Income Tax Ordinance (XXXI of 1979)---

----S. 59(4)---Self-Assessment Scheme for 1993-94, para. I (k)---C.B.R Circular No.9 of 1993, dated 1-7-1993, para. 1(k)---C.B.R. Circular No.3 of 1994, dated 3-2-1994--- Failure of assessee to provide short statement account, details and documents within one month of the date of service of letter in that regard from the Assessing Officer ---Condonation of delay-- Principles---Expression "tax-payer fails to provide" occurring in para. 1(k) of C.B.R. Circular No.9 of 1993---Connotation----Where it is provided that the tax-payer fails to provide such statements, accounts, details and documents within one month. of the date of service of a letter in regard from the Income-tax Officer, that means that there was an omission on the part of assessee which was within his competence--- Expression "cannot" thus envisages an omission which was due to circumstances beyond control of the assessee---Where the submission of short documents within time specified in the notice/letter was not beyond the control of the assessee, no case was made out for condonation of delay---Immunity allowed by C.B.R. Circular No.3 of 1994, therefore, was not applicable to the assessee for the reason that the necessary requirements were not fulfilled---Case was remanded by the Tribunal to Commissioner of Income-tax (A) for deciding same on other grounds agitated by the assessee before him.

Whenever the word "fail" is used by the Legislature it connotes an act of a person who is required to perform the same within his authority and power. The word "fail" connotes an act of the defaulter and a default can be envisaged only if an act is within the competence, authority and power of a person and is not beyond his control, authority and power. Thus, when it is provided that the tax-payer fails to provide such statements, accounts, details and documents within one month of the date of service of a letter in that regard from the Income Tax Officer, it means that there was an omission on the part of assessee which was within his competence. It cannot envisage an omission, which was due to circumstance beyond his control.

In the present case facts showed that the assessee had not made out any case for condonation of delay or extension of time because the preparation of trading account which was submitted on specified date was not beyond the control of the assessee as it was to be prepared on the basis of documents already available with him and no such document (as contended by the assessee) was to be procured from the Central Excises and Sale Tax Department without which the trading account could not be prepared. Thus, the Assessing Officer had the discretion to condone the delay, but Commissioner of Income Tax (Appeal) was not justified in condoning the delay without considering the facts on record. On appreciation of facts no case was made out for condonation of delay.

The immunity allowed by the C.B.R. vide Circular No.3 of 1994 was not applicable to the assessee for the reason that the necessary requirements were not fulfilled.

The impugned direction of the C.I.T. (A) for processing the return under the Self-Assessment Scheme and extending of immunity from total audit was vacated by the Tribunal. The case was remanded to the C.I.T. (A) for deciding the appeal on other grounds agitated by the assessee before him.

Abdul Wadood Khan, D.R. for Appellant.

Maqbool Ahmed Saighal for Respondent.

Date of hearing: 15th September, 1997.

ORDER

MUHAMMAD MUJEEBULLAH SIDDIQUI (CHAIRMAN).-- The above appeal at the instance of Department is directed against the order dated 16-9-1996 by the learned Commissioner of Income Tax (Appeals), Zone-1, Peshawar in Income Tax Appeal No.328 relating to assessment year 1993-94.

2. Heard Mr. Abdul Wadood Khan, learned representative for the department/appellant and Mr. Maqbool Ahmed Saighal, learned Advocate for the respondent.

3. The department has assailed direction of learned CIT(A) to process the return under the Self-Assessment Scheme and the finding that the return enjoyed immunity from total audit.

