1994 P T D (Trib.) 128

[Income-tax Appellate Tribunal Pakistan]

Before A.A. Zuberi, Accountant Member and Nasim Sikandar, Judicial Member

I. T. As. Nos.1031/LB and 1032/LB of 1990-91.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 65, 59 & 91---Change of opinion---Where arises---When an order had been passed consciously by taking into consideration the facts and material relating to controversy and subsequently on the same facts a different view was taken and notice under S.65 was issued, that notice amounted to have been issued on the basis of change of opinion---Where there was no definite or additional information which could be said as not havi5, been considered while accepting the return under Self-Assessment Scheme and the succeeding Assessing Officer in fact had used the same material which had already been considered by his predecessor, issuing of notice by succeeding Assessing Officer under S.65 of the Ordinance was without lawful authority and the superstructure thereon was illegal, with the consequence that assessment framed in pursuance thereof was annulled and imposition of penalty under S.91, was cancelled.

Pakistan Oil Mill's case 1969 SCMR 175 fol.

Jenning Private School's case 1990 PTD 873; 1991 PTD 217; 1989 PTD 1010;1986 PTD (Trib.) 831 and 1983 PTD (Trib.) 278 ref.

Zia Ullah Kiyani and Kh. M. Asghar for Appellants.

Javed Tahir Butt, DR for Respondent.

ORDER

AA. ZUBERI (ACCOUNTANT MEMBER): --These two appeals have been filed at the instance of an `individual' who is a vendor of chemicals. The appeal assails order, dated 29th January, 1991 passed by .the learned Commissioner (Appeals) Zone IV, Lahore in respect of the assessment year 1987-88 against order passed under section 65 of the Ordinance. Another appeal assail penalty imposed under section 91 for the same assessment year.

2. Mr. Zia Ullah Kiyani, the learned counsel for the appellant explained that return of income was originally filed declaring income at Rs.3,60,000 and claiming immunity. The assessing officer, before accepting the return under SAS, issued a notice on 14th November, 1987 calling for wealth statement which was duly filed. Another notice was issued by the assessing officer on 20th May, 1987 asking for details of investment etc. These also were supplied. A third notice, dated 4th February, 1988 proposed value at Rs.8,00,000 for a shop purchased by the Appellant for a declared value of Rs.2,20,000. The higher valuation was proposed on the basis of Rs.2.5 million found to have been declared for a shop measuring 3 Marlas in some other case. The shop of the Appellant measured 1 Marla and 6 sq. ft. A detailed reply was furnished on 10th February, 1988 distinguishing the so-called identical shop cited by the assessing officer and referring to more identical cases in support of the declared value. The assessing officer then raised certain queries as respects the business income vide letter, dated 1st July, 1988 but finally framed the assessment at Rs.3,60,000 accepting the return under section 59(1) of the Ordinance.

3. The learned counsel Mr. Kiyani vociferrously expressed the view that although the assessment was completed under section 59(1) of the Ordinance, it was not a result of mechanical process but the assessing officer had raised objections and sought their clarifications before he accepted the income as per return and the position as per wealth statement wherein the value of the shop was duly declared at Rs.2,20,000. Both of these were accepted by the assessing officer who felt satisfied with the explanation offered and the proof tendered by the appellant. Therefore, the appellant was surprised, the learned counsel continued, when the assessing officer issued notice under section 65 of the Ordinance 22nd May, 1987 followed by notice under section 61 etc. Against this protest was raised by the appellant, though return was filed "as before" and statutory notices complied with though always protest was voiced against the validity of and justification for additional assessment proceedings under section 65 of the Ordinance. During the proceedings, the assessing officer (vide letter dated 27th August, 1987) once again proposed to enhance the value of the shop from the declared Rs.2,20,000 to Rs.8,00,000. This time to the surprise of the appellant, the assessing officer rejected the same explanations, which were earlier accepted by his predecessor. He finally framed the assessment at Rs.9,40,000 which comprised of business income at Rs.3,60,000 (same as declared and assessed earlier) but an amount of Rs.5,80,000 was deemed as income by resort to section 13(1)(d) of the Ordinance as allegedly unexplained income. This the learned Commissioner confirmed.

