I. T. A. NO. 107/KB OF 1987-88 VS I. T. A. NO. 107/KB OF 1987-88, 1997 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 103 (1996)

1997 P T D (Trib.) 103

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Mujibullah Siddiqui, Chairman and S.M. Sibtain, Accountant Member

I.T.A. No. 678/HQ of 1988-89, decided on 01/08/1996.

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

----Ss.65 & 59(1)---Re-opening of assessment---Self-assessment---Change of opinion---Record showed that original assessment of the assessee was completed with the conscious application of mind to the facts available on record---Re-opening of the case, therefore, was a case of clear change of opinion and as such re-assessment proceedings were not sustainable in law.

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

----S.144---Power to call for information---Income-tax Inspector is not included in the specified officers under S.144, Income Tax Ordinance, 1979---Income-tax Inspector can exercise such powers if authorised in this behalf by the Commissioner or the Central Board of Revenue and not otherwise.

The Deputy Commissioner, the Inspecting Additional Commissioner and the Commissioner have been specifically empowered to call for the information in respect of the matters specified in section 144, Income Tax Ordinance, 1979. In addition to the above officials any other officer authorised in this behalf by the Commissioner, or the Central Board of Revenue may also exercise the said powers. The Income Tax Inspector is not included in the specified officers under section 144 and, therefore, he can exercise such powers if authorised in this behalf by the Commissioner or the Central Board of Revenue and not otherwise.

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

----S.145---C.B.R. Circular No. 10 of 1979, dated Ist October, 1979---Power of survey-d-Powers of specified officers under 5.145, Income Tax Ordinance, 1979---Scope---Income Tax Inspector has been precluded from exercising the authority independently anti has been required to obtain the prior approval of Deputy Commissioner of Income Tax or Inspecting Additional Commissioner of Income-tax.

Legislature under section 145, Income Tax Ordinance, 1979 has specifically authorised the Inspecting Additional Commissioner of Income tax, the Deputy Commissioner or an Inspector of Income-tax to exercise the powers mentioned in section 145. It is, however, very important to keep in view that the powers vested in tire Deputy Commissioner, Inspecting Additional Commissioner and Income Tax Inspector under section 145 are subject to such directions as may from time to time be issued by the C.B.R in this behalf. As the power of survey conferred on the specified officers is very important power and hazardous too, to the assessees and is likely to cause difficulties and harassment in some cases, therefore, the Legislature has conferred this authority subject to the directions as may from time to time be issued by the C.B.R. in this behalf. In view of the importance of the power of survey and its implications the Legislature has taken special care to keep a check on this power of specified officers and the specific provision of the exercise of authority subject to directions of the C. B. R. and is in addition to the general provisions contained in section 8 of the Income Tax Ordinance whereby all the officers and persons employed in the execution of the Ordinance are required to observe and follow orders, instructions and directions of the C.B.R. In order to keep a check on the authority of Income Tax Inspectors, the C.B.R. issued directions in Circular No.10 of 1979, dated October 1, 1979.

The provisions contained in section 145 in respect of the authority of Income Tax Inspector is to be read with Circular No. 10 of 1979 and thus the Inspector of Income-tax has been precluded from exercising the authority independently and has been required to obtain the prior approval of Deputy Commissioner of Income Tax or Inspecting, Additional Commissioner of Income-tax.

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

----S.146---C.B.R. Circular No. 10 of 1979, dated Ist October, 1979-- Power to enter and search business premises by specified officers ---Scope-- Income Tax Inspector cannot be authorised generally to enter and search business premises but permission is to be granted specifically and separately in each case and on each occasion keeping in view the facts and circumstances of the matters.

The Inspecting Additional Commissioner and Deputy Commissioner have been authorised under section .146, Income Tax Ordinance, 1979 to enter and search business premises while any other officer who is authorised in this behalf by the C.B.R. fan also exercise the said authority and so far the Income-tax Inspector is concerned he can enter and search the business premises if he is authorised in writing by the Inspecting Additional Commissioner or Deputy Commissioner to whom he is subordinate. Thus Inspector of Income-tax can exercise the authority to enter and search the business premises if authorised in this behalf by the C.B.R. or Inspecting Additional Commissioner or Deputy Commissioner to whom he is subordinate and not otherwise. As the power to enter and search business premises is also fraught with numerous dangers and is likely to cause harassment and difficulties to the assessees, therefore, C.B.R. vide Circular No. 10 of 1979 has further placed restriction on the authority of Deputy Commissioner and Income Tax Inspector authorised by the Deputy 'Commissioner of Income Tax by further curtailing the discretionary powers and have instructed the Deputy Commissioner or Inspector to obtain prior approval of the Inspecting Additional Commissioner for the entry into the business premises of an assessee.

The C.B.R. in order to place further check on the exercise of this authority directed vide Circular No. 4(40) WM/86, dated March 20, 1988 and while granting permission the. Inspecting Additional Commissioner is expected to use his discretion in a judicious manner. The C.B.R. further directed that on each occasion facts and circumstances of the matter necessitating an enquiry should be carefully examined before the required permission is granted by the Inspecting Additional Commissioner. It means that the Income Tax Inspector cannot be authorised generally to enter and search business premises but permission is to be granted specifically and separately in each case and on each occasion keeping in view the facts and circumstances of the matter.

