I.TA. NO.1103/LB OF 1995, DECIDED ON 18TH JUNE, 1995. VS I.TA. NO.1103/LB OF 1995, DECIDED ON 18TH JUNE, 1995.
1995 P T D (Trib.) 1430.
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mushtaq, Accountant Member and Muhammad Tauqir Afzal Malik Judicial Member
I.TA. No.1103/LB of 1995, decided on 18/06/1995.
(a) Income-tax---
----Appeal to Appellate Tribunal---Limitation---Ex parte appellate order by the Commissioner was sent to the assessee under Postal Certificate but there was no evidence that the order was ever served on the assessee---Contention of the assessee was that he had shifted from the address where the order in question was sent and in the reassessment order against which the appeal was filed also showed that the assessee had shifted from the address where the appellate order was sent---Held in the circumstances there was no possibility of service of appellate order on the assessee on the address on which appellate order was sent to the assessee---Appeal was thus treated to be in time by the Tribunal---Income Tax Ordinance (XXXI of 1979), S.134(3) & (4).
(b) Income-tax---
----Re-assessment---Essentials---Only ground on which the Income Tax Officer had started reassessment proceedings was that assessee had indicated in the wealth statement that he had completed the house by 30-6-1988---Assessee stated that his previous Authorised Representative, had, under a mistaken view, mentioned the date of completion of house in the said wealth statement as 30-6-1988---Income Tax Officer, however, had completely ignored the other evidence produced by the assessee regarding completion of the house i.e. letter from Sui Gas Authorities for installation of gas and payment of Property Tax-- Effect---H Id, Income Tax Officer, in circumstances, should have examined the evidence so produced by the assessee and should have proved that the evidence produced by the assessee was not correct and actually the house was completed in 1988---Income Tax Ordinance (XXXI of 1979)
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 65---Re-assessment---Original assessment was completed under Self- Assessment Scheme but there was no assessment order available in the record; no notice under S.65 of the Income Tax Ordinance, 1979 was served on the assessee and only IT-30 was found in the record which was not even signed-- Re-assessment initiated by the Income-tax Officer under S.65 of the Income Tax Ordinance, 1979, in circumstances was ab initio void and illegal---Income Tax Appellate Tribunal cancelled the re-assessment order.
Mian Ashiq Hussain for Appellant.
Mrs. Sabiha Mujahid, D.R. for Respondent.
ORDER
This appeal has been 'filed on behalf of Dr. Muhammad Aslam (hereinafter also referred to as the assessee) challenging A.O. No.2004/31, dated 23-2-1994 by C.I.T.(A) Zone V, Lahore.
2. The brief facts leading to this appeal are that the assessee in this case is an individual, earning his income from medical profession as a Dental Surgeon. For the assessment year under consideration, the assessee filed income-tax return declaring net income at Rs.35,000 from profession and Rs.40,000 as Agriculture income. Original assessment in this case was completed under S.A.P. However, as per assessment order subsequently during the assessment proceedings for the assessment year 1990-91 the assessee filed wealth statement and reconciliation statement. According to the I.T.O. in this wealth statement the assessee had indicated that the House No.76 Garden Block, New. Garden Town, Lahore as shown to be completed by 30-6-1988. As per assessment order the total covered area of this house was 6157 sq. ft. and the assessee declared cost of construction at Rs.4,25,000. The cost of construction per square foot declared by the assessee was Rs.69 which was considered to be low by the I.T.O. and he issued a notice under section 65 for the assessment year 1988-89. The I.T.O. took the view that the assessee had constructed the house in 1988 because the assessee in the wealth statement as mentioned above had indicated that house was completed by 1988. He adopted the cost of construction at Rs.175 per sq. ft. and made an addition of Rs.652,475 under section 13(1)(6) of the Income Tax Ordinance, 1979 to the other income of the assessee.
3. During the reassessment proceedings the assessee contended before the I.T.O. that I.T.O. had wrongly presumed that house was completed in 1988. According to the assessee it was completed prior to 1982 and in support of this contention the assessee furnished completion certificate from the L.D.A. receipts for payment of property tax prior to 1982, evidence for Sui Gas connection but the I.T.O. discarded the evidence produced by the assessee before the I.T.O, and he completed reassessment as above.
4. Aggrieved by this treatment the assessee preferred first appeal. The learned C.I.T(A) made an ex parte order and rejected the appeal of the assessee.
