(a) Income Tax Ordinance (XXXI of 1979)---

----S.65---Assessment could not be reopened under S. 65(2) unless the Assessing Officer had come into possession of definite information and had obtained the prior approval of Inspecting Assistant Commissioner---Provision of S. 65(4) was not applicable to a case to which S. 65(1)(c) of the Ordinance applied i.e. where total income of the assessee had been assessed under S.59(1) of the Ordinance and no order of assessment had subsequently been made under S. 65 or any other provision of the Ordinance---Assessing Officer had already issued a notice under S. 65 on 28-6-1987 for the same year and then he decided to file the proceedings on 6-6-1988 for this year as well as-other year involved---Filing of proceedings, held, would tantamount to "assessment" and it could be said that an assessment order had been passed on 6-6-1988 after issuance of a notice dated 28-6-1987 and Assessing Officer was deprived of the protection given by the provision under S. 65 (4) read with provision of S. 65(1)(c)---Fresh notice issued on 6-6-1988 in respect of assessment years 1982 83 and 1983-84 thus would tantamount to initiation of fresh proceedings under S. 65(1)(a) of the Ordinance and under the provisions of S. 65(2) of the Ordinance, no proceedings could be initiated unless the two conditions were fulfilled i.e. definite information being in possession of I.T.O. and previous approval of I.A.C. in writing for reopening the assessment---Where no prior approval was obtained from the IA.C. while issuing the notices dated 6-6-1988, issuance of the notices under S.65 for the years 1982-83 and 1983-84 was invalid and assessments for these years were liable to be annulled.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 59---Self-Assessment Scheme (1986-87), paras. 9 & 5---When return is excluded from the Self-Assessment Scheme because of concealment that did not amount to selection of the same for total audit and there was no provision for intimating the assessee about the exclusion of the return from Self Assessment Scheme on account of concealment.

Under the provisions of paragraph 9 of the Self-Assessment Scheme for the year 1986-87, where the department held the positive evidence of concealment, the returns were to fall outside the purview of Self-Assessment Scheme irrespective of the claim for immunity from total and Under the provisions of paragraph 5, the cases were to be selected for total audit through computer ballot etc. and the assessee was to be informed in that regard. However, when a return is excluded from the Self-Assessment Scheme because of concealment that did not amount to selection of the same for total audit and' there is no provision for intimating the assessee for the exclusion of the return from Self-Assessment Scheme on account of concealment.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 19---Annual value of property is chargeable under the head "income from house property' subject to the provisions of Ss.19, 20 & 21 of the Ordinance-- Annual value of the property is deemed to be the sum for which the property could reasonably be expected to let from year to year provided that the A.L.V. was not to be less than the rent payable by the tenant---Annual letting value of the property could not be reduced for investment made by some intermediary.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 19---Income from house property---Contention that same property was being subjected to double assessment--Assessee had been assessed to income from property under S. 19 on his proprietary rights of the property in question whereas the intermediary registered firm who had made investment in the property in question and where lessee had no such proprietary rights---Income of such intermediary from said property would not be chargeable to tax as "income from house property".

(1959) 37 ITR 107 distinguished.

(e) Income-tax---

----Res judicata or estoppel by record, doctrine of---Application.

Since the Assessing Officer is not a Court, the doctrine of res judicata or estoppel by record does not apply to his decisions; a finding or decision of the income-tax authorities in one year may be departed from in a subsequent year. The assessment is final and conclusive between the parties only in relation to the assessment for a particular year for which it is made. No doubt, a decision reached in one year would be a cogent factor in the determination of a similar point in a following year, but it is not to be treated as an estoppel binding upon the same party for all years. If the department wrongly arrived at a certain finding in a past year and the assessee accepted it, or if the department failed to protest against a wrong departure from the regular method of accounting in a prior year, that can give the assessee no claim to have the mistake repeated in a subsequent year in his favour.

Conversely, the assessee may discover that in past years he had paid tax on an erroneous basis or had returned as income that which was not assessable as income at all; such past practice would not prevent him in any later year from making a return on a correct basis. The practice of the tax payer, acquiescing in the claim of revenue, is of little value, when the practice is sought to be put upon a legal footing. Similarly, the department may depart from its existing practice and change its opinion, e.g. regarding the taxability of certain classes of income, and may raise inconsistent contentions in successive cases of different assessees.

