(a) Income‑tax‑‑‑

‑‑‑‑Finding on an issue‑‑‑Jurisdiction of Tax Authorities‑‑‑Irrelevant issue‑‑‑Principle‑‑ No one, be that an Assessing Officer, Commissioner of Income‑tax (Appeals) or Appellate Tribunal can give a finding on an issue, which is not before it for adjudication‑‑‑Courts or other judicial or administrative officers can dispose the subject to which they have the seizure‑‑‑To give a finding on an issue, which is not the subject‑matter of the appeal or such other proceedings is beyond the jurisdiction of the Authority dealing with such matters‑‑‑Giving a finding in respect of assessment year, which is not pending before an Authority, is a far fetched idea, which jurisdiction is not available to anybody‑‑ Jurisprudence is clear in its application that no one can give a finding during the proceeding of a case on an issue, which is not challenged before him by the petitioner or the respondent.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 52, 86 & 61‑‑‑C.B.R. Circular No.19 of 1999, dated 14‑9‑1999‑‑ Liability of a person failing to deduct or pay tax ‑‑‑Assessee in default ‑‑ Chargeability of tax under S.52 of the Income Tax Ordinance, 1979 on total payment made on account of supplies for the last five years alongwith additional tax on observation of Audit Authorities in one assessment year‑‑‑First Appellate Authority set aside the order with the direction to pass separate orders for each year‑‑‑Assessments for, each year on such directions‑‑ Validity‑‑‑No legal direction was in the order of the First Appellate Authority which made the present continuation of the old proceedings except for the relevant assessment year only one year was pending adjudication before the First Appellate Authority‑‑‑Finding with regard to other years was an obiter dicta, which could not bind the Assessing Officer to follow his remarks‑‑‑Such remarks did not saddle the Department with the powers to initiate the proceedings for the years which were not pending before him‑‑‑No continuation of the proceedings for the assessment years were independent from the earlier proceedings‑‑‑Proceedings under S.52 of the Income Tax Ordinance, 1979 could be initiated at any time during the financial year‑‑‑If Assessing Officer fails to take cognizance of assessee's default during the financial year from assessee's statements or such other information, tie could proceed after gathering information from assessee books called under S.61 of the Income Tax Ordinance, 1979 for assessment ‑‑‑Assessee under S.61 of the Income Tax Ordinance, 1979 could be asked to produce books of accounts for a period, which was not more than three years prior to the income year‑‑‑Proviso to S.61 of the Income Tax Ordinance, 1979 means that during the course of an assessment, the Assessing Officer could ask for production of books of accounts for four assessment years only‑‑‑Since the determination of the purchases in the absence of statement under S.142 of the Income Tax Ordinance, 1979 could only be from the accounts, the Assessing Officer could not go beyond the period of four assessment years‑‑‑Such limitation for, calling for the books of accounts, had been fixed by the statute and Assessing Officer could not enforce beyond‑the same‑‑ Assessing Officer did not find the assessee to be in default during the financial years, or on the inspection of their books during proceedings under S.61 of the Income Tax Ordinance, 1979 and suddenly became wiser after almost five years without having access to books or any such other relevant material‑‑‑Assessment year for which the notice was issued had been held to be illegal by the First Appellate Authority‑‑ Order was liable to cancellation in view of the fact that the figure determined for holding assessee in default had no relationship with the facts of case‑‑‑If it was for more than one year, it was not to be considered as default on the part of the assessee‑‑‑Assessing Officer was not sure about the amounts, the years for which the amounts pertained, actual name of the recipients of the money and the fact whether the recipients had already paid taxes or not‑‑‑Even Audit party had no access to the books of accounts and their apprehension was on the basis of the balance sheet of the assessee; otherwise it was a case of inordinate delay and the assessment by virtue of S.64 of the Income Tax Ordinance; 1979 of the recipients presumably stood finalized‑‑ Assessing Officer had also no power to call for the books of accounts for the years on which the assessments were made‑‑‑Orders finalized by the Assessing Officer and confirmed by the First Appellate Authority were, cancelled by the Appellate Tribunal and appeal was allowed.