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

----S.148---Power of specified officers to take evidence on oath---Scope-- Procedure---Income Tax Inspector, until and unless specifically empowered by the Central Board of-Revenue in this behalf cannot exercise any power under S.148, Income Tax Ordinance, 1979---Income Tax Inspector cannot record statement of assessee and witnesses on oath, in his independent capacity---Officers and authorities specified in S.148, can, however, utilize the services of Income Tax Inspector for the purpose of recording statements of assessees and witnesses by issuance of commission but the commission is to be issued in accordance with the provisions contained in Civil Procedure Code, 1908.

The Deputy Commissioner, the Inspecting Additional Commissioner, the Appellate Assistant Commissioner, the Commissioner and the Appellate Tribunal have been specifically empowered for the purpose of the Income Tax Ordinance to exercise the same powers as are vested in a Court under the Code of Civil Procedure when trying a suit in respect of enforcing the attendance of any person and examining him on oath or affirmation compelling the production of any accounts or documents, receiving evidence on affidavit and issuing commissions for the examination of witness. The Income Tax Inspector is not included in the specified officers/authorities empowered to exercise the powers vested in a Civil Court under the Code of Civil Procedure, 1908 in respect of the matters specified in the section. However, the Inspector of Income Tax or any other officer under the administrative control of the C.B.R. can exercise this authority as and when authorised by the C.B.R. in this behalf and not otherwise. The legal position is not clear in the mind of some departmental officers in the matter relating to the recording of statements of assessees and witnesses by the Income Tax Inspector. The misunderstanding and misconception about this legal position is not confined to the lower strata of the officers in the department only but is prevailing at the level of Regional Commissioner of Income-tax as well. The reason for entertaining such view is a circular issued by the Regional Commissioner of Income-tax, Central Regional bearing No. 1158/J/RCIT, dated September 18, 1986 a portion whereof reads as follows:---

"It is, therefore, directed that wherever an Inspector directed to perform these functions an order in writing must be made. Without such written order, the Inspector should not record the statement of assessees and witnesses."

An impression is gathered from the above circular that according to the Regional Commissioner of Income-tax, Central Region, the Inspector can be authorised by the Deputy Commissioner or Inspecting Assistant Commissioner or Commissioner to record the statement of assessees and witnesses. A careful perusal of section 148 shows that this view is not correct. The Legislature has specifically empowered the Deputy Commissioner; the Inspecting Additional Commissioner, the Appellate Assistant Commissioner, the Commissioner and Appellate Tribunal to exercise the authority vested in a Civil Court under the Code of Civil Procedure and these authorities are not empowered to authorise any other officer to exercise the powers vested under section 148. The Legislature has empowered C.B.R. only to authorise any other officer under its administrative control to exercise the powers vested under section 148, A perusal of section 148 of the Income Tax Ordinance, 1979 shows that the word 'and' which has been used after the expression "the Commissioner" is disjunctive and cannot be read in conjunctive sense. Thus the expression any other officer under the administrative control of C.B.R. authorised by it in this behalf would mean that the power to take evidence on oath etc. can be conferred on any officer other than the specified officers by the C.B.R. only and not by the other officers specified in this section. Thus, the Inspector of Income Tax has no authority under the law to record statement of assessee and witnesses or exercise any other authority or power under section 148 until and unless empowered in this behalf by the C.B.R. Thus any statement recorded by Inspector of Income-tax on oath or affirmation either on his own or under the authorisation, direction or instruction by any income-tax authority other than the C.B.R. would be nullity in law and such statement shall not be admissible in evidence against any assessee. The officers and authorities specifically empowered under section 148 to exercise the power of the Civil Court under the Code of Civil Procedure can issue commission for the examination of witnesses and an Inspector of Income-tax can also be appointed a Commissioner for the examination of witnesses. While issuing commission for the examination of witnesses by appointing the Inspector of Income-tax as Commissioner, the relevant provisions contained in the Code of Civil Procedure are to be kept in view.

The powers vested in a Civil Court under sections 75 and 78 of the Civil Procedure Code are subject to such conditions and limitations as may be prescribed in Order XXVI of the Civil Procedure Code.

Under section 148 of the Income Tax Ordinance, 1979 the powers vested in a Civil Court under the Code of Civil Procedure have been conferred on the officers and authorities specified in the section by way of legislation by reference/incorporation and, therefore, for the purpose of exercising the said powers the provisions contained in section 148 of the Income Tax Ordinance, 1979 are to be read with the relevant provisions in the Civil Procedure Code.

The authorities and officials specified in section 148 can utilize the services of Income Tax Inspector for the purpose of recording statements of witnesses. In doing so the provisions contained in Civil Procedure Code are to be strictly adhered to failing which the statements recorded by the Income Tax Inspector shall become inadmissible for want of jurisdiction.

The Inspector of Income Tax until and unless specifically empowered by the Central Board of Revenue in this behalf cannot exercise any power under section 148 of the Income Tax Ordinance, and more specifically speaking, cannot record statements of assessees and witnesses on oath, in his independent capacity. The Officers and authorities specified in section 148 can utilize the services of Income Tax Inspector for the purpose of recording statements of assessees and witnesses by issuance of commission but the commission is to be used in accordance with the provisions contained in the Civil Procedure Code.

In the present case the Income Tax Inspector was deputed for conducting local enquiry and while conducting local enquiries recorded statements of witnesses on the basis which the assessing officer made additions to the total income of the assessee. The statements so recorded by the Income Tax Inspector were clearly without jurisdiction as no such authority was conferred on him by the C.B.R. and he was not appointed Commissioner for the examination of witnesses in accordance with the law. The reason being that under Order XXVI, Rule 1 of the Civil Procedure Code any Court may appoint a commission for the examination on interrogatories or otherwise of any person resident within the local limits of its jurisdiction who is exempted under the Civil Procedure Code from attending the Court or who is from sickness or infirmity unable to attend it. No such conditionalities had been observed in the present case and there was nothing on record to show that the circumstances existed under which a commission could be issued by the Deputy Commissioner under section 148(1) of the Income Tax Ordinance, 1979 read with section 75, C.P.C. and Order XXVI, Rule 1, thereof.

