I.T.As. Nos. 1194(IB), 1195(IB), 1189(B), 1190(IB) of 2000-2001, VS I.T.As. Nos. 1194(IB), 1195(IB), 1189(B), 1190(IB) of 2000-2001,
2004 P T D (Trib.) 106
[Income-tax Appellate Tribunal Pakistan]
Before Syed Masood-ul-Hassan Shah, Judicial Member and Mahmood Ahmad Malik, Accountant Member
I.T.As. Nos. 1194(IB), 1195(IB), 1189(B), 1190(IB) of 2000-2001, decided on /01/.
th
January, 2003. (a) Income Tax Ordinance (XXXI of 1979)-----
----Ss. 154, 65, 56 & 13(1)(aa)---Civil Procedure Code (V of 1908), O.V, R.15---Service of notice---Additional assessment---Notices were served on the father of one of the Members of Association of Persons without making efforts for service of such notice on the assessee-- Finalization of assessment---First Appellate Authority set aside the assessment rather -than annulling the same with the direction that statutory notice should be properly served upon the assessee and fresh assessment be framed accordingly---Validity---Service could be made on a male member of assessee's family where, the assessee could not be found---Copies of notices indicated that both notices were served on the father of one of the Members of the Association of Persons---Service was effected by a bailiff and there was no certificate of process server/bailiff to the effect that any effort was made to locate and find any Member of the Association of Persons before service was effected upon an adult member of the family of Association of Persons---Basic requirement laid down in S.154 of the Income Tax Ordinance, 1979 and R.15 of O. V of Civil Procedure Code, 1908 were not met while making service of notices---Notice under Ss.65 & 56 of the Income Tax Ordinance, 1979 having not been served upon any Member of Association of Persons, assessments were liable to be annulled and not set aside ---Assessee's appeals were accepted and those of Department stood dismissed by the Appellate Tribunal.
1988 PTD (Trib.) 117 and 2003 PTD (Trib.) 625 ref.
2000 PTD (Trib.) 19 and 2001 PTD 1998 rel.
(b) Income Tax Ordinance (XXXI of 1979)-----
----S. 154---Service of notice---"Some efforts"---Concept---Assessing Officer was required to ensure that notices were served properly and in accordance with the provisions of law---No concept in law of making "some efforts" to serve notices existed---Proper service of notices is sine qua non.
(c) Income Tax Ordinance (XXXI of 1979)-----
----Ss. 65 & 56---Additional assessment---Where no assessment had been framed, instead of issuing a notice under S.65 of the Income Tax Ordinance, 1979 the Assessing Officer could have issued a notice under S.56 of the Income Tax Ordinance, 1979 to call for income-tax returns.
2001 P T D 1998 rel.
Abdul Jalil, D.R. for Appellant (in I.T.As. Nos.1194/IB and 1195/IB of 2000-2001).
Naik Muhammad Malik for Respondent (in I. T. As. Nos. 1194/IB and 1195/113 of 2000-2001.).
Naik Muhammad Malik for Appellant (in I.T.As. Nos.1189/IB and 1190/IB of 2000-2001).
Abdul Jalil, D.R. for Respondent (in I.T.As. Nos.1189/IB and 1190/IB of 2000-2001).
Date of hearing: 24th February, 2003.
ORDER
MAHMOOD AHMAD MALIK (ACCOUNTANT MEMBER).-- These are cross appeals relating to an assessee who has been given the status of AOP by the Assessing Officer. The proceedings in this case were initiated by the Assessing Officer on the basis of information received from the Directorate of Intelligence and Investigation, Direct Taxes, Islamabad. The bank deposits appearing in the joint name of the two members of the alleged AOP namely Mr. Asmat Ullah Khan and Mr. Raees Ahmed Khan were treated as income and an addition was made under section 13(1)(aa) at Rs.35,685,958 for the assessment year 1997-98 and at Rs.22,000,000 for the assessment year 1998-99. The assessee filed appeal before the Firs Appellate Authority who held that notices under sections 56. 65 and 61/13(1)(aa) had not been properly served as these were served on father of one of the alleged members of the AOP and also upon a Munshi. The learned AAC accordingly set aside the assessment orders directing that statutory notices should be properly served upon the assessee and the assessee should be provided reasonable opportunity of hearing and fresh assessments framed accordingly.
The assessee feels aggrieved, and has filed appeals on the ground that the alleged bank transactions related to Messrs Bismillah Contractors, Musa Khel, District Mianwali and the Assessing Officer had wrongly assessed the same in the hands of the alleged AOP. The assessee contends that the learned AAC was not justified to set aside the assessment order instead-, of annulling the same. The grounds of departmental appeal are that notices had been properly served and proper opportunity of hearing had been provided to the assessee and therefore, there was no justification with the First Appellate Authority to set aside the assessment orders.
