I.T.A. NO.6135/I13 OF 1995 VS I.T.A. NO.6135/I13 OF 1995
1997 P T D (Trib) 1133
[Income-tax Appellate Tribunal Pakistan]
Before Ch. Muhammad Ishaq, Judicial Member and Saleem Asghar Mian, Accountant Member
I.T.A. No.6135/IB of 1995, decided on 23/01/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
----S.65---Additional assessment---Initiation---Essentials---Prior notice for initiating proceedings under S.65, Income Tax Ordinance, 1979=--Originally assessment was framed under S.50(1) of the Ordinance---Later on concealment of one source of income was discovered---Assessing Officer with permission of I.A.C. issued notice under S.65---Assessee contended that no notice of opening of assessment under S.65 was issued---Held, prior notice to the assessee was not necessary for initiating proceedings under S.65 of the Ordinance.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.65---Additional assessment---Assessment of total income---Definite information---During proceedings under S.65 of the Income Tax Ordinance, 1979 Officer came to know of other concealments and without definite information opened assessment of total income ---Assessee contended that Assessing Officer was not authorised to open assessment of total income as assessment was finalized under S.59(1) of the Ordinance---Held, there was no justification for opening of entire assessment pertaining to other income, for the Assessing Officer had no definite information---Additional assessment was declared to be illegal and was cancelled.
Muhammad Akbar, F.C.A. for Appellant.
Malik Mubeen, D.R: for Respondent.
Date of hearing: 23rd January, 1996.
ORDER
This appeal for the assessment year 1992-93 has been preferred at the instance of the assessee to impugn the order dated 11-10-1995 passed by the Commissioner of Income Tax (Appeals), Zone-I, Lahore. The appellant challenges the proceedings taken against him under section 65 of the Income Tax Ordinance, 1979.
2.We have heard the parties. The record has been examined.
3. In this case, original assessment was framed under section 50(1) of the Income Tax Ordinance, 1979. Later on, it was discovered that the appellant had concealed one source of his income and, therefore, the case warranted action under section 65. The assessing officer sought the requisite permission from the I.A.C. Officer for initiating the afore-stated action. Accordingly notice issued to the assessee under section 65 of the Income Tax Ordinance, 1979 on 24-7-1993. The notice pointed out that the income received from one Dr. Abdul Ahad at Rs.4,000 per month on, account of rent paid to Al-Rehman Clinic was not disclosed by the assessee. Accordingly, a notice under section 65 as stated was served. The assessee/appellant submitted his reply on 10-8-1993 wherein it was stated that re-opening of the assessment was unjustified.- It was stated in that reply that receipts from Dr. Abdul Ahad have duly been accounted for in the Books of Account and had been shown as Indoor receipts. According to the learned A.R., the Books of Accounts were produced and he was ready to produce the same again.
4. The assessing officer rejected the explanation of the appellant and brought into tax not only the amount of Rs.4,000 per month which originally formed the basis of opening the assessment but through a subsequent notice, the entire assessment was re-opened. For the reasons stated in the assessment order, the I.T.O. framed fresh assessment under section 65 of. the Income Tax Ordinance, 1979.
5. The appellant feeling aggrieved of the additional assessment preferred an appeal before the Commissioner of Income Tax (Appeals) which was disposed of through the aforesstated order.
6. Before us the contention of the assessee is two-fold: First that no notice for opening of the assessment under section 65 was issued, therefore, the proceedings taken thereafter, were nullity in the eye of law. Secondly that the basis on which the notice was issued pertained to the concealment of the income received from Dr. Abdul Ahad as monthly rent by the assessee and the same having been explained provided no justification for action under section 65 of the Income Tax, Ordinance, 1979. In addition thereto, it is further argued that there was no definite information in respect of the opening of the entire assessment in the facts and the circumstances of this case.
7. The contention of the assessee that no prior notice for opening of the assessment under section 65 was issued nor the assessee was confronted with the available material is concerned; we are of the view that the department had sufficient material in the form of definite information to re-open the assessment under section 65 of the Ordinance. We are quite in agreement with the observations of the C.I.T. (Appeals) in this respect that no prior notice is necessary for initiating proceedings under section 65. The department had Ifficient material to open the assessment as from the record it was not obvious the amount paid by Dr. Abdul Ahad has really been accounted for. Before explanation by the assessee, the amount of Rs.48,000 was certainly not obvious to have been accounted for in the record. Therefore, the IT.O had full justification to initiate action under section 65 of the Income Tax Ordinance, 1979 The impugned Order is also correct on the point that due formalities in respect of initiating action under section 65 were complied with in so far as the first notice under the said provision was concerned. We will, therefore, uphold the action of the I.T.O. in this respect.
