2000 P T D (Trib.) 19

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood ul Hassan Shah, Judicial Member and Mansoor Ahmed,

Accountant Member

I.T.As. Nos. 1141/IB to 1149/IB of 1998-99, decided on 24/07/1999.

Income Tax Ordinance (XXXI of 1979)---

----Ss.13(1)(aa), 59-D, 55, 56, 61, 62 & 63---Wealth Tax Act (XV of 1963), Ss.3-A, 16(2)(4) & 17--Addition---Tax Amnesty Scheme---Government departmental investigation/inquiry---Assessee , filed declaration of a commercial plot under S.3-A, Wealth Tax Act, 1963---Department refused to accept the declaration on the ground that proceedings in the case of assessee had already beets unearthed by Economic Enquiry Wing, F.I.A. and the department had also issued notices under Ss.56, 61 & 62 of the Income Tax Ordinance, 1979 and under Ss. 17 & 16(2), (4) of the Wealth Tax Act, 1963---Assessing Officer completed assessment under S.63-, Income Tax Ordinance, 1979 and made addition under S.13(1)(aa) of the Income Tax Ordinance, 1979---Letter of Investigation from Assistant Director; F.I.A. Headquarters, Islamabad had been addressed to the Director Estate Management, C.D.A., Islamabad giving information that the assessee had purchased the said plot---Service of notices on proper person was not proved---Questions regarding letter, as to when the said letter was received and in what manner it was received and why it had been kept pending for a long --time with the department, were not properly answered by' the department---Entries in the order sheet of the Assessing Officer were manipulated---First Appellate Authority set aside the assessment for de novo decision with the direction to the Assessing Officer to serve notices on proper person and give full opportunity to assessee to plead his case-- Validity---Enquiry/investigation letter was not directly related to the asset of the assessee but it was against someone else---Such information could not be regarded as "positive and definite information" to be available with the department in respect of purchase of said plot or about the undisclosed asset/income of the assessee---Proceedings and record did not show as to how the letter in question came on file or brought on file/record---No notices under S.16(2) of the Wealth Tax Act, 1963 and under S.61 of the Income Tax Ordinance, 1979 could be issued straightaway directly without first issuance of notices under Ss.55 & 56 of the Income Tax Ordinance, 1979 and under S.17 of the Wealth Tax Act, 1963 respectively---Notices under Ss.56 & 55 of the Ordinance and under S.17 of the Act had not been served upon the assessee and the entries on the order sheet regarding issuance of such notices did not appear to be in good order and seemed to be manipulated-case was not that of setting aside of assessment for de novo proceedings but was that of cancellation of assessment orders and annulment of assessment-- Assessee had rightly availed the amnesty under S.3-A of the Wealth Tax Act, 1963 and under S.59-D of the Income Tax Ordinance, 1979---Benefit of irregular proceedings would go to the assessee---By applying rule of "audi alterem partem" the assessee was to be benefited as a whole keeping in view the situation emerging in favour of the assessee --- Assessment order and order of the First Appellate Authority was cancelled and assessment was annulled by the Income-tax Appellate Tribunal in circumstances.

Law Lexicon; C.W.T. v. Kundan Lal Behari Lal 1975 ITR 581; 1991 PTD (Trio.) 26; Kundan Lal Behari Lal v. C.W.T. U.P. 1975 ITR 359; 1999 PTD 1358 and 1994 SCMR 223 ref.

Mian Muhammad Azim and Anwar ul Haq for Appellant. Imran Raza Kazmi, D. R. for Respondent.

Date of hearing: 15th June, 1999.

ORDER

SYED MASOOD UL HASSAN SHAH (JUDICIAL MEMBER).---

This order will dispose off above nine income tax appeals filed by the assessee against the consolidated order dated 15-9-1998 passed by the learned A.A.C., Sargodha. (hereinafter referred as the impugned order) relating to assessment under section 63 of the Income Tax Ordinance, 1979 .(hereinafter called the Ordinance) for assessment years 1987-88 to 1995-96.

(1)thatthe orders of the officers below were against law and facts of

the case;

(2)that the DCIT, Circle-4, Sargodha has proceeded without jurisdiction in the case and that all actions taken by the Assessing Officer were void and of no legal substance and that the learned A.A.C. has not appreciated that aspect of the case.

(3)that the DCIT Circle-8, Islamabad had no jurisdiction in the case to take cognizance of the matters and that it was apparent from the record that jurisdiction in the case was lying at Sargodha or Karachi and that all notices and processes issued by him were illegal and hence void;

(4)that the assessee was member of AOP M/s. United Traders, Block-5, Sargodha which was, being assessed to tax with DCIT Circle-7, Sargodha and that accordingly the jurisdiction in the case lay with Circle 7, Sargodha;

(5)that the assessee was having permanent residence at 65-A, Satellite Town, Sargodha and that none of the notices issued by the DCIT Circle 8, Islamabad was addressed to assessee at his permanent address and that no notice was served upon the assessee;

(5)that the amnesty was available and claimed by the assessee under section 59-D of the Ordinance and that it was wrong .to suggest that amnesty was not available to the assessee under para. I of the scheme formed by C.B.R. under section 59-D and that there was no enquiry or proceedings pending or conducted against the assessee;

(6)that assessment has been framed by the DCIT, Circle-4, Sargodha with the object that the amount which may he required for construction of plot and for acquisition of further properties be assessed without settling the source of income;

(7)that the assessee has been drawing. agricultural income share income from AOP sand salary; income from a limited company and that as to what income has been assessed was not clear from the assessment order and that the order fixing the income of the assessee at Rs.1,00,000 was bad in law and was liable to be cancelled; and

(9)that the total proceedings were illegal and without jurisdiction and that the learned A.A.C. has not appreciated, this aspect of the case and in place of cancellation of assessment has set aside the assessment and that the assessment has been framed to safeguard the interest of the revenue and as such void ab initio.

