I.T.AS. NOS.1791/LB TO 1796/LB OF 1988-89, DECIDED ON 24TH JULY, 1995. VS I.T.AS. NOS.1791/LB TO 1796/LB OF 1988-89, DECIDED ON 24TH JULY, 1995.
1996 P T D (Trib.) 18
[Income-tax Appellate Tribunal Pakistan]
Before Nasim Sikandar, Judicial Member and Khalid Mahmood Accountant Member
I.T.As. Nos.1791/LB to 1796/LB of 1988-89, decided on 24/07/1995.
Income Tax Ordinance (XXXI of 1979)---
----Ss. 65 & 132---Decision in appeal---Remand---Reassessment---Definite information---Limitation---Principles---Where any kind of proceedings, assessment or reassessment, are found to be void ab initio, an Appellate Authority cannot set aside same for a fresh round if, in the meanwhile, the prescribed limitation for the action has expired---Assessment in such a case, shall be cancelled and no direction will be issued which could be taken as an excuse for reassessment proceedings---If Appellate Authority does make a direction which purports to extend the time limit prescribed under the law same will be illegal and ineffective---Appellate Authority cannot give a direction while exercising powers of remand which goes to the extent of conferring jurisdiction on an Assessing Officer where he is not lawfully seized of the same.
Where any kind of proceedings, assessment or re-assessment are found to be void ab initio, an appellate forum cannot set aside them for a fresh round if, in the meanwhile, the prescribed limitation for the action has expired. In such cases, the assessment shall be cancelled and no direction will be issued which could be taken as an excuse for re-assessment proceedings. If an Appellate Authority does make a direction, which purports to extend the time limit prescribed under the law, it will be illegal and ineffective. The reason being that an Appellate Authority cannot, give a direction while exercising powers of remand which goes to the extent of conferring jurisdiction on an assessing officer where he is not lawfully seized of the same.
To attract the above rule two conditions must be satisfied; firstly that the Appellate Authority found the proceedings to be void ab anitio and secondly, that at the time and on the day remand was ordered for fresh proceedings, the time limit prescribed under the statute had already lapsed. In the present case none of these conditions were established. The Appellate Authority while setting aside the case and remanding the matter did not declare the reassessment proceedings to be null and void. The order speaks of lack of proper opportunity at a later stage of the proceedings although the assessee did raise a contention that re-assessment proceeding were illegal because these were initiated without any definite information which even according to the Assessing Officer himself became available months after issuing of notice under section 65 of the Ordinance. The other condition that time limit prescribed under section 65(3) of the Ordinance for reassessment proceedings had already lapsed had also not been established. Therefore, the Impugned order could not be struck down by applying the principles stated above. The assessee certainly had a good case if the Appellate Authority had found favourable on his objection that re-assessment proceedings were illegal and no definite information existed on the day those were initiated.
First Appellate Authority, however, did record the objections against initiation of re-assessment proceedings but proceeded to set aside the assessment on a different ground. There it was contended by the assessee that no definite information was available with the Assessing Officer on the day he proceeded under section 65 of the Ordinance. Also that the information which finally formed basis for the conclusion that income had escaped assessment was admittedly received months after issuance of notice for reopening. Again the assessee had challenged the veracity of the information on the ground that it was mala fide as he was engaged in litigation with the informer. First Appellate Authority instead of recording a finding on the contentions proceeded to set aside the assessments on the ground that proper opportunity of hearing was not allowed to the assessee. Revenue was not in cross-appeal against the remand order which meant also that setting aside of assessments on the grounds stated above had been accepted by it. However, since the Appellate Authority failed to adjudicate upon all the above objections, Income Tax Appellate Tribunal set aside the impugned order and directed the Appellate Authority to record a finding on every contention raised before it.
Narinder Singh Dhingra v. Commissioner of Income Tax New Delhi (1966) 60 ITR 641; C.I.T. v. Estate of Late Sri Veeraswami Chettiar (1963) 49 ITR 13 (Mad.); C.I.T. Bombay City v. Ranchhodas Karsondas (1959) 36 ITR 569; N. Naganatha Iyer v. C.I.T. Madras (1966) 60 ITR 647 and In re: (1954) 26 ITR 105 ref.
Ali Bin Abdul Kadir for Appellant. Qaiser M. Yahya, D.R. for Respondent.
Date of hearing: 28th June, 1995.