5. Mian Ashiq Hussain, Advocate the learned counsel of the assessee has vehemently contended that action taken by the I.T.O. as well as by the learned C.I.T.(A) was illegal and entire proceedings were null and void. Reassessment completed by the I.T.O. was capricious, harsh and vindictive. The learned counsel of the assessee contended that the reassessment order and appeal order are ab initio void and illegal for the following reasons:--
(1) The learned counsel for the assessee pointed out that in this case proceedings undertaken by the assessing officer under section 65 were ab initio void because notice under section 65 of the Income-tax Ordinance, 1979 was not served on the assessee and there was no evidence on the record that such notice was even served on the assessee. According to the learned counsel the superstructure built by the Assessing Officer without service of notice under section 65 of the Income Tax Ordinance, 1979 and without assuming jurisdiction properly is not maintainable.
(2) The learned counsel for the assessee contended that I.T.O. gathered the information from wealth statement and reconciliation furnished by the assessee which incorrectly indicated that house was completed by 1988. This information according to the learned counsel of the assessee was obtained from internal source and not from external source. In these circumstances, the information on which the I.T.O. relied was not at all an information warranting action against the assessee under section 65 of the Income Tax Ordinance, 1979. The learned counsel of the assessee in respect of this view relied on a case of Honourable Supreme Court of India reported as (1967) 65 ITR (Sh.N.) (Re: C.I.T. Gujrat v. A. Rehman & Co.) wherein the Honourable Supreme Court of India held that expression information in the context in which it occurs must in our judgment mean instruction or knowledge derived from an external source concerning facts or particulars, or as the law relating to a matter bearing on the assessment. The learned counsel of the assessee argued that the I.T.O. had no information at all whereas the action under section 65 can only be taken if the I.T.O. had any definite information but in this case there was no question of definite information. The I.T.O. did not have any information at all.
(3) The learned counsel of the assessee argued that in this case the I.T.O. had started proceedings under section 65 on the basis that assessee had indicated in the wealth statement for the year ending 30-6-1990 during the assessment proceedings in the assessment year 1990-91 that House No. 76 Garden Block, New Garden Town was completed by 30-6-1988. This information was internal information gathered from the record and the I.T.O. could not reopen the assessment already completed on the basis of eternal information. According to the learned counsel of the assessee for action under section 65 there had to be information from external sources because initiation of proceedings under section 65 on the basis of the information on the record was mere change of opinion. The learned counsel of the assessee relied on the case reported as 1990 SCMR 697 (Arfat Woollen Mills v. I.T.O.). The earned counsel pf the assessee built the thesis that the scheme of the Income Tax Ordinance, 1979 is such that if there is information gathered from internal sources the I.T.O. could not 'take action under section 65. For this purpose action could be taken only under section 66-A of the Income Tax Ordinance, 1979 by supervisory Authorities. For action under section 65 there had to be an information from external sources.
6.The next argument given by the learned counsel of the assessee was that it has been indicated in the reassessment order that A.R. of the assessee admitted in the reconciliation statement of wealth that the house was constructed in 1988 from sale of plots. According to the learned counsel of the assessee there was no such statement of the A.R. of the assessee hence the observations made by the I.T.O. were incorrect and reassessmentproceedingwere void.
7.The next argument developed by the learned counsel of the assessee was that for action under section 65 information must relate to a particular year for which notice is issued. In this case I.T.O. proceeded on the basis of information obtained for assessment year 1990-91 which was not correct. The learned counsel of the assessee relied on, a reported case 77 ITR 955.
8. The next argument of the learned counsel is that word definite information was defined by the Honourable Supreme Court of Pakistan in a case reported as 1993 SCMR 1108, I.T.O. v. Chappal Builders that for action under section 65 the I.T.O. must conform to the principles laid down by the Honourable Supreme Court in the above case.
9. The learned counsel of the assessee also contended that in the assessment order the I.T.O. had admitted that the construction of the above house was started in 1984 and it was completed (sic) but surprisingly the I.T.O. brought to tax the entire unexplained investment in the assessment year 1988-89. According to the learned counsel of the assessee the order of the I.T.O. is contradictory and arguments given by the I.T.O. are self-destroying. According to the learned counsel of the assessee the concept of the chargeability of the I.T.O. was quite dim. He did not know in which year the alleged unexplained investment had to be taxed.
10. The next argument given by the learned counsel of the assessee was that while making the addition under section 13(1)(d) the procedure laid down under section 13 and elucidated by I.TA.T. in various decisions, has not been adhered to by the I.T.O. inasmuch as the I.T.O. had not obtained prior approval from the IA.C. in arriving at conclusion. He arrived at conclusion first and then the approval was taken from the I.A.C: subsequently which is against the letter and spirit of law, laid down by the appellate Courts regarding the provisions of section 13 of the Income Tax Ordinance, 1979.
11. The learned counsel of the assessee contended that the IA.C. gave the approval mechanically without applying his mind. Thus, the approval given by the IA.C. for making addition under section 13 was no approval at all.