2002 PTD 14 distinguished.

I.T.A. No.5382/LB of 1999; 1999 PTD (Trib.) 3357; 2001 PTD (Trib.) 755; 1996 PTD (Trib.) 65; 2000 PTD 2883; PTCL 1976 CL 598; CIT v. Manager, Madhya Pradesh State Coop. Development Bank Ltd. (1982) 137 ITR 230 and 2000 PTD (Trib.) 2605 ref.

1999 PTD (Trib.) 3757 not infield.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 52‑‑‑Liability of persons failing to deduct or pay tax ‑‑‑Limitation‑ Law could not be left with unlimited application‑‑‑No clue is given in S.52 of the Income Tax Ordinance, 1979 itself with regard to its application‑‑‑Inference could be drawn from the scheme of law and other provisions of the Income Tax Ordinance 1979.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 50‑‑‑Liability o persons failing to deduct or pay tax‑‑ Machinery provisions‑‑‑Section 52 of the Income Tax Ordinance, 1979 is only a machinery section introduced to effect the deductions under various provisions of S. 50 of the Income Tax Ordinance, 1979‑‑ Section 52 is not a charging provision and the amount deducted through this mode is adjustable against the demand of the recipient of the money or in other words of the supply contractor.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 61‑‑‑Liability of persons failing to deduct or pay tax‑‑ Limitation‑‑‑Time for initiation of proceedings and limitation‑‑‑When the Assessing Officer was not permitted to call for books beyond the period of 4 years under S.61 of the Income Tax Ordinance, 1979, how could he be allowed to assess the default of a person beyond it‑‑‑Determination of purchases liable to deduction could only be from the accounts and there was no question about issuance of notice under S.61 of the Income Tax Ordinance, 1979 beyond this period‑‑‑Limitation to issue a notice under S.52 of the Income Tax Ordinance, 1979 could not be extended beyond four assessment years.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 156‑‑‑Liability of persons failing to deduct or pay tax‑‑ Limitation‑ ‑‑Section 156 of the Income Tax Ordinance, 1979, was not applicable as order under S.52 of the Income Tax Ordinance, 1979 was not basically a rectification of mistake‑‑‑Issue of rectification came into picture where an order had been finalized earlier but when the proceedings under S.52 of the Income Tax Ordinance, 1979 were initiated they were in the absence of an earlier order on the subject.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 65‑‑‑Liability of persons failing to deduct or pay tax‑‑Assessee in default‑‑‑Definite information‑‑‑Evidence‑‑‑Section 52 of the Income Tax Ordinance, 1979 could not be invoked on mere presumptions, estimates or surmises‑‑‑Information for holding an assessee in default requires even stronger evidence than for re‑opening of case under S.65 of the Income Tax Ordinance, 1979 in term of definite information as the assessee in default had to pay the tax of the other persons.

(h) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 61‑‑‑Liability of persons failing to deduct or pay tax‑‑ Proceedings‑‑‑Limitation‑‑‑Assessing Officer, under S.52 of the Income Tax Ordinance, 1979, had to proceed before the end of the financial year; on inspection of books and on his failure, he could proceed within three years prior to the income year for which he had issued a notice under S.61 of the Income Tax Ordinance, 1979 for assessment.

Khawaja M. Iqbal and Faisal Iqbal Khawaja, F.C.A. for Appellant.

Shahid Jamil Khan, Legal Advisor for Respondent.

Date of hearing: 21st September, 2002.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).‑‑‑The limited company not quoted on Stock Exchange, has filed these appeals. The appeals are against the orders under section 52 which have been finalized by the Assessing Officer under direction of the CIT(A).

Brief facts leading to these appeals are that the Assessing Officer made an assessment under section 52 by holding the company‑ as an assessee‑in‑default vide order, dated 8‑2‑1999. In the said order the assessment was framed only for one assessment year i.e. 1995‑96 and demand notice was also issued only for one year. The fact is evident from the order placed before us which has been registered vide DCR No.16/F/54. The order was finalized by DCIT Circle‑7 and the same speaks as follows:‑‑‑

ORDER under section 52/86 of the Income Tax Ordinance, 1979.