ORDER
The assessee appellant in this case is an individual who derived income from sale of fertilizers during the period spread on assessment year?s 1982-83 to 1987-88. Original assessments in his case were framed at declared incomes under SAS at Rs.21,200, Rs.18,500, Rs,18,700 Rs.18,500 and Rs.30,000 for charge years 1982-83 to 1986-87. The return filed for the year 1987-88 declaring income at Rs.30,000 was still pending when re-assessment proceedings were initiated in respect of the aforesaid years. The assessing officer appears to have been informed that besides already declared commission receipts from PAD & SC and M/s Dawood Herculees he was also in receipt of commission receipts from M/s. Fauji Fertilizer through another firm namely M/s Saqib Brothers. On being served with a notice seeking his explanation if the income was being derived from the aforesaid firm, the assessee revised his returns for the assessment year?s 1982-83 to 1986-87 on 20-9-1987. Though receipts from the said firm M/s Saqib Brothers were declared yet the final total or net income did not increase in any manner except in the case of the assessment years 1983-84 where it was enhanced by a sum of Rs.1,500 only. The 'assessing officer proceeded under section 65 of the Ordinance and ultimately framed assessments for the first five years under review respectively at Rs.47,060 Rs.1.37,648 Rs.4,18,350 and Rs.2,05,600. For the assessment year 1987-88 assessment was completed under section 62 at Rs.1,11,225.
2. Before the first appellate authority it was argued that the alleged definite information on the basis of which proceedings under section 65 of the Ordinance were initiated in respect of the years 1982-83 to 1986-87 was received through a letter dated 22-2-1988 from M/s. F.F.C. Limited while the assessee had already been served with a notice under the said provision of the Ordinance and thereupon he had since revised his returns on 29-6-1987. It was further contended, that notice issued on 20-6-1987 alleging concealment/escapement of the income derived from the above said source was without any definite information, which came along subsequently on 22-2-1988. Learned First Appellate Authority, however, observed that notice was issued in this case on 31-12-1987 for the assessment years 1982-83 to 1986-87 under section 65 of the Ordinance: It was further found that notice for the last hearing was served for 29-5-1988 but the assessing officer made assessments on 31-7-1988 without issuing any further notice to the assessee. Therefore, it was held that the assessee was not allowed proper opportunity and accordingly all the assessments were set aside with the following observations:--
"It has been further argued that the last hearing in this case was done by the assessing officer on 29-5-1988 for which date notices under section 61/62 were issued. But the assessing officer made assessment on 31-7-1988 without issuing any notice to the assessee in between. It appears from order-sheet entry that none appeared on 29-5-1988 and the assessing officer ordered to re-fix the case. But subsequently entries appear to have been made in one sitting, without issuing any notice to the assessee, which is highly unfair. Against these entries, signatures of the assessee or his A.R were not obtained, which confirms the version of the appellant. The assessment orders are set aside to be made de novo, after affording proper opportunity to the assessee to explain his side of the story and also after verification of sales and commission paid to the assessee from account books of Fauji Fertilizer Company kept at their Regional Office, Faisalabad."
3. Parties have been heard. Learned counsel for the assessee repeats his contentions which he earlier made before the first appellate authority that no definite information existed on the date the assessee was served with a notice under section 65 of the Ordinance and the proper opportunity was not allowed to the assessee in this case. It is further contended that the first appellate authority erred in law as well as in fact by only setting aside the assessments and not cancelling them after it had recorded a finding that the assessee was not allowed proper opportunity and that in order to rope him in the assessing officer manipulated the official record. Therefore, on the authority of a case from Indian jurisdiction re: Narinder Singh Dhingra v. Commissioner of Income Tax Delhi cited as (1966) 60-ITR-641 (Delhi High Court) he contends that by setting aside the assessments and remanding the case to the assessing officer learned first appellate authority in fact re-activated the time limit as prescribed under section 65 (3) of the Income Tax Ordinance which had since expired. Learned D.R. on the other hand states that objections made at the bar are not legally tenable and that the assessee himself having revised returns in the year?s 1982-83 to 1986-87 had in fact admitted the concealment on his part. Therefore, according to the Revenue, the assessee has no case at all against the remand order.