The appeal at the instance of department was dismissed.

(f) Income Tax Ordinance (XXXIX of 1979)---

----Ss.149 & 148---Power to impound and retain books of accounts---Powers of impounding and retaining books of accounts under section 149 of the Income Tax Ordinance, 1979 can be exercised by those officials and authorities who are referred to in subsection (1) of S.148 of the Ordinance.

Saulat Naseer Pasha, D.R. for Appellant

Nemo for Respondent

Date of hearing: 24th July, 1996.

ORDER

The above appeal at the instance of department is directed against the order, dated 14-3-1988 by the learned A.A.C. of Income-tax, Hyderabad Range, Hyderabad in I.T.A. No. 1861 relating to the assessment year 1986-87.

2. None present for the respondent though duly served with the notice of hearing. The service of notice on the respondent is held good and the appeal is heard ex parte with the assistance of learned D.R.

3. The department has assailed the impugned finding of learned A.A.C. whereby re-assessment proceedings under section 65 of the Income Tax Ordinance, 1979 have been held to be illegal and void. The re assessment proceedings have been quashed and assessment completed under section 59(1) of the Income Tax Ordinance, 1979 has been restored.

4. Briefly stated the relevant facts are that the respondent/assessee is a registered firm deriving income from supply of auto parts. The original assessment was completed under section 59(1) at the declared income of Rs.70,000. The assessment was subsequently reopened by issuance of notice under section 65 of the Income Tax Ordinance, 1979. The reason for reopening has been assigned by the assessing officer in the assessment order as follows:

"During the course of verification of assessee's nature of business and also on going through their assessment records it was observed that the assessee is' a supplier of auto parts as is evident from certification of deductions filed by them from different parties. It was further observed that assessee has wrongly claimed subletting to petty contractors to the extent of Rs.7,50,000 out of their total receipt of Ps.14,73,549 and thereby assessee has suppressed true profit. "

5. In the above circumstances the assessing officer issued a show-cause notice to the respondent as to why the assessment may not be reopened. The explanation furnished on behalf of the respondent was not found satisfactory and, therefore, the assessing officer conducted local enquiries and thereafter reopened the assessment with the prior approval of I.A.C. During the course of assessment proceedings the assessing officer held further enquiries which were summarised in the notices under sections 61 and 62 of the Income Tax Ordinance, dated 14-1-1988 which read as follows:

"On going through your assessment record it is observed that you are supplier of auto parts etc. as is evident from the certificate of deduction filed -by you from different authorities. During the abovementioned assessment year you have claimed subletting to petty contractors to the extent of Rs.7,00,000 out of total receipts of Rs.14,73,549. On the basis of commission issued by me under section 148(1) of the Income Tax Ordinance, 1979, my Inspector Mr. Irtza Khan made necessary enquiries and also recorded statements on solemn affirmation of the two petty contractors namely M/s. Muhammad Shafi and Muhammad Asghar while the third Mr. Niamat Khan could not be contacted and traced out due to unavailability of his complete address on record. The two petty contractors (witnesses) have deposed in their statement, dated 6-12-1987 that they have been undertaking shuttering work and they have never supplied or did any business of auto parts or any other item. The Inspector has also confirmed that they are labour and they derived income from shuttering work. They have no shop or godown etc. In order to afford you an opportunity for cross examination a summons was issued under section 148 of the Income Tax Ordinance, 1979 to partner Mr. Naeem Ahmed Khan and also 'the two witnesses but Mr. Naeem Ahmed Khan has failed to attend and thus you have failed to avail the opportunity of cross-examining the witnesses. Since the subletting has been established to be bogus, therefore, I wish to recompute your income by applying the rate of net profit at 15 % on the declared receipts. "

6. In reply to the above notice the respondent reiterated the facts as already alleged on the point of petty contracts and contended that the evidence of witnesses was not admissible without cross-examination. The proposed -application of net profit at 15% was also disputed. The assessing officer, however, held that as the assessee failed to avail the opportunity of cross-examination of the two alleged petty contractors, therefore, the factum of sub-letting was not proved and consequently net profit rate at 15 % was applied on the total declared receipts at Rs.14,73,549 whereby total income was worked out at Rs.2,21,000.

7. The respondent preferred first appeal assailing the reopening of assessment and determining of total income at Rs.2,21,000 by rejecting the plea of subletting and applying G.P. rate at 15% on the declared receipts. It was contended before the learned A.A.C. that in the original assessment proceedings a claim of subletting of petty contractors for Rs.7,50,000 was allowed and the assessment of petty contractors was also completed in the same circle. The successor I.T.O. was of 6pinion that the petty contracts were not genuine which opinion was not formed on the basis of any subsequent information in possession of the successor I.T.O. and, therefore, it was a clear case of change of opinion. The contentions found favour with the learned A.A.C. who held that sell the material facts furnished by the respondent-firm at the time of original assessment were duly considered by the predecessor I.T.O. and the successor I.T.O. reopened the assessment onreconsideration of the same material. He further held that no positive evidence of concealment was in possession of successor I.T.O. from anywhere else other than the material furnished by the respondent-firm itself at the time of original assessment and, therefore, the opinion formed by the successor officer which was not based on any subsequent information was not sufficient for resorting to the proceedings under section 65. The learned A.A.C. further observed-that, "I apprehend if this type of orders are allowed to stand the credibility of Government and confidence reposed by the assessee in self-assessment scheme would be lost and shaked which is not the purpose and intention of self-assessment: scheme promulgated from year to year". With these findings the learned A.A.C. quashed the re-assessment proceedings. The department feeling aggrieved has preferred this second appeal before us.

