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

----Ss. 65, 59 & 13---Self-Assessment Scheme, 1984-85---Self-assessment---Rc opening of assessment---Essentials---Definite information ---Meaning-- Assessment having once been completed after conscious application of mind and no fresh evidence worth the name or definite information having been brought home nor there existing any, re-opening was unwarranted---Mere change of opinion of Assessing Officer will not justify re-opening the assessment order.

CIT, Karachi v. Jennings Private School 1993 SCMR 96; Central Insurance Co. and others v. The Central Board of Revenue 1993 PTD 766 = 1993 SCMR 1234 and Edulji Dinshaw Limited v. Income Tax Officer 1990 PTD 155 ref.

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

----S. 129---Appeal---Order of setting aside assessment or remand-- Essentials---Need to avoid as far as possible orders setting aside and remanding assessment, emphasized.

In cases of remand, it is necessary that not only the grounds of remand but also the subsequent proceedings should be crystallised. It appears a common practice amongst the first Appellate Authorities that they remand the cases by using vague directions such as "proceedings should be conducted de novo". It also appears that except for a negligible number, in all such cases, original assessments are repeated after remand. In most of these cases a remand order with a direction for "de novo" proceedings is only an eye wash and manifests shyness of the Appellate Authority to decide for or against an assessee and to give a clear and outspoken finding. The orders framed on remand are also a mere formality without any serious attempt on the part of the Assessing Officers to look into the spirit and reasons necessitating remand. It is therefore desirable that setting aside and remanding of assessments should be avoided as far as possible. Mere use of the phrase "de novo" without elaborating the exact nature, scope and the involved steps or phases of subsequent inquiry, if any, does not mean anything. These types of remand orders are, in the long run never to the benefit of either the assessee or the Revenue. The law is absolutely clear in this regard that no remand should normally be ordered when the Appellate Authority could itself dispose of the matter on the basis of material available before it. However, when a remand is absolutely necessary in view of a peculiar situation in a case, the scope and parameters must be expressly delienated so that the assessees as well as the Assessing Officers are well aware of the nature and the extent of further inquiry desired by the Appellate Authorities.

Javed Iqbal Khan, F.C.A. for Appellant.

Agha Sarwar Qazalbash, D.R. for Respondent.

Date of hearing; 3rd November, 1993.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER): --In this second appeal by an individual an order of C.I.T. (A), Zone IV, Lahore dated 19-1 1992 is assailed on the ground that the said authority was not justified in only setting aside the assessment framed in his respect for the year 1984-85 instead of annulling the same out rightly.

2. According to the assessment order dated 20-6-1991 original assessment in this case was made under section 59(1) of the Ordinance at an income of Rs.66,450. Subsequently the assessing officer framing the assessment requested his officer incharge, I.A.C. Range III, Zone A, for a permission for reopening of the assessment through a letter dated 24-6-1990. The permission was sought on the ground that the assessee during the charge year under review purchased a residential Plot No. 80-C-1, Gulberg-III, Lahore on 7-8-1983 but its price was shown low in his wealth statement. After having obtained the permission, his successor in office issued on notice on 3-6-1991 asking the assessee to furnish the copy of the sale-deed alongwith approved site plan. No compliance was made and, therefore, the assessing officer statedly issued another notice under section 13(2) on 26-6-1991 coupled with a notice under section 61 of the Ordinance. However, since again the assessee did not come up with any of the material required or the explanation asked for through these notices the assessing officer proceeded to assess him at a total income of Rs.1,166,450 by way of the assessment order dated 30-6-1991. The income thus computed included the income as originally declared and assessed at Rs.66,450 as also two additions of Rs.870,000 and of Rs.230,000. The addition of Rs.870,000 was made under section 13(1)(d) of the Ordinance being the difference between the declared value of the Bungalow and the value adopted for the assessment purpose. The other addition of Rs.230,000 was made on account of alleged bogus liability declared in the wealth statement which remained unexplained.

3. The appellant, on the other hand narrates and altogether different story. It is stated that the assessee is an individual and derives income from manufacture of hardware items, which are supplied to various customers in public and private sector. He returned an income of Rs.66,450 under section 59(1) of the Ordinance for the assessment year under consideration viz. 1984-85. The return statedly accompanied with a wealth statement was filed on 10-10-1984. Admittedly, following assets were declared in this statement: ---

A letter was issued to the assessee on 12-12-1984, inter alia, asking for the details of the property and other supporting documents. After having received the reply submitted by the assessee the assessing officer finalised the assessment on 27-12-1984 without any reference to that property. However, a show-cause notice was issued on 19-4-1986 which was complied with on 12-5-1986 whereby the required details were again submitted with the assessing officer. Another notice was issued on 14-5-1986 asking for show cause as to why the case should not be reopened under section 65 of the Ordinance. A third letter was issued on 19-5-1986 requiring submission of documents and details of an adjacent property for the purpose of comparison. Thereafter, according to the assessee, the proceedings were dropped on 18-5-1986 with these findings of the assessing officer on the order sheet: "In view of AR's letter and my personal visit to spot alongwith Inspectors, proceedings are dropped". Still, the things did not end here. Another notice with similar requisition was received on 24-6-1990, which was replied on 7-7-1990. In this reply the assessee statedly raised an objection against reopening of the case though it did file a return "as before" under protest; receipt of other subsequent notices as alleged by the Revenue and detailed in para. 2 is however, denied.