3. The learned AR submitted that the learned AAC had examined the assessment record and had observed that not a single notice under sections 56, 65 and 61/13(1)(aa) had been served upon any alleged member of the AOP. Some of the notices were served through the Inspector of the Circle upon the father of one of the members of the AOP and upon the Munshi. He stated that no proper service was effected because no serious efforts were made to serve the notices upon the members of the AOP. He submitted that service upon father of one of the members of the AOP was not proper service as the son resided separately and independently. He referred to the report of the Inspector reproduced in the CIT(A)'s order wherein the Inspector reported that Mr. Sher Bahadur, the father of Mr. Asmat Ullah had gone out of station and Mr. Sher Bahadur gave the address and telephone number of Mr. Asmat Ullah at Muzaffarabad District, Multan where he was available. The learned AR vehemently contended that in the circumstances no service of notices had taken place. He submitted that the learned Assessing Officer had framed assessment on an AOP which did not exist. He stated that the bank deposits which were made the basis of additions under section 13(1)(aa) pertained to Messrs Bismillah Contractors, Musa Khel, District Mianwali, an existing assessee on NTN No.20-12-0424290. He submitted that the amounts were duly reflected in the statements filed under section 143B in the case of Messrs Bismillah Contractors, Musa Khel, District, Mianwali where a bid money of Rs.224,084,100 had been declared in the assessment year 1997-98 and of Rs.57,000,000 in the assessment year 1998-99. He argued that no loss of revenue had occurred because the amounts covered by the bank deposits were duly declared in the case of Messrs Bismillah Contractors which is an AOP and both Mr. Asmat Ullah and Mr. Raees Ahmed Khan were also members in that AOP. The learned AR supported his arguments by referring to the following case-law:--
(1)1988 PTD (Trib.) 117; (2) 2000 PTD (Trib.) 19 and (3) 2003 PTD (Trib.) 625.
4. The learned DR submitted that the learned AAC has observed in the impugned order that the Assessing Officer had made "some efforts" to serve the notices as the notices had been served on a male adult member of the family residing with the assessee. In these circumstances he submitted that since notices had been served the plea that the assessments should have been cancelled could not hold ground.
5. We have perused the orders of the Authorities below and have given consideration to the facts and circumstances of the case. The learned ACIT passed a combined assessment order ex parte under section 63 on. 30-6-2000 for the two years under appeal. We perused the assessment record which shows that a notice under section 65 was served for the assessment year 1997-98 on 5-6-1999 and a notice under section 56 was also served on the same date for the assessment year 1998-99. Both the notices were not served upon any of the two alleged members of the AOP but upon one Haji Sher Bahadur khan who is the father of one of the members of the AOP namely Mr. Asmat Ullah.
6. A notice is issued under section 56 requiring an assessee to file a return of income. Similarly a notice under section 65 of the Income Tax Ordinance is issued by the Deputy Commissioner to an assessee containing all or any of the requirements of section 56. These two notices are of a paramount importance; particularly in a case where no previous assessment has been framed and the Assessing Officer requires the assessee to file Income Tax Return for the current or the prior year so that assessment proceedings may be initiated. In the present case the assessee has been assigned the status of an AOP consisting of two members namely Asmat Ullah and Raees Ahmad Khan. No assessment of the AOP had been made in the past and the Assessing Officer now intended to create tax liability. Therefore, the issuance of notice under sections 56 and 65 was of vital importance because the foundation of assessment structure was to be made on the bass of these notices.
7. Section 154 of the Income Tax Ordinance, 1979 provides that a notice under the Income Tax Ordinance may be served on the person named wherein either by post or in the manner provided for service of a summons issued by a Court under the Code of Civil Procedure, 1908. We find that in this particular case the notices under sections 56 and 65 were not issued by post. So the notices could be served in the mariner provided for servile of a summons issued by a Court under Code of Civil Procedure the notices were allegedly served on the father of one of the members of the AOP. The service on a member of a family of an assessee is regulated under Rule 15 of Order V of the Code of Civil Procedure which reads as under:--
"Where service may be on male member of defendant's family.---Where in. any suit the defendant cannot be found and has no agent empowered to accept service of the summons on his behalf, service may be made on any adult member of the family of the defendant who is residing with him."
A bare reading of the above mode of the service shows that service can be made on a male member of assessee's family where the assessee cannot be found. A perusal of the copies of notices issued on 3-6-1999 under section 65 for the assessment year 1997-98 and under section 56 for the assessment year 1998-99 indicates that both these notices were served on Haji Sher Bahadur the father of one of the members of the AOP. The service was effected by a bailiff. There is no certificate of the Process Server/bailiff to the effect 'that any effort was made to locate and find any member of the AOP before service was effected upon an adult member of the family of a AOP. Thus the basic requirements laid down in section 154 of the Income Tax Ordinance, 1979 and Rule 15 of Order V of Civil Procedure Code were not met while making service of these notices.