Law and Practice of Income Tax by NA. Palkhivala and B.A. Palkhivala, 8th Edn., Vol. I, p.1143; New Jehangir Vakil Mills v. CIT 49 ITR 137 (SC); 15 ITR 246; 5 ITR 279 and 66 ITR 154 (SC) ref.

(f) Income Tax Ordinance (XXXI of 1979)---

----S. 19---C.B.R.Circular No.14 of 1959, dated 10-8-1959, para. 3---Assessed does not have to be the owner of the land to attract the provisions. of S. 19 if the assessee is found to be the owner of the building constructed on such land belonging to other persons.

(1984) 145 ITR 198; (1985) 156 ITR 127 and CIT, Madras v. Madras Cricket Club (1934) ITR 209 ref.

Siraj Khalid for Appellant. Arshad Malik D.R. for Respondent.

Date of hearing: 2nd February, 1991.

ORDER

An individual assessed, deriving income as a partner of two registered firms and from property as well as salary has preferred these four further appeals against an order dated 1-7-1990 recorded by the learned CIT (A) Zone IV, Lahore. The common issue involved in all the four years under appeal is with regard to the property income whereas in the first two years under appeal the assessee has also agitated the reopening of the assessments under section 65 of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance).

2. The facts of the case may be summarised in the following manner. In addition to the share from the registered firms and from salary, which is not in dispute, the assessee derived income from property No.21-Queens Road, Lahore. The assessee was the owner of a plot which was adjoining to the other three plots owned by his brothers. The assessee as well as the three brothers alongwith a minor sister entered into an Iqrarnama on 25-5-1976 whereby it was agreed that a building would be constructed by them and each of the signatories to that agreement was allocated a floor in that building and each signatory was. to contribute the construction cost for that floor. According to' that Iqrarnama Mr. Abdul Nasir and Mr. Abdul Khaliq the two of the four owners of the plots were also minors and Mr. Abdul Hamid, the father of these as well as Fauzia Hameed signed the Iqrarnama on their behalf. The building was constructed and the relevant information regarding the area of land and construction cost etc. was said to be in the following manner:

3. Each floor of this building was leased out to a firm called Plaza Enterprises. The assessee in the present case made an agreement with the said firm on 1-8-1977 whereby the second floor of the building was leased out and the lessee was required to complete certain work in that building and the rent was fixed at Rs.1,500 p.m. w.e.f. 1-8-1977. That firm Plaza Enterprises is said to have rented out the property to some other tenants after carrying out necessary finishing and modifications. This arrangement was said to have been accepted by the Income Tax Department up to the assessment year 198--84. The assessment for the year 1982-83 was completed under section 59(1) of the Ordinance and for the year 1983-84 under section 62 of the Ordinance. The assessing officer received information on 12-1-986 from Survey and Collation Department to the effect that the rent of the said property was Rs.48,000 p.a, and that the basement also belonged to the four co-owners of the property and not to Miss Fauzia Hamid. The assessing officer issued notices under section 65 of the Ordinance for the assessment years 1978-79 to 1983-84 which were served on the assessee through an Inspector on 29-6-1987 and were also dispatched through the registered post which were received by the assessee on 4-4-1987. The assessee disputed the mode of service before the superior departmental officials with the contention that the service through the Inspector was not proper whereas the service through post was acknowledged. However, the issue of limitation of five years was also raised at that time. Hence under the instructions of the RCIT the proceedings were filed by the assessing officer on 6-6-1988 on which date he issued fresh notices for 1982-83 and 1983-84 under section 65 of the Ordinance. In the reassessment proceedings, the assessing officer adopted the A.L.V. of the said property at Rs.48,000 and also added to the assessee's income one-fourth share of the A.L.V. of basement. In the assessment years 1986-87 and 1987-88 the property income was assessed in the same manner as in the assessment years 1982-83 and 1983-84. All these assessments were upheld by the learned CIT (A). The assessee's claim of self-assessment in 1986-87 and 1987-88 was also denied by the departmental officials.

