COMMISSIONER OF INCOME-TAX, RAWALPINDI VS AMANAT ALI
2001 P T D 860
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
THE COMMISSIONER OF INCOME-TAX, RAWALPINDI
versus
Messrs AMANAT ALI
C.T.R. No.296 of 1991, decided on 06/11/2000.
Income Tax Ordinance (XXXI of 1979)---
----Ss.65, 59(1) & 13(1)(b)---Reopening of assessment---Scope and extent-- Self-Assessment Scheme---Unexplained investment---Once the assessment was re-opened under S.65, Income Tax Ordinance, 1979 on one specific issue, the Income-tax Officer could reassess income from other sources for the same year even when income from other sources was previously accepted under Self-Assessment Scheme---Principles---Proceedings initiated under S.65 of the Ordinance were not restricted only to the grounds and the reasons or the material on the basis of which a notice for reopening was issued Such proceedings were not to remain within the four corners of the reasons given in the show-cause notice---Once the assessment had been reopened same would not be restricted to a specific head of income or a sub-head of the main head---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) of the Ordinance were answered--Additional assessment could be made and proceedings for reopening of assessment could also be initiated when either a lower rate of tax had been applied in respect of a particular head of income or excessive relief had 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-- Findings 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 case, if the Income-tax Officer could assess income from other source in the same year when income had previously been accepted under Self-Assessment Scheme.
The original assessment in the case of the assessee, an individual, was framed at total income of Rs.18,200 under section 59(1) of the Ordinance. Subsequently on the basis of a 'complaint he was served with a notice under section 65 of the Ordinance and in the proceedings that followed net income for the year was determined at Rs.38,650. In the process besides making an addition of Rs.1,00,000 under section 13(1)(b) of the Ordinance a sum of Rs.38,650 was determined as income from business. Appellate Tribunal directed that business income as earlier accepted at Rs.18,200 under section 59(1) of the Ordinance should be accepted. According to the Tribunal the case of the assessee was not re-opened on the question of any suppression relating to business income and therefore, income from that source could not again be determined.
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 assess or determine by an order in -writing; the total income of the assessee or the tax payable by him, as the same 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 re-opened, 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 had been under assessed, or assessed at too low rates or had 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 had 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.
A finding of fact that enough material was not available on record to enhance the business income does not in any manner change the 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.
Messrs Sutlej Cottog 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 C.S.T. v. H.M. Esufali H.M. Abdulali (1973) 32 STC 77 (SC) = (1973) 90 ITR 271 (SC) ref.
Malik Muhammad Nawaz for Petitioner.
Nemo for Respondent.
ORDER
NASIM SIKANDAR, J.---This is a case stated by the Lahore Bench of the Income-tax Appellate Tribunal for our opinion and answer. The question framed for this purpose reads as under:---
"Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that once assessment is re-opened under section 65 of the Income Tax Ordinance, 1979 on one specific issue the Income-tax Officer cannot reassess income from other sources for the same year even when income from these sources was previously accepted under S.A.S."
2. The facts in brief are that original assessment in the case of the assessee, an individual, was framed at total income of Rs.18,200 under section, 59(1) of the Ordinance. Subsequently on the basis of a complaint he was served with a notice under section 65 of the Ordinance and in the proceedings that followed net income for; the year was determined at Rs.38,650. In the process besides making an addition of Rs.1,00,000 under section 13(1)(b) of the Ordinance a sum of Rs.38,650 was determined as income from business. Tile assessee failed before the Assistant Commissioner while the learned Appellate Tribunal directed that business income as earlier accepted at Rs.18,200 under section 59(1) of the Ordinance should be accepted. According to the learned Tribunal the case of the assessee was not re-opened on the question of any suppression relating to business income and therefore, income from that source could not again be determined.
3. 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 shat 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 same 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 re-opened, 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 had 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.
4. 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. C.I.T. 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 re-opening of the assessment could happen in a particular situation. 1n 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 laps 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 year, to those items only in respect of which concealment or deliberate misrepresentation is found .
5. To the same effect have been the observations by the Hon'ble Supreme Court of India in Re: Hind Wire Industries Ltd. v. C.I.T. 1996 PTD 562. In that judgment, the Court dealt with the identical provisions of section 34 of the Indian Income-tax Act, 1922 viz. "Income escaping assessment" and held that once the assessment was re-opened, the previous under-assessment was set aside' and the whole proceedings started afresh. Their lordships reproduced the following portion by Ramaswani from their earlier judgment in re: V. Jagmahan Rai v. C.I.T. (1970) 75 ITR 373:---
"Section 34 in terms states that once the Income-tax Officer decides to re-open 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 re-opened 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."
6. The Court also made a reference to another judgment in C.S.T. v. H.M. Esufali H.M. Abdulali (1973) 32 ST C 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 reassessment was made the former assessment was completely re-opened and in its place a fresh 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 turn-over but it assesses him on his total estimated turn-over".
7. As to the observation 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 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.
8. In view of what has been said in the penaltimate para. our answer to the question is in the negative.
M.B.A./C-30/L Reference answered.