(3) . .
(4).........................................................................................................
(5) .........................................................................................................
(6) The validity of any notice issued under this Ordinance or the validity of service of any such notice shall not be called in question after the return in response to such notice has been filed or compliance thereto has been made:'
10. In the present case, there is no denying the fact that the notices were issued under section 56 of the Ordinance, on 27-2-1985, for charge year 1984-85 and on 1-2-1987 for the charge year 1985-86 in compliance wherewith returns for these years were filed on 2-4-1985 and 9-6-1987, respectively. The objection of the learned counsel for the respondent that the Assessing Officer's action was coram non judice for failure to sign entry in the order-sheet regarding issuance of notice under section 56 is, therefore, misconceived.
11. In this regard, reliance is placed on a decision of the Patna High Court in the case of Chatturam and others v. C.I.T. Bihar and Orissa, reported as (1946) 14 I T R 695. In this case, notice under sections 22(1) and (2) of the Indian Income Tax Act, 1922 had been issued and served on the appellant prior to the date of notification under section 92(1) of the Indian Finance Act, 1940, which applied to the assessment. It was contended by the appellant that since proper notices had not been issued under subsections (1) and (2) of section 22 of the Indian Income Tax Act, 1922, the assessment which was completed on the 19th March, 1941 was entirely invalid. The High Court held that as a valid notice had been issued and the return was filed by the assessee in compliance therewith, and as the assessment was completed after the Indian Finance Act; 1940 had been applied to that area, it was not open to him to contend that the notice under section 22(2) was invalid.
12. There is another decision of the same High Court in the case of Rajab Bahadar Kamakshya Naraian Singh v C.I.T. Bihar and Orissa, reported as (1946) 14 I T R 673, wherein it was held by their Lordships of the Patna High Court that where the assessee had been served with a notice under section 22(1) and he had filed a return, it was not open to him to object to the assessment merely on the ground that the notice under section 22(1) of the Act was issued irregularly.
13. It is, therefore, abundantly clear that even if there was any defect or irregularity in the notice issued under section 56 of the Ordinance for the two years, it was taken care of; firstly by section 154(6)(ibid) and secondly in the light of the decisions discussed hereinabove. Even otherwise, we have come to the conclusion that there was no material defect as wrongly presumed by the lower appellate authority in the issuance of notices under section 56 for the years under appeals.
14. As far as the notice under section 56 issued in respect of the charge year 1984-85 is concerned it was issued during the relevant current assessment year about which decision of the learned C.I.T.(Appeals) holding that a notice under section 65 of the Ordinance should have been issued is wrong according to the earlier decision of the Tribunal in this regard holding that a notice under section 56 of the Ordinance could only be issued for a current year on the basis of which the learned C.I.T. (Appeals) annulled the assessment for the charge year 1985-86. However, as far as the subsequent year under appeal i.e. 1985-86 is concerned, the notice under section 56 of the Ordinance was issued on 1-2-1987 which was not during the current assessment year but this notice was covered by the decision of the larger Bench of the Tribunal relied upon by the learned D.R. reported as 1990 P T D (Trib.) 260. Therefore the notices issued under section 56 of the Ordinance for both the years under appeals were validity issued conferring proper jurisdiction on the I.T.O. to proceed in the matter to frame the assessments.
15. In view of the above discussion, it is held that the I.T.O. had correctly assumed jurisdiction under section 56 of the Ordinance for both the years and that the learned C.I.T.(A) had wrongly annulled the assessments. The order of the first appellate authority is vacated and that of the I.T.O. restored for both the years under dispute.
16. Consequently, the departmental appeals succeeds.
M.B.A./1189/TAppeals accepted.