4. Putting in simple words, the preposition put forth by Mr. Ali Bin Abdul Qadir, Advocate is that where any kind of proceedings, assessment or re-assessment are found to have been void ab initio the appellate forum cannot simply set aside them and thereby allow a new lease of life if the prescribed limitation in the meanwhile has expired. In the case relied upon re: Narinder Singh Dhingra (supra) a Division Bench of the High Court considered the question, "whether the Tribunal, having held that the order of assessment for the year 1961-62 made under section 143(3) of the Income Tax Act 1961, was invalid, could restore the case to the file of the Income Tax Officer and direct him to proceed from the return stage and make fresh assessment according to law under the Income-tax Act, 1922?". The assessee in that case Mr. Narinder Singh Dhingra for the assessment year 1961-62 returned an income of Rs.19,002 being remuneration received by him as a director of a company and fee received for attending Board Meetings. Assessment proceedings started in his respect on July 1962 under section 23(2) of the Indian Income-tax Act, 1922 were not finalized. These proceedings were again started on June, 1964 and finalized on July 20, 1964. The assessment order so made was labelled as being under section 143(3) of the Income Tax Act, 1961 and the income returned by the assessee, as an individual was included in the income declared by the joint Hindu family of which he was a member. The assessee filed an appeal, which failed and the order of assessing officer was confirmed. In second appeal before the Tribunal it was contended that as the return was filed before March 31, 1962 the assessment ought to have been completed under section 23(3) of the Old Act and not under section 143(3) of the Income Tax Act, 1961 as had been done by the I.T.O. The Tribunal allowed the preliminary objection that the assessment was invalid because it was made under the new Act. However, the assessment was set aside and the case restored to the file of the Income Tax Officer with a direction to proceed from the return stage and make a fresh assessment according to the provisions of Act of 1922. Learned Division Bench of the High Court, while considering the above stated question on reference noted that under section 34(3) of the late Act of 1922 the assessment proceedings had to be completed within four years from the end of the year in which the income, profits or gains were first assessable. Also that since Tribunals order was made on July 20, 1966, after the expiry of stipulated period of four years, it could not direct the Income Officer to proceed from the return stage and make a fresh assessment under the Old Act. Before the learned Bench reliance was placed on (1963) 49 ITR 13 (Mad) re: CIT v. Estate of Late Sri Veeraswami Chettiar; (1959) 36 ITR 569 Supreme Court re: CIT Bombay City v Ranchhoddas Karsondas and (1966) 60 ITR 647 re: N. Naganatha lyer v. C.I.T. Madras.
5. In the first case re: Estate of Sri Veeraswami, the Appellate Assistant Commissioner set aside the assessment framed for the year 1950-51 in respect of an individual share-holder wherein deemed dividends were taxed in his hands. In the remand order, it was recorded, as a valid order has never been passed under section 23-A the Income Tax Officer will now precede under section 34 of the Act to -include dividends in the hands of share-holder. The time limit for such a proceeding will be four years from the last day of the financial year in which the income first became assessable in the hands of the share-holder on June, 25, 1956. The time limit will therefore be up to March 31, 1961". On remand re-assessment proceedings were completed on February, 1957 under section 34 of the Act of 1922 including therein the deemed dividends as per earlier order recorded on June 25, 1956 under section 23-A in respect of the company of the assessee was a share-holder. This order was confirmed in first appeal. Before the Tribunal inter alia, it was submitted that the IAC ought to have held that the present proceedings were referable only to the notice, dated October 27, 1956 and the assessment made in pursuance of the said notice was beyond time and hence illegal; that the ITO could not act on the direction given by AAC which was not permissible under the law and that the direction given by the AA.C could not be deemed to be a direction coming within the ambit of section 31. The Tribunal held that the assessments should be cancelled as the proceedings had been taken beyond the prescribed time limit provided for under the law. On reference, "whether on the facts and circumstances of the case, the re-assessment made on 11th February, 1957, is valid in law", a Division Bench of the Madras High Court repelled the contention that in a case where the Income Tax Officer purports to give effect to a direction of the appellate authority under section 31, there is no bar of limitation whatsoever. It was held, section 31(3) of the Act confers powers upon the appellate authority to set aside the assessments and direct the Income Tax Officer to make fresh assessment after making such further enquiry as the Income Tax Officer thinks fit or the Appellate Assistant Commissioner may direct. But that contemplates that the assessment proceedings themselves had been validly initiated and it was set aside, only for the reason that a proper enquiry had not been made by the Income Tax officer, that is to say, the Income Tax Officer had been seized of jurisdiction in the matter and only the final order made by him was defective for some reason or other.... But it is unthinkable that a direction can be made in the exercise of the powers under section 31 of the Act, which goes to the extent of conferring jurisdiction upon the Income-tax Officer if he is not lawfully seized of jurisdiction. To our minds, the direction issued by the Appellate Assistant Commissioner travels far beyond the scope of section 31 of the Act in the circumstances of the case. If direction is neither lawful nor valid, it cannot come within the scope of the saving proviso and serve to remove the bar of limitation.
6. In the second case re: Ranchhoddas Karsondas (supra) the assessee did not file a return even after issuance of a public notice on May 1,1945 under section 22(1) of the Income-tax Act, 1922. The assessing officer, while examining the books of accounts of a partnership firm of which he was a partner found certain cash credits in the name of assessee's wife. Before, however, the I.T.O. could take any action the assessee submitted in "voluntary" return indicating therein, by way of a foot, note, that his wife had sold old ornaments and had deposited the proceeds in his firm. The I.T.O. did not act on the return but issued a notice purporting to be one under section 34 of the Act calling upon the assessee to submit his return. The assessee filed a return showing same income and added the same foot, note. However, the assessing officer framed assessment under section 34 and added the amount towards the income of the assessee, which was alleged to have been deposited by his wife. The contention that assessment was invalid inasmuch as it was completed four years after the end of the relevant assessment year failed before the A, A.C. and the Tribunal. On reference the Bombay High Court in Ranchhoddas Karsondas (1954) 26 ITR 105 upheld the above objection and also found that the I.T.O. could not issue a notice under section 34 after a return was already made before it. The Supreme Court confirmed the view adopted by the High Court.
