I.T.AS. NOS.574(PB) TO 577(PB) OF 1998-99 VS I.T.AS. NOS.574(PB) TO 577(PB) OF 1998-99
2001 P T D (Trib.) 2642
[Income-tax Appellate Tribunal Pakistan]
Before Fazlur Rehman Khan, Muhammad Tauqir Afzal Malik, Judicial Members
and Abdur Rehman Afridi, Accountant Member
I.TAs. Nos.574(PB) to 577(PB) of 1998-99, decided on 29/03/2000.
(a) Income-tax---
----Assessment---Annulment of setting aside of assessment by Tribunal-- Principles--- Assessment is usually annulled on, the ground that when an assessee comes with clean hands he shall not be harassed time and again-- Assessment will be set aside for fresh assessment where the assessee did not come with clean hands and was a tax evader.
(b) Administration of justice---
---- Law believes in doing substantial justice to the parties, rather believing in technicalities.
(c) Income Tax Ordinance (XXXI of 1979)---
----S.148---Power to take evidence on bath, etc.---Any proceedings based on a statement on oath recorded by an officer not authorised under the law to do so shall be without any legal effect.
(d) Income-tax---
----Invalid assessment---Illegally recorded statement on oath---When assessment itself was invalid in law, the Tribunal did not have any discretion left except to annul the assessment insofar as it was based on an illegally recorded statement on oath.
(e) Income-tax---
---Non-practising allowance ---Fact that assessee had not been receiving non- practising allowance as- shown by her salary statement was not sufficient to conclusively prove, that the assessee had been earning income from private practice---If the assessee had been receiving such income the quantum had to be determined by the Assessing Officer through other irrebutable evidence.
(f) Income-tax---
----Proof of assertion by assessee---Assertion that assessee had not come up to the Department with clean hands, had to be established with reference to independent evidence to be gathered in a legal manner.
(g) Income Tax Ordinance (XXXI of 1979)---
----Ss.148 & 62---Power to take evidence on oath, etc. ---Assessment-- Income of doctor from private clinic/practice was added in the salary income of the assessee on the basis of statements of assessee and witnesses recorded by the Inspector on oath---Validity---Statement recorded by the Circle Inspector on oath being inadmissible in evidence, the income determined in respect of private practice was deleted and the income declared by .the assessee was accepted by the Tribunal.
I.T.A. No.43(PB of 1996-97 and 1997 PTD (Trib.) 103 rel.
1985 PTD (Trib 178 ref.
Sultan Wazir, D.R. for Appellant.
Nawaz Ahmad Khan for Respondent
Date of hearing: 26th January, 2000.
ORDER
FAZLUR REHMAN KHAN (JUDICIAL MEMBER). ---These four departmental appeals are directed against the order, dated 14-12-1998 of the learned Commissioner of Income Tax (Appeals), Peshawar whereby appeals of the assessee/respondent for assessment years from 1992-93 to 1995-96 were accepted.
2. The brief facts giving rise to these appeals are that income tax proceedings were started against the respondent on the basis of a complaint that the respondent is earning income from salary as well as from private practice but the latter income is not being shown in the return/and that she has almost converted the Government hospital into her private clinic. Accordingly, local and spot enquiry was conducted through Circle Inspector, who visited the spot, recorded the statements of the assessee and a few other witnesses and submitted his detailed report, which is on the tile. On the basis of this enquiry report, net income from the profession was assessed at Rs.466,800, Rs.484;800. Rs.502,800 and Rs.520,800, to which income from the salary was added and total net income was assessed at Rs.551,250, Rs.586,170, Rs.607,884, and Rs.648,450. Feeling aggrieved, the respondent went in appeals/and the learned CIT(A) dropped the income from the private practice and directed that the declared income from the salary shall be accepted. The Department is aggrieved by the order of the learned CIT(A) and has filed the present appeals.
3. We have heard the learned representatives of the parties and have also perused the record.
4. The learned CIT(A) has dropped the income from private practice mainly on the grounds that the enquiry was conducted during the assessment year 1998-99 while the years under appeals are from 1992-93 to 1995-96; that in response to notice under section 62 of the Ordinance, the respondent had clearly stated that she has started the practice during the assessment year 1997-98 and' the .learned Assessing Officer has failed to establish by any material evidence that she had started private practice since 1992-93; that the enquiry report is silent about the staff employee by the respondent that whether they are working under the appellant in the Government Hospital as employees or in private practice; and that the Circle Inspector has recorded the statements of the assessee and the witnesses on oath in violation of the provisions of section 148 of the Ordinance. As such, the enquiry report was not admissible in evidence. In support of the last ground, the learned CIT(A) has placed reliance on (1) a Judgment of this Tribunal in ITA No.43(PB) of 1996-97, dated 17-9-1997 and (2) another judgment of the Tribunal in 1985 PTD (Trib.) 178. No doubt in the foregoing authorities, the enquiry reports wherein statements were recorded on Oath by the Circle Inspector were held to be inadmissible in evidence and the assessments were annulled but annulment of assessment is at the discretion of the Tribunal. Sometimes in suitable cases, the Tribunal annuls the assessments while in others set aside the same for fresh assessments. This conclusion is supported by the provisions of clauses (a) and (c) of subsection (4) of section 135 of the Ordinance. These clauses read as under:---
(4) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal;
(a) ought to be reduced or annulled, it shall reduce or annul the assessment accordingly; or
(b)----------------------------------------
(c) Ought to be set aside, it shall set aside the assessment and direct the Deputy Commissioner to make a fresh assessment."
