COMMISSIONER OF INCOME-TAX, FAISALABAD VS YOUSAF SONS, SARGODHA
1996 P T D 1125
[Lahore High Court]
Before Malik Muhammad Qayyum and Ahmad Saeed Awan, JJ
COMMISSIONER OF INCOME-TAX, FAISALABAD
Versus
YOUSAF SONS, SARGODHA
Civil Tax Reference No. 17 of 1987, decided on 13/03/1996.
(a) Income-tax Act (XI of 1922)--
----S. 23(2)---Provisions of S.23(2), Income-tax Act, 1922 were mandatory in nature---Whenever an Assessing Officer doubted the correctness of any return submitted by an assessee it was incumbent upon him to serve notice on the assessee requiring him, on a specified date, to produce evidence in support of his return.
(b) Interpretation of statutes---
---- Fiscal statute---Corroboration---Such statute has to be strictly construed and interpreted.
(c) Income-tax Act (XI of 1922)---
----Ss. 22(3) & 23(4)(2)---Ex, parte assessment---Notice under Ss.22(3) & 23(2), Income-tax Act, 1922 were issued and properly served on the assessee---Neither the assessee appeared nor any application for adjournment was received by the Income-tax Officer---Income-tax Officer completed the assessment under S.23(4), Income-tax Act, 1922---Validity---Held, conditions required under law having been satisfied by issuing and service of notice under Ss.23(2) & 22(3) of Income-tax Act, 1922, the Income-tax Officer acted legally in making ex pane assessment on a date though not fixed for hearing.
C.I.T. v. Sakhi Contractor and Engineering, Multan 1981 PTD 210 distinguished.
C.I.T. v. Popular Engineering Works, Burewala PLD 1975 Lah. 893 ref.
Shahbaz Butt for Applicant.
Nemo for Respondent.
Date of hearing: 13th March, 1996.
JUDGMENT
AHMAD SAEED AWAN, J.--- This is a reference under section 66(1) of the Income-tax Act, 1922 on a point of law arising in the case in the following circumstances.
2. briefly facts of the case are that the respondent/assessee filed returns for the years 1968-69 to 1970-71; statutory notices under sections 22(4) and 23(2) of the Income-tax Act, 1922 were issued in the name of respondent/assessee and were complied with by the assessee as he appeared before the Income-tax Officer, during the proceedings it transpired that the respondent/assessee besides the business declared had been running Ration Depot; Inspector, in that regard during inquiry case across a "Dasti Note Book" in assessee's business premises; on the basis of which the Income-tax Officer subsequently issued under section 22(4) of the Act to the assessee to produce the said "Dasti Note Book" on 29-12-1970. The notice was properly served on the assessee on 20-12-1970; neither the assessee nor any application for adjournment was received; consequently the Income-tax Officer completed the assessment under section 23(4) of the Income-tax Act on 1-1-1971. The respondent/assessee having felt aggrieved filed appeals before the Income-tax Tribunal; who allowed the same and remanded the case to the Income-tax Officer for decision de novo in accordance with law. The applicant/department being dissatisfied with the order of learned Tribunal; required the Tribunal to refer the following question of law arising out of the Tribunal's order, dated 3-2-1977:--
"Whether on the facts and in the circumstances of the case the Tribunal was justified in holding that the Income-tax Officer could resort to action under section 23(4) of the Income-tax Act on 29-12-1970 only when the default had occurred and not on any subsequent date?"
3. In order to resolve the above question it would be pertinent to reproduce section 23 of the Act which runs as under:--
"23.--(1) if the Income-tax Officer is satisfied (without requiring the presence of the assessee or the production by him of any evidence) that a return made under section 22 is correct and complete, he shall assess the total income of the assessee, and shall determine the, sum payable by him on the basis of such return.
(2) If the Income-tax Officer (is not satisfied without requiring the presence of the person who made the return or the production of evidence that a return made under section 22 is correct and complete, he shall serve on such person) a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's Office or to produce, or to cause to be there produced, any evidence on which such person may rely in support of the return. ?????????
(3) On the day specified in the notice issued under subsection (2) or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, a specified points, shall, by an order in writing, assess the total income of the assessee, and determine the sum payable by him on the basis of such assessment.
(4) If any person fails to make the return required by any notice given under subsection (2) of section 22 and has not made a return or a revised return under subsection (3) of the same section), or fails to comply with all the terms of a notice issued under subsection (4) or subsection (4-A) of the same section or, having made a return, fails to comply with all the terms of a notice issued under subsection (2) of this section, the Income-tax Officer shall make the assessment to the best of his judgment (and determine the sum payable by the assessee on the basis of such assessment) and, in the case of a firm, may refuse to register it or may cancel its registration if it is already registered."
4. The provisions of subsection (2) of section 23 are mandatory in nature t as whenever an assessing officer doubts the correctness of any return submitted by an assessee then in such case it is incumbent upon him to serve notice on the 1A assessee required him, on a specified date, evidence in support of his return. The learned Tribunal while setting aside ex parte assessment order observed:--
"It would thus be clear from the perusal of the above facts that the impugned assessment was not framed on 29-12-1970 for which date the appellant was served with a notice. The impugned assessment was later on framed on 1-1-1971. On 29-12-1970 the assessing officer had not even bothered to pass the order saying that as none was present he would pass the order under section 23(4) of the Act."
5. It is manifest from the above observation that the requisite notices in the name of the assessee were issued for 29-12-1970 but on that notified date of hearing of case neither the respondent/assessee appeared nor any adjournment was sought. The observation of the learned Tribunal that on 29-12-1970 the Income-tax Officer had not bothered to pass the order saying that as none was present he would pass the order under section 23(4) of the Act is misconceived as it is well-recognized principle of law that taxing statute has got to be strictly construed and interpreted; the Income-tax Officer had called the case for hearing on 29-12-1970 and he waited till last moment as is evident from the order, dated 29-12-1970 which was "None present. R.K. to report if there is any application for adjournment"; the R.K. reported on 30-12-1970 that no application for adjournment was moved; hence made the assessment after waiting on 1-1-1971. It was not necessary for the Income-tax Officer to have passed an ex pane order on that date i.e. 29-12-1970 as was not warranted by any of provisions contained in the Income-tax Act.
6. The dictum laid down in case. C.I.T. v. Sakhi Contractor and Engineer Multan 1981 PTD 210 that ex parte assessment on a date which was not fixed for hearing without furnishing the assessee with requisite notices is bad in law is not applicable to the facts of the case in hand as the requisite notices were admittedly issued and served upon the assessee.
7. The facts of the reference are identical to the facts of case reported as C.I.T. Lahore v. Popular Engineering Works, Burewala PLD 1975 Lah. 893 wherein learned D.B. Bench observed that the Tribunal was not justified in holding that the Income-tax Officer could resort action under section 23(4) of the Act; only when default occurred and not on any subsequent date.
8. As stated above, in the present case, the conditions required under the law were satisfied by issuing notices under section 22(3)/23(2); the Income-tax Officer acted legally in making ex parte assessment on a date though was not fixed for hearing as observed by the learned Tribunal; we, therefore, answer the question referred to the High Court in negative. There shall be no order as to costs.
M.B.A./C-2/L????????????????????????????????????????????????? ?????????? Reference answered in negative.