3.Hence the above appeals.

4 Briefly the facts as arise from the combined assessment order for the assessment years under consideration are that the -department on receiving information from Assistant Director, F.I.A. vide Letter No.EE/FIN/F-22/88 dated 5-10-1988 about the purchase of Plot No.78-W, Blue Area, Islamabad by the assessee from C.D.A. vide Letter No.CDA/EM-27 (1404) /86/3432 dated 29-9-1986 issued notices under section 56 of the Ordinance on the basis of above definite information on 24-10-1995 and the said notices were served on 26-10-1995 and then another notice under section 61 of the Ordinance was issued on 20-11-1995 which was served on one Mr. Muhammad Yasin, Chief Accountant on 21-10-1995 for hearing on 30-11-1995 and said Mr. Muhammad Yasin C/o. M/s. Feroz Sons/AR attended in response to the notice and stated it would be convenient for them to transfer the file to Sargodha Zone and the said AR was asked to file a written letter in that context.

7. Thereafter, notice under section 61 of the Ordinance was issued by the Assessing Officer on 6-6-1998 and AR of the assessee attended and he was asked to file returns and wealth statements of the assessee and the case was adjourned for 17-6-1998 and was then further adjourned for 24-6-1998 and none attended on 24-6-1998. The Assessing Officer then keeping in view the scope of amnesty scheme issued a notice under section 13(1) (aa) of the Ordinance to the assessee on 24-6-1998 along with notice under section 61 and notice under section 62 and these notices were served personally by the Notice Server and copies of the same were also sent through registered post for compliance by 29-6-1998 mainly stating therein that the facility according to section 59-D of the Ordinance was not available to the assessee because the scope of scheme as enumerated in para.1 of the said scheme does not cover persons in whose cases assets or income has been discovered as a result of or in response of which proceedings have been initiated by way of Government Investigation/enquiry and that the proceedings in the case of the assessee was already unearthed by Economic Enquiry Wing, F.I.A. vide Letter No.EE/FIN/F-22 dated 5-10-1988 and that the department has also issued notice under section 56 regarding assessment year 198"-88 on 24-10-1995 served upon the assessee on 26-10-1995 and that the assessee who submitted application for transfer of the case from Islamabad to Sargodha on 22-1-1996 and that it stood established that the amount of Rs.10,035,200 can be added in the total income under section 13(1)(aa) of the Ordinance and the assessee was required to file nature and source of said . investment. Notice under section 61 of the Ordinance was also enclosed with the saidnotice. Thereafter, no one responded on behalf of the assessee and the Assessing Officer through notice under section 62 proposed action for deciding the case ex pane and proposed the estimation of income of the assessee aft (i) Rs.1,00,000 other than addition under section 13(1) (aa), (ii) Rs.1,25,000 (iii) Rs.1,50,000 (iv) Rs.1,75,000 (v) Rs.2,00,000 (vi) Rs.2,25,000 (vii) Rs.2,50,000 (viii) Rs.2,75,000 and (ix) Rs.3,00,000 for the assessment years 1987-88 to 1995-96 respectively and. called for reply of the assessee on or before 29-6-1998 by enclosing notice under section 61 of the Ordinance.

8.In response to the said notice a written reply dated 29-6-1998 was received through bearer Mr. Muhammad lqbal mainly stating that no notice under any section of the Ordinance was ever received by the assessee prior to the receipt of instant notice and that the jurisdiction to take up the matter in his case vested with the Special Officer, Circle-7, Sargodha as his being Member AOP ofM/s. United Traders, Block-7 Sargodha and the assessee further requested for reasonable time for compliance and also sought for transfer of record to Special Officer, Circle-7, Sargodha for further proceedings.

9Thereafter, the Assessing Officer conveyed last opportunity to the assessee and the case was adjourned for 30-6-1998 but no one attended and then he proceeded to decide the case ex parte under section 63 of the Ordinance to the best of his judgment.

10. The Assessing Officer while declaring claim of amnesty by the assessee as null and void observed that the scope of amnesty scheme does not envisage

cases in which the assets or income has been discovered as a result of or in respect of which proceedings have been initiated by way of Government investigation/enquiry under clause (5) of section 3A of the Wealth Tax Act and that the case already stood unearthed by F. I. A. and that the transfer letter of ACIT, Circle-8, Islamabad dated 15-2-1996 very clearly mentioned that the department had prior knowledge for purchase of commercial plot by the assessee for Rs.10,035,200. Then the Assessing Officer in absence of any response by the assessee, framed the assessment 'of the assessee as confronted vide notice under section 62 of the Ordinance dated 24-6-1998.