5. The Tribunal usually annuls an assessment on the ground that when an assessee comes to the Tribunal with clean hands he shall not be harassed time and again but the Tribunal will set aside the assessment for fresh 'assessment; where the assessee does not come to the Tribunal with clean hands and is a tax evader in the case in hand, the complaint against the respondent clearly shows that she is abusing her authority as a Government servant and has almost converted the Government hospital into her private clinic. Moreover, even if, the enquiry report is taken out of consideration, extracts from the-Salary Account of the Office of the District Accounts Officer which are available on the departmental record show that the respondent has not claimed Non-practising Allowance, which means that she is doing her private practice from the year 1991-92 but she has not shown any income from the same in her return. She is, therefore, a tax evader. The law believes in doing substantial justice to the parties, rather to believe in technicalities. In the circumstances, we are, therefore, of the considered view that it would be in the interest of justice that the two orders of the learned two forums below are set aside and the case is remanded to the Assessing Officer with the direction to conduct himself local and spot enquiry, complete in all respects and then on the basis of that enquiry decide the case afresh for the years under appeals in accordance with law.
6. As a result, these departmental appeals are accepted, the impugned orders of the learned two forums below are set aside and the case stands remanded to the Assessing Officer with the foregoing directions.
Abdur Rehman Afridi (Accountant Member). I have carefully gone through the order passed by my learned brother, the Judicial Member. I beg, however, to differ with him regarding the conclusions drawn by him for the following reasons:
(a) The assessment has been based entirely on the statement of the assessee which the Circle Inspector recorded on oath. As has been mentioned by the learned CIT(A) and has also been stated by the learned Judicial Member, the Inspector was not authorised under the law to record a statement on oath. It has also been observed (two cases quoted in the appeal. order) that any proceedings based on a statement on oath recorded by an officer not authorised under the law to do so shall be without any legal effect. For the same reason a Division Bench of this Tribunal annulled the assessment and directed for the acceptance of the income declared by the assessee vide order passed. In ITA No.43(PB) of 1996-97, dated 17-9-1997. The issue the instant case being the same. I wonder if any different treatment could be meted out to the assessee.
(b) It is true that this Tribunal has the power to set aside an assessment and to direct the Deputy Commissioner to make a fresh assessment but such a power can be exercised only in cases where the facts and law warrant doing so. In the case before us since the assessment itself is invalid in law, this Tribunal does not appear to have any discretion left except to annul the assessment in so far as it is based on an illegally recorded statement on oath.
(c) The assessee has not been receiving Non-practising Allowance as shown by her salary statement but then this fact alone is not, sufficient to conclusively prove that the assessee has been earning income from private practice for the last so many years. The fact that the assessee has been receiving such income and the quantum thereof, has to be determined by the Assessing Officer through other irrefutable evidence which in the instant case appears to be contained in a statement which under the law is not admissible to be taken into consideration.
(d) I also find myself unable to agree with the findings 'of the learned Judicial Member that the assassee had not come up to the Department with clean hands. This assertion has in fact to be established with reference to independent evidence to be gathered in a legal manner. The Assessing Officer has failed to do so.
2. For the reasons mentioned-above, therefore, and in view of this Tribunal decisions mentioned in the earlier part of this order, I would direct that the statement recorded by the Circle Inspector on oath being inadmissible in evidence, the income determined in respect of private practice may be deleted and the income declared by the assessee be accepted.
In view of difference of opinion, the following question is framed for the opinion of a third Member of the Tribunal:--
"Whether on the facts and in the circumstances of the case and in view of the enquiry report, conducted by the Circle Inspector, being inadmissible in evidence, this Tribunal is justified to set aside the assessment order and to remand the case to the Assessing Officer under clause.,(c) of subsection (4) of section 135 of the Income Tax ` Ordinance,' 1f979 with the directions to decide the same afresh in accordance with law, after conducting a complete enquiry himself. "
The record of the case may be sent to the Headquarter for placing the same before the Hon'ble Chairman with the request to entrust the case to a third Member of the Tribunal for his opinion on the question framed above. '
Muhammad Tauqir Afzal Malik (Judicial Member). This difference of opinion has been referred by the honourable Chairman to me. The question framed for my opinion is as under:
"Whether on the facts and in the circumstances of the case and in view of the enquiry report; conducted by the Circle Inspector, being inadmissible in evidence, this Tribunal is justified to set aside the assessee order and to remand the case to the Assessing Officer under clause (c) of subsection (4) of section 135 of the Income Tax Ordinance, 1979 with the directions .to decide the same afresh in accordance with law, after conducting a complete enquiry himself".