4. Briefly stated, the relevant facts are that the respondent an individual being Director of M/s. Hoti Flour Mills Private Limited, Mardan, deriving income from manufacture and sale of cigarettes under the name and style of M/s. United Tobacco Company in individual capacity, filed return of total income for the assessment year 1993-94 on 1-9-1993 under Self Assessment Scheme, declaring net income at Rs.1,99,000. On a security the assessing officer found that wealth statement and statement of accounts were not furnished alongwith the return, which was the requirement of S.A.S. and, therefore, a notice for filing of short documents was issued on 10-2-1993. The compliance was to be made in consonance with the provisions contained in Self-Assessment Scheme for the assessment year 1993-94 within one month of receiving the notice. The notice was served on 12-10-1993 and the compliance was due by 12-11-1993. On 9-11-1993, the assessee sought extension for filing of short documents within 15 days. The assessing officer rejected the request for extension of times for the reason that there was no provision of law for granting of extension beyond one month and referred to the provision contained in para. 1(k) of the Self Assessment Scheme for the assessment year 1993-94. The assessee/respondent filed short documents on 18-11-1993. The assessing officer, therefore, held that the return automatically stood excluded from the purview of Self-Assessment Scheme and thereafter completed the assessment under section 62 of the Income Tax Ordinance, 1979. The total income was determined at Rs.1,31,69,875. The respondent being aggrieved preferred first appeal raising objections to the completion of assessment under section 62 and exclusion of return from the purview of Self Assessment Scheme. Objections were raised on merits also to the determination of total income. The Learned CIT (A) decided the appeal on one ground only which related to the exclusion of return from the purview of Self-Assessment Scheme. The, learned CIT(A) referred to the following passage from the order of Tribunal in Income-tax Appeal No.218(PB) of 1995-96:--

"The Assessing Officer it may be noted, has simply stated in his order that since the return declaring net income at Rs.100,000 was to be accompanied with the wealth tax return it was invalid return and even if it was revised showing upward income and tax at 25 % more than highest tax payable in the last 3 years as per Circulars referred to above, the return still remained invalid. This is most certainly incorrect construction and appreciation of the provisions contained in the said circulars. We, therefore, accept the appeal 'for the appellant, vacate the orders of the Learned CIT(A) as well as that of the Assessing Officer for the year 1994-95 and direct the assessing officer to accept the return as being immune from the security, total audit in view of the circulars referred to above."

The Learned CIT(A) further referred to the ruling of the Hon'ble Supreme Court of Pakistan reported as (1991 PTD 968), wherein it was held that the delay could be condoned by the assessing officer if an assessee was prevented by the circumstances beyond his control. The Learned CIT(A) further held that the appellant was prevented by circumstances beyond .his control, therefore, on the basis of case law referred to above, the plea of assessee was accepted and ultimately he directed to process the case under Self-Assessment Scheme being immune from total audit.

