C.I.T., RAWALPINDI VS SAIFULLAH
2001 P T D 1475
[Lahore High court]
Before Nasim Sikandar and Jawwad S Khawaja, JJ
THE C.I.T. RAWALPINDI
versus
SAIFULLAH
C.T.R. No. 299 of 1991, heard on 26/10/2000.
(a) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S.65‑‑‑Additional assessment‑‑‑Scope and extent‑‑‑Proceedings initiated under S.65, Income Tax Ordinance, 1979 were not restricted only to the grounds and the reasons or the material on the basis of which a notice for re opening was issued‑‑‑Proceedings under S.65, Income Tax Ordinance, 1979 were not to remain within the four corners of the reasons given in the show cause notice or the material pointed out therein‑‑‑Use of, the word "total income" used in S.65 was indicative of the fact that once the proceedings had been re‑opened these will not be restricted to a specific head of income or a specific sub‑head of the main head‑‑‑Words "or the tax payable by him" used in S.65 of the Ordinance point out that an additional assessment could be made not only with respect to total income of the assessee but also the tax payable by him if the requirements of S.65(1)(b) were answered which required of an Assessing Officer to go for additional assessment if the total income of an assessee had been under‑assessed or assessed at too low rates or had been the subject of excessive relief or refund under the Ordinance.
Section 65 of the Income Tax Ordinance, 1979 is titled as "additional assessment". After contemplating various situations, in which re‑assessment proceedings are .to be initiated, it is laid down that an Assessing Officer "may proceed to assessee or determine by an order in writing, the total income of the assessee or the tax payable by him, as the case may be, and all the provisions of this Ordinance shall, so far as may be, apply accordingly". These provisions do not in any manner go to point out that the proceedings initiated under section 65 are to be restricted only to the grounds and the reasons or the material on the basis of which a notice for re‑opening was issued. It is also not discernible from the provisions that the proceedings initiated thereunder are to remain within the four corners of the reasons given in the show‑cause notice or the material pointed out therein. The use of the words "total income" is also indicative of the fact that once the proceedings have been reopened, these will not be restricted to a specific head of income or a specific sub‑head of the main head. Also the succeeding words "or the tax payable by him further go to point out that an additional assessment can be made not only with respect to total income of the assessee but also the tax payable by him if the requirements of sub‑clause (b) of subsection (1) of section 65 are answered. That clause requires of an Assessing Officer to go for additional assessment if the total income of an assessee has been under assessed, or assessed at too low rates or has been the subject of excessive relief or refund under the Ordinance. All the three elements pointed out in sub‑clause clearly show that additional assessment can be made and proceedings for re‑opening of assessment can also .be made when either a lower rate of tax had been applied in respect of a particular head of income or excessive relief has been allowed to an assessee in relation to any claim to which he was not entitled as also for the reason that the amount of refund made was more than what was due to him.
Messrs Sutlej Cotton Mills Ltd., Okara v. C.I.T., North Zone (West Pakistan), Lahore PLD 1965 SC 443; Hind Wire Industries Ltd. v. C.I.T. 1996 PTD 562; V. Jagmahan Rai v. C.I.T. (1970) 75 ITR 373 and CST v. H.M. Esufali H.M. Andulali (1973) 32 STC 77 (SC) = (1973) 90 ITR 271 (SC) ref.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S.136‑‑‑Reference to the High Court‑‑‑Scope‑‑‑Question of fact‑‑ ‑Finding of fact that enough material was not available on record to enhance the business income would not in any manner change the nature of the question if an Income Tax Officer could assess income from sources in the same year when income had previously been accepted under Self‑Assessment Scheme.
Muhammad Ilyas Khan for Petitioner. Nemo for Respondent.
Date of hearing: 26th October, 2000,
JUDGMENT
NASIM SIKANDAR, J.‑‑‑This is a case stated by the Islamabad Bench of the Income Tax Appellate Tribunal for our opinion and answer:‑‑‑
"Whether on the facts and in the circumstances of the case, Tribunal was justified in holding that once assessment is reopened under section 65 of the Income Tax Ordinance, 1979, on one specific issue, the Income‑tax Officer cannot re‑assess income from other sources for the same year even when income from these sources was previously accepted under SAS?"
2. Before answering the question, it appears appropriate to go through the facts giving rise to the statement of the case and the framing of the question. The assessee in this case is an. individual and, at the relevant time derived income from sale and supply of bricks. His return for the assessment year 1987‑88 disclosing an income of Rs.31,000 was accepted under section 59 (1) of the Income Tax Ordinance. Subsequently his case was reopened oh the ground that during the aforesaid period, he derived share income from a registered firm namely M/s. National Bricks. After confronting the assessee on the alleged concealment of income and on usual proceedings re‑assessment was completed on 30‑3‑1988 at, total income of Rs.84,150. While framing the assessment the share income from the aforesaid registered firm at Rs.9,150 was added to income from sale of bricks computed at Rs.75,000 as against the earlier, income accepted under section 59(1) at Rs.31,000. The learned First Appellate Authority rejected the proposition put fourth before ii that the reopening of assessment under section 65 of the Income Tax Ordinance having been made on the specific issue of non‑disclosure of income from the registered firm,, the already accepted business income could not have been re‑assessed. In this regard, reference was made to the contents of the notice under section 65 of the Income Tax Ordinance. However, the learned First Appellate Authority. CIT Appeals did not agree. In her opinion once an assessment is re‑opened for whatsoever reasons the entire case for that year is opened to scrutiny. According to CIT Appeals, the case would have been different if the original assessment had been completed under section 62 wherein the Assessing Officer had examined the declared version in detail on the basis of supporting evidence obtained from the assessee.