8. During the course of assessment proceedings before us the attention of learned D.R. was invited to the averments in the assessment order itself, according to which the successor I.T.O. formed a different opinion by going through the assessment record. The learned D.R. had no option but to concede that the assessing officer reopened the assessment on the basis of same material which was already available on record. The learned D.R. could not show us that while completing original assessment, under section 59(1) the material forming basis for reopening of assessment could not come to the notice of assessing officer or mind was not applied to the facts. The reason being that not only the plea of subletting was accepted by the assessing officer but the assessments of petty contractors were also completed in the same circle. Thus the factum of subletting was floating on the record. It was such a glaring fact that it can be described as staring bodily in the eyes of the assessing officer. There is sufficient material on record from which it can be inferred that the original assessment of the respondent firm and the petty contractors were completed with the conscious application of mind to the facts available on record, and, therefore, no exception can be taken to the impugned finding of learned A.A.C. that the reopening of assessment was a case of clear change of opinion and as such the reassessment proceedings were not sustainable in law. The quashment of re assessment proceedings by the learned A.A.C. is, therefore, hereby maintained. This finding effectively disposes of the appeal preferred at the instance of department. However, another important point of law has been canvassed by the learned D.R. during the course of arguments before us and the issue being of general importance requires, careful consideration on our part. The learned D.R. while supporting the assessment order on reopening of assessment, contended that after reopening of proceedings the assessing officer deputed the Income Tax Inspector for necessary enquiries who recorded statements of two witnesses namely, Muhammad Shafi and Muhammad Asghar, the alleged petty contractors and on the basis of their statements formed opinion that the plea of subletting was not a genuine. At this stage a question arose whether the Income Tax Inspector is authorised aid empowered under the law to record statements of witnesses under section 148 of the Income Tax Ordinance, 1979 and if not whether such statements have any legal validity and can be utilized for giving any finding against any assessee. In short the point for consideration is whether a statement recorded by the Income Tax Inspector is admissible in evidence for the purpose of giving any finding against any assessee. The learned D.R. submitted that such authority is vested in the Income flax inspector. The point in issue required in-depth examination of the relevant provisions of law as there are various misgivings and misconceptions in respect of the jurisdiction and authority vested in various income-tax authorities and particularly in respect of the authority vested in Income Tax Inspector under various provisions of the Income Tax Ordinance. Therefore, we would like to have a resume of powers vested under-various income-tax authorities and particularly in Income Tax Inspector. It would be appropriate to reproduce sections 144, 145, 146, 148 and 149 of the Income Tax Ordinance, 1979 which read as follows:

"144. Power to call for information.--The Deputy Commissioner, the Inspecting Additional Commissioner, the Commissioner, or any other officer authorised in this behalf by the Commissioner or the Central Board of Revenue, may, by notice in writing, require--

(a)any assessee to furnish within such time as may be specified in such notice a statement showing the names and addresses of all persons to whom he has paid in any income year rent, interest, commission, fee, royalty or brokerage, or any annuity amounting to not less than four hundred rupees together with particulars of all such payments or remuneration in the nature of valuable consideration, under whatever nomenclature;

(b)any dealer, broker or agent or any person concerned in the management of a Stock or Commodity Exchange to furnish, within such time as may be specified in such notice, a statement showing the names and addresses of all persons to or from whom he, or the Exchange, has paid or received in any income year any sum amounting to not less than five thousand rupees in the aggregate in connection with the transfer of assets, together with particulars of all such payments and receipts;

(c)any person, including a banking company, to furnish such information or such statement or accounts as may be specified in such notice:

Provided that no such notice shall be issued to any banking company as respects any client, except with the prior approval of the Commissioner in the case of Deputy Commissioner, or the Central Board of Revenue or any other income-tax authority authorised in this behalf in the case of the other officer.

145. Power of survey. ---Notwithstanding anything contained in any other provision of this Ordinance and subject to such directions as may, from time to time, be issued by the Central Board of Revenue in this behalf, the Inspecting Additional Commissioner, the Deputy Commissioner or an Inspector of Income Tax may enter any premises within the area assigned to him for the purpose of making a survey of persons liable to tax under this Ordinance and may--

(a) inspect any accounts or documents;

(b) stamp such accounts and documents;

(c) take extracts from such accounts and documents; and

(d) make such enquiries as may be necessary.

146. Power to enter and search business Premises ---The Inspecting Additional Commissioner or the Deputy Commissioner or any other officer authorised in this behalf by the Central Board of Revenue if so authorised in writing by the Inspecting Additional Commissioner or the Deputy Commissioner to whom he is subordinate, an Inspector of Income Tax may, for the purpose of making any inquiry, enter the premises in which a person carries on, or is believed to carry on, his business or profession, and may--

(a) search such premises and inspect any accounts or documents;

(b) stamp such accounts or documents or take extracts or copies thereof;

(c) impound such accounts or documents and retain them for so long as may be necessary for examination thereof or for the purposes of prosecution; and

(d) make any inventory of any articles found in such premises.