Original assessments for the assessment years 1991‑92 to 1995‑96 were finalized under section 62 of the Income Tax Ordinance, 1979.

Later on Audit Authorities pointed vide Paras. 1 and 2 in the Audit Report 1996‑97 that the assessee has not fulfilled its obligation as withholding agent property during the year under consideration. It was observed that payments to contractors suppliers of Rs.10,950,000 on which tax under section 50(4) of Rs.547,500 was not deducted. Additional tax under section 86 of the Income Tax Ordinance, 1979 was also to be charged.

The assessee was confronted on the above issue through Letter No.366, dated 28‑12‑1998. No compliance was made on the due date meaning thereby that the assessee has nothing to say in its defence. Tax under section 52 alongwith additional tax under section 86 is being charged accordingly as under as neither the Audit Authorities nor the assessee has given the year‑wise/head‑wise details of the payment as such undersigned have no alternative but to tax the total amount of Rs.10,950,000 as pointed out by the Audit Authorities under section 52 in the assessment year 1995‑96 subject to action under section 156 of the Income Tax Ordinance, 1979.

An appeal was filed by the assessee for 1995‑96 wherein the contents of the said order were challenged. The order was contested on legal as well as factual premises both the learned CIT(A) while deciding assessment year 1995‑96 set aside 6ie order and gave following further directions:‑‑

"Perusal of the order shows that the said payments amounting to Rs.1,09,50,000 pertained to the assessment years 1991‑92 to 1995‑96. By no stretch of imagination this type of glaring illegality can be maintained. Since it is established law that for every assessment year there is to be a separate order. Without going into the merits of dements of a number of grounds of appeal taken in this regard, I have no hesitation in ordering that the impugned order stands vacated for de novo consideration. The Assessing Officer is directed to pass separate orders for the assessment years 1991‑92, through 1995‑96, if need there be, after proper scrutiny of record and after affording the appellant proper opportunity of being heard in this behalf."

In consequence of the directions of the CIT(A) the, assessing officer passed order again for the assessment years 1991‑92 to 1995‑96 separately for each year. In these new orders which were 'framed on 29‑5‑2001 the reason of the initiation of the proceedings is the direction of the CIT(A) reproduced above. The Assessing Officer initiated proceeding following the above directions of the First Appellate Authority, which has been challenged to be as without jurisdiction by the learned AR of the assessee. He said that on the date of finalization of these assessments, which are common for all the years i.e. 29‑5‑2000, there was no valid order in field to give life to these assessments being time‑barred. The Assessing Officer originally had finalized only one assessment, which was for the assessment year 1995‑96. The demand notice was also for one year and the assessment order also speaks of one assessment, i.e. 1995‑96. Above all the appeal filed by the assessee was also for one year: In fact, the learned CIT(A) should have cancelled the order instead of setting it aside. This set aside in his opinion should have been challenged further but assessee having missed is no more in a position to comment upon the same. In any case, he remarked that the findings of the CIT(A) are obiter dicta in the nature of an opinion and not a direction as other years were not even before him. He repeated that the appeal before the First Appellate Authority was only for the assessment year 1995‑96.

The arguments of the learned‑A.R. are two‑fold.

1. Firstly that the CIT(A) has not given any direction and this is in fact only a comment which neither legally nor on facts has any bearing.

2. Secondly even if it is to be considered as a direction, it is without jurisdiction, as he was not ceased with the appeals for the assessment years 1991‑92 to 1994‑95.