11. The Assessing Officer then sent a letter for statutory approval for addition under section 13(1)(aa) of the Ordinance to the IAC for addition of Rs.10.035,200 under section 13(l)(aa) and the approval was received and then the Assessing Officer computed the total income at (i) Rs.10,035,200 including addition under section 13(1)(aa) and other income as discussed and at (ii) Rs.1,25,000 (iii) Rs.1,50,000 (iv) Rs.1,75,000 (v) Rs.2,00,000 (vi) Rs.2,25,000 (vii) Rs.2,50,000 (viii) Rs.2,75,000 and (ix) Rs.3,00,000 for the assessment years 1987-88 to 1995-96 respectively.

12. Feeling aggrieved with the above treatment, the assessee went in appeal before the learned first appellate forum and the learned AAC vide impugned order set aside the assessment for de novo decision with the direction to the Assessing Officer to serve notices on proper person and give full opportunity to the assessee to plead his case.

13. Against the above set aside order of the learned first appellate forum, now the assessee has come to us by way of these appeals contesting the impugned order on the grounds enumerated above.

14. We have heard Mian Muhammad Azim, Advocate and Mr. Anwar ul Haq, Advocate/A.Rs. for the assessee and Mr. Imran Raza Kazmi, D.R. for the department.

15. The learned A.R. on behalf of the assessee contended that the declaration under section 3A of the Act was filed on 30-9-1997 for amnesty for assessment year 1997-98. He further contended that the amnesty for all the previous years both for income tax and wealth tax was available and the declaration was made under section 3A of the Act before 30-9-1997 but the department has refused the amnesty in respect of property in question on the pretext that the department had already started the proceedings on the prior information being available with the department which was without any basis. He further contended that the proceedings on the order sheet reflected a very irregular manner in which the department proceeded against the assessee and specifically the order sheet entry dated 20-11-1995 which was to the effect that issue notice under section 61 for assessment years 1987-88 to 1994.-95 and issue notice under section 16(21) for assessment years 1987-88, to 1994-95. He further contended that straightaway no notice under section 61 of the Ordinance or under section 16(21) of the Act could be issued if no return was on file. He then referred order sheet entry dated 30-11-1995 which was showing the presence of one Mr. Muhammad Yasin, Accountant of M/s. Feroz Sons and he contended that the assessee was having no concern with M/s. Feroz Sons Laboratories or with said Mr. Muhammad Yasin. He further contended that the alleged letter dated 22-11-1996 was not written and signed by the assessee at all and it was never sent by the assessee to the department and hence the contents of the letter regarding mention of receipt of notices under section 56 of the Ordinance and under section 16(2) of the Act and then mention of receipt of notice under section 61 of the Ordinance and notice under section 17 of the Act have been wrongly attributed to the assessee. He further contended that none of the notices was bearing the signatures of the assessee and no proceedings against the assessee were ever initiated because no notice was served upon the assessee. He further contended that the process of assessment in question was completed in three years and there appeared no genuineness in the process which has been made at the back of the assessee and without associating the assessee with the same or affording him proper opportunity of being heard. He further contended that the alleged notices were containing the endorsement but there was no name of the recipient given thereon. He contended further that the notices under section 61 dated 20-1J-1995 for the assessment years 1987-88 to 1994-95 were bearing the address of that of 78-W, Blue Area, Islamabad whereas in the F.I.A's. letter dated 5-10-1998 the address of the assesee was given that of Sargodha. He contended further that the letter 22-1-1996 which has been attributed to have been written by the assessee was not in fact written by the assessee or signed by the assessee. He further contended that in the return for the assessment year 1997-98, the signatures of the assessee on the return may be seen which are different than that of the signatures on the said letter and similarly the signatures on the appeal papers were also different than that on the letter and on declaration. He while explaining the health condition of the assessee contended that the assessee is a heart patient at present and his signatures were not static at the moment and so the signatures on the memo. of appeal were different than that of the signatures on the declaration of amnesty and in the form of the return. However, in the return and declaration of amnesty, the signatures of the assessee appeared to be somewhat similar and the signatures on the memo. of appeal filed in the Tribunal were also similar with the signatures on the appeal filed before the learned CIT(A). He further contended that a sum of Rs.725,640 was deposited on time as per amnesty scheme and the declaration was made accordingly for claiming amnesty as per law.

16. While arguing the legal aspects of the case, the learned A.R. of the assessee contended that both the provisions of section 3A of the Act and section 59D of the Ordinance were parallel provisions as inserted through Finance Act, 1997 prescribing amnesty from tax on undisclosed assets/income in case of declaration and specified amount of tax filed and deposited by a person/ assessee before a particular date. He contended further that although disentitlement and disqualification for amnesty was appearing in the scheme in case the department had already discovered the undisclosed asset/income and started proceedings prior to the declaration under amnesty but yet the department has to prove that it was having prior definite information and discovered the undisclosed asset/income through governmental investigation/enquiry and the proceedings were initiated by the department on the said information before the declaration for amnesty was filed and the specified amount of tax was deposited. He further contended that the record in the case of the assessee was silent as to in what manner and how the department discovered about the asset in question of the assessee and whether the discovery/information was available with the department before the declaration was made or it came later on. He contended further that no process for the information/discovery was issued: He then referred to the meaning/interpretation of the phrase initiation of proceedings as given in the Law Lexicon as under:-