(2)The Director-General of Investigation and Intelligence, the Commissioner and the Inspecting Additional Commissioner may make any enquiry which they consider necessary as respects any person liable or believed to be liable to assessment under this Ordinance or require any such person to produce or cause to be produced any accounts or documents which they consider necessary, and shall have the same powers for the purpose of making any such enquiry of requiring the production of accounts or documents under this Ordinance as the Deputy Commissioner has.

(3) Notwithstanding anything contained in this Ordinance, the Deputy Commissioner may, with the prior approval of the Commissioner, authorise any valuer to enter any place and inspect such accounts and documents as may be necessary to enable him to make a valuation of any asset for the purposes of section 67.

148. Power to take evidence--on-oath- etc.--(1) The Deputy Commissioner, the Inspecting Additional Commissioner, the Appellate Additional Commissioner, the Commissioner and any other officer under the administrative control of the Central Board of Revenue authorised by it in this behalf, and the Appellate Tribunal shall, for the purposes of this Ordinance, have the same powers as are vested in a Court under the Code of Civil Procedure, 1908 (V of 1908), when trying a suit in respect of the following matters, namely:---

(a) enforcing the attendance of any person and examining him on oath or affirmation;

(b) compelling the production of any accounts or documents;

(c) receiving evidence on affidavit; and

(d) issuing commissions for the examination of witnesses.

(2) Where a person to whom a summons is issued under subsection (1) either to attend to give evidence or to produce accounts or documents at the place and time specified in such summons fails to do so without any reasonable cause, the authority issuing such summons may, without prejudice to the provisions of any other law for the time being in force, imposed upon him such fine not exceeding one thousand rupees as it thinks fit, and the fine so imposed may be recovered in the manner provided in Chapter IX.

(3) The provisions of subsection (3) of section 111 shall mutatis mutandis apply in the case of an order made under subsection (2) by any authority (other than the Deputy Commissioner) as they apply to an order made under subsection (1) of the said section 111.

149. Power to impound and retain books of accounts etc.---Any authority referred to in subsection (1) of section 148 may impound and retain in its custody for such period as it thinks fit any books of accounts or other documents produced before it in any proceeding under this Ordinance."

A perusal of section 144 shows that the Deputy Commissioner, the Inspecting Additional Commissioner and the Commissioner have been specifically empowered to call for the information in respect of the matters specified in the section. In addition to the above officials any other officer authorised in this behalf by the Commissioner or the Central Board of Revenue may also exercise the said powers. The Income Tax Inspector is not included in the specified officers under section 144 and, therefore, he can exercise such powers if authorised in this behalf by the Commissioner or the Central Board of Revenue and not otherwise. However, so far the power of survey under section 145 is concerned the Legislature has specifically authorised the Inspecting Additional Commissioner of Income-tax, the Deputy Commissioner or an Inspector of Income-tax to exercise the powers mentioned in section 145. It is, however, very important to keep in view that the powers vested in the Deputy Commissioner, Inspecting Additional Commissioner and Income Tax Inspector under section 145 are subject to such directions as may from time to time be issued by the C.B.R. in this behalf. As the power of survey conferred on the specified officers is very important power and hazardous too, to the assessees and is likely to cause difficulties and harassment in some cases, therefore, the Legislature has conferred this authority subject to the directions as may from time to time be issued by the C.B.R,. in this behalf. In view of the importance of the power of survey and its implications the Legislature has taken special care to keep a check on this power of specified officers and the specific provision of the exercise of authority subject to directions of the C.B.R. and is in addition to the general provisions contained in section 8 of the Income Tax Ordinance whereby all the officers and persons employed in the execution of the Ordinance are required to observe and follow orders, instructions and directions of the C.B.R. In order to keep a check on the authority of Income Tax Inspectors, the C.B.R. issued following directions in Circular No. 10 of 1979, dated October 1, 1979 which reads as follows:

"Under section 38-B of the repealed Act, the Inspector of Income tax, if authorised by I.T.O. or Inspecting Assistant Commissioner could enter any place within limits of the area assigned to the I.T.O. or to the I.A.C. in which a person carried on his business or profession. Section 145 of the Ordinance authorises the Inspector to enter any premises without authority from the I.T.O. or the I.A.C. This discretion to the Inspector is likely to create difficulties especially when the place which can be entered into is not confined to business premises of the assessee but includes any other place including the residence of the assessee situated within the area of his jurisdiction. Instructions have been issued requiring the Inspector to obtain the prior approval of the I.T.O. or I.A.C. for entering any place."

10. The provisions contained in section 145 in respect of the authority of Income Tax Inspector is to be read with Circular No. 10 of 1979 above and thus the Inspector of Income Tax has been precluded from exercising the authority independently and has been required to obtain the prior approval, of Deputy Commissioner of Income Tax or Inspecting Additional Commissioner of Income Tax.

11. A perusal of section 146 shows the Inspecting Additional Commissioner and Deputy Commissioner have been authorised to enter and search business premises while any other officer who is authorised in this behalf by the C.B.R. can also exercise the said authority and so far the Income-tax Inspector is concerned he can enter and search the business premises if he is authorised in writing by the Inspecting Additional Commissioner or Deputy Commissioner to whom he is subordinate. Thus Inspector of Income-tax can exercise the authority to enter and search the business premises if authorised in this behalf by the C.B.R. or Inspecting Additional Commissioner or Deputy Commissioner to whom he is subordinate and not otherwise. As the power to enter and search business premises is also fraught with numerous dangers and is likely to cause harassment and difficulties to the assessees, therefore, C.B.R. vide Circular" No. 10 of 1979 has further placed restriction on the authority of Deputy Commissioner and Income Tax Inspector authorised by the Deputy Commissioner of Income Tax by further curtailing the discretionary powers and have instructed the Deputy Commissioner or Inspector to obtain prior approval of the Inspecting Additional Commissioner for the entry into the business premises of an assessee. The relevant extract from Circular No. 10 of 1979 is as follows:

"Under section 38-A of the repealed Act, an Inspector or Income Tax Officer could not enter the business premises of an assessee without specific authority from the Inspecting Assistant Commissioner or Commissioner etc. Section 146 of the Ordinance empowers the Income Tax Officer to enter the premises and also empowers him to authorise his Inspector to do so. In order to remove difficulties arising from the extension of the discretionary powers available to the income Tax Officer under the new provision, instructions have been issued requiring the Income Tax Officer and the Inspector to obtain prior permission of the Inspecting Assistant Commissioner for the entry into the business premises of an assessee. "

12. The C.B.R. in order to place further check on the exercise of this authority directed vide Circular No. 4(40) WM/86, dated March 20, 1988 that while granting permission the Inspecting Additional Commissioner is expected to use his discretion in a judicious manner. The C.B.R. further directed that on each occasion facts and circumstances of the matter necessitating an enquiry should be carefully examined before the required permission is granted by the Inspecting Additional Commissioner. It means that the Income Tax Inspector cannot be authorised generally to enter and search business premises but permission is to be granted specifically and separately in each case and on each occasion keeping in view the facts and circumstances of the matter. The relevant portion from the above circular is as follows:

"According to the provisions of subsection (1) of section 146 of the Income Tax Ordinance, 1979 read with CBR's Circular No. 10 of 1979, the Income Tax Officer or an Income Tax Inspector can enter and search business premises of an assessee for the purpose of making an inquiry after obtaining prior permission of the Inspecting Assistant Commissioner. While granting permission, the I.A.C. is expected to use his discretion in a judicious manner and satisfy himself that such entry and search of the business premises is necessary. Therefore, on each occasion, facts and circumstances of the matter necessitating an inquiry should be carefully examined before the required permission is granted by the Inspecting Assistant Commissioner.

13. Now we come to the provisions contained in section 148 which is under consideration in the present appeal. A perusal of above section shows that the Deputy Commissioner, the Inspecting Additional Commissioner, the Appellate Assistant Commissioner, the Commissioner and the Appellate Tribunal have been specifically empowered for the purpose of the Income Tax Ordinance to exercise the same powers as are vested in a Court under the Code of Civil Procedure when trying a suit in respect of enforcing the attendance of any person and examining him on oath or affirmation compelling the production of any accounts or documents, receiving evidence on affidavit and issuing commissions for the examination of witness. Thus we find that the Income Tax Inspector is not included in the specified officers/authorities empowered to exercise the power vested in a Civil Court under the Code of Civil Procedure, 1908 in respect of the matters specified in the section. However, the Inspector of Income Tax or any other officer under the administrative control of the C.B.R. can exercise this authority as and when authorised by the C.B.R. in this behalf and not otherwise. It appears that the legal position is not clear in the mind of some departmental officers in the matter relating to the recording of statements of assessees and witnesses by the Income Tax Inspector. We further feel that the misunderstanding and misconception about this legal position is not confined to the lower strata of the officers in the department only but is prevailing at the level of Regional Commissioner of Income-tax as well. The reason for entertaining such view by us is that we have come across a circular issued by the Regional Commissioner of Income-tax, Central Region bearing No.1158/J/RCIT, dated September 18, 1986 a portion whereof reads as follows:---

"It is, therefore, directed that wherever an Inspector directed to perform these functions an order in writing must be made. Without such written order, the Inspector should not record the statement of assessees and witnesses. "

14. An impression is gathered from the above circular that according to the then Regional Commissioner of Income-tax, Central Region, the Inspector can be authorised by the Deputy Commissioner or Inspecting Assistant Commissioner or Commissioner to record the statement of assessees and witnesses. A careful perusal of section 148 shows that this view is not correct. The Legislature has specifically empowered the Deputy Commissioner, the Inspecting Additional Commissioner, the Appellate Assistant Commissioner, the Commissioner and Appellate Tribunal to exercise the authority vested in a Civil Court under the Code of Civil Procedure and these authorities are not empowered to authorise any other officer to exercise the powers vested under section 148. The Legislature has empowered C.B.R. only to authorise any other officer under its administrative control to exercise the powers vested under section 148. A perusal of section 148 of the Income Tax Ordinance, 1979 shows that the word 'and' which has been used after the expression "the Commissioner" is disjunctive and cannot be read in conjunctive sense. Thus expression "any other officer under the administrative control of C.B.R. authorised by it in this behalf would mean that the power to take evidence on oath etc. can be conferred on any officer other than the specified officers by the C.B.R. only and not by the other officers specified in this section. Thus, we hold that the Inspector of Income Tax has no authority under the law to record statement of assessees and witnesses or exercise any other authority or power under section 148 until and unless empowered in this behalf by the C.B.R. Thus any statement recorded by Inspector of Income-tax on oath or affirmation either on his own or under the authorisation, direction or instruction by any income-tax authority other than the C.B.R. would be nullity in law and such statement shall not be admissible in evidence against any assessee. However, we would like to clarify that the officers and authorities specifically empowered under section 148 to exercise the power of the Civil Court under a the Code of Civil Procedure can issue commission for the examination of witnesses and an Inspector of Income-tax can also be appointed a Commissioner for the examination of witnesses. While issuing commission for the examination of witnesses by appointing the Inspector of Income-tax as Commissioner, the relevant provisions contained in the Code of Civil Procedure are to be kept in view. The relevant provisions in the Code of Civil Procedure, 1908 in this behalf are sections 75 and 78 which are reproduced below:

"75. Power of Court to issue commissions. --Subject to such conditions and limitations as may be prescribed, the Court may issue re a commission---

(a) to examine any person:

(b)to make a local investigation;

(c)to examine or adjust accounts; or

(d)to make a partition.

