Income Tax Ordinance (XXXI of 1979)---

----S. 62---Assessment on production of accounts, evidence etc.-- Assessee, a public limited company---Declaration of loss---Income was assessed without issuance of notice under S.62 of the Income Tax Ordinance, 1979 and pointing out any defects in the books of accounts- Validity---Proceedings conducted in absence of notice under S.62 of the Income Tax Ordinance, 1979 would be nullity in the eye of law and not sustainable---Appeal of department was dismissed by the Appellate Tribunal being devoid of merits.

1999 PTD (Trib.) 3892 and 2002 PTD (Trib.) 1583 rel.

Nemo for Appellant.

Tipu Sultan, I.T.P. for Respondent.

Date of hearing: 15^th August, 2003.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---The aforesaid appeal pertaining to the assessment year 1999-2000 has been submitted calling in question the impugned order, dated 12-8-2000 passed by the learned CIT(A), Zone-III, Lahore. The Revenue has agitated that the learned First Appellate Authority was not justified to cancel the assessment.

2. The brief facts giving rise to the instant appeal are that the assessee filed a return of income declaring loss at Rs.31,357,832 for the year under appeal. It also claimed exemption under clause 118D of Part 1 of the Second Schedule to the Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance). The exemption claimed by the assessee was allowed for the reason that it fulfilled all the conditions precedent to avail exemption. However, the assessment was finalized at nil income against loss declared by the assessee, assesses; approached the learned First Appellate Authority contesting the impugned assessment framed by the learned Assessing Officer. The learned CIT(A) felt persuaded by the contentions raised by the assessee respondent and cancelled the impugned assessment. The department is in further appeal assailing the same.

3. None is present on behalf of the department while Mr. Tipu Sultan, ITP appeared on behalf of the assessee-respondent and was heard.

4. The learned AR has supported the impugned order passed by the learned CIT(A) and pleaded at the Bar that the same has been passes? keeping in view the case-law on the issue. It was strenuously argued by then learned A.R. that the assessee being a public limited company was maintaining requisite books of account which were duly produced and examined by the Assessing Authority. It was averred that despite the fact that these books were produced before the Assessing Officer he failed to point out any defects in the said books of account It was pleaded at the Bar that in the absence of pointation of any defects, learned DCI'T deemed, under the law, to have accepted the version of the assessee. The learned A.R. however, emphasized that law enjoins duty upon the Assessing Authority in terms of provisions of section 62 subsection 1 of the repealed Ordinance that the Assessing Officer is under legal duty to give notice to the assessee of the defects in the books of account and provide an, opportunity to the assessee to explain his point of view about such defects and record such explanation and the basis of computation of that income of the assessee in the assessment order. He drew attention of the Bench of impugned assessment order submitting that admittedly no such notice was ever issued which creates a presumption in favour of the assessee that there was no defect meriting the rejection of the version of the assessee. The learned A.R., contended, in such-like circumstances, the Assessing Officer is bound under the law to frame assessment exactly in accordance with the version of the assessee contained in the return filed by the assessee. While continued to argue, the learned A.R. stated that since no notice had been issued nor any defect had been pointed out in the assessment order, therefore, the Assessing Officer had neither any justification nor any authority under the law to reject the version of the assessee and the only course open for the Assessing Officer was to accept the assessee's declared version. The learned A.R. stressed that there is a plethora of law wherein it has been held that any proceedings conducted without issuing notice under section 62 of the Ordinance would entail annulment. In support of his contention the learned A.R. relied upon the judgments of the Tribunal reported as 1999 PTD (Trib.) 3892, 2002 PTD (Trib.) 1583. The learned A.R. submitted that the assessee declared loss and the Assessing Officer finalized the assessment at nil income summarily without ascertaining the true facts.

5. We have heard the learned A.R. and have also gone through the relevant case-law cited at the Bar in support of his contentions. In the light of aforementioned discussion we find ourselves in full agreement with the assertions made by the learned A.R. At this juncture it would be appropriate to reproduce some of the relevant paragraphs from the supra judgments cited at the Bar. In the case-law reported as 1999 PTD (Trib.) 3892 it was held:--

"ITO in terms of proviso to subsection (1) of section 62 should have confronted the assessee with the defects found in the books of accounts. It was a mandatory provision which he was required to follow. As he failed to do so he has no legal authority to make any addition in the declared trading results. Any addition made is therefore, ab initio illegal and void. Even otherwise on fact ITO was not justified to reject the trading results."

In another case reported as 2002 PTD (Trib.) 1583 it was held by the Income Tax Appellate Tribunal.

"Learned First Appellate Authority was erred in law while setting aide the case instead of annulling the assessment when the Assessing Officer failed to confront the assessee with the defects found by him in the books of account which. is mandatory provision of law for framing the assessment. We, therefore, vacate the order of the learned First Appellate Authority and annul the assessment framed by the Assessing Officer being in violation of section 62 of the Income Tax Ordinance, 1979."

We have gone through the judgments referred to by the learned A.R. We are constrained to observe that this is the unanimous view of the Tribunal as well as other higher judicial forums that any proceedings conducted in absence of the notice under section 62 of the repealed Ordinance would be considered nullity in, the eye of law, hence not sustainable. Under these circumstances the appeal filed by the department is dismissed being devoid of merits.

C.M.A./21/Tax (Trib.)Appeal dismissed