4. The learned representatives of both the parties have been heard and the relevant orders perused. In the appeals for the assessment years 1982-83 and 1983-84, the learned counsel of the assessee strongly attacked the orders of the departmental officials on the issue of reopening of the assessments with the contention that this tantamount to change of opinion and also these were agitated to be invalid since the assessing officer had not obtained any definite information or prior approval while issuing the second notice under section 65 of the Ordinance. The learned counsel of the assessee agitated that the, assessing officer had obtained r. new information while issuing either of the notices under section 65 of the Ordinance as the full facts were available on the assessment record ever since the assessment year 1978-79 when the first assessment of such income was made. It has also been agitated that the assessing officer failed to obtain the prior approval of the 1AC, as required by the provisions of section 65 (2) of the Ordinance, before issuing second notice dated 6-6-1988, the proceeding initiated under the notice dated 28-6-1987 having been filed. At this point the learned D.R. was asked to confirm whether the assessing officer had obtained fresh approval before issuing notices under section 65 of the Ordinance on 6-6-1988. The learned DR confirmed that no such approval had been obtained at this point of time but he stressed that original proceedings had been filed on RCIT's instructions for technical default only. Thus the learned D.R. claimed that there was no need for fresh approval of the IAC in this case.

5. On the quantum of assessment in all the four years under consideration the learned counsel of the assessee strongly agitated that the departmental officials erred in concluding that Miss Fauzia Hamid could not be the owner of the basement of the building as she was not the owner of the land, to any extent, on which the building was constructed. It was argued that Miss Fauzia Hamid was the owner of the basement of the building even though she did not own any part of the land on which the building was constructed. It was also argued that the department had accepted this ownership in the first. year after the' construction of the building i.e. assessment year 1978-79 when the assessment had been completed under section 23(3) of the repealed Income Tax Act. At that time, it was argued the income of the basement had been assessed in the hands of Fauzia Hamid after consideration of the explanations and submissions in that regard.

6. On the issue of ALV of the said second floor of the building, the learned counsel of the assessee argued that the assessing officer was not justified in adopting the same at Rs. 48,000 as M/s. Plaza Enterprises had already been assessed on that ALV and also that this was inconsistent with the ALV adopted in the earlier years.

7. While arguing the appeals for the assessment years 1986-87 and 1987 88, the learned counsel of the assessee strongly agitated that the assessing officer was not justified in denying the assessee's claim of self-assessment scheme. It was argued that the assessee had filed the returns in time and that the assessing officer did not intimate the assessee regarding the exclusion of the return for the assessment year 1986-87 from the self-assessment scheme. It was submitted that the assessing officer issued a combined notice under section 61 of the Ordinance on 15-8-1988 for both these years whereas a letter dated 31-8 -1988 was issued to intimate the assessee of the fact of setting apart of the cases for total audit. The learned DR, however, defended the orders of the departmental officials.

8. I have heard the learned representatives of both the parties and also I have perused the orders of the departmental officials. In the assessment year 1982-83, the assessment had been completed under section 59(1) of the Ordinance and the assessing officer could have reopened the same under section 65(1)(c) of the Ordinance read with section 65(4) of the Ordinance. Under the provisions of section 65(2) of the Ordinance an assessment could not be reopened unless the assessing officer came into possession of definite information and he had obtained the prior approval of the JAC. However, according to section 65(4) of the Ordinance this provision was not applicable to a case to which section 65(1)(c) of the Ordinance applied, i.e. where the total income of an assessee had been assessed under section 59(1) of the Ordinance and no order of assessment had subsequently been made under section 65 or any other provision of the Ordinance. Nevertheless, the assessing officer had already issued a notice under section 65 of the Ordinance on 28-6-1987 for the same year and then he decided to file the proceedings on 6-6-1988 for this year as well as other year involved. The superior Courts have held in a number of cases that the filing of proceedings tantamount to assessment. Thus, it could be said that an assessment order had been passed on 6-6-1988 after issuance of a notice dated 28-6-1987. Thus, the assessing officer was deprived of the protection given by the provisions under section 65(4) read with the provisions of section 65(1)(c). The fresh notices issued on 6-6-1988 in respect of assessment years 1982-83 and 1983-84 thus tantamount to initiation of fresh proceedings under section 65(1)(c) of the Ordinance and under the provisions of subsection. (2) of section 65 of the Ordinance, no proceedings could be' initiated unless the two conditions were fulfilled i.e. definite information being in the possession of the I.T.O. and the previous approval of the I.A.C. in writing for reopening the assessment. Admittedly no prior approval was obtained from the IAC while issuing the notice dated 6-6-1988. Hence the issuance of these notices under section 65 of the Ordinance for the years 1982 83 and 1983-84 are held to be invalid. The assessments for these two years are, therefore, annulled.