"78. Commission issued by foreign Court. ---Subject to such conditions and limitations as may be prescribed; the provisions as to the execution and return of commissions for the examination of witnesses shall apply to commissions issued by or at the instance of---

(a)Courts situate beyond the limits of Pakistan and established or continued by the authority of the Federal Government; or

(c)Courts of any State or country outside Pakistan."

15.The powers vested in a Civil Court under sections 75 and 78 of the Civil Procedure Code are subject to such conditions and limitations as may be prescribed and the conditions and limitations have been prescribed in Order 26 of the Civil Procedure Code which read as follows:---

"Rule1 Cases in which Court may issue commission to examine witness.---Any Court may in any suit issue a commission for the examination on interrogatories or otherwise of any person resident within the local limits of its jurisdiction who is exempted under this Code from attending the Court or who is from sickness or infirmity unable to attend it.

Rule2. Order for commission. ---An order for the issue of a commission for the examination of a witness may be made by the Court either of its own motion or on the application, supported by affidavit or otherwise, of any party to the suit or of the witness to be examined.

Rule 3. Where witness resides within Court's jurisdiction.--A commission for the examination of a person who resides within the local limits of the jurisdiction of the Court issuing the same may be issued to Any person whom the Court thinks fit to execute it.

Rule 4. Persons for whose examination commission may issue.--(1) Any Court may in any suit issue a commission for the examination of--

(a) any person resident beyond of local limits of its jurisdiction;.

(b) any person who is about to leave such limits before the date on which he is required to be examined in Court; and

(c) any person in the service of the (State) who cannot, in the opinion of the Court, attend without detriment to the public service.

(2) Such commission may be issued to any Court, not being a High Court, within the local limits of whose jurisdiction such person resides, or, to any pleader or other person whom the Court issuing the commission may appoint.

(3) he Court on issuing any commission under this rule shall direct whether the commission shall be returned to itself or to any subordinate Court.

Rule 5. Commission or request to examine witness not within Pakistan.--Where any Court to which application is made for the issue of commission for the examination of a person residing at any place not within (Pakistan) is satisfied that the evidence of such person is necessary, the Court may issue such commission or a letter of request.

Rule 6. Court to examine witness pursuant to commission.--Every Court receiving a commission for the examination of any person shall examine him or cause him to be examined pursuant thereto.

Rule 7. Return of commission with depositions of witnesses.- Where a commission has been duly executed, it shall be returned, together with the evidence taken under it, to the Court from which it was issued, unless the order for issuing the commission has otherwise directed, in which case the commission shall be returned in terms of such order; and the commission and the return thereto and the evidence taken under it shall (subject to the provisions of the next following rule) form part of the record of the suit.

Rule 8. When depositions may be read in evidence.--Evidence taken under a commission shall not be read as evidence in the suit without the consent of the party against whom the same is offered, unless--

(a) the person who gave the evidence is beyond the jurisdiction of the Court, or dead or unable from sickness or infirmity to attend to be personally examined, or exempted from personal appearance in Court, or is a (person in the service of the State) who cannot, in the opinion of the Court, attend without detriment to the public service, or (b) the Court in its discretion dispenses with the proof of any of the circumstances mentioned in clause (a), and authorises the evidence of any person being read as evidence in the suit, notwithstanding proof that the cause for taking such evidence by commission has .ceased at the time of reading the same.

Rule 9. Commissions to make local investigations.--In any suit in which the Court deems a local investigation to be requisite or proper for the purpose or elucidating any matter in dispute, or of ascertaining the market value of any property, or the amount or any mesne profits or damages or annual net profits, the Court may issue a commission to such person as it thinks fit directing him to make such investigation and to report thereon to the Court:

Provided that, where the Provincial Government has made rules as to the persons to whom such commission shall be issued, the Court shall be bound by such rules.

10. Procedure of Commissioner. ---(I) The Commissioner, after such local-inspection as he deems necessary and after reducing to writing the evidence taken by him, shall return such evidence, together with his report in writing signed by him to the Court. Report and depositions to be evidence in suit. 'Commissioner may be examined in person.

(2) The report of the Commissioner and the evidence taken by him (but not the evidence without the report) shall be evidence in the suit and shall form part of the record; but the Court or, with the permission of the Court, any of the parties to the suit may examine the Commissioner personally in open Court touching any, of the matters referred to him or mentioned in his report, or as to his report, or as to the manner in which he has made the investigation.

(3) Where the Court is for any reason dissatisfied with the proceedings of the Commissioner, it may direct such further inquiry to be made as it shall think fit.

Rule 11. Commission to examine or adjust accounts.---In any suit in which an examination or adjustment of accounts is necessary, the Court may issue a commission to such person as it thinks fit directing him to make such examination or adjustment.

Rule12. Court to give Commissioner necessary instructions. ---The Court shall furnish the Commissioner with such part of the proceedings and such instructions as appear necessary, and the instructions shall distinctly specify whether the Commissioner is merely to transmit the proceedings which he may hold on the inquiry, or also to report his own opinion on the point referred for his examination.

Rule 13. Commission to make partition of immovable property--- Where a preliminary decree for partition has been passed, the Court may, in any case not provided for by section 54, issue a commission to such person as it thinks fit to make the partition or separation according to the rights as declared in such decree.