In both the above situations the learned A.R. argued that the proceeding in the cases for the assessment years 1991‑92 to 1994‑95 are without any legal sanction or command. Even if some one says that this is continuation of the proceedings there is no reason to include the assessments for the assessment years 1991‑92 to 1994‑95 in the same. At best one can argue that as a result of the order of the CIT(A) the Department has become wiser though the facts for initiating proceedings are the same as narrated‑, yet the limitation to assess these cases had expired. In the case of an assessment under section 52 the limitation provided by different Courts has been four years. In this regard he has referred judgment reported as 2002 PTD 14. The judgment is on the issue of application of W.W.F. The Legislature like section 52 of the Income Tax Ordinance has not provided any dates in the said Act for imposition of W.W.F. hence the Hon'ble High Court firstly held that it can be charged within 30 days from the framing of the assessment. On failure to do so the Assessing Officer can rectify its order under section 156. The relevant para speaks as follows:‑‑

"A period of 30 days would be a reasonable period during which the Assessing Officer would be required to make an order for levy of Workers' Welfare Fund on this failure to do so in the assessment order: However, if such order is not made even within thirty days of the original assessment order, then on expiry of thirty days the provisions of section 156 of the Income Tax Ordinance would be attracted and the error/mistake in not levying Workers' Welfare Fund would be rectifiable there -under."

He further referred I.T.A. No.5382/LB of 1999 for the assessment year 1992‑93 dated 1‑8‑2000. In this case reliance has further been placed upon the judgment reported as 1999 PTD (Trib.) 3357. The para. relied upon from said reported judgment is as follows:

"Therefore, while we don't endorse Rehan Hasan Naqvi's views regarding time limits prescribed for assessment proceedings being applicable to orders under sections 52/86, or that such orders constitute assessment proceedings or such orders be passed simultaneously with order under' section 62 etc. or with 90 days thereof we are of the view that orders under sections 52/86 be passed within time limit of 4 years prescribed under section 156 and as laid down for the purpose of charging additional tax under section 87 by a Full Bench of this Tribunal cited as 1996 PTD (Trib) 65. Thus orders, for 1992‑93 and 1993‑94 being beyond this time limit are held void where order for other three years being within time are sustained. Mr. Rehan Hasan Naqvi also complained that calculations of tax under section 52 or additional tax under section 86 was not wholly correct, as his clients' had discharged their liabilities. He could not however, support his claim by furnishing statements of tax deduction under section 50 on ground that books were with official assignee. We, therefore, direct that DCIT should; carry out necessary rectification as per law as and when assessee produces adequate evidence or material such action."

Moving on to next point tote learned A.R. has challenged the jurisdiction of the Assessing Officer. He said that without prejudice to his earlier arguments. The proceedings subsequently initiated being continuation as per the claim of the Department were to be finalized by the Assessing Officer of the recipient. The original order in this case was finalized on 1‑8‑1999 and the amendment was brought on 1‑7‑1999. The Departmental stand being that this was in pursuance of the direction of the CIT(A) vide order dated 8‑2‑1999, the same falls in the category covered by the judgment reported as 2001 PTD (Trib.) 755. The assessment in such cases fell within the jurisdiction of the Assessing Officer of the recipient.

Even on merits he remarked that the case of the assessee require full appreciation. He said that there are so many payments, which are made to Government Department from whom tax was not to be deducted. Furthermore, in most of the cases almost 7 to 10 years have passed; hence determination of the payment less than the threshold, non identification of the sellers etc. have been ignored. Above all he remarked that the dealing of this company is mostly with the taxpayers and all such nominated sellers have paid their dues more than a decade ago. At this stage all the proceedings asking for such document even otherwise is not a reasonable step. He remarked that it goes without saying that this is without prejudice to his main arguments regarding jurisdiction of the CIT(A) as well as of the Assessing Officer and limitation provided in law.

The L. A. challenging the arguments first of all said that the Assessing‑'Officer was legally bound to comply with the direction of the CIT(A). He accepted that the original order was not a proper order, hence the learned CIT(A) directed to re‑assess all the years on the basis of facts on record.

