TAQI MUHAMMAD VS MUHAMMAD AFZAL KHAN, 1993 PTD-LAHORE-HIGH-COURT-LAHORE 801 (1993)

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

----Ss. 65 & 61---Notice under S.65 for reopening the assessment ---Assessee, on receipt of the notice, filed a representation before Regional Commissioner of Income-tax praying that the Income-tax Officer be directed to drop the proceedings---Regional Commissioner sent the representation for necessary action to the Commissioner of Income-tax, who after examining the matter, took the view that notice to assessee under S.65 was not justified---Regional Commissioner, however, did not agree with the Commissioner and observed that notice under S.65 was validly issued ---Assessee's contention was that as the Commissioner had directed the Income-tax Officer to drop the proceedings under S.65, Regional Commissioner had no jurisdiction to set aside that order or direct that the proceedings be continued---Held no revision at all having been filed by the assessee before the Commissioner but only a representation was made to the Regional Commissioner who forwarded it to the Commissioner of Income-tax, Regional Commissioner to whom 'the representation was addressed being an officer higher than the Commissioner was certainly entitled to interfere.

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

----Ss. 65 & 61---Notice under S.65 for reopening of assessment ---Assessee, against such notice made a representation to the Regional Commissioner who observed that the information on the basis of which the assessment was reopened by the Income-tax Officer that the two properties had been undervalued was not available with the Income-tax officer when the assessment was originally made and came into his possession subsequently-- Order of the Income-tax Officer also did not show that he had applied his conscious mind to the valuation of properties---Held, in such a situation the principle that mere change of opinion of the assessing authority will not justify reopening the assessment under S.65 would be very much applicable.

Commissioner of Income-tax, Zone-D, Karachi and others v, Jennings Private School 1993 S C M R 96 applied.

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

----S. 65---Constitution of. Pakistan (1973),.Art.199---Notice under S.65 for reopening the assessment on the ground that properties purchased by the assessee were undervalued by him---Constitutional petition---Department's 'report to the Constitutional petition showed that the assertion regarding the under valuation of the properties was incorrect---Held, if that was so, it was open to the assessee to demonstrate the fact before the Income-tax Officer and to satisfy him that the properties in question were not undervalued--- No interference was, however, called for ' in the exercise of High Court's Constitutional jurisdiction.

Dr. Ilyas War for Petitioner. Muhammad Ilyas Khan for Respondents.

Date of hearing: 18th April, 1993.

JUDGMENT

This petition under Article 199 of the Constitution of Islamic Republic of Pakistan, 1973, calls in question the notice issued by the ITO under section 65 of the Income Tax Ordinance, 1979 on 19-2-1992.

2. The dispute in this case relates to the assessment year 1986-87. The petitioner filed his return of income for this year under the Self-Assessment Scheme which was accepted by the Department without detailed scrutiny on 8-12-1986. However, on 19-2-1992, respondent No.2 issued a notice under section 65 of the Income Tax Ordinance, 1979 for reopening the assessment. On the receipt of this notice, the petitioner approached the Regional Commissioner of Income-tax by filing a representation on 28-3-1991 praying that the Income-tax Officer be directed to drop the proceedings. The Regional Commissioner sent this representation for necessary action to the commissioner of Income-tax, on 30-3-1991. The Commissioner of Income Tax, after examining the matter, took the view that as there was no fresh material on the basis of which action under section 65 of the Ordinance could be taken, there was no justification for reopening the assessment. The Commissioner consequently directed the ITO to drop the proceedings under section 65 of the Ordinance vide his order dated 24-4-1991. A copy of this order was also endorsed to the Regional Commissioner of Income-tax, who on 9-5-1991 did not agree with the Commissioner and observed that the notice under section 65 had been validly issued by the ITO who was directed to proceed further: Therefore, the notice issued by respondent No.2 has been assailed in this petition.

3. Learned counsel for the petitioner, in support of this petition, has raised the following contentions:--

(1) that as the Commissioner of Income-tax has on 24-4-1991 directed theIncome-tax Officer to drop the proceedings under section 65 of the Income Tax Ordinance, 1979 and the Regional Commissioner of income-tax had no jurisdiction to set aside that order or to direct that the proceedings be continued;

(2) that there was no fresh material available with respondent No.2 justifying action under section 65 of the Ordinance and the impugned notice has resulted from mere change of opinion.

4. Learned counsel for the respondents on the other hand, has pointed out that the order of the Commissioner of Income-tax w4s-passed by him on the administrative side and Regional Commissioner of Income-tax to whom he was subordinate could have interfered with it. In reply to the second contention raised by learned counsel for the petitioner, learned counsel for the respondents has urged that the Income-tax Officer, while completing the assessment under the Self-Assessment Scheme, did not apply his conscious mind to the valuation of the two properties bearing Nos.16-A, Sher Shah Block, New Garden Town, Lahore and 60-A, Ahmad Block, New Garden Town, Lahore mentioned in the Wealth Statement and after learning that the properties have been undervalued, the Income-tax Officer was justified in proceeding under section 65 of the Income Tax Ordinance, 1979. Reliance has been placed by learned counsel for the respondents upon Commissioner of Income-tax, Zone D, Karachi and others v. Jennings Private School 1993 SCMR 96.

5. Having heard learned counsel for the parties and perused the record, I am of the view that both the contentions of learned counsel for the petitioner are without any merit.

6. Although it is correct that the Commissioner of Income-tax on - a representation sent to him by the Regional Commissioner of Income-tax, had by his letter dated 24-4-1991, opined that the assessment could not be reopened as there was no fresh material available with the Income-tax Officer but learned counsel for the petitioner is not in a position to point out as under what provision such an order could be passed by the Commissioner of Income-tax. He has tried to rely upon section 138 of the Ordinance, which on the face of it has no applicability as it confers upon the Commissioner of Income-tax power to revise any order passed by any authority subordinate to him. Admittedly, in the present case, there was order passed by Income-taut officer who had only issued a notice to the petitioner.

7. Be that as it may, it stands admitted that no revision at all was filed by the petitioner before the Commissioner but only a representation was made to the Regional Commissioner of Income-tax who forwarded it to the Commissioner of Income-tax. That beings so, the Regional Commissioner, to whom the representation was addressed being an officer higher than the Commissioner of Income-tax, was certainly entitled to interfere.

8. As regards the other contention of learned counsel for the petitioner, suffice it to say that the Regional Commissioner, while disposing of the representation made by the petitioner, has observed that information on the basis of which the assessment was reopened by the Income-tax Officer that the two properties had been undervalued was not available with the Income-tax Officer when the assessment was originally made and came into his possession subsequently. There is also nothing in the order of the Income-tax Officer to show that he had applied his conscious mind to the valuation of the properties. That being so, the rule laid down in Commissioner of Income-tax Zone D, Karachi and others v. Jennings Private School 1993 S C M R 96, becomes fully applicable.

9. ' In the end, learned counsel for the petitioner has tried to argue that even on the basis of the material which has been annexed by the respondent' alongwith the report to this petition, it is evident that the assertion regarding the under valuation of the properties is incorrect. If that be so, it is open to the petitioner to demonstrate this fact before the Income-tax Officer and to satisfy him that the properties in question were not undervalued. No interference is, however, called for in the exercise of this Court's Constitutional jurisdiction at this stage.

In these circumstances, the petition fails and is dismissed, leaving the parties to bear their own costs.

M.BA./A-391/L Petition dismissed.