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

----S. 66-A---Proceedings under S.66-A cannot be taken by the Inspecting Assistant Commissioner in cases where the original order of assessment had been appealed against.

Glaxo Laboratories Ltd. v. Inspecting Assistant Commissioner of Income Tax and others 1992 PTD 932 applied.

(b) Income-tax---

----Reopening of assessment---Change of opinion---Assessment cannot be re opened merely on the basis of change of opinion.

Edulji Dinshaw Limited v. Income Tax Officer PLD 1990 SC 399 applied.

Siraj-ud-Din Khalid for Petitioner. Ch. Muhammad Ishaq for Respondents.

Date of hearing: 31st March, 1993.

JUDGMENT

This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, arises under the following circumstances:--

2. The petitioner, who is a film artiste, filed her return of income for the assessment year 1988-89 showing her assessable income as Rs.40,000. The declared version was not accepted by the Income-tax Officer, who served the petitioner with a notice under section 58(1) of the Income Tax Ordinance, 1979, in response to which she filed her wealth statement, It is claimed by the petitioner that this wealth statement was revised on 26th February, 1991. This was followed by another notice on 8th May, 1991 in which the petitioner was asked to produce evidence to explain the income of Rs.24,00,000 which had been paid by her to her brother and with regard to which a civil suit had also been filed by her.

3. From the record, it appears that on 27-5-1991, the Income-tax Officer proposed to levy tax on the aforesaid sum of Rs.24,00,000, treating it to be her unexplained income. He sent this proposal for approval to the Inspecting Assistant Commissioner Income Tax, who on 28th May, 1991 declined to grant the approval observing that the matter related to assessment year 1989-90. Thereafter the Income-tax Officer by his order dated 28th May, 1991, completed the proceedings and assessed the petitioner's income at Rs.3,84,000.

4. Aggrieved by that order the petitioner filed an appeal before the Appellate Assistant Commissioner of Income Tax, which was partly accepted on 30th October, 1991, and her income was reduced from Rs.3,84,000 to Rs.3,00,000. This order of the Appellate Assistant Commissioner, was not challenged any further and as such became final.

5. On 11th January, 1992, the Inspecting Assistant Commissioner of Income-tax, respondent No.l, herein, served the petitioner with a notice under section 66-A of the Income Tax Ordinance, 1979, alleging that the order passed by the Income-tax Officer on 28th May, 1991, relating to assessment year 1988-89 was erroneous and prejudicial to the interest of Public Revenue and as such the petitioner should show cause as to why her assessment be not reopened. The petitioner has by filing this petition under Article 199 of the Constitution of Islamic Republic of Pakistan; 1973, assailed the aforesaid notice.

6. The learned counsel for the petitioner in support of this petition has raised the following contentions:--

(i)That as admittedly the order of assessment passed by the Income-tax Officer, on 28th May, 1991 was subject to appeal by the petitioner which was partly accepted by the Appellate Assistant Commissioner of Income Tax on 31st December, 1991, the order of Income-tax Officer had merged into the appellate order which alone remained in the field and as such section 66-A of the Income Tax Ordinance had no applicability. Reliance in this respect was placed by the learned counsel on Glaxo Laboratories Ltd, v. Inspecting Assistant Commissioner of Income Tax and others 1992 PTD 932.

(ii)That the petitioner had in her revised wealth statement shown the amount of Rs.24,00,000 as a loan advanced to her brother which fact was duly noticed at the time of assessment by the Income-tax Officer the Inspecting Assistant Commissioner of Income-tax and also by the Income Tax Appellate Tribunal while deciding the appeal of the appellant. In these circumstances, section 66-A of the Income Ta) Ordinance, 1979, could not be invoked merely on the ground of change in opinion by the assessing authorities.

7. Learned counsel for the respondent, on the other hand, has submitted that the petitioner did not file any revised statement of wealth and the allegations in this behalf are not correct. On a perusal of the record, however, it was found that a revised statement signed by the petitioner does exist on the record of the department. In the submission of the learned counsel for the respondent, this document has been subsequently introduced by making some interpolation in the record.

8. Both the contentions raised by the learned counsel for the petitioner as noted above have force. It is not disputed by the respondents that the order of assessment dated 27th May, 1991, of the Income-tax Officer was subjecte0 to appeal before the Appellate Assistant Commissioner of Income Tax, which was partly allowed on 31st December, 1991 and the income-tax of the petitioner was reduced from Rs.3,84,000 to Rs.3,00,000. The original order having been appealed against merged into the order of the Appellate Assistant Commissioner of Income Tax, which alone remained in the field. Section 66-A of the Income Tax Ordinance, 1979, as originally enacted, empowered the Income Tax Assistant Commissioner to exercise jurisdiction in respect of order passed by the Income-tax Officer. No such authority, however, vested in him as regards the order of the Appellate Authority. The Supreme Court of Pakistan in Glaxo Laboratories Ltd. v. Inspecting Assistant Commissioner of Income-tax and others 1992 PTD 932 has been pleased to hold that proceedings under section 66-A of the Income Tax Ordinance, 1979, cannot be taken by the Inspecting Assistant Commissioner of Income Tax in cases where the original order of assessment had been appealed against. The law declared by the Supreme Court applies with full force to the facts of the present case and as such the notice issued by the respondent under section 66-A is clearly without any jurisdiction.

9. It may be noted that subsequently by Finance Act, 1991, section 66-A of the Ordinance was amended so as to empower re-opening of cases even where the orders in appeal and revision have been passed. This amendment however, has no application in the present case which pertains to the assessment year 1988-89 being not retrospective in nature as held by the Supreme Court in Glaxo Laboratories Ltd. case supra.

10. There is also merit in the other contention raised by the learned counsel for the petitioner. The question as to whether or not tax should be levied on the sum of Rs.24,00,000 advanced by the petitioner as a loan to her brother treating it to be unexplained income in her hand, was a live issue both before the Income-tax Officer and the Inspecting Assistant Commissioner of Income-tax at the time of the assessment. It is not disputed by the learned counsel for the respondents that the Income Tax Officer had in fact proposed that this amount be assessed but the Inspecting Assistant Commissioner refused to accord the necessary sanction on the ground that this amount related to assessment year 1989-90 and not 1988-89.

Furthermore, from a perusal of the order of the Appellate Assistant Commissioner of Income-tax dated 31st December, 1991 it is evident that he had while deciding the appeal, taken into consideration the assets and the liabilities of the petitioner as declared in her wealth statement, a photostat of which was placed before him, which included a sum of Rs.24,00,000 as loan to her brother. This order of the Income Tax Appellate Tribunal was not challenged any further and as such became final. In this view of the matter, the rule laid down by the Supreme Court in Edulji Dinshaw Limited v. Income-tax Officer P L D 1990 SC 399, would become applicable and merely on the basis of change of opinion, the assessment could not be reopened.

11. The learned counsel for the respondents, however, contended that as a sum of Rs.24,00,000 has escaped assessment, the discretion vested in this Court under Article 199 of the Constitution should not be exercised in favour of the petitioner. This contention of the learned counsel cannot be accepted. The only effect of the acceptance of this petition would be that the assessment for the year 1988-89 cannot be reopened. But this would not deprive the respondents of their right to take appropriate action, if otherwise permissible under the law for subsequent period.

With the observations made above, this petition is allowed, with no orders as to costs.

M.BA./A-407/L Order accordingly.