"Initiation of proceedings.---If any proceeding for assessment is sought to be started or initiated against the assessee by the Assessing Officer in pursuance of any direction issued by the appellate authority while annulling the assessment and a notice to that effect is issued against the assessee this will amount to initiation of a re assessment proceedings. This is the ratio decidendi of the Full Bench Court inRajpur Farms Ltd. v. Commissioner of Commercial Taxes, Bihar (1972) 29 S. T. C.77.--------------------"

17. The learned A.R. of the assessee also referred following case laws from Indian and Pakistani Jurisdictions to support his contentions:---

(i) 1975 ITR 581 (C.W.T. v. Kundan Lal Behari Lal).(SC India),

(ii) 1991 PTD.(Trib..) 26,

(iii) 1975 ITR 359 (All. H.C.) (Kundan Lal Behari Lal v. C.W.T. UP)

19. At this juncture on a question by the Bench to the learned D.R. as to how the letter came on file, the reply of the learned D.R. was that there was no record/proceedings of the receipt of above said letter by the department. .

20. The, learned A.R. of the assessee referred to 'order sheet-entries dated 24-5-1998 and dated 14-6-1998 in respect of wealth tax assessment proceedings for the assessment years 1987-88 to 1995-96 and contended that the entries of the above dates were speaking the behaviour of the department because the entry dated 24-5-1998 was inserted on the top later on and hence the sad action of the department has shaken the confidence on the department.

21. The learned A.R. of the assessee contended further that the address on the notices under section 16(2) of the Act dated 20-11-1995 was 78-W, Blue Area, Islamabad but the notices were bearing the signatures of Mr. Muhammad Yasin, Accountant of M/s. Feroz Sons with whom the assessee was having no concern. He contended further that notice under section 14(2) dated 13-1-1996 for assessment year 1995-96 and notice under section 17 dated 13-1-1996 for assessment year 1994-95 and notice under section 16(2) dated 13-1-1996 for assessment years 1991-92 to 1993-94 were also sent by registered post on the address 78-W, Blue Area, Islamabad. He then referred to ACIT's letter dated 15-2-1996 for transfer of file from Islamabad to Sargodha and contended that the file actually first reached in Bhalwal and then it was sent to Sargodha. He contended further that the wealth tax return was filed on 30-9-1997 with the signatures of the assessee. .

22 The learned A.R. of the assessee contended further that the declaration once made under section 3A of the Act for amnesty was available both for wealth tax and income tax exemption. He further contended that the sanctity of order sheet as per Manual-IV is considered as unchallengeable but if the sanctity is shaken then how would the same be open to believe that such entry was correct or whole proceedings were correct. He contended further that the declaration was properly made and service of notices was improper and neither' it was upon the assessee nor on any authorized representative or agent of the assessee and as such whole of the proceedings were biased and nullity in the eye of law. He contended further that the order of the learned first appellate forum of setting aside the assessment for de novo proceedings was having no legal nexus and as such his order was illegal because it was a case of annulment of assessments. He further contended that the provisions of section 47 of the Act and sections 56 and 55 of the Ordinance become applicable when no return is there. He contended further that directly notices under section 16(2) of the Act and notices under section 61 of the Ordinance cannot be issued before issuance of notice under sections 56 and 55, of the Ordinance or notices under section 17 of the Act. He contended further that notices under sections 56 and 55 of the Ordinance and notice under section 17 of the Act have been manipulated by the department in order to finalize the assessment in a hasty, biased and irregular manner. He contended further that if service of notice was not proved positively and definitely then it was not a case of set aside but a case of cancellation and annulment of assessments.

23.On the other hand the learned D.R. contended that the department received detailed information through a letter of F.I.A. dated 5-10-1988 and the said information was available with the department prior to the declaration made by the assessee under amnesty scheme and hence the amnesty was not available to the assessee because the department started proceedings and thereafter the declaration was filed by the assessee in respect of property- in question (78-W, Blue Area, Islamabad). He while referring to the said letter of F.I.A. and going through the assessment order contended that the said letter was addressed to the Director Estate Management, C.D.A., Islamabad and the Inspector of the Department collected, the said information/letter from C.D.A. He while repelling the arguments of the learned A.R. on legal issue contended that the information was obtained by the department through a source of government investigation/enquiry and the amnesty was not available to the assessee in view of provisions of subsection (5) of section 3A of the Act. We may like to observe here that the learned D.R. to the question raised by the Bench as to how the said letter came son file, replied that there is no record or proceedings of the receipt of above letter of F. I. A.

24.The learned D.R. further contended that the discovery of the income or asset included the discovery as a result of any investigation or enquiry by any Governmental Agency as was contained in section 59D of the Ordinance and section 3A of the Wealth Tax Act and as such the department was having positive and definite information available with it and no amnesty was allowable to the assessee as per said provisions of law. He contended further that the notices were served on the assessee and on the concerned person according to the address of the asset in question and there was no manipulation by the department in the record or notices. He contended further that the letter dated 22-1-1996 written by the assessee to ACIT Circle 8, Islamabad was bearing the signatures of the assessee and it was acknowledging the receipt of notices under section 56 of the Ordinance and under section 16(2) of the Act for assessment years 1994-95, 1991-92 and 1993-94 and the notices under section 61 of the Ordinance and under section 17 of the Act for the assessment years 1987-88 to 1994-95 (requiring the assessee to file his income tax and wealth tax returns) and the said letter proved that the assessee received the above notices.