Rule14. Procedure of Commissioner.---(1) The Commissioner shall, after such inquiry as may be necessary, divide the property into as many shares as may be directed by the order under which the commission was issued, and shall allot such shares to the parties, and may, if authorised thereto by the said order, award sums to be paid for the purpose of equalizing the value of the shares.

(2) The Commissioner shall then prepare and sign a report or the Commissioners (where the commission was issued to more than one person and they cannot agree) shall prepare and sign separate reports appointing the share of each party and distinguishing each share (if so directed by the said order) by metes and bounds. Such report or reports shall be annexed to the commission and transmitted to the Court; and the Court, after hearing any objections which the parties make to the report or reports, shall confirm, vary or set aside the same.

(3) Where the Court confirms or varies the report or reports it shall pass a decree in accordance with the same as confirmed or varied; but where the Court set aside the report or reports it shall either issue a new commission or make such other as it shall think fit.

Rule 15. Expenses of commissions to be paid into Court.---Before issuing any commission under this order, the Court may order such sum s(if any) as it thinks reasonable for the expenses of the commission to be, within a time to be fixed, paid into Court by the party at whose instance or for whose benefit the commission is

Rule 16. Powers of Commissioners. ---Any Commissioner appointed under this order may unless otherwise directed .by the order of appointment,---

(a)examine the parties themselves and any witness whom they or any of them may produce, and any other person whom the Commissioner thinks proper to call upon to give evidence in the matter referred to him;

(b)call for and examine documents and other things relevant to thesubject of inquiry;

(c)at any reasonable time enter upon or into any land or building mentioned in the order.

Rule 17. Attendance and examination of witnesses before Commissioner. ---(I) The provisions of this Code relating to the summoning, attendance and examination of witnesses, and to the remuneration of and penalties to be imposed upon, witnesses shall apply to persons required to give evidence or to produce documents under this order whether the commission in execution of which they are so required has been issued by a Court situate beyond the limits of Pakistan and for the purposes of this rule the Commissioner shall be deemed to be Civil Court.

(2) A Commissioner may apply to any Court (not being a High Court) within the local limits of whose jurisdiction a witness resides for the issue or any reprocess which he may find it necessary to issue to or against such witness, and such Court may, in its discretion, issue such process as it considers reasonable and proper.

Rule 18. Parties to appear before Commissioner. ---(I) Where a commission is issued under this Order, the Court shall direct that the parties to the suit shall appear before the Commissioner in person or by their agents or pleaders.

(2) Where all or any of the parties do not so appear, the Commissioner may proceed in their absence. "

16. Under section 148 of the Income Tax Ordinance, 1979 the powers vested in a Civil Court under the Code of Civil Procedure have been conferred on the officers and authorities specified in the section by way of legislation by reference/incorporation and, therefore, for the purpose of exercising the said powers the provisions contained in section 148 of the Income Tax Ordinance, 1979 are to be read with the relevant provisions in the Civil Procedure Code. For the time being we do not propose to dilate in the parameters and the requirements as well as the limitations and the mode of exercising powers in respect of the matters enumerated in section 148(1)(a)(b) and (c). We will consider these matters in some other appropriate proceedings. We confine our discussion to the issuance of commission for the examination of witnesses as the authorities and officials specified in section 148 can utilize the services of Income Tax Inspector whose authority and jurisdiction we are considering for the time being for the purpose of recording statements of witnesses. In doing so the provisions contained in Civil Procedure Code and reproduced by us above are to be adhered to strictly failing which the statements recorded by the Income Tax Inspector shall become inadmissible for want of jurisdiction. So far the powers of impounding and retaining books of accounts under section 149 of the Income Tax Ordinance is concerned, this power can also be exercised by those officials and authorities who are referred to on subsection (1) of section 148. We have already dealt sufficiently with the extent of authority vested in various officers specified in subsection (1) of section 148 which shall be applicable for exercising authority under section 149 as well.

17.The upshot of the above discussion is that the Inspector of Income Tax until and unless specifically empowered by the Central Board of Revenue in this behalf cannot exercise any power under section 148 of the Income Tax Ordinance, and more specifically speaking, cannot record statements of assessees and witnesses on oath, in his independent capacity The Officers and authorities specified in section 148 can utilize the services of Income Tax Inspector for the purpose of recording statements of assessees and witnesses by issuance of commission but the commission to be issued in accordance with the provisions contained in the Civil Procedure Code which have been referred and elaborated by us in this order.

18. Coming to the facts of the present case we find that the Income Tax Inspector was deputed for conducting local enquiry and while conducting local enquiries recorded statement of witnesses on the basis which the assessing officer made additions to the total income of the appellant. The statements so recorded by the Income Tax Inspector are clearly without jurisdiction as no such authority was conferred on him by the C.B.R. and he was not appointed Commissioner for the examination of witnesses in accordance with the law as discussed above. The reason being that under Order XXVI, Rule 1 of the Civil Procedure Code any Court may appoint a commission for the examination on interrogatories or otherwise of any person resident within the local limits of its jurisdiction who is exempted under the Civil Procedure Code from attending the Court or who is from sickness or infirmity unable to attend it. No such conditionalities have been observed in the present case and there is nothing on record to show that the circumstances existed under which a commission could be issued by the Deputy Commissioner under section 148(1) of the Income Tax Ordinance, 1979 read with section 75, C.P.C. and Order XXVI, Rule 1, thereof.

19. For the -foregoing reasons the appeal at the instance of department stands dismissed.

MAA./230/Trib.Order accordingly.