I.T.A. NO.665/KB OF 1983-84, DECIDED ON 29TH NOVEMBER, 1984 VS I.T.A. NO.665/KB OF 1983-84, DECIDED ON 29TH NOVEMBER, 1984, 1998 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 3766 (1984)

(a) Income-tax Act (XI of 1922)---

----Ss.23(3) & 26-A---Separate order was passed by the Assessing Officer under Ss.23(3) & 26-A of Income-tax Act, 1922---One appeal against both the order was filed by the assessee---Validity---Option was given to the assessee by the Appellate Tribunal either to select the order under S.26-A or under S.23(3) of the Act for adjudication ---Assessee opted to press appeal against order passed under S.23(3) of the Act.

Income-tax Act (XI of 1922)---

----S.23(3)---Assessment on production of accounts, evidence etc.-- Addition---Validity---Assessing Officer issued various notices to assessee for different dates to produce books of accounts---Books of accounts were presented on 25-6-1981 which were examined and certain queries were made by the Assessing Officer---Notice issued to explain such queries for 28-6-1981 which was not complied with---Last notice was served on 29-6-1981 for its compliance on 30-6-1981 to explain queries-- Representative of the assessee had shown his inability to reply the queries without consulting the working partner in the matter---Assessment was finalized by making addition as it was becoming time-barred on the same day---Such assessment was confirmed by the First Appellate Authority-- Contention was that proper opportunity was not given to explain the queries as the same were to be explained on next day---Validity---Order of Assessing Officer was vacated and matter was remitted to the Assessing Officer to pass a fresh order after allowing proper opportunity to assessee in the circumstances.

(c) Income-tax Act (XI of 1922)---

----Ss.26-A & 28(c)(iii)---Reassessment---Assessee not appearing after service of notices---Effect---Assessing Officer could make ex parte assessment and besides refusing claim of registration under S.26-A of Income-tax Act, 1922 he could also impose penalty under S.28(c)(iii) of the Act to safeguard interest of revenue.

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

----S.65---Additional assessment---If definite information regarding under assessment of income had come to knowledge of Assessing Officer later on Assessing Officer had power to re-open assessment and pass fresh order.

Abdul tahir, I.T.P. for Appellant.

Muhammad Fareed, D.R. for Respondent.

Date of hearing: 20th November, 1984.

ORDER

GHULAM MURTAZA KHAN (ACCOUNTANT MEMBER).---In the various grounds of appeals appearing in the memo. of appeal the only objection of the appellant relates to the addition of Rs.3,88,590 made by the Income-tax Officer. The other objection in the alternative, disputes the aforementioned amount because in one of the notices under section 23(3) the assessing officer proposed to make an addition of Rs.2,14,730, only.

2. The appellant is a registered firm deriving income as a Government contractor. Mr. Abdul Tahir I.T.P., appearing for the appellant, proceeded to argue that the departmental officers were not justified in considering the number of partners to be four when in fact there were seven partners. When it was brought to the notice of the learned Authorised Representative that the two separate orders had been passed by the assessing officer namely under section 26-A regarding registration of the firm and another one under section 23(3) determining the quantum of total income whereas the assessee has filed only on appeal against both the orders. He was therefore, given an option either to select the order under section 26-A or under section 23(3) for adjudication by the Tribunal. The learned Authorised Representative decided to proceed with the appeal against the quantum of income.

3. This case has a chequered history so far as the assessment order under consideration is concerned. After receipt of return of income the assessment proceedings were initiated by, issue of notice on 26-2-1979. The assessee went on asking for adjournments for one reason or the other. After pointing out the fact that the notices are being flouted for one reason or the other, the Income-tax Officer gave a sort of final notice under section 61 on 7-5-1981, for compliance on 23-5-1981. On this date also the appellant did not produce books of accounts and requested for an adjournment up to 27-5-1981. This notice was also not complied with because on this date the assessee's Authorised Representative submitted written contentions only on the point of registration under section 26-A. The assessing officer, therefore, gave another final show-cause notice for compliance on 26-6-1981. In this letter/notice the assessing officer clearly mentioned that in case of default of this notice an order will be passed under section 23(3) and the order of the registration will also be refused under the same provisions of law. On 25th June, 1981 being the date fixed by the assessing officer the Authorised Representative of the appellant attended the office at 2-15 p.m. alongwith the books of accounts. There being no time left for scrutiny of books the assessing officer kept the books of accounts in his custody and directed the Authorised Representative to attend the office on 28-6-1981. On this date also the appellant did not comply with the notice despite the fact that the assessing officer had disclosed his mind clearly that in case of failure to comply with the notice an ex parte order will be passed but he did not act upon it and instead another notice under section 23(3) was issued for compliance on 30-6-1981 at 10-00 a.m. In this notice besides mentioning the default committed on 28-6-1981 the assessing officer also after checking the books of accounts noted certain defects and discrepancies which were conveyed to the assessee. To sum up he pointed out that the books of accounts were not written on day to day basis and the same were also defective, Secondly, the appellant had been depositing substantial amounts in his bank account although on those dates the cash book showed only small amounts. The balance amounts were thus considered to be from undisclosed sources. Likewise, he observed that the appellant showed receipts of ' Amanat' on different dates amounting to Rs.40,000 Rs.80,000 and Rs.24,472 which were to be explained. In the concluding paragraph of his notice under section 23(3) the Income-tax Officer directed the assessee to explain the aforementioned deposits alongwith the supporting evidence on the date of hearing (i.e. on 30th June, 1981) at 10-00 a.m.