26.We have considered the respective contentions of the parties at length.

27. Before discussing the arguments advanced on behalf of the parties, we may like to frame the main issue involving the above case in order to give specific findings to that effect.

28.The main issue involving the case is as to whether the amnesty as granted through Finance Act, 1997 by insertion of section 3A in the Wealth Tax Act, 1963 and insertion of section 59D in the Income Tax Ordinance, 1979 was available to the assessee and he rightly availed the same in respect of purchase of Asset/Property No:78-W, Blue. Area, Islamabad stated to be purchased by him vide CDA letter dated 29-9-1986 and the assessment framed by the department in respect of above said asset under section 16(5) of the Act and under section 63 of the Ordinance were legally justified and in accordance with the provisions of law or not. We would like to reproduce here the relevant corresponding provisions of the Act and of the Ordinance for reference purposes:-

Wealth Tax Act, 1963

Section 3A Tax on undisclosed assets.---

(1)Notwithstanding anything contained in this Act, where any person has not, for any year or years, declared any assets chargeable to tax under this Act or has declared the value of any asset lower than the value determinable under the provisions of the Act, such person may declare such asset or the value of the asset in accordance with the provisions of the scheme to be made by the Central Board of Revenue.

(2)Subject to subsection (3), the tax on the value of assets declared under subsectionshall be charged at the rate of seven and one half percent. of the value of the asset.

(3)No tax under this Act (including this section) shall be payable in respect of the value of the assets declared under this section in respect of which income tax has been paid in accordance with the provisions of section 59D of the Income Tax Ordinance, 1979 (XXXI of 1979).

(4)Subject to subsections (5) and (6), where any assets are declared in accordance with the scheme made tinder subsection (1), the person declaring such assets shall not be subjected to. any additional tax, penalty, penal action or prosecution for any year for and up to the assessment year 1997-98.

(5)Nothing contained in this section shall apply to any person in whose case assets have been discovered as a result of or in respect of which proceedings have been initiated by way of Government investigation/inquiry.

(6)The amnesty provided in subsection (4) shall be available on the

following conditions, namely:-

(i)that the return of assets including the undisclosed assets for an up to

the assessment year 1997-98 is filed as specified in section 14;

(ii)that the full and correct declaration of assets is made in the return;

(iii)that the basis of valuation of assets and the payment of tax shall be

as follows:-

Valuation of Assets

Residential properties

Plots and open landsEqual to the value specified b5

the District Collector for the

purposes of Stamp Duty 4; on

June 30, 1997.

Super structureAt the rate of Rs.300 per square

foot.

Apartments/flatsAs registered for the purposes of

Stamp duty.

Commercial properties;

Plots and open landsEqual to the auction value or the

value specified by the District

Collector for the purposes of

Stamp .Duty as on June 30, 1997,

Which ever is higher.

Super structure------------------------

----------------------------------------------------------------

----------------------------------------------------------------

Other assets.As per provisions under this Act.

Payment of tax:

This wealth tax payable on the undisclosed wealth declared by any person under the scheme made under subsection (1) shall be paid by the declarant before furnishing the return and the return shall be accompanied by proof thereof.

Wealth Tax Rules, 1963

Rule 11 (Inserted vide SRO 545(1) /97, dated 25-7-1997).

TaxAmnesty Scheme, 1997; In pursuance of the provisions of section 3A ofhe Wealth Tax Act, 1963, tax amnesty shall be available to the extent and in accordance with the following terms and conditions:--

(a)any person who, on the thirtieth day of June, 1997, holds any assets as werechargeable to wealth tax but were not so charged in any year prior to the assessment year997-98, whether partly or wholly, may file a declaration in the prescribed form and shall thereupon be granted amnesty from any penal action, penalty or prosecution under thewealth Tax Act, 1963, subject to the following conditions that a full and correct disclosure of all assets is made in the prescribed form, not later than thethirtieth day of September, 1997 and the declaration along with the evidence of payment of tax is delivered to the Deputy Commissioner ofWealth Tax holdingjurisdiction over the tax-payer.

(i)That tax calculated at the rate of seven and one half per cent of the up due of undisclosed assets is deposited prior to the filing of the prescribed declaration.

(ii)and acopy of . the paid challan is duly attached along with the declaration.

Explanation

For purpose of this clause a demand draft or a pay orderfor the amount of tax payable under, his scheme, furnishedalong withthe declaration shall be deemed to the sufficient compliance of this clause.

(iii)that valuation of assets contained in the said declaration is made inaccordance with the provisions of section 3A of the Act, and WealthTax Rules 963 Provided that the Deputy Commissioner may, where basis ofvaluation has not been in accordance with the said provisions, proceed to adopt the prescribed basis ofvaluation and no amnestywould be available to the tax-payer until the amount ofax so determined payable, if any, has been duly paid and evidence thereoffurnished to the Deputy Commissioner.

