I.TAS. NOS. 1909/KB AND 1910/KB OF 1992-93 VS I.TAS. NOS. 1909/KB AND 1910/KB OF 1992-93
1994 P T D (Trib.) 1336
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Judicial Member and Abdul Malik,
Accountant Member
I.TAs. Nos. 1909/KB and 1910/KB of 1992-93, decided on 06/01/1994.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 66---Interpretation of S.66, Income Tax Ordinance, 1979---Provisions of S.66 are to be read with the relevant provisions of the Income Tax Ordinance conferring jurisdiction on the various authorities created under the Ordinance---Section 66 purports to lift the bar of limitation only and does not enlarge the jurisdiction on the Appellate Authorities or the Assessing Authority under the relevant sections---Findings or directions referred to in S.66, are, therefore, confined to- the assessment which is subject of appeal before the Appellate Authority and to the relevant year under appeal and the parties to the proceedings: -[Laxmi Parkash v. CIT (1963) 48 ITR 705; Khader Ismail v. I.T.O. (1963) 47 ITR 16; K. Simrathmull v. Addl. Income Tax Officer, Octacamund (1959) 36 ITR 41 overruled].
47 ITR 16; (1993) 140 ITR 206; (1970) 77 ITR 456; V.R. Indurkar and others v. Pravinchandra Memchand (1958) 34 ITR 397; Pt. Hazarilal v. ITO (1960) 39 ITR 265 and I.T.O. v. Murlidhar Bhagwandas (1964) 52 ITR 335 ref.
Laxmi Parkash v. CIT (1963) 48 ITR 705; Khader Ismail v. I.T.O. (1963) 47 ITR 16; K. Simrathmull v. Addl. Income Tax Officer, Octacamund (1959) 36 ITR 41 overruled.
(b) Income Tax ordinance (XXXI of 1979)---
----Ss.66, 64 & 65---Re-assessment---Lifting the bar of limitation ---Essentials--
Exception.
In order to attract the provisions of section 66 of the Income Tax Ordinance, 1979 for the purpose of lifting the bar of limitation there should be definite and conclusive finding of the Appellate Authority in consequence or result whereof the Income Tax Officer may merely complete the assessment. However, if the matter is incidentally considered by the Appellate Authority and the, question is left open to the discretion of Income Tax Officer or it is a matter of independent enquiry of the Income Tax Officer then the assessment sought to made would be deemed to be in consequence of the finding or direction of the Appellate Authority. In such circumstances the provisions of section 66 shall not be available to the 'department for the purpose of lifting the bar of limitation provided in sections 64 and 65 of the Ordinance.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss.66 & 65---Re-assessment---Limitation---Income Tax Officer had initiated reassessment proceedings against the assessee as a result of his independent enquiry and not in consequence of or to give effect to any finding or direction of Income Tax Appellate Tribunal---Period of limitation, held, was not saved under S.66 of the Ordinance---Notice under S.65 of the Ordinance having admittedly been issued after the period of limitation provided under S.65(3) was clearly barred by time with the result that the entire proceedings were without jurisdiction and thus consequent assessment orders framed were ordered to be quashed.
Muhammad Farid for Appellant.
Muhammad Nawaz, D.R. for Respondent.
Date of hearing: 6th January, 1994.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (JUDICIAL MEMBER).---The above appeals are directed against the order, dated, 1-11-1992 by the learned CIT(A) ITAs. Nos.1872 and 1873 of 1992 relating to the assessment years 1974-75 and 1975-76.
2. The appellant is an individual deriving income from retainership from M/s. M D C ,U.S.A. and Aircraft Manufacturing Company in the capacity of sales representative. The impugned orders have been completed under section 63/65/66 of the Income Tax Ordinance, 1979 and the relevant facts for the purpose of these appeals in both the assessment years are common. The assessing officer has passed elaborate order in the assessment year 1974-75 and has followed the same in the assessment year 1975-76, therefore, the common facts as contained in the assessment order for the assessment year 1974-75 are reproduced below.
3. According to the facts as contained in the assessment order for the assessment year 1974-75 the agency held by the appellant was governed by an agreement, dated 1-4-1970 with M/s. M....D....C....(hereinafter referred to as M.D.C.). According to the terms of this agreement the appellant was entitled to receive U.S. Dollars one lac as sales commission on sale of each aircraft. He was also entitled to a monthly retainer fee of U.S. Dollars one thousand. In October, 1972 the P.IA. decided to purchase wide bodied aircraft for expending their fleet. The appellant succeeded in selling the idea of utilising DC-10 aircraft to. the P.IA. The P.IA. agreed to buy three DC-10 aircrafts from M/s. D... ..A... ...C... ...The P.IA. however, under the instructions of the Government issued the letter of intent on the condition that any commission payable to DA.C. agent in Pakistan shall be reduced from the cost of each aircraft. The appellant agreed to this stipulation. According to the assessing officer it transpired that the appellant agreed to this stipulation because there was another secret agreement between the appellant and the suppliers of the aircraft, which provided a payment of U.S. Dollars 500,000 per aircraft to the appellant. The appellant received commission on the basis of this contract which was allegedly deposited admittedly in the secret bank account of appellant in Switzerland. The assessing officer has further observed that scrutiny of record revealed that the appellant neither declared the commission received from the supplier of DC-10 nor declared his deposits in the Swiss Bank Account in his wealth statement. In fact at no stage the appellant divulged to the department any deal or secret contract referred to above.
