I.T.AS. NOS.25/LB TO 29/LB OF 2000 VS I.T.AS. NOS.25/LB TO 29/LB OF 2000
2001 P T 0 (Trib.) 2596
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Judicial Member and
Mrs. Safia Choudhary, Accountant Member
I.T.As. Nos.25/LB to 29/LB of 2000, decided on 24/10/2000.
Income Tax Ordinance (XXXI of 1979)---
----Ss.154, 61 & 13---Service of notice---Improper service---Effect-- Assessee assailed the order setting aside the assessment by First Appellate Authority on the ground that once it was established that notice had not been served properly the assessment order should have been annulled and not set aside---Validity---Assessing Officer had though proceeded on the basis of a notice which was not properly communicated to or served upon the assessee but it would not mean that the notice was without jurisdiction---If, in ordinary course of proceedings, a notice was not properly served and the ,Issuing Authority otherwise had the jurisdiction to assess the case it could not be annulled because in the process of material irregularity the Assessing Officer was still acting with jurisdiction---Illegality or irregularity in the exercise of jurisdiction was not the same as acting of the Authority without jurisdiction---Improper service of notice would not make an order "without lawful authority" or "of no legal effect" ---Order of the First Appellate Authority was upheld and assessee's appeal was dismissed by the Tribunal.
1971 SCMR 681 and 1986 SCMR 962 distinguished.
1985 PTD (Trib.) 178 and PLD 1966 SC I ref.
Latif Ahmed Qureshi for Appellant.
Mrs. Talat Altaf, D.R. for Respondent.
Date of hearing: 24th October, 2000,
ORDER
KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---In this petition filed by the assessee the order of the First Appellate Authority is assailed. The point advanced for adjudication is that the C.I.T. having held that the notice under section 61 was not properly served had no option but to annul and not to set aside the assessment.
The brief facts of the case are that the assessee company that deals in medicine filed returns of income. Notices issued by the department remained uncomplied with as - a result of which the ex parte assessment has been considered as illegal. The notices were statedly served on a person to whom the assessee claimed to have no relationship hence the C.I.T. set aside the case. As regards improper service of notice is concerned there is no dispute to this extent. The A.R., therefore, argued that the Courts have taken the view that where giving a notice is a statutory obligation, non-issuance or unproper service of the same is an incurable mistake. In this regard his argument is on the famous principle of natural justice 'audi altrem partem' which means that 'no one shall be condemned unheard'. His reliance is on the judgment of the Hon'ble Supreme Court as well as that of the learned Tribunal itself. Firstly he relied upon 1971 SCMR 681 wherein the Hon'ble Supreme Court has held that if giving notice is mandatory requirement failure is fatal and such default on the part of Government functionary shall render the Act as void ab initio being in disregard to the provisions of the statute. Further the superstructure raised on the base of such illegal proceedings shall also crumble to ground. The other judgment is reported as 1986 SCMR 962 in which the Hon'ble Chief Justice as the then he was, held in D. B: judgment "that if any impugned order was passed without hearing and notice to a party whose presence was otherwise necessary before the authorities concerned, such order would be a nullity in the eye of law and no question of limitation would arise". The order, is with reference to the point of limitation. It has basically been held in his order that where a person has not been made a party to some proceedings he obviously is not aware of the proceedings. Such an order cannot further deprive him of his right. of appeal by way of limitation because the order being illegal on the face of it, having been made without making him a party, no limitation should run against him. The findings of the Hon'ble Supreme Court, therefore,, in this case are not applicable on the facts and circumstances of the case before us. We, therefore, respectfully ignored the same.
The judgment of the ITAT is reported as 1985 PTD (Trib.) 178 which is with reference to section 13(2). This speaks of the particular requirements of the notice and reference to the language of the provisions that say "after giving reasonable opportunity to the assessee of being heard". This is where the learned Tribunal has found that ratio decidendi of the Hon'ble Supreme Court of Pakistan in the case referred by learned A.R. and mentioned by us reported as 1971 SCMR 681 has been found fully applicable. Since there is no cavil that non-observation of the necessary directions under section 13 makes the assessment void on the fact of it we do not go into much of discussion. A procedure has been prescribed in section 13 of the Ordinance, if an I.T.O. does not follow this procedure or the assessee has not received any prescribed notice under the provisions of section 13 the answer undoubtedly is the annulment of the proceedings. However, the proceedings before us are with reference to issuance of a notice of presence which has statedly not properly served on the assessee we do not consider the same to be applicable on the facts.