(iv)that the declaration shall relate to hitherto undisclosed or under disclosed assets for and up to the assessment year 1997-98 and the return of wealth in respect of other assets, not appearing in the declaration, shall be separately filed for 1.997-98 in accordance with law.

(v)that the assets. disclosed in the prescribed declaration shall qualify to be reflected in all subsequent returns of wealth without payment of any additional tax or penalty for past year Provided that a declaration made under section 59D of the Income Tax Act, 1979, shall also qualify for inclusion of assets- declared therein, pari passu with the declaration made under this scheme, in respect assets created out of Income chargeable to tax under that Ordinance, while assets created out of any source not taxable under that Ordinance shall enjoy amnesty only to the extent of disclosure in the declaration under section 3A.

Explanation:

The term 'any source not taxable under that Ordinance' includes inheritance, gift, agricultural income and capital gains.

(vi)Nothing contained in this scheme shall apply to any person in whose case assets have been discovered as a result of or in respect of which proceedings have been initiated by way of Government investigation/inquiry ............

Income Tax Ordinance. 1979

Section 59D Tax on undisclosed income.

(1)Notwithstanding anything contained in this Ordinance, the Central Board of Revenue may, make scheme of payment of tax in respect of undisclosed income.

(2)Where any person declares his undisclosed income in accordance with the scheme and the rules the tax on such income shall be charged at the rate of seven and half percent. of such income

(3) Where a person has paid tax on his undisclosed income in accordance with the scheme and the rules, he shall-

(a) be entitled to incorporate in his books of account such undisclosed income in tangible form; and

(b) not be liable to pay. any tax, charge, levy, penalty or prosecution in respect of such income under this Ordinance.

(4)For the purpose of this section 'undisclosed income' shall mean any income (including any investment to be deemed as income under section 13 or any other deemed income 1 for any year or years Me\ and to any assessment year or years ending on or before the thirtieth day of June, 1997, which was chargeable to tax but was not so charged.

Income Tax Rules,I982 Part-II.A

Rule 26.A. Declaration of undisclosed income.---

(1)Any person -other than a company may. on or before 30th day of September, 1997 file declaration in respect of undisclosed income as defined in subsection (4) of section 59D for any year or years relevant to any assessment year or yearsending on or before thirtieth day of June 1997 which was chargeable to tax but wasnot so charged.

(2)The tar payable on the undisclosed income declared by any 'person tinder the scheme shall be paid by the declarant before furnishing the declaration and the declaration shall be accompanied by proof thereof.

(3)The declaration shall be filed with the officer designated for thispurpose.

Rules 26B Immunity:

No tax under the Income Tax Ordinance. 1979 ordinance XXXI of 1979) including the scheme shall he payable in respect of the value of the assets declared under the scheme in respect of which wealth tax has been paid in accordance with section 3.A of the Wealth Tax Act, 1963 (Act XV of 196)

29. In view of the above corresponding and parallel provisions of Wealth Tax Act, 1963 and Income Tax Ordinance, 1979, now we have to see in the light of contention and arguments of the parties as to whether the assessee fulfilled the qualification and conditions as laid down in the law or in the relevant rules for availing the amnesty from taxing of the asset in the context of issue as already framed above.

30. The case of the assessee as per contentions as already reproduced above is that the assessee made declaration for availing amnesty both for income tax and wealth tax under section 3A of the Act and under section 59D of the Ordinance and deposited tax amounting to Rs.725,640 along with declaration in respect of his undisclosed asset/income as per said provisions of law and the proceedings initiated against the assessee for taxing the said asset/income under normal law were not in accordance with law and no positive and definite information was available with the department to initiate the proceedings in that respect and no notices were served upon the assessee as neither the assessee acknowledged any service of notice through letter dated 22-1-1996 which according to A.R. of the assessee was not bearing the signatures of the assessee and that the statutory notices served on one Mr. Muhammad Yasin, Accountant of M/s. Feroz Sons Laboratories could not be regarded as service on the assessee because the assessee was having no connection with said Mr. Muhammad Yasin and not Mr. Muhammad Yasin was authorized to accept the service nor he was agent of the assessee to be served upon and that whole of the proceedings contemplating service of notice under section 56 of the Ordinance and under section 16(2) of the Act for the assessment years 1994-95, 1991-92, 1993-94 and the service of the notice under section 61 of the Ordinance and under section 17 of the Act for the assessment years 1987-88 to 1994-95 requiring the assessee to file income tax and wealth tax returns were void ab initio because no service was effected upon the assessee and the subsequent proceedings culminating in assessment order under section 16(5) of the Act. and under section 63 of the Ordinance were illegal and having no sanction of law.

31. The learned A.R. of the assessee specifically also pleaded that no enquiry was conducted or even not any enquiry was pending against the assessee with F.I.A. and the information which has been alleged to be available with the department was not a direct information against the assessee but it was a letter of the Economic Enquiry Wing of F.I.A. to the Director, Estate Management, C.D.A. dated 5-10-1988 and the proceedings were initiated by the department in November, 1995. The learned A.R. along with the above contentions pleaded that even the order sheet entry was manipulated by the department by referring the order sheet entry in respect of wealth tax assessment for assessment years 1987-88 to 1995-96 and stated that the entry dated 24-5-1998 was inserted on the top of entry dated 14-6-1998 later on which were in close proximity with each other and which in fact was depicting the attitude and biased behaviour of the department while proceeding with the case of the assessee.