Arguments heard. Record perused.
I have minutely gone through the orders of both my learned Judicial as well as Accountant Members and the judgment cited by the CIT(A) which is referred as ITA No.43(PB) of 1996-97, dated 17-9-1997. A photo copy of this order is also given to me by the AR of the assessee. This order is written by the honourable Chairman in a miscellaneous application and the actual citation should be M.A. No.43(PB) of 1996-97 assessment year 1992-93, dated 17-9-1997. The learned Accountant Member in this case is also a signatory of this order. The relevant portion of the cited order reads as follows:
"Thus the entire material on record is indicative of the fact that the assessment order; first appellate order and the second appellate order are mainly based on the statement recorded by the Income Tax Inspector and taking the averment in the statement as admission on the part of the applicant. At this juncture we would like to observe that by now it is established principle of law, and the Hon'ble Supreme Court of Pakistan has held in a number of cases, that it is the duty of the Court itself to apply the correct law whether agitated by any party or not. In view of this established proposition of law and the facts admitted on record it was the duty of the learned members of this Tribunal to examine the legal position itself whether raised by any party or not and to consider if any assessment can lie based on a statement recorded by Income Tax Inspector without jurisdiction and if the assessment order is based on an inadmissible statement whether the assessment order can be deemed to be valid in law. It can be said without any hesitation that any assessment order on the basis of a statement which is not admissible in evidence cannot be sustained in law, and therefore, we are of the considered opinion that the order of this Tribunal, dated 30-11-1995 disposing of the main appeal and the order, dated 31-3-1996 dismissing the rectification application suffer from patent mistake of law apparent on record and consequently they are liable to be recalled being violative of the established proposition of law. For the foregoing reasons the orders, dated 30-11-1995 and 31-3-1996 passed by Division Bench of this Tribunal are hereby recalled by way of rectification. The appeal is allowed and it is held that the total income assessed at Rs.247,000 on the basis of a statement recorded by the Income Tax Inspector is not sustainable in law, with the result that the Assessing Officer is directed to accept the declared total income. ,
The rectification application and the appeal are allowed as above."
After going through the above cited judgment in detail, I have been able to lay hands on this Tribunal's order which is reported as 1997 PTD (Trib.) 103. which is again by the honourable Chairman alongwith one of the other learned Accountant Members of Karachi.
In the above cited judgment, the honourable Chairman minutely discussed sections 144, 145, 146, 148 and 149 of the Income Tax Ordinance, 1979, alongwith sections 75, 78 and Order 26 including rules 1 to 17 of the Civil Procedure Code. The above said appeal is summed up as under:--
"The up shot of the above discussion is that the Inspector of Income- tax until and unless specifically empowered by the Central Board of Revenue in this behalf cannot, exercise any power under section 148 of the Income-tax Ordinance and more specifically speaking cannot record statement of assessees and witnesses on oath, in this independent capacity. The officers and authorities specified in section 148 can utilize the services of Income Tax Inspector for the purpose of recording statements of assessees and witnesses by issuance of commission but -the commission is to be issued in accordance with the provisions contained in the Civil Procedure Code which have been referred and elaborated by us in this order. Coming to the facts of the present case we find that the Income-tax Inspector was deputed for conducting local enquiry and while conducting local enquiries recorded statement of witnesses on the basis of which the Assessing Officer made additions to the total income of the appellant. The statements so recorded by the Income tax Inspector are clearly without jurisdiction as no such authority was conferred on him by the C.B.R. and he was not appointed Commissioner for the examination of witnesses in accordance with the law as discussed above. The reason being that under Order XXVI, Rule 1 of the Civil Procedure Code any Court may issue a commission for the examination on interrogatories or otherwise of any person resident within the local limits of its jurisdiction who is exempted under the Civil Procedure Code from attending the Court or who is from sickness or infirmity unable to attend it. No such conditionalities have been observed in the present case and there is nothing on the record to show that the circumstances existed under which a commission could be issued by the Deputy Commissioner under section 148(1) of the Income Tax Ordinance, 1979 read with section 75, C.P.C. and Order XXVI, Rule 1 thereof.
For the foregoing reasons the appeal at the instance of department Stands dismissed " '
The appeal is hand in akin on all fours to the cases cited as M.A. No.43(PB) of 1996-97 assessment year 1992-93; dated 17-9-1997 and (1996) 74 Tax 212 Trib. This being an already decided issue, my answer to the question framed is in "negative".,
The upshot of this discussion is that I concur and agree with the learned Accountant Member.
C.M.A./M.A.K./90/Tax(Trib.) Appeals disposed of accordingly.