7. In the third case re: Naganatha Iyer (supra) learned Judges of the Madras High Court followed their decision in re: N. Veeraswami Chettier (supra). The assessee Nagantha Iyer, a member of Hindu undivided family, who was also a partner in a firm in his individual capacity, submitted his returns for the assessments years 1948-49 and 1949-50. The I.T.O. ignored the returns and issued notices under section 34(1)(a) of the Income-tax Act, 1922. The assessee again submitted returns but under protest. The assessments were completed by adopting the income from the firm as his individual income. The assessee preferred appeals and contended that the assessing officer could not ignore returns tiled by him and that otherwise the assessments framed were time barred as the prescribed four years had already expired from the end of the relevant year of assessment. A.A.C. upheld the action of the I.T.O. but remanded the cases, as in his view the case came under the provisions of section 34(1)(6). Finally, he set aside the orders and remanded the case for afresh proceedings under the said provisions of the Act. The Tribunal refused to interfere. Second round ensued after the I.T.O. made re-assessments as directed by the AA.C. The assessee appealed and repeated his contentions, which he made in the first round. None was considered favourably by either the AA.C or, the Tribunal. On reference the Madras High Court, as said above, followed their earlier decision in re: N. Veeraswami Chethiar and approved the findings which have been reproduced in para 5 of this order.
8. The contention advanced by the learned counsel for the assessee finds support from the cases relied upon. It appears settled that where any kind of proceedings, assessment or re-assessment are found to be void ab initio, an appellate forum cannot set aside them for a fresh round if, in the meanwhile, the prescribed limitation for the action has expired. In such cases, the assessment shall be cancelled and no direction will be issued which could be taken as an excuse for re-assessment proceedings. If an appellate Authority does make a direction, which purports to extend the time limit prescribed under the law, it will be illegal and ineffective. The reason being that an Appellate Authority cannot give a direction while exercising powers of remand which goes to the extent of conferring jurisdiction on an assessing officer where he is not lawfully seized of the same. The ratio in re: Naganatha Iyer v. C.I.T. (supra) elucidates this principle.
9. The facts in the case before us are, however, clearly distinguishable. To attract the rule laid down in the above cited case re: Narinder Singh Dhingra (supra) two conditions must be satisfied; firstly that the appellate authority found the proceedings to be void ab anitio and secondly, that at the time and on the day remand was ordered for fresh proceedings, the time limit prescribed under the statute had already lapsed. None of these conditions is established before us. The Appellate. Authority while setting aside the case and remanding the matter did not declare the reassessment proceedings to be null and void. The portion of the order reproduced in para. 2 antes speaks of lack of proper opportunity at a later stage of the proceedings although the assessee did raise a contention that re-assessment proceedings were illegal because these were initiated without any definite information, which even according to the Assessing Officer himself became available months after issuing of notice under section 65 of the Ordinance. The other condition that time limit prescribed under section 65(3) of the Ordinance for reassessment proceedings had already lapsed by that time has also not been established. Therefore, the impugned order cannot be struck down by applying the principles settled in above cases. The assessee certainly had a good case if the Appellate Authority had found favourably on his objection that re-assessment proceedings were illegal as no definite information existed on the day these were initiated.
10. Other submissions of the learned counsel, however, find support from the record. Learned First Appellate Authority, did record the objections against initiation of re-assessment proceedings but proceeded to set aside the assessments on a different ground indicated in the last passage of the impugned order as reproduced above. There it was contended by the assessee that no definite information was available with the Assessing Officer on the day he proceeded under section 65 of the Ordinance. Also that the information which finally formed basis for the conclusion that income had escaped assessment was admittedly received months after issuance of notice for reopening. Again the assessee had challenged the veracity of the information on the ground that it was mala fide as he was engaged in litigation with the informer. Learned First Appellate Authority instead of recording a finding on the contentions proceeded to set aside the assessments on the ground that proper opportunity of hearing was not allowed to the assessee. We have been informed that the Revenue is not in cross-appeal against the remand order which means also that setting aside of assessments on the grounds stated above has been accepted by it. However, since the Appellate Authority failed to adjudicate upon all the above objections, we consider it appropriate to set aside the impugned order and direct the learned Appellate Authority to record a finding on every contention raised before it.
11. It is so directed.
M.BA./131/T?????????????????????????????????????????????????????????????????????????????????????? Order accordingly.