5. The learned Departmental Representative has vehemently argued that the learned CIT(A) fell in serious error by not applying his mind to the law and facts of the present case. The learned D.R. has submitted that the learned CIT(A) has observed that the observation of Tribunal in Income-tax Appeal No.218(PB) of 1995-96 is on all fours and is parallel to the case of assessee in this case, however, he has not shown as to how the finding of Tribunal is on all fours of the present case. The learned D.R. has forcefully regard that the learned CIT(A) has not considered the facts on record at all. He has further submitted that the assessing officer has passed a very detailed order which contains that the requirements for availing Self-Assessment Scheme were not fulfilled as the required documents were not filed by the assessee alongwith the return of income and after service of notice, compliance was not made within the stipulated period of one month. The learned D.R. has further submitted that the ratio of judgment of the Hon'ble Supreme Court of Pakistan is not applicable to the facts of the present case. In support of his contention he has taken us through the judgment of the Hon'ble Supreme Court of Pakistan, which pertained to the Self-Assessment Scheme for the assessment year 1984-85. In the said case, the assessee did not file the documents alongwith the return of income as required under the scheme and the required documents were furnished after the period of one month. An application was submitted for condonation of delay, which was rejected for the reason that the scheme did not contain any provision for extension of time. The Hon'ble Supreme Court of Pakistan held that although, there was no provision in the Self-Assessment Scheme of condonation of delay but the request for condonation of delay required consideration for the reason that no assessee can be deprived from the benefit of scheme and that notwithstanding any provision contained in the S.A.S. the Income Tax Officer had the power to condone the delay and the discretion not to exclude the case from the benefit of the scheme. The learned D.R. has submitted that this observation and the dictum laid down by the Hon'ble Supreme Court of Pakistan is to be read in the light of provisions contained in the S.A.S. for the assessment year 1984-85 which contained that if the requirements were not fulfilled the return would be eligible for exclusion from the purview of the Self-Assessment Scheme. Thus the Hon'ble Supreme Court of Pakistan held that on non-fulfillment of the required conditions there was no ipso facto exclusion of the return from the purview of Self Assessment Scheme but the return merely became eligible for exclusion from the purview of S.A.S. Even if there was non-fulfilment of the requirements the assessing officer had the discretion not to exclude the return from Dr S.A.S. and, therefore, the assessing Officer had the discretion not the case from the benefit of the Self-Assessment Scheme and had the power to condone the delay. The learned D.R. has there submitted that on the other hand, the Self-Assessment Scheme for the year 1993-94 contains provisions whereby on non-fulfilment of and non-filing of the short documents within one month of service of notice the exclusion is ipso facto and consequently the was not available with the assessing officer, as it was available tar the Self-Assessment Scheme for the assessment year 1984-85 which under consideration by the Hon'ble Supreme Court of Pakistan in the dement reported as 1991 PTD 968. The learned D.R. has, therefore, the ratio of the judgment of the Supreme Court of Pakistan is to the facts and circumstances of the present case and the Self Assessment Scheme for the assessment year 1993-94. The learned CIT(A) not justified in extending the benefit of the judgment of the Hon'ble Supreme Court of Pakistan to the assessee and the Self-Assessment Scheme the assessment year 1993-94. The learned D.R. has further submitted in that the Hon'ble Supreme Court of Pakistan held that delay be condoned if an assessee was prevented by circumstances beyond' his of for sufficient grounds to have delayed the submission of beyond the prescribed period. He has further drawn our attention part of the judgment of Hon'ble Supreme Court of Pakistan remitted to the Income Tax Officer in order to consider explanation of the appellant for delay in submitting the documents and decision of the matter according to law. He has urged that neither was any application for condonation of delay on behalf of assessee nor learned CIT(A) has assigned any reason prevailing with him for the delay. No circumstances have been discussed by the learnedto show that the delay was caused due to circumstances beyond the of assessee. The learned D.R. has further argued that in the case Hon'ble Supreme Court of Pakistan an application for condonation delay was submitted wherein it was alleged that the assessee had fallen delay was caused, while no such reason was existing in the Present case. He has referred to the application, dated 9-11-1993 for extension of time which reads as follows:-----

To

The Deputy Commissioner of Income Tax Circle-08, Peshawar.

Subject: Extension of time for Assessment Year 1993-94.

Sir,

With reference to my application dated 28-10-1993 and your reply dated 1-11-1993 it is submitted that notice for calling short documents, received on 12-10-1993 and the reply required to be submitted before 12-11-1993. But as per notice some documents are required to be collected from the Central Excise and Sales Tax Department. So, at least 15 days time may please be granted for the submission of the documents.

Yours faithfully

Dated 9-11-1993

(Sd.)

Saeedur Rehman.

UTI Mardan. "

The learned D.R. has submitted that according to above application, as per notice some documents were required to be collected from Central Excise and Sales Tax Department, which is incorrect. The assessing officer had required to furnish wealth statement as on 30-6-93 and the statement of accounts only. He has further stated that on 18-11-1993 the assessee did not furnish any document procured from Central Excise and Sales Tax. Department but merely submitted the wealth statement and trading account. It is, thus, incorrect to say that certain documents were to be collected for production, which could not be procured for circumstance beyond control of the assessee. The learned D.R. has further argued that the learned CIT(A) did not apply his mind at all, which is apparent from the fact that he has observed in his order that there is delay of 15 days in filing of the required documents while in fact there was delay of 6 days. The compliance was to be made on 12-11-1993, which was made on 18-11-1993. Learned D.R. has further contended that for the purpose of condoning delay, each day has to be counted and explained while there is no explanation at-all as to when the scaled documents were applied for and on what date the documents, the nature and detail of which are not known were supplied. The learned D.R. has, therefore, submitted that the impugned direction of the learned CIT(A) may be vacated and the assessment order may be resorted.