4. It was only after the imposition of Martial Law in 1977 when the authorities started looking into the past deals of purchase of aircraft by P.I.A., that the facts came on the surface that the appellant was in fact the agent who had arranged the sale of DC-10 and had received commission as stated above but foreign exchange was neither declared nor brought to Pakistan as required by Foreign Exchange Regulations. The authorities concerned, therefore, initiated criminal proceedings against the appellant for breach of the Foreign Exchange Regulations Act, 1947. The appellant thereafter stated before the F.IA. official that he had parted with 50% of his commission and paid the same to Mr. A... ..A... ...B... ...and Mr. A... ...M... ...as according to him he had succeeded to arrange the deal through the help and influence of these two persons. On the basis of this information the F.IA. initiated proceedings against Mr. A... ..A... ...B... ...and A... ...M....under the Foreign Exchange Regulation Act as well as under sections 162 and 163, P.P.C. in the Court of Special Judge, Central Karachi. On the basis of same information notices under section 65 were also issued to tax the commission income. Initially notice under section 65 were issued in the name of an A.O.P. consisting of the appellant, Mr. A... ..A... ...B... ...and Mr. A... ...M... ..According to assessing officer the appellant appeared before the I.T.O. and in his statement under section 148 he reitereated that he has received only 50% of the commission while the other 50% was received by Mr. A... ..A:.. ...B... ...and Mr. A... ...M......The appellant also offered to pay tax on his alleged share of commission receipt in the assessment year 1979-80 on the ground that earlier he could not repatriate this amount from Swiss Bank. 50% of the commission received by the appellant was thus subjected to tax in the assessment years 1979-80 and 1980-81. A perusal of record further shows that notices under section 65 were issued in respect of assessment years 1974-75 and 1975-76 as well and after inclusion of 50%; of the commission income in the assessment years 1979-80 and 1980-81 the proceedings initiated under section 65 of the Income Tax Ordinance, 1979 in respect of assessment years 1974-75 and 1975-76 were filed vide order, dated 7-6-1982. On the basis of statement of the appellant under section 148 proceedings under section 65 were initiated against A.O.P. consisting of Mr. A... .:A... ...B... ...and Mr. A... ...M... ...As Mr. A... ...M...was not present in Pakistan the notices were served on Mr. A .A .B who was in jail undergoing the sentence passed against him by a Summary Military Court for violation of Foreign Exchange Regulations. Mr. A... ..A... ...B... ...did not file any return under section 65 and denied any knowledge or association with the deal alleged by the appellant. Ultimately after lengthy proceedings ex parte assessments were completed in respect of A.O.P. consisting of Mr. A... ..A... ...B... ...and Mr. A....M....whereby an income of Rs.49.,70,000 was charged to tax in the assessment year 1974-75 and Rs.23,35,900 in the assessment year 1975-76, Mr. A .A ..B filed an appeal against these two assessments before the CIT(A), which were dismissed. Mr. A... ...A... ...B... ...filed second appeal before Income Tax Appellate Tribunal and the assessment orders were set aside vide order, dated 16-4-1989 in ITAs Nos. 1688 and 1689/KB of 1986-87. On receiving the order of this Tribunal in the case of alleged A.O.P. consisting of Mr. A... ..A... ...B... ...and Mr. A... ...M... ..., the assessing officer formed view that this Tribunal has securtinized the entire gamut of the evidence and facts available on record and has made pertinent observations as to whether there was any evidence of an A.O.P. consisting of Mr. A..: ...A... ...B... ....and Mr. A... ...M... ...and whether any income accrued to such A.O.P. According to assessing officer this Tribunal gave specific findings on three major issues involved in the case as follows:
(1) Whether there was in fact any A.O.P. consisting of Mr. A... ..A... ...B... ...and A.....M... ...?
(2) Whether there was any evidence that Mr. A... ..A... ...B... ...and Mr. A... ...M... ...earned the income which was assessed in their hands?
(3) To whom did the income emanating this commission from the sale of the aircraft by M/s. DA.C. accrue and belong?
5. The assessing officer has further observed that the Tribunal has given finding specifically on the first two issues to the effect that there was no such A.O.P. consisting of Mr. A... ..A... ...B and Mr. A... ...M... ...and further there is no evidence that the alleged income actually accrued to the alleged A.O.P. According to the assessing officer these specific findings raised the third issue as to whom did the income accrue for the purpose of charging it to tax. The' assessing officer further came to the conclusion that the judgment of this Tribunal clearly gives rise to a situation where section 66 of the Income Tax Ordinance, 1979 applied. After citing section 66 of the Income Tax Ordinance, 1979 the assessing officer observed that the scrutiny of record showed that for the assessment years 1974-75 and 1975-76 the appellant did not declare the commission accrued to him which was received by him. He further observed that it was evident from the record that the commission receipts deposited by the appellant in the foreign banks were not declared by him in his return of income or in his wealth statement for the two years. According to the assessing officer the provisions of section 65 attracted to the facts of the case, with further observation that the department had in good faith accepted the deposition of the appellant in respect of his liability to tax during the assessment year 1979-80 which assessment was duly framed but only on part of the income. The assessing' officer further observed that the other Dart was evaded by the assessee. The finding of the assessing officer whereby the provision contained in section 66(2) of the Income Tax Ordinance, 1979 has been made applicable is very pertinent and has been main target of attack by the learned counsel for the appellant before us and, therefore, the relevant finding is reproduced below:--
"Had there been no order under section 135 by the Honourable Income Tax Appellate Tribunal in the case of Mr. A...A....B....and Mr. A....M....as mentioned above, the assessment of this commission income would have escaped assessment beyond retrieve because of the limitation under section 65(3). However, if the assessment is framed to give effect to the findings of Honourable Tribunal in the above mentioned order, the limitation is saved by virtue of section 66 quoted above."
6. From the perusal of the assessment order it appears that the assessing officer in spite of giving the above finding entertained some doubts about the applicability of section 66 and, therefore, in his own words, "to be doubly sure and to afford the assessee an opportunity to explain and realize his position he was summoned under section 148 and his statement was recorded on oath on 21-6-1989". After recording statement of the appellant the assessing officer issued a notice under section 65 read with section 66 after obtaining approval of the IA.C. in reply to the notice under section 65 read with section 66 of the Income Tax Ordinance, 1979 the A.R. of the appellant raised the objection vide letter, dated 27-6-1989 which reads as follows:
"That further Your Honours' kind indulgence is also invited to the proviso to section 65 of the Income Tax Ordinance, 1979 added vide Finance Act, 1987, according to which the period of 10 years has been substituted with the words `5' years and thus Your Honour have no jurisdiction to issue notice under section 65 of the Income Tax Ordinance, 1979 for the assessment years 1974-75,1975-76."
7. The assessing officer repelled the contention for the reason that the period of limitation provided in section 65(3) was not applicable because the assessments were being made to give effect to the findings of Income Tax Appellate Tribunal. In support of his finding the assessing officer placed reliance on three judgments from Indian jurisdiction. The relevant finding of the assessing officer is reproduced below:
"In the case reported as 47 TTR 16 the Honourable Madras High Court held as under: .
`The word `finding' in the proviso to section 34(3) must be given a wide significance so as to include not only findings necessary for the disposal of the appeal but also findings which are incidental to it. It will also apply to cases where it is held that the income in question was not received during the year with which the appellate authority was concerned. If, in pursuance of such a finding, the Income Tax Officer proceeds to investigate afresh as to in which year the income was received the action of the I.T.O. would still be the result of or the logical consequence of the finding arrived at for the purpose of the disposal of the appeal and the proviso to section 34(3) would apply to such a case'."
In another case reported as (1983) 140 ITR 206 the Hon'ble Madhya Pradesh High Court held as under:--
"Section 150 of the Income Tax Act, 1961, is an exception to and overrides the provisions of sections 149 and. 151. It starts with a non obstante clause `notwithstanding anything contained in section 149. Hence, when a notice under section 148 is issued at any time for the purposes for making an assessment or reassessment in consequence of or to give effect to any finding or direction contained in an appellate order, the provisions of section 149, as a whole will not be applicable, subsection (2) of section 149, which makes the provisions of subsection (1) subject to the provisions of section 151, will also not be applicable in view of the clear language of section 150(1). Therefore, it is not necessary for the ITO to obtain the sanction either of the Commissioner or of the CBDT under section 151 prior to the issue of a notice under section 148 of the Act where the case is covered by section 150(1)."