12. The learned counsel of the assessee contended that in this case reassessment relates to assessment year 1988-89 prior to amendment in section 13 brought about by Finance Act, 1992 hence I.T.O. had to obtain prior approval of IA.C. before arriving at any conclusion for addition under section 13 of the Income Tax Ordinance, 1979.
13. The learned counsel of the assessee also contended that in this case reassessment was completed by the I.T.O. Okara whereas the assessee had shifted from Okara to Lahore and this fact has been acknowledged by the I.T.O. on last page of the assessment order. Since the assessee had shifted to Lahore the I.T.O. Okara did not have any jurisdiction. The reassessment made by the I.T.O. Okara was without any jurisdiction and nullity in law.
14. The learned counsel of the assessee contended that in this case a .strange appeal order was made by the learned C.I.T.(A) which had no precedent inasmuch as the appeal was decided by the learned., C.I.T.(A) without affording any opportunity of being heard to the assessee. The learned counsel drew our attention to the first few lines of order which read as under:--
"The appellant is not traceable and all efforts were made to serve the notice at given address failed. Appeal will be decided ex parte."
15. The learned counsel of the assessee had taken most serious objection to this manner of completion of appeal proceedings. He had contended that these proceedings were in respect of construction of House No.76 Garden Town, New Garden Town, Lahore. The assessee was living in this house prior to re-assessment proceedings and there was no question that assessee was not traceable. If the Process-Server of the learned C.I.T.(A) could not serve notice on the assessee the learned C.I.T.(A) could have sent notice to the I.T.O. for proper service who completed reassessment proceedings under section 62/65 of the Income Tax Ordinance, 1979. The learned counsel of the assessee contended that it was a represented case and there was no question of non availability of the assessee. However, if it is presumed that the assessee was not traceable then a substituted service could be effected by the learned C.I.T.(A) before deciding this appeal. Hence the order made by the learned C.I.T.(A) was a nullity of law.
16. The learned D.R. vehemently defended the orders of the authorities below. The first contention made by the learned D.R. was that in this case reassessment proceedings were stated on the basis of admission by the assessee in the wealth statement for the year ending 30-6-1990 that the assessee had completed the above House No.76, Garden Town, New Garden Town, Lahore by 1988. But when the I.T.O. started reassessment proceedings the assessee resiled from the earlier stand and contended that house was completed in 1982. The next contention made by the learned D.R. was that in the reconciliation statement the A.R. of the assessee admitted that the above house was completed in 1988 by selling plots. The next objection raised by the learned D.R. was that appeal filed by the assessee was time-barred. The learned D.R: contended that appeal order in this case was made on 23-2-1994 by the C.I.T.(A) whereas the second appeal was filed by the assessee on 29-3-1995. Hence this appeal was fit to be dismissed in limine.
17. Availing the right of rebuttal the learned counsel of the assessee raised by the learned D.R. were not correct. The learned counsel pointed out that the learned D.R. has contended that the assessee admitted in the wealth statement filed' in the year 30-6-1990 that house was completed by 30-6-1988 but the learned D.R. has totally ignored the information provided by the assessee to the I.T.O. as under: --
(1) Completion certificate from L.DA. indicating that house was completed on 30-6-1982.
(2) Copy of Letter No.249/GT/566, dated 6-7-1982 indicating objection in construction of the house from L.DA.
(3) Letter No Cup No.28M, dated 10-5-1980 indicating installation of Sui Gas with effect from. 14-4-1980.
(4) Receipt for payment of property tax for the assessment year 1980-81
18.The learned counsel pointed out that all these documents indicate that the house was completed by 1982 and that the previous A.R. due to some misunderstanding had indicated in the wealth statement that house was completed in 1988. The learned counsel further contended that the learned D.R. has contended that the A.R. of the assessee in his reconciliation statement had admitted that the house was constructed from sale of plot. According to the learned counsel there was no such statement available on the record, hence this contention was not valid.
19.As far as the appeal being time-barred was concerned the counsel contended that the appeal order was not served on the assessee. The appeal order was passed by the learned C.I.T.(A) ex parte as pointed out above. The assessee came to know of the appellate order only when notice under section 93 was served on the assessee. Then the assessee applied for the certified copy of the appeal order but the office of the C.I.T.(A) provided only an attested copy on 21-3-1995 and appeal was filed by the assessee on 29-3-1995, hence it was in time.