32. While perusing the notices under section 16(2) of the Act dated 20-11-1995 for the assessment years 1987-88 to 1994-95, it was obvious that the said notices were bearing-the signatures of one Mr. Muhammad Yasin, Accountant of M/s. Feroz Sons and the address on the above notices was of 78-W, Blue Area, Islamabad. The notices under section 14(2) dated '13-1-1996 for assessment year 1995-96 and notices under section 17 dated 13-1-1996 for assessment year 1994-95 and notices under section 16(2) dated 13-1-1996 for assessment years 1991-92 to 1993-94 were sent by registered post on the same address i.e. 78-W, Blue Area, Islamabad.

33. Nothing has been plausibly argued on behalf of the, department to establish that Mr. Muhammad Yasin of M/s. Feroz Sons on whom the notices were served was having any connection with the assessee as to whether he was his authorized representative or his agent or his employee.

34. At this juncture, we would like to take guidance from the provisions of Code of Civil Procedure, 1908. The provisions of Order- V of the Code were relating to the issue and service of process. In rule 12 of Order-V of the Code of Civil Procedure, 1908, it is laid down that where it is practicable service shall be made on the defendant in person unless he as an agent empowered to accept service in which case service - on agent shall be sufficient. In rule l0A of Order V, the law envisages issue of process simultaneously through its agency of process and through registered post with Acknowledgement due. In rule 13 of Order-V, the method of service on agent in case of defendant carrying on business has been given where service on a person not residing within the local limits of the jurisdiction of the Court can be effected on the manager or agent who at the time of service personally carries on such business or works for such person within such limits.

35. From the above referred provisions of the Code of Civil Procedure, 1908, one can see that how important is the factum of service of process for initiating any proceedings of law against a person. The main stress has been laid on the personal service of, the respondent who is being proceeded against and in his absence on his agent who is empowered to accept service or on his male adult member of family residing with the respondent/defendant in case the respondent/defendant cannot be found and is having no agent to accept the service as given in the provisions of rule 15 of Order V of the Code.

36. There is an explanation under rule 15 of Order V of the Code to the effect that a servant is not a member of family within the meaning of this rule. It clearly meant that for effecting, the service the summon/notice are to be delivered to the respondent in person or to his agent who is duly empowered to accept the service or to male adult member of family when the respondent cannot be found and none else can be considered to be a person authorized to accept the service on behalf of the respondent or service on any other person cannot be regarded as a valid service. Then there are provisions in rule 16 of Order V of the. Code giving guidelines to the serving officer requiring him .to obtain signatures of the person to whom the notices so delivered or tendered and to have an acknowledgement of service endorsed upon the summon/notice. It clearly meant from the above provisions that the serving officer or official must make it clear in the endorsement that on whom the notice has been served as to whether he is the respondent in person or his agent duly empowered to accept the service or male adult member of family in case the respondent could not be found. Then there are provisions of service when the respondent refuses to accept the service in rule 17 of Order V of the Code and for the substituted service in rule 20 of Order V when the respondent is keeping out of the way for the purposes of avoiding service or when summons cannot be served in ordinary way.

37. As all importance is given to the process of service because this is the basic stage from where on wards the proceedings are initiated against a person ant the notice/summon is the basic document which in fact considered to be the document to call upon the person. and to provide opportunity of being heard. to the said person against whom the proceeding are to be initiated. This concept. is based on principle of natural justice and of universal natured and has also been ordained in the statute books where it always given in one form or other so that no one should be condemn unheard. It is an established principle of legal and natural justice and known as rule of audi alterem partem which has been acknowledged to applicable to both judicial as well as non-judicial proceedings whit culminate in an order against a person respecting his rights or imposing up him certain charges, liabilities and penalties etc.

38. In a recent case relating to tax matters reported as 1999 PTD 1358 (H. C. Karachi) the above concept has been acknowledged by the Honourable Sindh High Court to the effect that rule of 'audi alterem parten is applicable to both judicial and non-judicial proceedings. In the, said reported case, reliance has been placed. upon 1994 SCMR 223.

39. In the light of above discussion, we are of the view that in the case in hand, no proper service of notice was effected upon the assessee because the statutory notices aforementioned were neither bearing signatures of the assessee namely Mr. Ikram ul Haq Piracha nor it was proved that the service was effected on the agent of the assessee authorized and empowered to accept service or on the male adult member of family of the assessee in case the assessee was not found.

41. Moreover, amnesty which has been granted by insertion section 3A of the Act and section 59D of the Ordinance through Finance Act, 1997 was clearly containing a qualifying condition that the said amnesty would not be available in case where the undisclosed asset/income has been discovered as a result of or in respect of which proceedings have bee initiated by way of Governmental investigation/enquiry.