In still another case reported as (1970) 77 ITR 456 the Honourable Bombay High Court has held on page 469:--
"If a finding or a direction has been given by the appellate authority, which directs the ITO to make the fresh assessment as per that finding or direction, that would constitute an information under section 34(1)(b) of the Act. The decision of the Supreme Court in Maharaj Kumar Kamal Singh v. Commissioner of Income-tax shows that the information in section 34(1)(b) includes information as to facts as well as information as to the state of law and finding or direction given by an appellate authority either on the question of fact or of law would be an information to the ITO under the provisions of section 34(1)(b). Section 34(1)(b), however, puts a bar of limitation and for proceedings under that provision a notice has to be issued within a period of 4 years at the end of that year and the assessment has to be made before the expiry of one year from the date of the service of the notice. Apparently, if the order of the appellate authority remanding the matter to the Income Tax Officer is itself passed after a period of 4 years at the end of that year, no notice could ever be issued to the assessee under section 34(1)(b) of the Act and no effect could be given to the findings or direction given by the appellate authority. In order to remove this anomalous position, it appears that the second proviso below section 34(3) has been added which lifts the bar of limitation for making an assessment or reassessment in pursuance of the findings or directions given by the appellate or revisional authority under the different sections mentioned in the said proviso. This second proviso is a proviso to the whole of section 34 though put below subsection. (3) of section 34 and applies to all cases whether falling under section 34(1)(a) or 1(b) or (1-A) to (1-D) of section 34 provided that the assessment or reassessment is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in. any order under sections 31, 33, 33-A, 33-B, 66 and 66-A."
10. After rejecting the objection on the point of limitation the assessing officer issued various notices under sections 61 and 62 of the Income Tax Ordinance, 1979. The appellant objected to the jurisdiction of assessing officer which objection was also rejected. The assessing officer ultimately proceeded c ex parte due to non-compliance of notices under sections 61 and 62 and added commission income of Rs.49,73,000 to the total income of appellant in the assessment year 1974-75 and Rs.23,35,900 in the assessment year 1975-76.
11. The appellant preferred first appeals before the learned CIT(A) assailing the assessment order for the following reasons:--
(i) There was no justification for application of section 66 of the Income Tax Ordinance, 1979.
(ii) There was no justification for ex parte order. .
(iii) There was no justification for estimating commission income at Rs.49,73,000 in the assessment year 1974-75 and at Rs.23,35,900 in the assessment year 1975-76.
12. It was specifically contended that the impugned orders were illegal as the Income-tax Officer had based them on the order of the Income-tax Appellate Tribunal whereas the Income-tax Appellate Tribunal had not given any such directions. It was argued that the case of appellant was not covered by the provisions of section 66 and, therefore, the proceedings initiated under section 65 we're barred by limitation. It was contended on behalf of the appellant before the learned CIT(A) that the learned counsel for the department had conceded before the Honourable Supreme Court of Pakistan that there was no definite direction by the Income-tax Appellate Tribunal giving jurisdiction to the assessing officer for reopening the assessment by recourse to the provisions contained under section 66 of the Income Tax Ordinance. The contentions were, however, repelled by the learned CIT(A) and it was held that in view of the decision of Income-tax Appellate Tribunal on the appeal preferred by A.O.P. consisting of Mr. A.. A...B and Mr. A... M..., reliance on section 66 and consequent action under section 65 were justified. All other objections were also rejected and the appeals were dismissed.
13. Being still dissatisfied the appellant has preferred these appeals before us reiterating the same contentions as agitated before the learned two officers below.
14. We have heard Mr. Muhammad Farid, learned counsel for the t appellant and Mr. Muhammad Nawaz, learned representative for the Department. The main contention of Mr. Muhammad Farid before us is that there is no direction or finding of the Income-tax Appellate Tribunal as envisaged in section 66, in the judgment on the appeal of Mr. A... A... B... and, therefore, the proceedings initiated under section 65 are hopelessly barred by time and, therefore, they are required to be quashed. On the other hand, the learned D.R. has submitted that although there is no direction contained in the judgment of this Tribunal but there is a finding, therefore, the recourse to provision contained in section 66 is justified. The learned D.R. has drawn our attention to the following finding contained in the order of this Tribunal, dated 16-4-1989 in ITAs. Nos.1688 and 1689/KB of 1986-87 in respect of assessment years 1974-75 and 1975-76 while deciding appeal at the instance of Mr. A... A... B...:
"Because the ITO twisted the facts and testimony of aforesaid Mr. Abidi in order to fit in his theory of alleged A.O.P. of two persons.
Similarly the ITO has also failed to establish that the alleged income actually accrued to the appellant. In this connection his reliance on the testimony of Sequira without adverting to the fact that he had several motives for telling lies does not lead him anywhere as he was nothing but an accomplice and his evidence, before it could be relied upon required corroboration from some independent sources and of course that might have come from the cheques and receipts and the evidence of handwriting expert had all of them been considered according to law. Let us mention here that the admission of the appellant that he had no enmity with Mr. Sequira was not of any importance whatsoever because of the financial gains which Mr. Sequira could expect to get from the A.O.P. of 2 persons only. Thus, in view of discussion made above we feel that the order of the ITO and for that matter the impugned order is not sustainable in law.
However, since some prima facie evidence appears to be available on record which has not been properly appreciated by rather on ever enthusiastic assessing officer.
We feel that in the interest of justice and fairplay the matter should go back to him for re-examination of all issues in the light of discussion made above."
15. Replying to the contention of learned D.R. Mr. Muhammad Farid, learned counsel for the appellant has submitted that a perusal of the above finding shows that it is in respect of the issue relating to the accrual of income in the hands of Mr. A... A... B... and the reference to the testimony of Mr. S... (the appellant) does not lead to the conclusion that there was any finding on the point of accrual of income in the hands of appellant. Mr. Muhammad Farid has further contended that notwithstanding the fact that this Tribunal had not given any direction or finding in respect of the appellant as conceded by the learned counsel for the Department before the Honourable Supreme Court of Pakistan in ~ivil Appeal No.546-K of 1990, the Tribunal could not give any direction or finding as envisaged under section 66 of the Income Tax Ordinance, 1979 in respect of the appellant while deciding appeal of Mr. A... A... B... as the appellant was not a party to those proceedings and was never heard on any issue for the simple reason that the appeal related to the assessment in respect of an AOP consisted of Mr. A... A... B... and Mr. A... M... Mr. Muhammad Farid has vehemently argued that the assessing officer has stated in the assessment order that but for the order of this Tribunal in the case of Mr. A... A... B... and Mr. A... M... the assessments would have been barred by limitation. Thus, in short the contention of Mr. Muhammad Farid is that first the Tribunal has not given any direction of finding regarding the accrual of income in the hands of appellant while deciding appeal at the instance of Mr. A... A... B... and second, if there is any finding as alleged by the assessing officer it is of no legal consequences because it is outside the purview of direction or finding envisaged under section 66 of the Income Tax Ordinance, 1979. Mr. Muhammad Farid has submitted that he is not able to lay hand on any case-law on the point from any superior Court in Pakistan or this Tribunal but the point in issue has been considered in various judgments in India. Mr. Muhammad Farid has placed reliance on various judgments from Indian jurisdiction which we will consider presently.