4. Parties have been heard and the record perused. Learned AR for the appellant contends that the assessee having declared his assets, the amount spent on acquiring the property in question and also having submitted the supporting material, reopening of the assessment was not justified. It is further, submitted that even in presence of earlier assessment order which was made after conscious application of mind and proper consideration of the documents submitted in this regard the assessing officer issued notices and after receiving reply and visiting the property dropped the proceedings which leaves no doubt that the matter was thoroughly probed. Further contends that the Revenue was not justified by any stretch of logic or reason to reopen the proceedings for the third time and that too on the matter, which stood examined from all possible angles including personal visit of the property by the assessing officer. Learned AR also submits that the third round of the proceedings on the basis of which the impugned assessment order dated 30-6-1991 was framed is a clandestine proceeding of which the assessee was never aware of. According to the learned AR this assessment order is a result of mere paper work and the alleged notices issued for 15-6-1991 and 26-6-1991 never left the file for service upon the assessee. By relying upon a reported case of the Supreme Court of Pakistan cited as 1993 SCMR 96 re: C.I.T. Karachi v. Jennings Private School it is submitted that there was no "definite information" available with the assessing officer on 24-6-1990 when he sought permission to reopen the case and in fact no information worth the name was established or otherwise brought on record or factually existed till 30-6-1991 the day the impugned assessment order was framed. The assessment so framed, according to learned AR is clearly a case of mere change of opinion and the appellate authority was not justified in remanding the case Learned DR, speaking for the Revenue Supports the assessment order and without contradicting the factual averments made at the Bar for the appellant, contends that the appeal is not competent as the assessee has not been prejudiced by setting aside of the assessment order and that he can very well raise all the above-stated objections before the assessing officer. It is further submitted that the assessee having failed to participate in the proceedings despite service of notices as indicated in the assessment order, is not entitled to challenge the proceedings on any of the grounds taken.

5. The contentions made by the appellant both on legal as well as factual side stand unremitted. The case relied upon by the appellant supports the preposition that it was merely a change of opinion on the part of the assessing officer on the basis of which he embarked upon the exercise of reopening of the assessment. There also appears little doubt that the reopening of the case was done without any information much less to say of a "definite information". The ratio of the said case also supports the submission that assessment in the case having once been completed after conscious application of mind and no fresh evidence worth the name having been brought home nor there existed any, the reopening was unwarranted: In this connection the relevant considerations and the basis for reopening of an assessment have been laid down by the Supreme Court of Pakistan m the said case which stands on all fours qua the facts of this case including the assessment year and the self -assessment scheme announced for that year. Their Lordships found: ---

"By virtue of note appended to para 6, and para 9 of the Scheme it was open to the Income Tax Officer to have obtained requisite information and documents before framing of an assessment even under the Scheme. In the present case the Income Tax Officer opted to obtain the information/documents about the purchase of the two plots mentioned in the impugned notice and the source of purchase etc. from the assessee, before framing the assessment. In such a situation the principle that mere change of opinion of the assessing authority will not justify reopening the assessment order under section 65 of the Ordinance, would be very much applicable."

As to what "definite information" means which would justify reopening of an assessment reference can be made to another recent case decided by the Supreme Court of Pakistan re: Central Insurance Co. and others v. The Central Board of Revenue, 1993 PTD 766 = 1993 SCMR 1234. In this case the assessments in respect of appellant insurance companies were completed/finalised by Income Tax Officers concerned in accordance with section 26 read with rule 5 of the Fourth Schedule to the Ordinance. Subsequently, on the basis of Circular No.4 of 1988, dated 19-4-1988 issued by CBR whereby the above-said provisions of the Ordinance were interpreted, the assessing officer reopened the cases of the appellant insurance companies on the ground that the income earned by them from Khas deposit/defence saving certificates had escaped assessment in the relevant assessment years. The assessee insurance companies filed Constitutional petitions before the High Court of Sindh, Karachi which were not successful. On further appeal before the Supreme Court, though their Lordships approved the interpretation placed upon these provisions by CBR through the said circular, nevertheless, they held the reopening of the assessments to be illegal. While dilating upon the word "information", in the light of its dictionary meaning, the judgments of Superior Courts in Pakistan and India, as also the word "definite information" it was concluded: ---

"From the above-quoted definition of the word `information' it is apparent that it has wide connotation and it is also used in relation to an acquisition of the commission of an offence. Whereas, the word `definite' carries inter alia meaning defined, having distinct limits, fixed, each, clear precise, bounded etc. Since the word `information' has been prefixed by the word `definite' in above subsection (2) of section 65 of the Ordinance, it controls the generality of the word `information'. Every information cannot be created as the basis for reopening of the assessment, but the information should be of the nature, which should qualify as a definite information. However, we may observe that the expression definite information cannot be given a universal meaning but it will have to be construed in the context of the circumstances of each case."

