I.T.AS. NOS. 3218/LB TO 3223/LB OF 1999 VS I.T.AS. NOS. 3218/LB TO 3223/LB OF 1999, 2000 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 3407 (2000)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 64(3), 56 & 63---Assessment---Limitation----Notice for furnishing return of total income---Best judgment assessment---Assessee was brought on tax roll on the strength of notice under S.56 of the Income Tax Ordinance, 1979 and ex parte assessment was made after the expiry of two years from the end of the assessment year during which the notice under S.56 was issued---Validity---Ex parte assessment made under S.63 of the Income Tax Ordinance, 1979 being hit by limitation under S.64(3) of the Income Tax Ordinance, 1979 assessment was not sustainable in law appeal of assessee was accepted by Appellate Tribunal:

1998 PTD (Trib.) 1250 ref.

M. M. Akram fox Appellant.

Basharat Ullah Khan, D.R. for Respondent.

Date of hearing: 9th March, 2000.

ORDER

These six appeals have been filed at the behest of the appellant to call in question legality of the impugned consolidated order passed by the A.A.C. Range, Sargodha, dated 28-5-1999.

2. The facts in brief are that the assessee was brought in the tax net by way of issuance of notice under section 56 of the Ordinance for the years under appeal. Subsequently, statutory notices under section 61 were issued time and again as many as on six occasions but, none bothered to attend the proceedings. Consequently, ex parte assessments were formulated at net income of Rs.1,80,000, Rs.2,09,000, Rs.2,36,000, Rs.2,51,000, Rs.2,59,000 and Rs. 2,86,000 respectively.

3. Feeling dissatisfied by the order of the Assessing Officer the appellant went in first appeal challenging the ex parte action as well as the quantum of income assessed but the learned A.A.C. confirmed the treatment meted out to the assessee on both the Courts. Hence, these further appeals are directed by the assessee.

4. In the original grounds of appeal the assessee has taken common objection against proper service of the statutory notices, estimation of working days, pattern of making assessments and adoption of sale rate of Ice per block. However, at the time of hearing of the present appeals the A.R. of the appellant seeks permission to furnish additional grounds of appeals for all the years under reference which are as under:--

"(1) That the impugned assessment order is void ab initio as the same has become barred by time.

(2) That the impugned assessment order is void ab initio for want of jurisdiction as the notice under section 56 could not be issued for the preceding year."

Since the additional grounds raised by the appellant are going to the route of the assessments and require no investigation or additional evidence for their adjudication, I hereby allow the assessee's A.R. to argue on these two issues first.

5. The learned counsel for the assessee forcefully argued legality of the assessments being those were made beyond the limit of time prescribed under the law to do so. He stated that this case was brought- on tax roll on the strength of notice issued under section 56 of the Income Tax Ordinance. Section 64(3) of the Income Tax Ordinance, 1979 provides that where the notice under section 56 has been served, the assessment in such cases shall be made within two years from the end of the financial year in which the notice under section 56 has been served. To substantiate this contention my attention was invited to the assessment order whereby the- Assessing Officer had stated that the first notice under section 61 was issued on 22-6-1995 meaning thereby that the notice under section 56 had been served prior to the notice issued under section 61 of the Ordinance. Thus, the assessment in this case could have been finalized by 30-6-1997 whereas this was formulated on 26-6-1998 which is patently barred by limitation as provided in section 64(3) of the Income Tax Ordinance. Further argued that even otherwise the ex parte assessment made on the strength of notice issued under section 56 is void ab initio illegal because that could be made after issuance of notice under section 65 of the Income Tax Ordinance being the accepted assessment. Thus, notice under section 56 can be issued for current assessment year only and not for the preceding assessment years. Also contended that for issuance of notice under section 65 approval of the I.A.C: is mandatory and this requirement of law having not been fulfilled the plea that notice issued under section 56 could be assumed to have been issued under section 65 is also not available to the department. Reliance in this regard was placed on the Full Bench judgment cited as 1998 PTD (Trib.) 1250.

6. The leaned D.R. appearing on behalf of the Revenue half heartedly opposed the submissions advanced for the assessee at the bar and supported the orders of the authorities below for the reasons stated therein.

7. I have heard the parties and perused the relevant orders. The facts recorded in the assessment order vividly reveals that the proceedings in this case were initiated by issuing a notice under section 56 of the Income Tax Ordinance, 1979 which was certainly got served upon the assessee prior to date of issuance of first notice under section 61 and that was 22-6-1995. It is so because as per the Scheme of Income Tax Ordinance, 1979, a notice under section 61 has to follow the notice under section 56. To resolve the controversy as to whether the ex parte assessment in this case was made in flagrant violation of law, Subsection (3) or section 64 of the Income Tax Ordinance, 1979 is being reproduced hereunder:--

"Notwithstanding anything contained in subsection (1) where, for any income year, as assessee has failed to furnish the return of total income, no assessment under section 62 or section 63 shall be made after the expiration of two years from the end of the financial year in which notice under section 56, subsection (3) of section 72 or subsection (3) of section 81, as the case may be, was served."

8. From bare reading of the above section it is abundantly clear that the very moment notice under section 56 or subsection (3) of section 72 or subsection (3) of section 81 is served upon the assessee, limitation for completion of assessment starts running. For this purpose the Legislature-has fixed two years for completion of the assessment from the end of the financial year in which notice under the above sections are served upon the assessee.

9. Reverting to the facts of the case admittedly notice under section 56 was served upon the assessee prior to notice issued under section 61, which was, dated 22-6-1995, the assessment should have been completed till 30th June, 1997. After having reckoned the facts incorporated above, I have no hesitation in holding that the consolidated ex parse. assessment made under section 63 of the Income Tax Ordinance, 1979, dated 26-6-1998 is hit by limitation of time, hence that is not sustainable in law. Consequently, the impugned consolidated ex parte assessment order is hereby cancelled by me being that was made without lawful jurisdiction in terms of subsection (3) of section 64 of the Ordinance.

10. Since, I have adjudged the assessee's Appeals on legal premises, therefore, no occasion arises to adjudicate the other issues raised by the learned A.R. of the assessee before me.

11. In the result, the appeals filed at the behest of the assessee are accepted.

C.M.A./M.A.K./39/Tax(Trib.) Appeals accepted.