16. We have given anxious consideration to the material available on record and the respective contentions raised by the learned representatives for the parties as well as the rulings cited from the Indian jurisdiction. First we would like to examine the question of fact if there is any finding of the Tribunal in respect of the accrual of income in the hands of appellant in the assessment years 1974-75 and 1975-76. The assessing officer while invoking jurisdiction under section 66 of the Income Tax Ordinance, 1979 and before issuing notice under section 65 observed that the Income Tai Appellate Tribunal while deciding appeal at the instance of Mr. A... A... B... gave definite and specific findings on the issues if there was any AOP consisting of Mr. A... A... B... and Mr. A... M... and whether there was any evidence that Mr. A... A... B... and A...M .earned the income which was assessed in their hands. So far the question as to whom did the income emanating as commission from the sale of aircraft by Messrs DA.C. accrued and belonged is concerned there is no finding of this Tribunal which is evident from the following observation in the assessment order:--
These specific findings clearly raised the third issue which need to be given effect to, that is to say, to whom did the income accrue for the purpose of charging it to tax. The judgment of the Honourable Tribunal, therefore, clearly gives rise to a situation where section 66 of the Income Tax Ordinance, 1979 applies."
The above observation of the assessing officer is indicative of the fact that the Tribunal has not given any finding as alleged by the learned D.R. that the commission income accrued in the hands of appellant Mr. S... in the assessment years 1974-75 and 1975-76. In fact, the finding on the point of accrual of commission of income in the hands of appellant in the assessment years 1974-75 and 1975-76 has been given by the assessing officer which is purported to be in consequence of the finding of Tribunal in the appeal at the instance of Mr. A... A... B... The learned D.R. has gone further ahead of the assessing officer and has submitted that the Tribunal in fact gave a finding although no direction was given and the finding is contained in Para. 5 of the order of this Tribunal dated 16-4-1989 while deciding appeal of Mr. A... A... B... Para. 5 of the order, dated 16-4-1989 has been reproduced in earlier part of this order. A perusal of the finding of this Tribunal shows that a reference was made to the testimony of Mr. S... (appellant in this case) in respect of accrual of income in the hands of Mr. A... A... B.. and Mr. A... M... and it was held that his testimony was not reliable without corroboration from some independent source as Mr. S... was an accomplice. Ultimately it was held that the order of ITO in respect of Mr. A... A... B... was not sustainable in law. There is no finding whatsoever to the effect that the commission income accrued in the hands of appellant, Mr. S... in the assessment years 1974-75 and 1975-76. The learned counsel for the Department conceded before the Honourable Supreme Court of Pakistan at the time of hearing of Civil Appeal No.456-K of 1990 that "there is no direction in the order of Income-tax Appellate Tribunal relied upon by the ITO as to the recovery of the impugned from the appellant. The learned D.R. has also conceded before us that there is no direction by the Income-tax Appellate Tribunal. His only contention was that there was finding of the Tribunal but we do not find any substance in his contention and, therefore, it is held that there is no finding of the Tribunal in the appellate order on the appeal of Mr. A... A... B... that the commission income accrued in the hand of Mr. S... (the appellant in this case) in the assessment years 1974-75 and 1975-76.
17. Now, we proceed to examine the second contention of Mr. Muhammad Farid that while deciding appeal of Mr. A... A... B... which related to the AOP consisting of Mr. A... A... B... and Mr. A... M... the Tribunal was seized of the question relating to accrual of income in the hands of those two persons and, therefore, no direction or finding as envisaged under section 66 of the Income Tax Ordinance, 1979 could be given by the Appellate Tribunal in respect of appellant Mr. S... He has submitted that observations; if any, in respect of Mr. S... cannot be treated as direction or finding of the Income Tax Appellate Tribunal, and, therefore, the issuance of notice under section 65 of the Income Tax Ordinance, 1979 after the expiry of period of limitation by recourse to the provisions contained in section 66 of the Income Tax Ordinance, 1979 cannot be held to be in compliance or consequence of any direction or finding of the Income Tax Appellate Tribunal. He has further submitted that in order to take refuge under the provision of section 66(2) of the Income Tax Ordinance, 1979 three conditions are sine qua non, first, that by an order referred to in subsection (1) of section 66 any income is excluded from the total income of the assessee for any year, secondly, the said income is held to be income of another year, and, thirdly, any income is excluded from the total income of one person and held to be income of another person. Mr. Muhammad Farid has further urged that if any income is excluded from the total income of an assessee for any year and is not held to be income of another year or any income is excluded from the total income of one person and is not held to be the income of another person the assessment of such income as income of another income year or of another person as the case may be, shall not be deemed to be an assessment made in consequence of or to give effect to, a finding or direction contained in such order. The learned counsel for the appellant has further maintained that in the present case the condition of exclusion of income from the total income of Mr. A.. A... B... is satisfied but the other condition of holding the income in question to be the income of Mr. S... has not been satisfied. Mr. Muhammad Farid has vehemently argued that the second condition could not be satisfied because Mr. S... was not a member of AOP whose appeal was under consideration before the Tribunal and Mr. S... was never heard by the Tribunal on the point if the commission income accrued in his hand in the assessment years 1974-75 and 1975-76. Mr. Muhammad Farid has submitted that the Tribunal very rightly refrained from giving any finding or direction in respect of alleged commission income in the hands of any person other than Mr. A... A... B... and left the issue open because the Tribunal was seized of the appeal in respect of Mr. A... A... B... only and no other person including Mr. S... was before the Tribunal: In support of his contention Mr. Muhammad Farid has invited our attention to the following finding of the Tribunal:--
"However, since some prima facie evidence appears to be available on record which has not been properly appreciated by rather an overenthusiastic assessing officer, we feel that in the interest of justice and fairplay the matter should go back to him for re-examination of all issues in the light of discussion made above."
18. Mr. Muhammad Farid has next argued that Tribunal could not give any finding in respect of Mr. S... while deciding appeal of Mr. A... A... B... because no such power vested in the Tribunal under Chapter XIII of the Income Tax Ordinance, 1979. According to Mr. Muhammad Farid subsection (2) of section 66 refers to any such order as referred to in subsection (1) and subsection (1) saves assessments from being time-barred made in consequence of order to give effect to any finding or direction contained in any order made under Chapter VII, VIII, XIII or XIV of the Income Tax Ordinance, 1979 or any order made by any High Court or the Supreme Court of Pakistan in exercise of its original or appellate jurisdiction. The appeal to the Appellate Tribunal is preferred under section 134 and is disposed of under section 135 of the Income Tax Ordinance. Section 135 (contained in Chapter XIII) enumerates various orders which can be passed and it is clearly provided therein that the Appellate Tribunal can give finding or direction in respect of the assessment or the order which is the subject of appeal. Thus, the logical conclusion would be that the Appellate Tribunal is not empowered to give any finding or direction in respect of an assessment which is not subject of appeal before it. Mr. Muhammad Farid has maintained that the issue of accrual of income in the hands of Mr. S... was not subject of appeal before the Tribunal and, therefore, there can be no' direction or finding in respect of Mr. S. in the decision relating to AOP consisting of Mr. A... A... B... and Mr. A... M... Mr. Muhammad Farid has submitted that the notice under section 65 is clearly barred by time as conceded by the assessing officer himself and the contention that it is saved by virtue of provisions contained in section 66(2)(ii) is not tenable.