4. In compliance to this notice the learned Authorised Representative of the assessee attended on the date fixed and he alongwith the accountant was specifically asked to examine the books of accounts and to explain the defects and discrepancies pointed out in his notice under section 23(3) mentioned above. The Learned Authorised Representative could not give any explanation in regard to the defective nature of accounts. In respect of the deposits of amounts made in the bank on different dates it was explained that the appellant received the amounts from paying authority prior to the dates on which the deposits were made. In other words, it was explained that although the cash book, did not show sufficient balances, the additional amounts were received on earlier dates from the paying authority and were accordingly deposited in bank account. In respect of the amounts appearing in as ' Amanat' it was briefly stated that these represented outstanding labour charges and that these amounts were received as 'Amanat' (presumably from the labourers). The explanation given by the appellant was not considered to be satisfactory and hence discarding the reasons given by the appellant, the assessing officer made a total addition of Rs.3,88,590 representing the unexplained amounts enumerated in his order. When the matter was brought before the learned Appellate Assistant Commissioner, Hyderabad Range, he vide his order dated 4-8-1983, inter alia, observed in the operative part of his order that despite sufficient opportunity having been allowed the appellant could not prove the unexplained amounts mentioned by the Income-tax Officer. He also observed that the Income-tax Officer disclosed his mind to the assessee in writing and as such the contention of the learned Authorised Representative that sufficient time was not allowed to explain the case, was found to be without any basis. He, therefore, discarded the appellant's explanation and confirmed the order passed by the assessing officer.

5. The learned Authorised Representative appearing on behalf of the appellant contends that the last notice on the basis of which the assessment order was finalised was served on the assessee on 29-6-1981 (although it is not clear from the Income-tax Officer's order but the date seems to be available as per learned Departmental Representative in the order-sheet). Compliance was to be made on the next day i.e. 30-6-1981, at M-00 a.m. It is contended that although the books of accounts were made available but it was not possible to give off hand explanation in respect of various amounts appearing on different dates which the assessing officer considered to be unexplained. He contends that for explaining the various queries made by the Income-tax Officer in his notice, some reasonable time should have been allowed so as to enable the appellant whose working partner was not personally present on this date to give proper replies/explanations. He, therefore, contends that the additions made without proper opportunity having been allowed to the assessee, could not be maintained. Mr. Amin-e Ajam, the learned Departmental Representative, on the other hand, vehemently contends that it was a case where the assessee has been flouting the notices of the assessing officer and that a time came when the assessment order was going to be time-barred with the result that first time when the books were produced before him, on 25-6-1981, he retained the same for scrunity and, therefore, issued a final show-cause notice for compliance on 30-6-1981 which was the last day of the financial year after which the assessment would get barred by limitation. He further contends that to the preceding, years the assessment was made by applying a net profit rate on disclosed receipts. In the year under consideration the Income-tax Officer did not want to make the assessment on the pattern of the earlier year because he thought that there might be some other defects in accounts so as to justify separate additions to income. It was for this reason that the assessing officer did not pass an ex parte order and went on allowing opportunities to the assessee so as to enable him to make a proper assessment. He, therefore, contends that on the facts obtaining in this case the departmental officers were fully justified in. confirming the Income-tax Officer's order.

7.After hearing the representatives of both the sides and on consideration of the facts of the case we note that it was open to the Assessing Officer to make an ex parte assessment and besides refusing the claim of registration under section 26-A he could also impose penalty under section 28(c)(iii) to safeguard revenue. Later on, if definite information about unexplained bank deposits and credits in the books etc., came to his .knowledge, showing under assessment of income he had the power to reopen the assessment and pass fresh orders. Notwithstanding the availability of the aforementioned powers, the assessing officer decided to finalise the assessment after giving only a few hours time to explain the various entries in the books of accounts. As a matter of fact to give a satisfactory reply it could have been necessary not only to see the books of accounts and vouchers but also to discuss/consult the matter with the working partner of the appellant. The fact remains that for giving an explanation/reply to the notice issued under section 23(3) on various queries, the time allowed could not be considered as sufficient specially when the appellant's Authorised Representative was to see the books of accounts and give a reply on the same day without consulting the working partner of the appellant. Under these circumstances, we are of the opinion that a proper opportunity was not allowed to the appellant so as to give an explanation on the queries raised by the assessing officer. It will be in the interest of justice and not in any manner prejudicial to the department, if for making a proper assessment the orders of the departmental officers are vacated and the matter is remitted to the assessing officer to pass a fresh order after allowing a proper opportunity.

8. In the result, the appeal is disposed of as indicated above.

C.M.A./569/Trib. Case remanded.