20. We have carefully considered the facts of the case and arguments advanced from both the sides. We have also examined the assessment record and record of the learned C.I.T.(A). The learned D.R: has pointed out that this appeal is time-barred where the learned counsel of the assessee has contended that appeal order was never served on the assessee. The assessee came to know regarding appeal order when notice under section 93(2) was served on the assessee. The assessee applied for a certified copy of the appeal order but an attested copy was supplied to the assessee on 21-3-1995. The learned D.R. was asked to produce the record and for this purpose searing was adjourned from 29-5-1995 to 7-6-1995. A perusal of the record of the learned C.I.T.(A) indicates that appeal order was sent to the assessee on the address of Okara through U.P.C. on 28-7-1994 but there was no evidence that this appeal order was ever served on the assessee. The assessee's counsel contended that he had shifted from Okara to Lahore and that in the reassessment order against which this appeal was filed it was clearly mentioned on last page that assessee had shifted from Okara to Lahore. In these circumstances there was no possibility of service of appellate order on the assessee on the address on which appellate order was sent to the assessee. In these circumstances the appeal is treated to be in time.
21. A perusal of the reassessment order indicates that only ground on which the I.T.O. started reassessment proceedings was that assessee had indicated in the wealth statement in the year ending 30-6-1990 filed by the assessee during the assessment proceedings in the year 1990-91 that assessee had completed the above house by 30-6-1988. The other ground indicated in the reassessment order that assessee's A.R. had admitted in the reconciliation statement that house was completed in 1988 is not available on the record. The learned counsel of the assessee had also argued that this observation. of the I.T.O. was not correct. So, the only basis which remains for reassessment was 8 wealth statement for the year ending 30-6-1990 in which according to the I.T.O. the assessee indicated that this house was completed m 1988. The learned counsel of the assessee has contended that this was a mistake by the previous ' A.R. of the assessee who was not authorised to give such statement. But we have noted that the I.T.O. has completely ignored the other evidence produced by the assessee regarding completion of the house, letter from Sui Gas authorities for installation of Sui Gas, and payment of property tax as indicated in the foregoing paragraphs. The I.T.O. should have examined the evidence as above and should have proved that the evidence produced by assessee was not correct and that actually house was constructed in 1988.
22. As per reassessment order the assessee has shown cost of construction at Rs.4,25,000 which was considered low as compared to other cases. According to the I.T.O. the assessee declared cost of construction of Rs.69 per sq. ft. whereas in other cases the cost of construction declared was much more. The conclusion drawn by the I.T.O. that cost of construction was low was without discussing quality of construction of the house.
23. Again the I.T.O. observed in .the assessment order that the assessee started construction in 1984 but this entire additions under section 13(1)(d) was made by the I.T.O. in the assessment year 1988-89.
24. As pointed out above we have examined the assessment record in order to verify the contention of the learned counsel of the assessee that notice under section 65 was not served in this case on the assessee. A perusal of the record is that the contention of the learned counsel of the assessee is correct. The notice under section 65, dated 29-5-1991 was sent to the assessee on the address of Okara vide No.435, dated 29-5-1991. But it is not indicated whether this notice was sent through the registered post or through U.P.C. or by ordinary mail. The learned D.R. has contended that this notice was sent through registered post, but there is no acknowledgement of service of this notice on the assessee available on the record. It has already been pointed out that hearing was adjourned in this case from 29-5-1995 to 7-6-1995 specifically for examination of the record and the learned D.R. was asked by us to thoroughly go through the record and show us the evidence of service of notice under section 65. On 7-6-1995 again assessment record was examined by us in the presence of the learned counsel of the assessee and the D.R. but there was no evidence for service of notice under section 65 available on the record. Again the learned counsel of the assessee pointed out that this notice under section 65 was sent to the assessee on the address of Okara whereas the assessee had already shifted from Okara to Lahore and the address of the assessee House No.76 Garden Block. New Garden Town, Lahore regarding which these proceedings were started by the I.T.O. was available with the I.T.O. but the notice under section 65 was surprisingly sent to the address of Okara and even that address was not complete. This contention of the learned counsel of the assessee is also correct. The I.T.O. in the reassessment order on last page has indicated that assessee had shifted to Lahore but still he has not taken the precaution to send the notice on the proper address.
25.We were also surprised, to find out that original assessment in this case was completed under S.A.P. but there was no assessment order available in the record. Only I.T.30 dated 6-2-1989 was available on the record but it was not signed. As already pointed out the assessment record was examined in the presence of the learned D.R. and the learned D.R. could not show us from the record any assessment order for the assessment year.
26. Because of these reasons the reassessment proceedings initiated by the I.T.O. under section 65 of the Income Tax Ordinance, 1979 were ab initio void and illegal for the reason that there was no assessment order and that notice under section 65 was not served on the assessee. Accordingly we cancel the reassessment order in this case for the assessment year 1988-89. Since we have cancelled the assessment order because of the above reasons we need not discuss other contentions made by the learned counsel of the assessee.
M.B.A/124/T Appeal Allowed