Regarding application of section 52 he remarked that there is no limitation provided in law for making assessment under this provision, Section 52, he said is an independent provision and has no bearing on the other provisions of the Income Tax Ordinance. The Nishat case decided vide I.T.A. No.5382/LB of 1999 (Assessment year 1992‑93) dated 1‑8‑2000 he said is distinguishable in the manner that there were so many other lapses on the part of the Department in addition to the issue regarding limitation. He referred 1996 PTD (Trib.) 65 and 2000 PTD 2883 and said that the ratio of the judgment which has been followed by the Hon'ble ITAT in Nishat case reported as 1999 PTD (Trib.) 3757 has been considered as a bad law. He referred a Full Bench judgment wherein the Honourable ITAT has disapproved the finding with regard to fixation of four years for finalization of an order under section 52. It was asked from learned L.A. as to whether in law any provisions can be left for unlimited application to which he frankly conceded that this apparently shall be against the principle of justice. The provisions creating a charge should not be without limitation but, however, he remarked that it is beyond the powers of the Court to fix a date if the law does not so permit. It is beyond the scope of a Court to enter into legislation by way of interpretation. Fixation of period in such cases he added is not within the jurisdiction of the Hon'ble Court. Various methods of interpretation of fiscal statutes he said provide for a lot of relief to the subject but none of the same applies on the facts and circumstances of this case. Section 52 he added is independent and cannot be read with or in conjunction with any other provision of law. Referring to its language he said that where a person is under legal obligation and he fails to deduct or collect tax under section 50 he is deemed to be as an assessee‑in‑default in respect of such tax. In his opinion the question of limitation in this case does not arise. Referring to 2000 PTD 14 once again he said that the Tribunal has held these proceedings to be as totally independent and they were neither a part of any other proceedings nor they were subservient to any other provision of the Income Tax Ordinance, 1979. He, however, agreed that while deciding this point the Hon'ble ITAT has held that once a tax has been deducted or collected from one person it cannot be deducted or collected from another person. Further, the Court has also held that no provision can be left without limitation, as the same shall be against the spirit of law. He had his reservations regarding application of section 56 wherein the Courts have permitted to go up to 1‑7‑1978.

The arguments of the two sides have been heard. The basic error pointed out in the order of the CIT(A) by learned A.R. is that his finding is without jurisdiction, which needs consideration in depth. No on e be that an Assessing Officer, Commissioner of Appeals or ITAT can give a finding on an issue, which is not before it for adjudication. The Courts or other judicial or administrative officers can dispose the subject with what they are seized. To give a finding on an issue, which is not, the subject‑matter of the appeal or such other proceedings is beyond the jurisdiction of the authority dealing with such matters. Giving a finding in respect of an assessment year, which is not pending before an authority, is a far‑fetched idea, which jurisdiction is not available to any body. Even otherwise the law of jurisprudence is clear in its application. No one can give a finding during the proceeding of a case on an issue, which is not challenged before him by the petitioner or the respondent, as the case may be. The judgment, which can be referred in support of above discussion, speaks as follows:‑‑‑

"The appellant's Authorized Representative did not press his objection taken in ground No.2. The solitary grievance stated before me pertained to the directions given by the learned Appellate Assistant Commissioner for the assessment year 1975‑76. It was submitted that in appeal, the learned Appellate Assistant Commissioner, was legally required to adjudicate the issue involved for the year under review and the Appellate Court had no jurisdiction to issue directions for the preceding year. The Departmental Representative very frankly conceded that the learned Appellate Assistant Commissioner transgressed her limits in directing the Income‑tax Officer to re‑compute loss for the assessment year 1975‑76. There being no dispute in appeal for the charge year 1975‑77, the learned Appellate Assistant Commissioner erred in issuing directions while hearing appeal for the charge year 1976‑77, the learned Appellate Assistant Commissioner erred to issuing directions while hearing appeal for the charge year 1976‑77. I would, therefore, delete the following observations of the learned Appellate Assistant Commissioner from the impugned order PTCL 1976 CL 598.''

This being so there cannot be any cavil in holding that there is no, legal direction in the order of the CIT(A) which makes the present order as continuation of the old proceedings except for the assessment year 1995‑96. Before CIT(A) only one year was pending adjudication.

His finding with regard to other years is an obiter dicta, which cannot bind the Assessing Officer to follow his remarks. Such remarks does not saddle the Department with the powers to initiate the proceedings for the years which were not pending before him/There is, therefore, no continuation of the proceedings in this case and the present orders for the assessment years mentioned are independent from the earlier proceedings.