9. In the assessment years 1986-87 and 1987-88 the learned counsel of the assessee has pressed the claim of self-assessment scheme but I am not convinced by the same. Under the provisions of paragraph 9 of the self assessment scheme for the year 1986-87, where the department held the positive evidence of concealment, the returns were to fall outside the purview of self-assessment scheme irrespective of the claim for immunity from total audit. Under the provisions of paragraph 5, the cases were to be selected for total audit through computer ballot etc. and the assessee was to be informed in that regard. However, when a return is excluded from the self-assessment scheme because of concealment that did not amount to selection of the same for total audit and there is no provision for intimating the assessee for the exclusion of the return from self-assessment scheme on account of concealment.

10. The next objection of the learned counsel of the assessee was with regard to the rejection of the declared ALV which had been accepted in the past. The assessee declared the ALV of the property at Rs.18,000 on the strength of a lease agreement made with the Plaza Enterprises but the department had estimated the same at Rs.48,000 on the basis of actual rent paid by the occupant of the property. The learned counsel of the assessee has agitated that the department had accepted the declared ALV of Rs. 18,000 in. the past under similar circumstances and could not deviate from -the same. However, the learned counsel of the assessee failed to substantiate this contention with any case-law. On the other hand the provisions of section 19 which govern the estimation of income from house property go against the contention of the assessee. According to section 19 of the Ordinance, the annual value of property is chargeable under the head income from house property' subject to the provisions of sections 19, 20 and 21 of the Ordinance. According to section 19(2)(b) of the Ordinance the annual value of the property is deemed to be the sum for which the property could reasonably be expected to let from year to year provided that the ALV was not to be less than the rent payable by the tenant. It has not been disputed that the actual rent paid by the occupant of the property was Rs.48,000 per annum. The learned counsel could not cite any provision in the law whereby the ALV could be reduced for investment made by the intermediary such as Plaza Enterprises.

11. The next contention raised by the learned counsel of the assessee is' that Plaza Enterprises has already been assessed to the income from the same second floor and this assessment has resulted in double assessment of the second floor which is not permissible under the law. The learned counsel of the assessee has relied on a judgment of the Allahabad High Court reported as (1959) 37 ITR 107 in the case of Joti Parsad Agarwal and others v. Income Tax Officer B-Ward, Batra. In that case an association of persons had been formed under certain scheme for conducting the Sugar business. Out of 30 members of the AOP, 23 members were assessed to income-tax on their share of profits earned by that AOP. Subsequently the assessing officer initiated assessment proceedings and assessed the income of the AOP. The High Court in that case held, inter alia, that once income of the association was charged to income-tax in the hands of the members individually and the assessments of the members remained valid, there could be no fresh assessment of the income in the hands of the association. It was also held that under the provisions of section 3 of the Income Tax Act, 1922, the main charging section, income of certain persons could be charged and that there was no mention of income being charged on persons. Thus, it was held that implicitly the charge was to be levied on incomes only once.

12. I have considered this arguments of the learned counsel and also I have considered the case-law referred to above. In my view this case is not strictly parallel to the circumstances of this case under consideration. In the present case the assessee has been assessed to income from property under the provisions of section 19 of the Ordinance on his proprietary right of the property in question whereas in the case of Plaza Enterprises no such proprietary right was attached to the registered firm. The income of the said Plaza Enterprises, normally would not have been chargeable to tax as income from house property. Thus, it could not be said that the same income was being charged to tax twice.

13. The learned counsel of the assessee also agitated that the department having once accepted the arrangement of lease with Plaza Enterprises could not deviate from that pattern. The learned counsel referred to the principles of estoppel/res judicata in this regard but no further arguments or case-law was addressed in this regard. I have gainfully sought help from an authentic book of Income-tax by NA. Palkhivala and BA. Palkhivala. This issue has been elaborated on page 1143 of the Law and Practice of Income Tax eighth Edition Vol. 1. It may be useful to reproduce the following extracts from that with reference to the case-law cited in the book.