8. The learned AR has referred to the case-law cited as 2000 PTD (Trib.). 19 which throws light on the issue of service of notices. Incidentally one of the members of the present Bench was the author of that order and we may reproduce herewith advantage from that order where the issue was discussed in greater detail:---
"At this juncture, we would like to take guidance from the provisions of Code of Civil Procedure, 1908. The provisions of Order V of the Code were relating to the issue and service of process. In rule 12 of Order V of the Code of Civil Procedure, 1908, it is laid down that where it is practicable service shall be made on the defendant in person unless he as an agent empowered to accept service in which case service on agent shall be sufficient. In rule 10A of Order V the law envisages issue of process simultaneously through its agency of process and through registered post with Acknowledgement due. In rule 13 of Order-V, the method of service on agent in case of defendant carrying on business has been given where service on a person not residing within the local limits of the jurisdiction of the Court can be effected on the manager or agent who at the time. of service personally carries on such, business or works for such person within such limits.
From the above referred provisions of the Code of Civil Procedure, 1908 one can see that how important is the factum of service of process for initiating any proceedings of law against a person. The main stress has been laid on the personal service of the respondent who is being proceeded against and in his absence on his agent who is empowered to accept service or on his male adult member of family residing with the respondent/ defendant in case the respondent/defendant cannot be found and is having no agent to accept the service as given in the provisions of rule 15 of Order V of the Code.
There is an explanation under rule 15 of Order-V of the Code to the effect that a servant is riot a member of family within the meaning of this rule. It clearly meant that for effecting the service the summons/notice are to be delivered to the respondent in person or to his agent who is duly empowered to accept the service or to male adult member of family when the respondent cannot be found and none else can be considered to be a person authorized to accept the service on behalf of the respondent or service on any other person cannot be regarded as valid service. Then there are provisions in rule 16 of Order-V of the Code giving guidelines to the serving officer requiring him to obtain signatures of the person to whom the notices so delivered-or learned and to have an acknowledgement of service endorsed upon the summons/notice. It clearly meant from the above provisions that the serving officer or official must make it clear in the endorsement that on whom the notice has been served as to whether he is the respondent in person or his agent duly empowered to accept the service or male adult member of family in case the respondent could not, be found. Then there are provisions of service when the respondent refuses to accept the service in rule 17 of Order-V of the Code and for the substituted service in rule 20 of Order-V when the respondent is keeping out of the way for the purposes of avoiding service or when summons cannot be served in ordinary way.
As all importance is given to the process of service because this is the basic stage from where onwards the proceedings are initiated against a person and the notice/summons is the basic document which in fact is considered to be the document to call upon the person and to provide an opportunity of being heard to the said person against whom the proceedings are to be initiated. This concept is based on principle of natural justice and is of, universal nature and has also been ordained in the statute books where it is always given in one form or other so that no one should be condemned unheard. It is an established principle of legal and natural justice and is known as rule of audi alteram partem which has been acknowledged to be applicable to both judicial as well as non-judicial proceedings which culminate in an order against a person respecting his rights or imposing upon him certain charges, liabilities and penalties etc.
9. The learned AAC took pains to examine the issue regarding service of notices and he held that basic notices under section 65 for the assessment year 1997-98 and under section 56 for the assessment year 1998-99 had not been served upon any members of the AOP. He also observed that in his opinion the Assessing Officer had not made any concerted efforts to serve the notices on any member of the AOP when he was provided with the complete address of one of the members of the AOP namely Mr. Asmat Ullah through a report of an Inspector, dated 14-6-2000. Further he goes on to observe that Assessing Officer had made "some efforts" to serve the notice properly.
10. We are of the considered opinion, that the Assessing Officer was required to ensure, that the notices were served properly and in accordance with the provisions of law. There is no concept of making "some efforts' to serve notices. Proper service of notices is sine qua non. Notices under sections 56 and 65 are of paramount importance and these initiate action to create tax liability. We have examined the record and found that notices under sections 56 and 65 for the years under consideration were not properly served upon the assessee AOP.
11. The Lahore High Court has held in the case reported as 2001 PTD 1998 (Lahore High Court) that a notice under section 65 can be issued where assessment had already been finalized. It is an admitted fact that no assessment has been framed for the assessment year 1997-98 in the past. Therefore instead of issuing a notice under section 65 the Assessing Officer could have issued a notice under section 56 to call for income-tax. return for the assessment year 1997-98. Further as we have observed above even notice under section 65 for the assessment year 1997-98 and under section 56 for the assessment year 1998-99 had not been served upon any members of the AOP. In these circumstances we hold that the assessments were liable to be annulled and not set-aside as done by the First Appellate Authority.
12. Accordingly the assessee's appeals are accepted and those of the department for both the years under appeal stand dismissed.
C.M.A./882/Tax (Trib.)Order accordingly.