The learned L.A. is successful in convincing us that the judgment reported as 2000 PTD 14 (High Court) does not apply on the facts and circumstances of this case. The Honourable Karachi High Court in this judgment has fixed 30 days for charging W.W.F. by an Assessing Officer after finalization of the assessments. This has been so interpreted in keeping view the words mentioned in the W.W.F. Act. The words used therein are "as soon as thereafter". No such words exist in section 52. Similarly, we are also convinced and learned L.A. on the basis of the judgment of the Full Bench is correct in saying that Nishat case no more holds field. However, learned L.A. himself conceded that no law can be left with unlimited application. It is true that no clue is given in section 52 itself with regard to its application, however, inference can be drawn from the scheme of law and other provisions of the Income Tax Ordinance, 1979.

To understand the procedure going through the relevant provisions shall be of help.

Section 50. Deduction of tax at source.‑‑‑

(4) Notwithstanding anything contained in this Ordinance‑‑

(a) any person responsible for making any payment in full or in part (including a payment by way of an advance) to any person (being resident) (hereinafter referred to respectively as "payer" and "recipient"), on account of the supply of goods or for service rendered to or the execution of a contract with the Government, or a local authority, or [a company], [or a registered firm] or any foreign contractor or consultant or consortium shall, deduct advance tax, at the time of making such payment, at the rate specified in the First Schedule, and credit for the tax so deducted in any financial year shall, subject to the provisions of section 53, be given in computing the tax payable by the recipient for the assessment year commencing on the first day of July next following the said financial year, or in the case of an assessee to whom section 72 or section. 81 applies, the assessment year, if any, in which the "said date", as referred to therein, falls whichever is the later."

Section 52. Liability of persons failing to deduct or pay tax,‑

Where any person fails to deduct or collect, or having deducted or collected, as the case may be, fails to pay the tax as required by, or under section 50, he shall without prejudice to any other liability which he may incur under this Ordinance, be an assessee in default in respect of such tax.

Explanation.‑‑‑For the purposes of this section, the Deputy Commissioner having jurisdiction under section 5 over the case of the assessee in default may initiate action.

Section 52‑A. Recovery from the person whom tax was not deducted or collected.‑‑‑

Section 52(A) has been introduced to give the power to the I.T.O. to recover tax from the recipient of money if it has not been recovered by him. The C.B.R., however, in the eventuality where the tax has been recovered from assessee in default has explained that no tax shall be charged from recipient. C.B.R. Circular No.19 of 1999, dated September 14, 1999. This is where mentioning of section 86 .is of relevance.

Section 86. Charge of additional tax for failure to deduct and pay tax.‑‑‑Where any person fails to deduct, or having deducted, fails to pay any tax, as required by section 50, such person shall, without prejudice to any other liability which he may incur, be liable to pay additional tax at the rate of (twenty‑four) percent. per annum on the amount not paid for the period commencing from the date on which he was required to pay such tax to the date of the payment thereof.

This is where the Legislature has taken cognizance of the default of section 52. The default therein can be two‑folds‑‑‑

(a) that a person has not deducted the tax which he was legally bound from the recipient of money on account of his obligation under section 50(4)(a);

(b) that the tax has been deducted but has not been paid in Government Treasury.

So far as second eventuality is concerned the person who has deducted tax and not deposited it, is obviously at fault rather he has committed a crime. He has deducted tax of a taxpayer and has not deposited in the Government Treasury thus has deprived the Government as well as the person on whose behalf he has deducted, tax. Here, obviously on one hand he must deposit the retained money to the Government and should also be made liable to pay penalty as well as above additional tax for retaining Government money. However, where the tax has not been deducted the law as per above sequence has given the power to the D.C.I.T. who has jurisdiction over the case of the assessee in default to recover the amount from the recipient of money under section 52. Further, the C.B.R. has explained vide the circular referred above that if the payer has been held as an assessee in default and tax has been recovered from him the recipient in such situation shall not be asked to pay the tax.