19. As already observed we have not been able to lay hand on any judgment of this Tribunal or any superior Court from Pakistani jurisdiction on the point in issue. There are some judgments from Indian jurisdiction whereby similar provisions contained in the Indian Income Tax Act, 1922 and Indian Income Tax Act, 1961 have been interpreted. Before embarking on the decisions it would be appropriate to reproduce the relevant provisions contained in the Indian Income Tax Act, 1922, Indian Income Tax Act, 1961 and Income Tax Ordinance, 1979 (the Pakistan statute) in order to show that the relevant provisions in the three statutes are similar.
20. Section 34(3) and the second proviso thereto of the Indian Income Tax Act, 1992 read as follows:--
"No order of assessment or reassessment, other than an order of assessment under section 23 to which clause (c) of subsection (1) of section 28 applies or an order of assessment or reassessment in cases falling within clause (a) of subsection (1) or subsection (lA) of this section shall be made after the expiry of four years from the end of the year in which the income, profits or gains were first assessable...
Provided further that nothing contained in this section limiting the time within which any action may be taken or any order, assessment or reassessment may be made, shall apply to a reassessment made under section 27 or to an assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33 section 33-A, section 33-B, section 66 or section 66-A.
21. The relevant provision contained in section 153(3) of the Indian Income Tax Act, 1961 reads as follows:--
"(3) The provisions of subsections (1) and (2) shall not apply to the following classes of assessment, reassessment and recomputations which may, subject to the provisions of subsection (2-A), be completed at any time---
(i) where a fresh assessment is made under section 146;
(ii) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260,262, 263 or 264 or in an order of any Court in a proceeding, otherwise than by way of appeal or reference under this Act;
(iii) where, in the case of a firm an assessment is made on a partner or the firm in consequence of an assessment made on the firm under section 147.
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Explanation 2.---Where, by an order referred to in clause (ii) of subsection (3), any income is excluded from the total income of the assessee for an assessment year, than an assessment or such income for another assessment year shall, for the purpose of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order.
Explanation 3.---Where, by an order referred to it clause (ii) of subsection (3), any income is excluded from the total income of one person and held to be the income of another person, then an assessment of such income on such other person shall for the purposes of section 150 and this section, be deemed .to be one made in consequence of or to give effect to any finding or direction contained in the said order, provided such other person was given an opportunity of being heard before the said order was passed:"
22. Section 66 of the Pakistan Income Tax Ordinance, 1979 is reproduced below:--
"Limitation for assessment in certain cases.---(1) Notwithstanding anything contained in section 64 and subsection (3) of section 65 where in consequence of, or to give .effect to, any finding or direction contained in any order made under this Chapter or Chapter VII, XIII or XIV or any order made by any High Court or the Supreme Court of Pakistan in exercise of its original or appellate jurisdiction---
(a) an assessment is to be made on any firm or partner of any firm; or
(b) an assessment is to be made on the assessee or any other person; or
(c) an assessment has been set aside, in full or in part, by an order under section 132 or section 135 and no appeal is filed under section 134 against such order or no reference made under section 136 in respect thereof, as the case may be,
such assessment may be made at any time within two years in any case to which clause (a) or clause (b) applies, and within one year in any
case to which clause (c) applies, from the end of the financial year in which such order is received by the Income Tax Officer.
(2) Where, by any such order, as is referred to in subsection (1), any income is excluded--
(i) from the total income of the assessee for any year and held to be the income of another year;
(ii) from the total income of one person and held to be the income of another person,
the assessment of such income as income of another income year or of another person, as the case may be, shall, for the purposes of the said subsection, be deemed to be ah assessment made in consequence of, or to give effect to, a finding or direction contained in such order.
(3) ..
23. A comparison of the relevant provisions contained in the above statutes shows that they are similar in substance. The relevant expressions in the above sections in the context. of the present appeal are as follows:
"Section 34(3). Second proviso to the India Income-tax Act: 1922.--"An assessment or reassessment made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 31. Section 33, section 33-A, section 33-B, section 66 or section 66-A." (The above provision is as stood from April 1, 1956).
Section 153(3)(ii)of the Indian Income Tax Act, 1961.--"Where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, 254, 260, 262, 263 or 264 or in an order of any Court in a proceeding otherwise than by way'
of appeal or reference under this Act.
Section 66(1) of the Income Tax Ordinance. 1979.--"Where in consequence of, or to give effect to, any finding or direction contained in any order made under this Chapter or Chapter VIII, XIII or XIV or any order made by any High Court or the Supreme Court of Pakistan in exercise of its original or appellate jurisdiction."
24. The above comparison shows that there are slight variations in the language in which the provisions are couched but in substance the purport of all the three provisions is same and, therefore, the interpretation placed by the superior Courts in India on the provisions contained in Indian Statutes shall be relevant for the purpose of interpreting the provision contained in the Pakistan Statute.
25. The first ruling from Indian jurisdiction on which we have been able to lay hand is in the case of V.R. Indurkar and others v. Pravinchandra Memchand (1958) 34 ITR 397. In this case a similar question came for consideration before the Hon'ble Bombay High Court. Briefly stated the facts before the Bombay High Court were that the Income-tax Officer initiated reassessment proceedings under section 34 against the assessee in respect of the assessment year 1944-45 and by an order, dated February 9, 1955 brought to tax two sums as income from undisclosed sources. On appeal the appellate Commissioner held that the two amounts did not form part of the income of the assessee for the assessment year 1945-46 and further stated that, "they could be assessed, if at all, for the tax year 1944-45 for which the Income Tax Officer may take necessary steps, if so advised". Thereupon, on May 14, 1956 the Income Tax Officer issued another notice under section 34 seeking inclusion of the two amounts, as income for the assessment year 1944-45. This notice was issued beyond eight years from the relevant assessment year arid the question arose whether proviso to section 34(3) of the Indian Income-tax Act, 1922 applied. It was held by the Bombay High Court that the Appellate Commissioner only decided that the amounts did not form part of the income for the assessment year 1945-46 and did not find that they were income for the earlier year and he could not have found to that effect; the suggestion that they could be assessed, if at all for the year 1944-45 was neither a finding nor a direction. It was further held that the Appellate Assistant Commissioner was not concerning himself whether this income was for year 1944-45 at all and, therefore, the n6tice would not be said to have been issued in consequence of or to give effect to any finding or direction given by the Appellate Assistant Commissioner and was, therefore, barred by time. A similar question came for consideration before Allahabad High Court in the case of Pt. Hazarilal v. I.T.O. (1960) 39 ITR 265. The relevant facts for the consideration were that for the assessment year 1947-48 the order of assessment under section 23(3) of the said Act, was passed on 30th of September, 1947. On the 15th of January, 1946 the wife of the petitioner purchased a house vide a registered sale-deed for a total price of Rs.19,500. Out of this Rs.500 were paid as earnest money on 20th December, 1945 and the balance of Rs.19,000 was paid on the 16th of January, 1946 at the time of execution of the sale-deed. The ITO receiving information of this document issued a notice under section 34(1)(a) of the Indian Income-tax Act, 1922 on 27th March, 1952 to the petitioner in respect of his assessment for the year 1947-48 and following that notice he made a fresh assessment on 25th of February, 1953 by adding a sum of Rs.12,800 to the income which was originally assessed under the assessment order, dated 30th of September, 1947. The petitioner went up in appeal and the Appellate Assistant Commissioner by his order, dated 20th of July, 1955 accepted the appeal and deleted the addition which had been made in the income for the assessment year 1947-48. He further gave direction to the Income- Tax Officer to revise the assessment in the light of that order. While giving this decision the Appellate Assistant Commissioner