3. The learned Income Tax Appellate Tribunal, however, differed, a Single Bench whereof concluded otherwise. He observed that reassessment proceedings were initiated primarily with the object of charging share income from the said firm which the assessee had failed to disclose in the return filed under the Self‑Assessment Scheme. The Assessing Officer during re assessment proceedings, according to the learned Accountant Member "was not required to tinker with the quantum of business income already assessed under section 59(1) of the Ordinance". Also he attempted to record a finding of fact that there was no material or evidence on the basis of which the Income‑tax Officer could have made re‑assessment of business income already assessed under section 59(l) of the Ordinance.
4. After hearing the learned counsel for the Revenue, we are of the view that the opinion held by the Tribunal is not supported by any provision of the Income Tax Ordinance. Section 65 of the Income Tax Ordinance is titled as "additional assessment". After contemplating various situations, in which re‑assessment proceedings are to be initiated, it is laid down that an Assessing Officer "may proceed to assess or determine by an order in writing, the total income of the assessee or the tax payable by him, as the case may be, and all the provisions of this Ordinance shall, so far as may be apply accordingly". These provisions do not in any manner go to point out that the proceedings initiated under section 65 are to be restricted only to the grounds, and the reasons or the material on the basis of which a notice for re opening was issued. It is also not discernible from the provisions that the proceedings initiated thereunder are to remain within the four corners of the reasons given in the show‑cause notice or the material pointed out therein. The use of the word "total income" is also indicative of the fact that once the proceedings have been reopened, these will not be restricted to a specific head of income or a specific sub‑head of the main head. Also‑the succeeding words "or the tax payable by him" further go to point out that an additional assessment can be made not only with respect to total income of the assessee but also the tax payable by him if the requirements of sub‑clause (b) of sub clause (1) of section 65 are answered. That clause requires of an Assessing Officer to go for additional assessment if the total income of an assessee has been under‑.assessed, or assessed at too low rates or has been the subject of excessive relief or refund under the Ordinance. All the three elements pointed out in sub‑clause clearly show that additional assessment can be made and proceedings for re‑opening of assessment can also be made when either a lower rate of tax had been applied in respect of a particular head of income or excessive relief has been allowed to an assessee in relation to any claim to which he was not entitled as also for the reason that the amount of refund made was more than what was due to him.
5. The view adopted by the learned Tribunal is also against the opinion held by their Lordships of the Supreme Court of Pakistan in Re: Messrs Sutlej Cotton Mills Ltd., Okara v. CIT, North Zone (West Pakistan), Lahore reported as PLD 1965 SC 443. In that case, their Lordships were considering the parallel provisions of section 34 of late Income‑tax Act (XI of 1922). Before their Lordships, the issue also pertained to the time limitation within which a reopening of the assessment could happen in a particular situation. In the first situation, it was found that an Assessing Officer may at any time within 8 years serve a notice upon the assessee if he had reasons to believe that the assessee had concealed particulars of income and had deliberately furnished inaccurate particulars in the original return. However, if he had no reason to believe that there had been any concealment or deliberate furnishing of inaccurate particulars, then a, notice under section 34 could not be served after a lapse of four years from the close of assessment year in which concealment was made or less income was declared. In the view of their Lordships, "the assessment in either case may extend to the whole of the income which initially escaped assessment altogether or was under assessed. The section cannot be read so as to confine assessment under section 34, after the lapse of four years from the expiry of the original assessment years, to those items only in respect of which concealment or deliberate misrepresentation is found".
6. To the, same effect have been the observations by the Hon'ble Supreme Court of India in Re: Hind Wire Industries Ltd. v. CIT 1996 PTD 562. In that judgment, the Court dealt with the identical provision of section 34 of the Indian Income‑tax Act, 1922, viz. "Income escaping assessment" and held that once the assessment was reopened, the previous under‑assessment was set aside and the whole proceedings started afresh. Their Lordships reproduced the following portion by Ramaswami from their earlier judgment in Re: V. Jagmahan Rai v. CIT.(1970) 75 ITR 373:‑‑
"Section 34 in terms states that once the Income Tax Officer decides to reopen the assessment, he could do so within the period prescribed by serving on the person liable to pay tax a notice containing all or any of the requirements which may be included in a notice under section 22(2) and may proceed to assess or reassess such income profits or gains. It is, therefore, manifest that once assessment is reopened by issuing notice under subsection (2) of section 22, the previous under‑assessment is set aside and the whole assessment proceedings start afresh. When once valid proceedings are started under section 34(1)(b), the Income Tax Officer had not only the jurisdiction, but it was his duty to levy tax on the entire income that had escaped assessment during that year. "
7. The Court also made a reference to another judgment in CST v. H.M. Esufali H.M Andulali (1973) 32 STC 77 (SC) = (1973) 90 ITR 271 (SC) which dealt with section 19 of the Madhya Pardesh General Sales Tax Act, 1958. In that case, the Court had found that when re‑assessment was made the former assessment was completely re‑opened and in its place afresh assessment was made. Hon'ble Hegde, J. while speaking for the Bench, observed what is true of the assessment must also be true of reassessment because reassessment is nothing but a fresh assessment: While reassessing ‑a dealer, the assessing authority does not merely assess him on the escaped turnover but it assesses him on his total estimated turnover".
8. As to the observations of the learned Accountant Member that there was no material or evidence available with the Income Tax Officer to make reassessment of the business income, we are not persuaded to return a ruling. It is only the question which has been framed for our opinion which needs to be answered. A finding of fact that enough material was not available on record to enhance the business income does not in any manner change the A nature of the aforesaid question if an Income Tax Officer could assess income from other sources in the same year when income had previously been accepted under Self‑Assessment Scheme.
9. In view of what has been said in the penultimate para, our answer to the question is in the negative.
M.B.A./C‑63/L Reference answered.