6.On the other hand, Mr. Maqbool Ahmed Saighal, learned counsel for the respondent/assessee has submitted that notwithstanding a difference in the provisions contained in Self-Assessment Scheme 1984-85 considered by the Hon'ble Supreme Court of Pakistan in 1991 PTD 968 and the Self Assessment Scheme for assessment year 1993-94, the observation appearing on page 90 of the report shall be fully applicable which reads as follows: --

"We cannot conceive of the framer of the scheme to have laid down that once there is failure on the part of the assessee to submit documents with prescribed period of one month, even if he was prevented by any circumstance beyond his control or for sufficient grounds to have delayed the submission of the documents beyond the said period, to be totally deprived of the benefit of the scheme. We, therefore, hold that the Income Tax Officer had the power to condone the delay and even if it did not do so, he had the direction not to exclude the case of the appellant form the benefit of the scheme if otherwise entitled thereto under the other provisions of the scheme."

Mr. Saighal has submitted that the principle pronounced by the Hon'ble Supreme Court of Pakistan lay-down a principle of natural justice that nobody should be condemned for non-fulfilment of any requirement due to circumstance beyond his control and if any law deprives any assessee of any benefit which is otherwise available to him in law merely for the reason of non-fulfilment for the circumstance beyond his control, is not good to that extent. He has, therefore, submitted that notwithstanding ipso facto exclusion envisaged in the Self-Assessment Scheme the principle of natural Justice shall be deemed to be applicable and if there is any circumstance beyond the control of assessee it must be considered and the assessee should not be deprived of the benefit of Self-Assessment Scheme. He has next contended that the return was excluded from the purview of Self-Assessment Scheme in March, 1995 and according to the provisions contained in section 59(4) if an assessment is not completed by 30th of June, 1994 the assessment would be deemed to have been completed after that date. In support of his contention he has placed reliance on judgment, reported as 1993 PTD 332 and 1993 PTD 1421.

7. When asked to show if any application for condonation of delay was submitted, Mr. Saighal stated that the only application submitted on behalf of the assessee is dated 9-11-1993, which contained the request for extension of time and according to him it amounts to a request for condonation of delay. When further asked the reason for extension of time, he stated that certain documents were to be procured from Central Excise and Sales Tax Department. Hoverer, he was not able to specify as to what documents were required to be procured from Central -Excise and Sales Tax Department. He was pointed out that no such documents were required to be produced and were not produced at all on 18-11-1993. He has shown the assessment file according to which the trading account was produced only. The learned counsel then sought assistance of the representative of the assessee who was present in Court and he stated that the amount of sale tax and excise duty was to be verified from the Central Excise and Sales Tax Department and it caused the delay. The representative of the assessee was asked to explain the procedure of depositing the Central Excise Duty and Sales tax in the Government treasury. He stated that the payment was made through bank. Four challans were prepared. Two copies were kept by the bank, one was sent to the concerned Government Department and one copy was supplied to the assessee. When asked as to where was the necessity of any verification when all the bank challans through which the payments were made were supplied to the assessee, le stated that there was possibility of missing of some challans and, therefore, verification is made. Thus from the facts as narrated by the repersentative of the assessee it transpired that basically the trading account was to be prepared on the basis of documents available with the assessee himself and the verification was stated by him was to be made as a matter of extra caution only. Thus, it is abundantly clear that the contention in the application dated 9-11-1993 for extension of time for the reason that some documents were required to be collected from Central Excise and Sales Tax Department was factually incorrect.

8. So far the contention of the learned counsel for respondent about the deemed assessment after 30-6-1994 is concerned, the learned D.R. has submitted that this provision is applicable to an assessment which qualifies for processing under the Self-Assessment Scheme and as the return of income filed by the assessee admittedly did not fulfil requirements and the exclusion was automatic this provision was not attracted to the facts of the present case. The learned counsel for the appellant further referred to Circular No.3 of 1994 but ongoing through it he conceded that it was applicable to the return of income which fulfilled all the conditions laid down in Circular No.9 of 1993 and in the present case all the conditions were not fulfilled.