of Income Tax noticed the fact that the purchase of the house by the wife of the petitioner had taken place. on the 15th January, 1946 and the entire consideration had been paid by that date so that the previous year available for the investment of the income which had been made and completed on 15th of January, 1946 was the financial year 1945-46. The financial year 1945-46 was not the previous year for the assessment year 1947-48 in respect of which notice under section 34 had been issued in pursuance of which this amount has been taxed as income in the hands of the petitioner. On this view the Appellate Assistant Commissioner of Income Tax held that this addition of Rs.12,800 in the assessment for the year 1947-48 was without any jurisdiction. On receipt of this order of the Appellate Assistant Commissioner of Income Tax the Income Tax Officer in addition to giving effect to that order by revising the assessment for the year 1947-48 issued notice under section 34(1)(a) of the said Act to the petitioner for reassessment of his income for the assessment year 1946-47. This notice under section 34 in respect of the assessment year 1946-47 was issued on the 4th of January, 1956. The petitioner objected to the issuance of this notice principally on the ground that it was barred by time, so that the Income Tax Officer had no jurisdiction to initiate proceedings against the petitioner for the assessment year 1946-47. The Income Tax Officer did not accept the contention of the petitioner and, therefore, a writ was filed before the Allahabad High Court contending that the notice, dated 4th January, 1956 in respect of the assessment year 1946-47 was barred by time. While considering the above question with reference to proviso to section 34(3) of the Indian Income-tax Act, 1922 the Allahabad High Court held that, "in interpreting this proviso, it appears to us that two aspects have to be kept in view then considering the fact of an order under section 31, section 33, section 66 or section 66-A. The order under section 31 is passed by the Appellate Assistant Commissioner of Income-tax when deciding an appeal. The order under section 33 is passed by Income Tax Appellate Tribunal on a second appeal against the order passed by the Appellate Assistant Commissioner of Income Tax under section 31. The opinion of the High Court under section 66 or the decision of the Supreme Court on that opinion of the High Court under section 66-A is also given in proceedings which have passed through the state of an order by the Appellate Assistant Commissioner of Income Tax under section 31. The powers that are exercised by the various authorities, can thus pass orders under section 31, section 33, section 66 or section 66-A, are powers which can be exercised by an appellate authority or by authorities or Courts to whom further appeals or references arising out of the appellate order lie. The scope of the order that can be passed is, therefore, to be determined by the power which an Appellate Assistant Commissioner of Income Tax has when passing an order under section 31 of the Income Tax Act. The very fact that the Appellate Assistant Commissioner of Income Tax, when making an order under section 31 is dealing with an appeal filed by an assessee in respect of an assessment order indicate the scope of its jurisdiction to give findings and to make the consequential orders. The various orders which an Appellate Commissioner of Income Tax can make, are detailed in section 31(3) though there is no detailed provision about the finding which he can record. It appears to us, however, that from the very nature of the jurisdiction which an Appellate Assistant Commissioner of Income Tax exercises, it must follow that his power of recording findings is limited to the matters which he is called upon to decide when passing the order in appeal in conformity with the details laid down in section 31(3). An order passed by him, which is beyond the scope of section 31(3), would be an order without jurisdiction and, similarly, any finding recorded by him which is not necessary for the purpose of making an order covered by section 31(3) would be a finding without jurisdiction. Further, when applying the second proviso to section 34(3) of the Income Tax Act the Income Tax Officer is only competent to take into account orders which are in conformity with the provisions of section 31(3) and findings which are necessary for passing those orders. Orders, which are outside the scope of section 31(3) or findings which are not at all necessary for making such orders, cannot be taken into account by the Income Tax Officer for the purpose of relying on the second proviso to section 34(3) which we are now considering. Sharigopal, learned counsel for the opposite-party in this connection urged before us. that the word "finding" had nowhere been defined in the Income Tax Act nor had its scope been indicated and we should, in interpreting this word, as used in the proviso, take into account the meaning attributed to that word in common use and should not draw any aid from the word as defined or as limited by the provisions of the Code of Civil Procedure. The word "finding" in law has a definite meaning and that is indicated by the provision of the Code of Civil Procedure where it is indicated that a finding is a decision of Court on material questions in issue. Issues are framed on material question of fact or law and the decision of the Court recorded on such issues has been called a finding. We do not think that there is any other wider meaning of the word "finding" in common use which can be appealed to this word as used in the proviso to section 34(3). The word "finding" cannot be interpreted so as to include within it any statement of fact contained in a decision irrespective of whether that fact was or was not material to the decision and whether the Court or the Tribunal, when recording the decision, had any occasion to hear parties on that question of fact and to record a decision on it instead of merely reciting it as a statement of fact. The word "finding" interpreted in the sense indicated by us above, will only cover material questions which arise in a particular case for decision by the authority hearing the case or the appeal which, being necessary for passing the final order or giving the final decision in the appeal, has been the subject of controversy between the interested parties or in which parties concerned have been given a hearing. While further dilating on the issue the Hon'ble Judges of Allahabad High Court observed as follows:
"In interpreting proviso, all the words used in it have to be given their true significance and it is a cumulative effect of that significance that has to be given effect to as we have indicated above. The very fact that findings are recorded or directions are made in exercise -of the appellate power or the power which arises in proceedings which have subject to an appellate decision indicates that the findings and the directions must be of the nature which an Appellate Court can record or make and, consequently, the directions must be limited to the nature indicated in section 31 and the findings must be limited to those facts which are necessary for the purpose of giving suchdirection. The object of the proviso was to enlarge the limitation, so that orders passed in appeal or findings given when passing those orders in appeal do not become infructuous and can be adequately given effect to."
26. After enunciating the principles and interpreting the provision of law the Hon'ble Judges reverted to the facts of the case before them and held that:
"Examining the present case in the\light of our view above it is clear that in this case the Appellate Assistant Commissioner of Income Tax was only competent to record finding that the sum of Rs.12,800 which was in question in the appeal before him was not income relevant to the assessment year 1947-48. The question whether this income accrued or was earned in the previous year relevant to the assessment year 1946-47, was not before him for decision, nor was it a point on which it was essential for him to record a finding before appropriately deciding the appeal before him. The only material point for his consideration was whether this income was earned by the petitioner in the previous year for the assessment year 1947-48. If it was not so, there was no need at all for the Appellate Assistant Commissioner of Income Tax to go into further questions, such as the question whether it was income of such a nature as to be liable to income-tax, or whether it was income earned by the petitioner or by someone else, or whether it was income earned in the previous year relevant to the assessment year 1946-47. These were all questions which were beyond the scope of his jurisdiction when deciding the appeal of the petitioner relating to the assessment year 1947-48. Consequently, for the purpose of applying the proviso to section 24(3) the Income Tax Officer was entitled only to take into account the finding recorded by the Appellate Assistant Commissioner of Income Tax that this sum of Rs.12,800 was not the income of the petitioner for the assessment year 1947-48, and the Income Tax Officer could not treat as a finding the remark made or the view expressed by the Appellate Assistant Commissioner of Income Tax that this sum was the income of the assessee for the assessment year 1946-47. That was point, as we have said earlier, which the Appellate Assistant Commissioner was not called upon to decide and was not a point on which he could competently record a finding."
