MESSRS HOME PLANNERS THROUGH MUHAMMAD AZEEM, PARTNER VS THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-06, COYS, ZONE-III, LAHORE
2001 P T D 1633
[Lahore High Court]
Before Malik Muhammad Qayyum, J
Messrs HOME PLANNERS through Muhammad Azeem, Partner
versus
THE ASSISTANT COMMISSIONER OF INCOME‑TAX, CIRCLE‑06, COYS, ZONE‑III, LAHORE (NOW CIRCLE 14, COY ZONE‑II, LAHORE) and 4 others
Writ Petition No.3520 of 2001, decided on 15/03/2001.
Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑S.65‑‑‑Constitution of Pakistan (1973), Art. l99‑‑‑Constitutional petition‑ Reassessment‑‑‑Requirements for issuing notice under S.65, Income Tax Ordinance, 1979‑‑‑Principles‑‑‑Where the requirements postulated in S.65, Income Tax Ordinance,. 1979 had not been met by the‑ department, High Court under its Constitutional jurisdiction, declared the order of reassessment to be without any lawful authority and of no legal effect with the observation that the department was at liberty to restart the proceedings, if it so desired, in accordance with law.
Section 65 of the Income Tax Ordinance, 1979 had postulated four situations under which a notice could be issued. The notice served in the present case was on printed form and it had not been made clear as to under which clause of section 65(1), the Assessing functionaries were acting. The power being statutory in nature had to be exercised by the concerned functionaries after due application of mind which should manifest itself from the notice for re‑assessment issued under section 65 of the Ordinance.
Subsection (2) of section 65 of the Ordinance provided that no proceedings under subsection (1) shall be initiated unless definite information had come into possession of the Deputy Commissioner and he had obtained previous approval of the Inspecting Additional Commissioner in writing to do so. This requirement did not appear to have been met with in the present case which did not disclose as to what information had come into possession of the Deputy Commissioner of Income‑tax which necessitated issuance of notice under section 65 of the Ordinance.
The impugned order was declared to be without any lawful authority and of no legal effect by the High Court. The department was, however, at liberty to restart the proceedings, if they so desired, in accordance with law.
Baby Own v. Income‑tax Officer 1997 PTD 47‑ref.
Siraj‑ud‑Din.Khalid for Petitioner.
Muhammad Ilyas Khan for Respondents
Date of hearing: 15th March, 2001.
JUDGMENT
This petition under Article 199 of ‑the Constitution of Islamic .Republic of Pakistan, 1973 calls in question the, notice issued by the respondents under section 65 of the Income Tax Ordinance, 1979, whereby the petitioner has been informed that the Assistant Commissioner of Income tax has proposed to reassess the income of the petitioner.
2. Admittedly, the petitioner had tiled the return of his income for the year 1999‑2000 under the Self‑Assessment Scheme. However, on 15‑5‑2000, the impugned notice was issued by the respondent which is on printed proformas.
3. The learned counsel for the petitioner has contended that the impugned notice shows no application of mind nor the basis on which the case of the petitioner is proposed to be re‑opened.
4. Before proceeding any further, it will be useful. to produce the provision of section 65 of the Income Tax Ordinance, 1979 as well as the notice received by the petitioner, .a copy of which is available with the writ petition as Annexure 'D':‑‑‑
Section 65
"Additional assessment.‑‑‑(1) If in any year, for any reason:
(a) any income chargeable to tax under this Ordinance has escaped assessment; or
(b) the total income of an assessee has been under assessed, or assessed at too low rate, orhas been the subject of excessive relief or refund under this Ordinance; or
(c) the total income of an assessee and the tax payable by him has been assessed or determined under subsection (1) of section 59 or section 59‑A or deemed to have been so assessed of determined under subsection (1) of section 59 or section 59‑A; the Deputy Commissioner may at any time, subject to provisions of subsections (2), (3) and. (4), issue a notice to the assessee containing all or any of the requirement of a notice under section 56 and 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 ail the provisions of this Ordinance shall, so far as may be, apply accordingly;
Provided that the tax shall be charged at the rate or rates applicable to the assessment year for which the assessment is made.
(2) No proceedings under subsection (1) shall be initiated unless definite information has come into possession of the (Deputy Commissioner) (and) he has obtained previous approval of the Inspecting (Additional Commissioner) of Income Tax in writing to do so.
Explanation.‑‑‑As used in this subsection, 'definite information' includes information in respect, of sales and purchase, made by the assessee, of any goods, and any information regarding acquisition, possession or transfer, by the assessee, of any money, assets or valuable articles, or any‑ investment made or expenditure incurred by him:
[(3) Notice under subsection (1), in respect of any income year may be issued within 10 years from the end of the assessment year in which the total income of the said income year was first assessable].
(Provided that, where the said notice be issued on or after the first day of July, .1987, this subsection shall have effect as if for the words '10 years' the words 'five years' were substituted.)
(3‑A) Where a notice under subsection (1) is issued on or after the 1st day of July, 1982, no order under the said subsection shall be made after the expiration of one year from the end of the financial year in which such notice was served."
NOTICE. UNDER. SECTION 65 OF THE INCOME TAX ORDINANCE, 1979
..
.
(1) Whereas I have reason to believe that your income assessable to income tax for the assessment year 1999‑2000 has
(a) escaped assessment;
(b) been under‑assessed
(c) been assessed at too low a rate,
(d) been the subject of excessive relief.
I, therefore, propose to assess/reassess the said income that has
(a) escaped assessment,
(b) been under assessed,
(c) been assessed an too low a rate,
(d) been the subject of excessive relief
(2) Whereas your income assess4ble to income‑tax for the assessment year 1999‑2000 has been assessed under section 59(1), I propose to reassess the said income.
(3) I hereby, require you to deliver to me not later than 20‑5‑2000 of the receipt of this notice, a return in the prescribed form of your total income assessable for the said assessment year.
(4) Failure to make the return required by this notice will result in an ex parte assessment under section 63 of the Income Tax Ordinance, 1979. Failure to furnish the return or to furnish it within the time allowed without reasonable cause or excuse, will also entail a penalty under section 108 'or prosecution under section 117 of the said Ordinance or both.
5. It is evident from section 65 of the Income Tax Ordinance, 1979 reproduced above that it postulates four situations under which a notice could be issued. The notice served in the present case is on printed form and it has not been made clear as to under which clause of section 65(1), the respondents were acting. The power being statutory in nature has to be exercised by the concerned functionaries ‑after due application of mind which should manifest itself from the notice for re‑assessment issued under section 65 of the Ordinance. Baby Own v. Income Tax Officer 1997 PTO 47 supports the view which has been taken.
6. It may also be noted that subsection (2) of section 65 provides that no proceedings under subsection (1) shall be initiated unless definite information has come into possession of the Deputy Commissioner and he has obtained previous approval of the Inspecting Additional Commissioner in 8 writing to do so. This requirement does not appear to have been met with in the present case which does not disclose as to what information had come into possession of the Deputy Commissioner of Income‑tax which necessitated issuance of notice under section 65 of the Ordinance.
In view of what has been said above, this petition is allowed the impugned order is declared to be without any lawful authority and of no legal effect. The respondents shall, however, be at liberty to restart the proceedings, if they so desire, in accordance with law. No order as to costs.
M.B.A./H‑33/L Petition accepted.