Learned counsel for the applicant has also referred to the leading case of Edulji Dishaw Limited v. Income Tax Officer, cited as 1990 PTD 155 wherein their Lordships examined and discussed at length the relevant case law from Indian and Pakistani Superior Courts on the subject and came to the conclusion: ---

"Once all the facts have been fully disclosed by the assessee and considered by the Income Tax Authorities and the assessments 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."

6. It needs to be repeated that the impugned assessment order circumvents the circumstances leading to reopening of the case. It does not even mention the date of the original assessment order. As already observed, the facts as narrated by the appellant find support from the record and none of them has expressly been controverted by the Revenue. We have seen the case file and found that an order (though in a stamp form which is generally used in cases of acceptance of returns filed under section 59(1) of the Ordinance) does exist on file and is initialled by assessing officer. It is also worth noting that besides the said order no other assessment order as such is available on record while the appellant has produced a photo copy of an attested copy of the assessment order rendered on 27-12-1984 under section 59(1) of the Ordinance, 1979 which again appears in a stereotype form, only filling in blanks for the date of filing of return, income declared and then total assets declared in the wealth statement. It may also be remarked that as per self- assessment scheme for the assessment year 1984-85 all returns declaring income in excess of Rs.50,000 were required to be accompanied with a wealth statement which was duly done in this case. Apparently the wealth statement was filed on the same day the return under section 59(1) of the Ordinance was filed and bears the signature of the assessing officer.

7. The ratio of the above-cited cases when seen in the perspective of the facts before us, clearly points towards the infirmity of the reopening proceedings and the impugned assessment framed as a result thereof. The factum of purchase and its price was duly declared to the department and on requisition its details/documents were also provided. In the second round the evidence relating to the adjacent property was also provided and as per order sheet entries, the assessing officer visited the property alongwith his Inspector before dropping the re-opening proceedings. At the time the third round was initiated the department was not possessed with any "definite information", nor any new fact over and above the earlier declared by the assessee came to its knowledge. In fact the alleged default in compliance of notices by the assessee was recorded. In the impugned order itself goes against the department. For if the assessee defaulted then wherefrom the assessing officer received the details of the property and its price. It is not the case of the department that these facts came to its knowledge from any extraneous source, complaint, survey report of information digged out from the assessment proceedings of another assessee. Learned first Appellate Authority decided all the above issues in a slipshod manner while remanding the case. The contention of the assessee that all the material being available with the Appellate Authority, the remand order was not justified as it resulted into unnecessary multiplicity of proceeding and in fact another opportunity to assessing officer to fill up lacuna also bears weight.

8. We would like to express that the learned first Appellate Authority did not muse at the real issue before it at any length. None of the issues raised before the first Appellate Authority was effectively disposed of or otherwise dealt with thoroughly. Barring narration of facts, which necessarily supported the Revenue version, it is a telegraphic order manifesting avoidance of serious application of mind. Even if the Appellate Authority wanted a fresh probe, it must have delineated the scope and parameter of the desired proceedings. In cases of remand, it is necessary that not only the groans of remand but also the subsequent proceedings should be crystallized. It appears a common practice amongst the first Appellate Authorities that they remand the cases by using vague directions such as "proceedings should be conducted de novo". It also appears that except for a negligible number, in all such cases, original assessments are repeated after remand. In most of these cases a remand order with a direction for "de novo" proceedings is only an eye-wash and manifests shyness of the Appellate Authority to decide for or against an assessee and to give a clear and outspoke finding. The orders framed on remand are also a mere formality without any serious attempt on the part of the assessing officers to look into the spirit and reasons necessitating remand. It is therefore desired that setting aside and remanding of assessments should be avoided as far as possible. Mere use of the phrase "de novo" without elaborating the exact nature, scope and the involved steps or phases of subsequent inquiry, if any, does not mean anything. These types of remand orders are, in the long run never to the benefit of either the assessee or the Revenue. The law is absolutely clear in this regard that no remand should normally be ordered when the Appellate Authority could itself dispose of the matter on the basis of material available before it. However, when a remand is absolutely necessary in view of a peculiar situation in a case, the scope and parameters must be expressly delienated so that the assessees as well as the assessing officers are well-aware of the nature and the extent of further inquiry desired by the Appellate Authorities.

9. The upshot of the above is that re-opening proceedings as also the resultant assessmentare declared to be null and void. Consequently, the assessment framed at the declared income at Rs.66,450 under section 59(1) of the Ordinance on 27-12-1984 stands restored.

M.BA./33/T.T.

Order accordingly.