27. It was further held by the Allahabad High Court that even if there is a finding by the appellate authority the Income Tax Officer has -to see whether the assessment sought to be made under the proviso to section 34(3) is in consequence of meaning thereby as a result of the finding or not. It was held that if the Income Tax Officer has to make assessment in Consequence of independent facts which the Income Tax Officer had before him then the issuance of notice did not automatically or directly follow from the finding which was recorded by the Appellate Assistant Commissioner of Income Tax. If as a reason of finding recorded by the Appellate Assistant Commissioner of Income Tax the Income Tax Officer starts looking for material on the basis of which he could come to believe that the provision of section 34(a) was applicable to the assessment of the petitioner then it did not arise as a result of finding recorded by the Appellate Assistant Commissioner.
28. Applying the above principles enunciated by the Bombay High Court and Allahabad High Court to the facts of the present case before us we find that the Income Tax Appellate Tribunal while deciding appeals at the instance of Mr. ..A .A .B assailing the additions in the hand of A.O.P. consisting of them amounting to Rs.49,70,000 in the assessment year 1974-75 and Rs.23,35,900 in the assessment year 1975-76 held that the Income Tax Officer failed to establish that the alleged income actually accrued to the appellant(A.O.P. consisting of Mr. A A .B and Mr A M ..). In arriving at the above finding the Tribunal held that the testimony of Mr. S ..(the appellant in present appeals) was not reliable without independent corroboration as he was an accomplice. The Tribunal further held that the assessment in respect of A.O.P. consisting of Mr A A .B .and Mr S ..M .was not sustainable. It was further held that some evidence was available which was not considered by the assessing officer and, therefore, the assessment in respect of the A.O.P. was set aside for re-examination of all issues. It is evident that while deciding appeal, at the instance of M/s . A A B ..the Tribunal was neither required -nor called upon to decide the issue relating to accrual of income in the hands of the present appellant Mr. S... ....in respect of assessment years 1974-75 and 1975-76. From a perusal of Tribunal's order dated 16-4-1989 it is clear that the Tribunal has not given any finding or direction on the- point of accrual of income in the hands of Mr. S....A perusal of the assessment order further shows that on receiving the order of this Tribunal the assessing officer initiated independent proceedings against the appellant. His statement was recorded under section 148 and thereafter a notice under section 65 read with section 66 of the Income Tax Ordinance, 1979 was issued. Before invoking jurisdiction under section 66 the assessing officer himself observed that, "had there been no order under sdction_135 by the Hon'ble Income Tax Appellate Tribunal in the case of Mr A .A B ..and Mr .. A .M .as mentioned above, the assessment of this commission income would have escaped assessment beyond retrieve because of the limitation under section 65(3). However, if the assessment is framed to give effect to the findings of the Hon'ble Tribunal in the abovementioned order, the limitation is saved by virtue of section 66 quoted above". However, the assessing officer was not able to show the alleged finding of this Tribunal in consequence whereof the reassessment proceedings were started. In fact the assessing officer himself observed that the Tribunal gave definite and specific findings on the issues whether there was in fact any A.O.P. consisting of Mr A .A .B ..and Mr . A .M .and whether there was anyevidence that Mr A A .Band Mr A M earned the income which was assessed in their hands. According to assessing officer the findings on these two issues to the effect that there was no such A.O.P. as consisting of Mr A ..A .B .and Mr A .M ..and further there is no evidence that the alleged income actually accrued to the alleged A.O.P., gave rise to the issue to whom did the income accrue for the purpose of charging it to tax. Thus, it is evident from the assessment order itself that the re-assessment proceedings initiated by the assessing officer is not in consequence of or to give effect to any finding or direction contained in the order of this Tribunal but it is a result of independent probe-made by the assessing officer and thus the benefit of section 66 on the point of period of limitation was not available to the assessing officer. The fact as gleaned from the record is that there was no finding by the Tribunal and the Income Tax Officer has acted on the basis of independent inquiries by him and thus the assessment would be deemed to be result of the findings arrived at by the Income Tax Officer and not by the Tribunal.
29. The judgment in the case of Pt. Hazari Lal was followed by the Allahabad High Court in the case of Laxmi Narain Agarval v. ITO (1963) 47 ITR 456 wherein it was held that:
"If for purposes of avoiding the bar of limitation the Income Tax Department seeks to take stand on the second proviso to subsection (3) of section 34 it can do so only if the direction or the finding relates to the assessee himself and relates to the very year in which the question arises and in regard to which the orders sought to be relied upon was passed by the appellate authority."
30. The point in issue came for consideration before the Supreme Court of India in the case of ITO v. Murlidhar Bhagwandas (1964) 52 ITR 335. The facts for consideration before the Hon'ble Supreme Court were that in the assessment for the charge year 1949-50 the Income Tax Officer brought to tax assessee's interest income. On appeal the Appellate Assistant Commissioner deleted the amount of interest and directed that this amount should be included in the assessment for the charge year 1948-49. Pursuant to this direction the Income Tax Officer initiated proceedings under section 34(1) of the said Act in respect of the year 1948-49 and served a notice on the assessee on 5th December, 1957. The assessee filed a writ petition in the High Court for quashing the proceedings mainly on the ground that these were initiated beyond the time prescribed by section 34 of the Act. The Allahabad High Court accepted the contention and quashed the proceedings initiated by the Income-.lax Officer. Special leave to appeal was granted by the Hon'ble Supreme Court of India for deciding the question of the construction of proviso to subsection (3) of section 34 of the Indian Income-tax Act, 1922 as amended by Act 25 of 1993. When the appeal came for adjudication before the Hon'ble Supreme Court there was a conflict of opinion between various High Courts in India and Benches of the High Courts. After having a resume of the conflict of decisions on the point under consideration the Hon'ble Supreme Court approved the ruling in the case of Pt. Hazari Lal v. ITO (1960) 39 ITR 265 referred to by us in the earlier part of this judgment and overruled the contrary view by majority of opinion holding:
(i) That under the Income Tax Act the year. was the unit of assessment. The decision of an Income Tax Officer given in a particular year did not operate as a res judicata in the matter of assessment of the subsequent years. The jurisdiction of the Tribunals in the hierarchy by the Act was no higher than that of the Income Tax Officer it was also confined to the year of assessment.