4. The learned counsel insisted that once having proposed the value of the shop at Rs.8,00,000 on 4th February, 1988 and then accepting the declared value at Rs.2,20,000 clearly meant that the assessing officer felt satisfied with the explanation offered in this behalf to which due consideration was given by him. Therefore, the initiation of proceedings by resort to section 65 of the Ordinance was unwarranted and amounted to change of opinion not permissible in law. In this connection, the learned counsel placed heavy reliance on Karachi High Court decision in re: Jenning Private School 1990 PTD 873 where also the assessment though framed under section 59(1) of the, Ordinance was held to be after application of mind. As respects change of opinion, the learned counsel referred to 1991 P T D 217, 1989 P T D 1010, 1986 P T D (Trib.) 831 and 1983 P T D (Trib.) 278.

5. It is very much true that the facts in the present case have a striking resemblance to those obtaining in Jenning's Private School 1990 P T D 873 inasmuch as in both of these assessments were framed under section 59(1)/SAS after summoning certain information and considering the material brought on record but subsequently additional assessments were made by invoking section 65 of the Ordinance. The ruling by the learned Judges of the Karachi High Court holding additional assessment proceedings to be without lawful authority and of no legal effect in the above case is in harmony with the verdict by the Supreme Court of Pakistan in an authoritative judgment in re: Pakistan Oil Mills reported as 1969 S C M R 175 where the law was enunciated as under:--

"---in our view `if an order has been passed consciously by taking into consideration the facts and material relating to the controversy, and subsequently on the same facts a different view is taken and notice under section 65 is issued, then it will amount to have been issued on the basis of change of opinion'. But where no conscious order has been passed by application of mind and the assessment seems to have been framed mechanically in a routine manner accepting the accounts as filed by the assessee and subsequently if any information is received, then on that basis the assessing officer is entitled to initiate action under section 65 of the Income-tax Ordinance. Considering from this point of view we find that the action of the assessing officer is not without jurisdiction."

6. This authoritative pronouncement by the highest judicial forum of the realm has been a source of consistent guidance for the learned Judges of the superior Courts of Pakistan who adhered to the view that change of opinion arises when there exists an opinion already expressed by an assessing officer in regard to the controversy or matter under consideration and that change of opinion is not a valid basis for the successor to initiate additional assessment proceedings holding the dispensation of the predecessor as unfair or incorrect. There are a chain of decisions affirming this view, the latest among these being 1989 P T D 1010 in re: M.R. Sons where the learned Judges of the Karachi High Court relied on yet another decision by the Supreme Court of Pakistan by quoting as:--

"Once all the facts have been fully disclosed by the assessee and considered by the Income-tax Authorities and the assessment have been consciously completed, and no new fact has been discovered there can be no scope for interference with these concluded transactions under the provisions of section 65 of the Ordinance on the ground that the income chargeable to tax under the Ordinance has escaped assessment or has been under assessed, etc. in the meaning of clause (a) or (b) of subsection (1) of section 65 of the Ordinance. On the glaring facts and circumstances of this case the mischief section 65 of the Ordinance was not attracted at all so as to call for the issuance of the impugned notices against the appellant-company, not to speak of passing the assessment orders, dated 26th December, 1982 which, however, have been already declared as nullity in law by the order of this Court, dated 23rd December, 1982, for the reasons stated earlier."

7. The learned Judge finally declared the notices issued on mere change of opinion as without authority.

8. In the case before us also there was no definite or additional information which could be said as not having been considered while accepting the return under SAS and the succeeding assessing officer in fact used the same material has had already been considered by his predecessor, a fact which is manifest by his having proposed the same value for the shop as was originally suggested by his predecessor but later abandoned. Therefore, we feel no hesitation in declaring that the notice issued by assessing officer on 22nd May, 1987 under section 65 of the Ordinance was without lawful authority and the superstructure thereon illegal, with the natural consequence that the assessment framed in pursuance thereof is annulled and order imposing penalty under section 91 cancelled.

M.B.A./6/TTOrder accordingly.