The accumulated result of the above discussion is that section 52 is only a machinery section introduced to effect the deductions under various provisions of section 50. It is not a charging provision and, the amount deducted through the mode is adjustable against the demand of the recipient of the money or in other words of the supply contractor etc. The finding given by various Courts, which are so far in field, do not favour the Department if the recipient is unidentifiable or that he has paid tax himself. For reference (1982) 137 ITR 230 in CIT v. Manager, Madhya Pradesh State Coop. Development Bank Ltd. which judgment has been followed in Pakistan in many cases. Reference may be made to 2000 PTD (Trib.) 2605.

Furthermore, the tax so deducted is in the nature of advance tax. The scheme of section 50 and onwards is deduction of tax before it becomes due for subsequent adjustment. If the same is deducted after the year it no more remains a tax in advance. Neither it can be adjusted against the tax of the recipient nor it can be considered as a charge in the case of the payer. It may be worth referring here that the recipient by virtue of section 64 would have been assessed after the end of the two years before the end of the relevant assessment year. The tax adjustment against their demand, therefore, is beyond question.

A very pertinent question arises from the above discussion. It is as to when the D.C.I.T. shall determine this default. It cannot be at the time of making assessment, as this is not an exercise of determining income of the payer. It is neither a part of his income chargeable under the provisions of sections 9 to 13, nor can such determination bye called as assessment proceedings. The question, therefore, arises as to at what stage the Assessing Officer can initiate proceedings for determining a person as assessee‑in‑default. Again, there is no direct clue on the subject. Obviously it is the scheme of law of the relevant provision of the Income Tax Ordinance under which it is to be applied. We have already mentioned that the deduction under section 50 is advance tax and such deduction at source is to be adjusted against the demand of the person whose payment it is deducted. Further section 52 comes into picture where any person fails to make such deduction. The deduction has to be made within the year before the end of the financial year and the Assessing Officer would know about such a default on examining the statement filed by the assessee under section 142. This statement is to be filed periodically and non‑filing of the same is an offence liable to penalty under section 108(b). So the cognizance of the default is either to be taken before the close of the year or before finalization of assessments. The second occasion, therefore, can be the time of inspection of the books of accounts.

The statement under section 142 is to be filed on a pro forma prescribed under rule 61 of the Income Tax Rules, 1982. This statement is filed on monthly basis in the manner prescribed for the purpose by law. If some assessee fails to submit such statement and the Assessing Officer have an information or a reason to believe that a person is liable to deduction of tax he can enforce submission of statement during the financial year. On default he can charge penalty under section 108. On establishing that the assessee has not made deductions from certain payments he can invoke the jurisdiction available to him under section 52. In nutshell the proceeding under section 52 can be initiated at any time during the financial year. If an Assessing Officer fails to take cognizance of assessee default during the financial year from assessee statements or such other information he can proceed after gathering information from assessee books called under section 61 for assessment.

Under section 61 an assessee can be asked to produce books of accounts for a period which is not more than three years prior to the income year. The proviso to section 61 is very clear and it obviously means that during the course of an assessment, the Assessing Officer can ask for production of books of accounts for four assessment years only.

Since the determination of, the purchases in the absence of statement under section 142 can only be from the accounts, the Assessing! Officer cannot go beyond the period of 4 assessment years. An example of the same can be given in the manner that if an Assessing Officer wants to issue notice under section 52 to an assessee today, he can go up to 4 years prior to 1‑7‑2002; meaning thereby that up to the period that starts from 1‑7‑1998. This limitation for calling for the books of accounts has been fixed by the statute and Assessing Officer cannot enforce beyond the same.

Now applying this principle the Assessing Officer could call for the record for and up to 1997‑98. The assessments for the earlier years are clearly beyond the jurisdiction of the Assessing Officer. These assessments by him, therefore, are beyond limitation provided for maintenance and retention of the books of accounts, which could be the base of such information.

The intention of Legislature in this respect is very clear as the provision categorically says:

"Provided that the [Deputy Commissioner], shall not require the production of any accounts relating to a period more than three years prior to the income year.

This, therefore, goes without saying than D.C.I.T. is note permitted to call for books beyond the above period how can he be allowed to assess the default of a person beyond. The determination of the purchases liable to deduction can only be from the accounts; hence there is no question about issuance of a notice beyond this period.