42. There is only one letter on record which has been mentioned in the assessment order and that letter is from Assistant Director, F.I.A Headquarters, Islamabad dated 5-10-1988 which has been addressed to the Director, Estate Management, C.D.A., Islamabad mentioning the letter date 29-9-1986 of the Directorate Estate Management. C.D.A. giving information that the assessee has purchased Plot No. 78-W, Blue Area, Islamabad. It is not clear from the whole of the assessment proceedings as to when the sail letter was received and in what manner it was received and why it has bees kept pending for so along with the department without any action and they suddenly made the basis for initiation of proceedings in respect of said undisclosed asset and source of investment/income. This cannot be regarded as positive and definite information with the department to have been mad4 available on account of any Governmental enquiry/investigation to have beer conducted against the assessee or for obtaining the said information Moreover, the question, of having remained unattended for such a long time or of keeping the said letter in the department without any action for sufficient long time, remained unanswered and no explanation to that effect was given by the learned D.R. on behalf of the -Department. Merely saying that the Inspector of the department received the above information from the C.D.A. or from any other department was not sufficient to establish that the information to the department in respect of said asset/source of investment was received by the department as a result of any Governmental enquiry/investigation which in fact was not a direct letter clearly relating to the asset of- the assessee regarding the purchase of the plot in question by the assessee. It was indirect information in that respect. It was also obvious from the said letter dated 5-10-1988 of F.I.A. that the enquiry was not against the assessee but it was against someone else. So, such information cannot be regarded as positive and definite information to be available with the department. in respect of purchase of said plot or about the undisclosed asset/income of the assessee. It was also not obvious from the proceedings or from the record that how the said letter came on file or brought on file record. The learned D.R. on a question to that effect conceded that there was no record or proceedings showing the receipt of above letter by the department.

43.In the above circumstances, we are not convinced with the stance of the department that the said information was available with the department prior to the declaration made by the assessee and deposit of tax by the assessee along with the declaration for availing, the amnesty, under the provisions of section 3A of the Act and under section 59D of the Ordinance. The pre-condition for disqualification of the assessee from availing the amnesty under the aforesaid provisions of law has not been established by the department and neither it has been proved to that extent. As it has and under section 17 of the Act were never served upon the assessee, therefore, no notices under section 16(2) of the act and under section 61 of the Ordinance could be issued straightaway and directly without first issuance of notices under the aforesaid provisions' of law. We agree with the contentions of the learned A.R. that the notices under sections 56 and 55 of the Ordinance and under section 17 of the Act have not been served upon the assessee and the entries on the order sheet regarding issuance of such notices were not looked to be in good order and seemed to be manipulated.

44.As regards the plea of the assessee that he did not write or send any letter dated 22-1-1996 which was manipulated on account of certain political rivalry, we are of the view that whenever there is any such specific denial of existence of signatures of any person on a document/paper then the said signatures are to be compared through naked eye or if possible to be got compared through hand writing expert with the other signatures of the person so available or with the fresh signatures of the person.

45. As we already found above that the assessee has not been served with the notices under sections 56 and 55 of the Ordinance and notices under sections 17 and 16(2) of the Act, requiring him to file income tax and wealth tax returns, all the subsequent proceedings in the case of the assessee are therefore, held to be irregular and against the provisions- of relevant law and as such having no legal effect. In the case in hand, we have noticed that many points/questions remained unanswered on the department side regarding the fact as to how the department received/discovered the information about the purchase of said plot by the assessee and whether the department positively discovered before the declaration of the assessee was filed under the amnesty scheme or later on and what was the proof of the said information/discovery and what was the process of discovery of the said information of the asset to have been issued by the department and why the department remained silent for such a long time over a letter of the year 1988 and then initiated the proceedings in 1995.

48.As we have discussed in detail every aspect of the case and also about the proceedings conducted by the Assessing Officer, therefore, we are of the considered opinion that the case of the assessee has not been conducted and processed in a lawful and regular manner and whole of the proceedings have been conduced in an irregular manner greatly prejudicing the rights of the assessee and without affording him opportunity of being heard in a fair acid proper manner and the orders have been passed denying him the right of opportunity of being heard which can never be sustained in the eye of law. We agree with the contentions of the learned A.R. that the case of the assessee was not that of setting aside of assessment for de novo proceedings as has been done by the learned first appellate forum but was that of cancellation of assessment orders and annulment of assessment. We are of the view that, the assessee has rightly availed the amnesty under section 3A of the Act and under section 59D of the Ordinance which were corresponding provisions in the relevant laws and the amnesty availed under section 3A of the Act was also applicable to the assessee on both income tax and wealth tax side and .the assessee deposited the prescribed tax at Rs.725,640 at 7.5% along with declaration as required by the said amnesty scheme under the law. The benefit of irregular proceedings obviously would go to the assessee because these proceedings prejudiced the case of the assessee at a great length. In such a case while relying on the dictums of the Superior Courts and specifically while applying rule of "audi alterem partem", the assessee is to be benefited as a whole while keeping in view the situation emerging, in favour of the assessee.

47.In the above circumstances,. we hold that the assessment order as well as the orders of the learned first appellate forum are liable to be cancelled and the assessments to be annulled. Accordingly, we cancel the assessment order and the order of the learned first appellate forum and annul the assessment as framed by the Assessing Officer for all the assessment years under consideration.

48.Consequently, the appeals filed by the assessee succeed and stand disposed of accordingly.

C:M.A./M.A.K./91/Tax(Trib).Appeals accepted.