Coming to the last judgment the facts here are to some extent similar as the judgment is with reference to notices under sections 22(4) and 23(2) which are similar to the notice under section 61 impugned before us. The learned Chairman as the then he has held as follows:---
"It is, therefore, patent that in these circumstances no assessment under section 23(4) for the first four years at all these could be made for the year 1974-75 because the notice under sections 23(2) and 22(4) were issued for this year yet the learned A.A.C. has held that these were not validly served. Therefore, in the eye of law the assessment framed for this year also could not be made under section 34(4). The assessment framed by the I.T.O. were, therefore, in the eye of law a nullity. In our opinion the appellant rightly contends that instead of annulling the assessments the learned A.A.C. by setting aside the same has simply given undue additional time to the Income-tax Department to finalize the assessments. We agree with the appellant's contention that under law no one can be permitted to avail of his own wrongs. The service of the notices for all these years having been found by the learned A.A.C. to be void and illegal the assessment framed could not be sustained in law. For this stated affairs, the Department itself is responsible and we agree with the learned counsel for the appellant that, in these circumstances, only two choices were left to the Department viz., (1) either to complete the assessments on the basis of the returns filed i.e. to complete the assessment under section 23(i) or (ii) to let go the assessments as barred by time unless they could find some method of serving the statutory notices in a legal manner on the appellant. We, have therefore, no choice but to direct that the orders of the learned A.A.C. for these five years should be modified so that instead of setting aside the assessment orders of the I. T.O. should be cancelled and all the five assessments be annulled.
From the above paras: while annulling the assessment, the learned D.B. has in mind the particular circumstances, of the case. The assessee was in jail and the I.T.O. had not used legal modes available for service of the notice. His stand was different at different stages. In any case we cannot follow this judgment for the reasons that a very important principal of jurisprudence has been ignored therein. The principle of 'jurisdiction of notice' has been equated with the principal of 'communication of notice'. The argument is that once it is established that the notices have not been served properly the order should have been annulled. We have dealt with a similar issue in I.T.As. Nos.4263 to 4266/LB of 1996 order, dated 14-6-1997 in the case of Mian Aftab Ahmed Sheikh, Lahore. While deciding the same we have relied upon PLD 1966 SC 1, wherein at page 48 of the same the late Mr. Justice Cornelious while dealing with the question of jurisdiction and wrongful exercise of jurisdiction observed:---
"It is necessarily involved in this provision that a Court acting illegally or with material irregularity is still acting with the jurisdiction, an illegality or irregularity in the exercise of jurisdiction is- the same as acting without jurisdiction'. Then on the same page it was further observed, ' it put the matter in my own words I would say that if a dispute be in the proper forum then the fact that illegalities are committed in the determination of the dispute does not render the proceeding without jurisdiction."
It, therefore, obviously concludes that order can only be cancelled or annulled if the same is without jurisdiction. In the impugned-case it is true that the Assessing Officer has proceeded on the basis of a notice which was not properly communicated pr served upon the assessee but it would not conclude that the notice was without jurisdiction.
The maxim 'audi altrem partem' does not peed any detailed discussion as the Courts have unanimity that 'no one can be condemned unheard'. However, all such orders cannot be annulled. Even the judgment referred by the leaned A.R. in term of 1971 SCMR 681 is of no help. After confirmation, of the cancellation of the order of High Court, the learned Supreme Court has further held, "this appeal is, accordingly, dismissed, but in view of the special facts of this case, we make no order as to costs. We would also like to make it clear that this order will not in any way debar the departmental authorities from proceedings against the respondent in accordance with law if they are still so minded".
From the above para. it becomes obvious that the Honourable Supreme Court has left the proceedings open even after confirmation of the cancellation of the order against the petitioner. Further, Mr. Justice Cornelious in its landmark judgment reported PLD 1966 SC 1 mentioned above has held that even when a judicial tribunal acts illegally or with material irregularity in the exercise of its jurisdiction the order- cannot be quashed. Only those orders, which a Court of appeal considers as null and void and of no legal effect, can be cancelled or annulled. An-order passed in proper exercise of jurisdiction and with bona fide continuation in the proceedings entails set aside and not cancellation if the service of notice is held to be improper. Thus, if in ordinary course of proceedings a notice is not property served and the issuing authority otherwise has the jurisdiction to assess the case it cannot be annulled. This is because in the process of material irregularity the Assessing Officer is still acting with jurisdiction. An illegality or irregularity in the exercise of jurisdiction is not the same as acting without jurisdiction. We, therefore, firstly hold that the facts in the case mentioned by learned A.R. reported as 1985 PTD (Trib.) 178 are different. Secondly, the Hon'ble Tribunal while deciding the issue has ignored the prominent issue of an irregular improper service of notice which does not make an order "without lawful authority" or "of no legal effect".
We, therefore, without any hesitation hold that the First Appellate, Authority has rightly set aside the case in exercise of its jurisdiction under section 129. The assessee appeal, therefore, is of no help to him. The same is dismissed.
C.M.A./M.A.K./88/Tax(Trib.) Appeal dismissed.