8. However, as far the action regarding the opening of the assessment in respect of the total income of the assessee is concerned, the record fails to support that there was any definite information available with the I.T.O. to initiate action on that account. The assessment in this case having been finalised under section 59(1) of the Income Tax Ordinance, 1979 should not be normally opened against without the provisions of section 65 having been made applicable in their entirety. Before us, the I.T.O., who framed the assessment, was also present from whom certain facts were ascertained.
9. It was inquired from him as to whether he had definite information in respect of concealment of any other source of income or otherwise in addition to Rs.48,000. His reply was that at the time when the action was initiated, he has no other information in respect of the concealment of the income by the assessee in addition to the said Rs.48,000. It is, therefore, noticed that the requirement of the law regarding the availability of definite information in respect of the opening of the entire assessment was not available with the Assessing Officer at the relevant time. In terms of law, therefore, the Income Tax Officer should, only initiate action in respect of that income of the assessee regarding which he had a definite information regarding concealment. We, therefore, do not feel inclined to support the impugned action in respect of the opening of the entire assessment of the appellant. The reason being that apart from the fact that law does not give authority to the assessing officer to initiate action without definite information in addition to the fact that at the 'time when the second notice was served, the I.T.O. had no such information in addition to the fact that the assessing officer candidly admitted that the subsequent information came to light during the assessment proceedings. Since notice in respect to the concealment of Rs.48,000 was issued, the action in respect of other sources of income could not be probed into as there was no definite information available with the I.T.O. at the time the notice was issued. The action of the I.T.O. and its subsequent confirmation by the I.A.O. in the circumstances, therefore, cannot be supported.
10. Next contention of the learned A.R. is that there was no concealment at all on the part of the appellant. He referred to his reply dated 30-8-1993 wherein it was explained that the alleged amount of Rs.4,000 per month received by the assessee had duly been accounted for in the books of account in the Head "Indoor Receipts" which were produced and subsequently reproduced at the time of additional assessment. It was argued that there was no justification for the assessing, officer to reject this explanation of the assessee in view of the availability of the account books. It is noticed that apparently the disputed amount is certainly not available under a separate Head. The close examination of the record, however, reveals that the said amount has duly been incorporated and accounted for in the Head "Indoor Receipts" the same can be verified from the examination of the record but the authority below failed to accept the same which resulted in the miscarriage of justice. When the appellant had maintained account in the usual course of business, he should have been allowed full opportunity to explain the same. The Assessing Officer is bound to examine the same in order to come to a correct conclusion but in this case, it appears that the explanation offered by the assessee was not attended to before arriving at the impugned conclusion. In the circumstances, we are unable to uphold the impugned addition made by the Assessing Officer, delete the impugned addition made by the assessing officer in the additional assessment while holding that the afore-stated amount received from Dr. Abdul Ahad by the assessee stood fully explained and duly accounted for in the Books, of Account maintained by the assessee in the normal course of business.
11. We may further observe that while there was justification for opening of the assessment in respect of the disputed amount of Rs.48,000, there was no further justification for opening of the entire assessment as pertaining to the other sources of income of the assessee as the department has no definite information available with it at the time when the original notice was issued. The proceedings taken in respect of the opening of the entire assessment, therefore, are certainly unwarranted by law. The law is absolutely clear on this score in so far as it ensures that no proceedings under subsection (1) shall be initiated unless definite information has come into there possession of the I.T.O. In this case, it is admitted that no such information was available with the Assessing Officer in respect of the opening of the entire assessment. We, therefore, observe that the income about which there was definite information stood fully explained by the assessee whereas the other income of the assessee could not be done again on account of lack of definite information. In view of this matter, the additional assessment having no basis in law is declared as illegal, unjustified and the same is, therefore, cancelled.
12. In view of the aforestated reasons, the appeal succeeds and is accordingly allowed.
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