Above discussion obviously concludes that limitation to issue a notice under section 52 cannot be extended beyond four assessment years. In this regard, the judgments referred by A.R. as well as L.A. are distinguishable, as we have come to this conclusion for entirely different reasons than given in the said judgments. In the D.B. judgment the period of four years was mentioned by taking support from section 156, which obviously was not applicable as it was not basically a case of rectification of mistake. The issue of rectification comes into picture where an order has been finalized earlier. Obviously when proceedings under section 52 are initiated they are in the absence of an earlier. order on the subject.

The initiation of proceedings under section 52 requires consideration from another angle. Section 50 deals with deduction of tax by various agencies under particular circumstances. It makes an obligation upon certain persons to deduct tax from such other persons, who come within the prescribed parameters. Section 52 declares the defaulter as an assessee in default and section 52(A) allows D.C.I.T. to recover the advance tax from the recipient of money. This is where if the recipient of money against supplies settles his account the default diminishes. However, on non‑deduction the assessee in default remains chargeable under section 86. He is liable to pay 24% additional tax for not complying with his legal duty. All these provisions if ignored by the Assessing Officer in the proceeding like this cannot be initiated where the recipient has paid taxes. In, the present case almost all the recipients statedly are limited companies. If for any reason they are held to be as supply contractor, they have already suffered the incident of tax in the manner that their assessments were to be made before the end of the two subsequent years in which they had filed their returns. Still further, the Assessing Officer did not find this assessee to be in default during the financial years, or on inspection of their books during proceedings under section 61 and suddenly he becomes wiser after almost 5 years for 1995‑96 without having access to books or any such other relevant material. Still further this is not known in whose account this deducted tax is going to be adjusted. Admittedly this is not the tax of this assessee whose tax is this it is also not known.

Coming back to the present case first notice issued was in respect of the assessment year 1995‑96 which assessment has been held to be as illegal by the learned CIT(A). This order was liable to cancellation in view of the fact that the figure determined for holding assessee in default had no relationship to the facts of the case. If it was for more than one year obviously it was not to be considered as default on the part of this assessee. The Assessing Officer was not sure about the amounts, the years for which the amounts pertained, actual name of the recipients of the money and the fact that whether the recipients have already paid takes or not. Furthermore, right from the account year's 1991‑92 to 1994‑95 which starts from 1‑7‑1991 and onwards up to 8-2‑1999 the Assessing Officer had not taken cognizance of this default in any manner. Even the Audit Party had no access to the books of accounts and their apprehension was on the basis of the balance‑sheet of the assessee. Section 52 cannot be invoked on mere presumption estimates or surmises. The information for holding an assessee in default required even stronger evidence than for re‑opening of case under section 65 in term of definite information. It is for the reasons that the assessee in default is to pay the tax of the other persons which he failed to deduct as an agent of the Income‑tax Department. It, therefore, even otherwise was a case of an inordinate delay and the assessment by virtue of section 64 of the recipients presumably stood finalized. The assessments for 1991‑92 to 1994‑95 suffer from still more laches and thus he was no question for confirmation of the same by the First Appellate Authority. These assessments have actually been framed on 29‑5‑2001 on which date the Assessing Officer had no power to call for the books of accounts for these years. Even on 8‑2‑1999 he had lost the jurisdiction to call for the books for these years. May be it was for this reason that he tried to cover all the so‑called earlier defaults of assessment years 1991‑92 to 1995‑96 in 1995‑96.

We, therefore, without any further hesitation or discussion feet that under section 52 firstly, the Assessing Officer has to proceed before the end of the financial year secondly, on inspection of books and on his failure he can proceed within three years prior to the income year for which he has issued a notice under section 61 for assessment.

The result of entire discussion is obvious. All the orders finalized by the Assessing Officer and confirmed by the First Appellate Authority in view of the ambient circumstances are hereby cancelled and appeals of the assessee are allowed in full.

C.M.A./635/(Trib.) Appeals allowed.