"Res judicata: Estoppel.--Since the A.O. is not a Court, the doctrine or. res judicata or estoppel by record does not apply to his decisions: a finding or decision of the income-tax authorities in one year may be departed from in a subsequent year.(New Jehangir Vakil Mills v. C.I.T. 49 ITR 137 (SC). In IR v. Sneath Handworth MR said, "The assessment is final and conclusive between the parties only in relation to the assessment for a particular year for which it is made. No doubt, a decision reached in one year would be a cogent factor in the determination of a similar point in a following year, but I cannot think that it is to be treated as an estoppel binding upon the same party for all years.".......If the department wrongly arrived at a certain finding in a past year and the assessee accepted it, or if the department failed to protest against a wrong departure from the regular method of accounting in a prior year, that can give the assessee no claim to have the mistake repeated in a subsequent year in his favour (15 ITR 246, 5 ITR 279 and 66 TTR 154(SC)) etc. Conversely, the assessee may discover that in past years he had paid tax on an erroneous basis or had returned as income that which was not assessable as income at all, such past practice would not prevent him in any later year from making a return on a correct basis. Lord Atkin said in Absalom v. Talbot, "The practice of the tax-payer, acquiescing in the claim of Inland Revenue, is of little value, when the practice is sought to be put upon a legal footing." Similarly, the department may depart from its existing practice and change its opinion, e.g. regarding the taxability of certain classes of income, and may raise inconsistent contentions in successive cases of different assessees."

14. On the basis of above extracts I am not convinced by the assessee's contention regarding the application of principles of estoppel/res judicata in the circumstances of this case.

15. Regarding the quantum of ALV, it may suffice that the ALV adopted by the assessing officer at Rs.48,000 on the basis of actual rent paid by the tenant to the Plaza Enterprises has not been 'disputed. Hence I confirm the ALV adopted by the assessing officer with regard to this floor.

16. The last contention of the assessee is with regard to the subjection to tax of one-fourth share of ALV of the basement which was said to be belonging to Mst. Fauzia Hamid. The department has held that Mst. Fauzia Hamid has no proprietary right in the basement and thus charged to tax one -fourth share of the said basement ALV in the hands of this assessee after excluding the income of this basement from the assessment of Mst. Fauzia Hamid. This conclusion has been arrived at by the department on the basis that the land on which the Plaza is constructed is owned by four brothers and the said Mst. Fauzia Hamid had no title to that land whatsoever. The learned counsel of the assessee has strongly agitated this action of the department with the plea that this was against the provisions of the law contained in sections 19 to 21 of the Ordinance. The learned counsel has filed a copy of Circular No.14 of 1959 issued by the Central Board of Revenue on 10-8-1959. The learned counsel has also relied on two judgements of the Indian Court reported as (1984) 145 ITR 198 and (1985) 156 ITR 127.

17. I am quite convinced by the submissions of the learned counsel of the assessee on this issue. An assessee does not have to be the owner of the land to attract the provisions of section 19 of the Ordinance if he is found to be the owner of the building constructed on such land belonging to other persons. The CBR has itself issued instructions in Circular No.14 of 1959 and in ~i paragraph 3 the opening sentence reads as follows:--

"a person may be the owner of the property without being the owner of the land on which the property is built."

The CBR itself has elaborated this position by reference to a dec4on of the Madras High Court in CIT, Madras v. Madras Cricket Club (1934) ITR 209 Similarly the two judgments relied upon by the learned counsel of the assessee support his contention. It may be mentioned that the department has not disputed the assessee's contention that Mst. Fauzia Hamid finance the construction cost of the said basement. The lease agreement between Mst. Fauzia Hamid and Plaza Enterprises has not also been disputed, In these' circumstances I am inclined to accept the assessee's contention on this issue and I direct that the income of the basement may not be assessed in the hands of this assessee.

18. As a result the assessee's appeals for the assessment years 1982-83 and 1983-84 are accepted and the assessments for these two years are annulled whereas in the assessment years 1986-87 and 1987-88 they are partially allowed as indicated above.

M.BA./1405/T Order accordingly.