9. We have carefully considered the contentions raised on behalf of the learned representatives of the parties. We have appreciated the efforts of learned D.R. in distinguishing the difference in the Self-Assessment Scheme for the assessment year 1984-85 which was considered by the Hon'ble Supreme Court of Pakistan in the judgment reported as 1991 PTD 968 and the provision contained in Self-Assessment Scheme for 1993-94, but we are persuaded to agree with the submission of learned counsel for the assessee that the dictum laid down by the Hon'ble Supreme Court of Pakistan is applicable to the Self-Assessment Scheme for the assessment year 1993-94 also for the reason that the observations made by the Hon'ble Supreme Court of Pakistan are in wider context and contain a basic principle of the natural justice which is to be extended to all the assessee. At this stage we would like to consider the provision contained in para. 1(k) of C.B.R's. Circular No.9 of 1993 which reads as follows:

"Returns where requirement as specified in paragraph-II are not fulfilled and the taxpayer fails to provide such statement, account, details and documents within one month of the date of service of a letter in regard from the Income Tax Officer.

10. The Hon'ble Supreme Court of Pakistan while considering the relevant provisions in the Self-Assessment Scheme for the assessment year 984-85 held that the key word used was 'eligible' for exclusion and on the consideration thereof the law was laid down as discussed above. According to our humble opinion the key word used

in para-I(k) of C.B.R's. Circular No.9 of 1993 are, "the taxpayer fails to provide". It has been held by Superior Courts in a large number of cases that whenever the word "fail" is used by the legislature it connotes an act of a person who is required to perform the same within his authority and power. The word "fail" connotes an act of the defaulter and default can be envisaged only an act is within the competence, authority and power of a person and is not beyond his control authority and power. Thus, even it is provided that the taxpayer fails to provide such statements, accounts, details and documents within one month of the date of service of a letter in regard from the income Tax Officer, it means that there was an omission on the part of assessee which was within his competence.

It cannot envisage an Commission which was due to circumstance beyond his control and, thus, the dictum laid down by the Hon'ble Supreme Court of Pakistan in the judgment reported as 1991 PTD 968 is fully attracted to the provisions contained in the Self-Assessment Scheme for the assessment year 1993-94. This brings us to the question whether the conditions as laid down by the Hon'ble Supreme Court of Pakistan were fulfilled in the present case which is a question of fact. The question whether there were sufficient reasons for condonation of delay, is always a question of fact and that is the reason why, Hon'ble Supreme Court of Pakistan remanded the mater to the Income Tax Officer for consideration of the facts with a specific direction that Income Tax Officer should consider the explanation of the appellant for delay in submitting the documents and give fresh decision according to law. In the present case, we have already discussed the facts which show that the assessee has not made out any case for condonation of delay or extension of time because the preparation of trading account which was submitted on 18-11-1993 was not beyond the Control of the assessee as it was to be prepared on the basis of documents already available with him and no such document was to be procured from the Central Excise and Sale-tax Department without which the trading count could not be prepared. Thus, while holding that the Assessing Officer had the discretion to condone the delay, it is held that the learned CIT (A) was not justified in condoning the delay without considering the facts on record. On appreciation of facts as discussed above it is held that no case was made out for condonation of delay.

11. So far the contention that as the assessment was not completed upto 30-6-1994, therefore, it would be deemed to have been completed under section 59(4), we are persuaded to agree with the submission of learned D.R. The perusal of the Self-Assessment Scheme for the assessment year 1993-94 shows that on non-fulfilment of the requirements the exclusion is automatic until and unless the delay is condoned by the Assessing Officer and the statement in the assessment order that, "the assessee was informed accordingly vide Letter No. 1529, dated March, 1995", it is only an intimation. The reason being that no specific order is required to be made for excluding a return from the purview of Self-Assessment Scheme except that the requirement are not fulfilled which was done by the assessing officer much earlier and with that finding the return was excluded ipso facto from the purview of Self-Assessment Scheme and thereafter none of the provisions relating to the Self-Assessment Scheme were attracted and all the provisions relating to the normal assessment came into operation. The contention of the learned counsel on behalf of the assessee is, therefore, repelled. As already observed the immunity allowed by the C.B.R. vide Circular No.3 of 1994 was not applicable to the assessee for the reason that the necessary requirements were not fulfilled.

12. For the foregoing reasons the impugned direction of the learned CIT (A) for processing the return under the Self-Assessment Scheme and extending of immunity from total audit is hereby vacated. The case is remanded back to the learned CIT (A) for deciding the appeal on other grounds agitated by the assessee before him.

13. The appeal is allowed as above.

M.B.A./402/Trib.Appeal allowed.