(ii) That the jurisdiction of the Appellate Assistant Commissioner under section 31 was strictly confined to the assessment order of the particular year under appeals.
(iii) That the assessment or reassessment in consequence of or to give effect to any finding or direction contained in an order under section 31, section 33, section 33-A, section 33-B, section 66 or section 66-A must necessarily relate to the assessment of the year under appeal, revision or reference, as the case might be.
(iv) That the second proviso to section 34(3) only lifted the ban of limitation and did not enlarge the jurisdiction of the Tribunal under the relevant sections.
(v) The expression "finding" and "direction" in the second proviso to section 34(3) meant respectively a finding necessary for giving relief in respect of the assessment for the year in question, and a direction which the appellate or revisional authority, as the case may be, was empowered to give under the sections mentioned in that proviso. A finding, therefore, could only be that which was necessary for the disposal of an appeal in respect of an assessment of a particular year. The Appellate Assistant Commissioner might hold, on the evidence, that the income shown by assessee was not the income for the relevant year and thereby exclude that income, for the relevant year and thereby exclude that income from the assessment of the year under appeal. The finding in that context was that the income did not belong to the relevant year. He might incidentally find that the income belonged to another year, but that was not a finding necessary for the disposal of an appeal in respect of the year or assessment in question.
(vi) That the expression "any person" in the second proviso to section 34(3) referred to one who would be liable to the assessed for the whole or a part of the income that went into the assessment of the year under appeal or revision.
(vii) That, therefore, the second proviso to section 34(3) did not save the time limit prescribed under section 34(1) in respect of an escaped assessment of a year other than that which was the subject-matter of the appeal or revision, as the case might be, and accordingly the notice issued under section 34(1)(a) in this case was barred by limitation and was not saved by the second proviso to section 34(3).
31. The Supreme Court of India in the above decision overruled the contrary view held by a Full Bench of Allahabad High Court in the case of Laxmi Parkash v. CIT (1963) 48 ITR 705. Another judgment of Madras High Court in the case of Khader Ismail v. ITO (1963) 47 ITR 16 (on which the Income Tax Officer in the present case has placed reliance) was also overruled. Similar view taken by another Division Bench of Madras High Court in the case of K. Simrathmull v. Addl. Income Tax Officer, Octacamund (1959) 36 ITR 41 was also overruled. The same question again came for consideration before Supreme Court of India in the case of N.K.T. Sivalingam Chettiar v. CIT, Madras (1967) 66 ITR 586 and the finding of Allahabad High Court in the case of Pt. Hazari Lai v. ITO was again confirmed.
32. The issue was again agitated before Supreme Court of India in the case of Rajinder Nath v. CIT 1981 PTD 245 which arose out of the judgment of High Court of Delhi. The Supreme Court of India again confirmed its finding in the case of Murlidhar Bhagwandas (supra) and Sivalingam Chettiar (supra). It was reiterated by the Supreme Court of India that the expression "finding" and "direction" are limited in meaning. The finding given in an appeal, revision or reference arising out of an assessment must be a finding necessary for the disposal of particular case, that is to say, in respect of the particular assessee and in relating to the particular assessment year. To be a necessary finding it must be involved in the disposal of the case. The Hon'ble Judges of the Supreme Court of India observed that, "the same principle seems to apply when the question is whether the income under enquiry is taxable in the assessment year under consideration or any other assessment year. As regards the expression "direction" in section 153(3)(ii) of the Act it is now well-settled that it must be an express direction necessary for the disposal of case before the authority or Court. It must be also direction which the authority or Court is empowered to give while deciding the case before it. The expression "finding" and "direction" in section 153(3)(ii) of the Act must be accordingly confined. Section 153(3)(ii) is not a provision enlarging jurisdiction of the authority or Court. It is a provision which merely raises the bar of limitation for making an assessment order under section 143 or section 144 or section 147". In this case the observation of Appellate Assistant Commissioner that, "the Income Tax Officer is free to take action to assess the excess in the hands of the co-owners" was not treated to be direction. It was further held that a direction by statutory authority is in the nature of requiring positive compliance. When it is left to the discretion of the ITO whether or not to take action, it cannot be described as a direction.
33. The above resume of the case-law from Indian jurisdiction shows that the point in issue has been conclusively decided at least in India and has attained finality. Since the provisions of Indian statute and Pakistan statute are in pari material to each other, therefore, we have no hesitation in applying the same principles to the facts of the present appeal. We respectively follow the authoritative pronouncement from the Indian jurisdiction and hold that the provisions of section 66 are to be read with the relevant provisions of the Income Tax Ordinance conferring jurisdiction on the various authorities created under the Ordinance. Section 66 of the Ordinance purports to lift the bar of limitation only and does not enlarge the jurisdiction of the appellate authorities or the assessing authority under the relevant sections. The findings or directions referred to in section 66 are, therefore, confirmed to the assessment which is the subject of appeal before the appellate authority and are further confined to the relevant year under appeal and the parties in the proceedings.
In order to attract the provisions of section 66 for the purpose of lifting the bar of limitation there should be definite and conclusive finding of the Appellate Authority in consequence or result whereof the Income Tax Officer may merely complete the assessment. However, if the matter is incidentally considered by the Appellate Authority and the question is left open to the discretion of Income Tax Officer or it is a matter of independent enquiry of the Income Tax Officer than the assessment sought to be made would be deemed to be in consequence of the finding of the Income Tax Officer and not in consequence of the finding or direction of the Appellate Authority. In such circumstances the provisions of section 66 shall not be available to the department for the purpose of lifting the bar of limitation provided is sections 64 and 65 of the Ordinance.
34. For the foregoing reasons we are persuaded to agree with the contention of Mr. Muhammad Farid and hold that the Tribunal while making order dated 16-4-1989 was merely seized of the assessment in the hands of A.O.P. consisting of Mr .. A .A B ..and Mr ..A .M ..and while deciding the said appeal the Tribunal has not given direction or finding in respect of theaccrual of income in the hands of the present appellant Mr. S ..The finding that the evidence of Mr. S .against M/s .. A ..A ..B ..was not reliable without independent corroboration or that the assessing officer has not properly appreciated some prima facie evidence available on record and the matter should be re-examined does not amount to direction or finding envisaged under section 66 vis-a-vis, the present appellant Mr. S ..It is farther held that the Tribunal could not give any finding in respect of the accrual of income inthe hands of Mr. S.. .while deciding appeal relating to the accrual of income in the hands of M/s ..A .A .B .and A M ..It is further held that the assessing officer has initiated reassessment proceedings against the appellant as a result of his independent enquiry and not in consequence of or to give effect to any finding or direction of this Tribunal. Consequent to this finding it is held that the period of limitation is not saved under section 66 of the Income Tax Ordinance as contended by the department. The notice under section 65 having admittedly being issued after the period of limitation provided in section 65(3) of the Income Tax Ordinance, is clearly barred by time with the result that the entire proceedings in the two assessment years under appeal is in pursuance of notice under section 65 are held to be without jurisdiction and the consequent assessment orders framed are hereby quashed.
35. The appeals are allowed accordingly.
M.BA./56/T.T.Appeals allowed.