Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 154, 59(1) & 13(1)(aa)‑‑‑Service of notice ‑‑‑Self‑assessment‑‑ Notice for short document was served on servant/employee ‑‑‑ Initiation of proceedings under normal law for non‑compliance of short document notice‑‑‑Addition‑‑‑First Appellate Authority set aside the order with the direction that either Assessing Officer will prove beyond doubt that `Short Document Notice' was duly and timely and validly served upon the assessee or will have to accept the declared income under S.59A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Service of notice on servant of an assessee could not be regarded as a proper or valid service because other than service by post the service could be made firstly on the assessee in person or upon his agent empowered/authorized to accept service and in their absence then upon an adult male member of the family of the assessee‑‑‑Servant/employee of a person could not be taken to be an authorized or empowered person to accept service on behalf of his master except when he had been specifically empowered or authorized to accept the service‑-‑Proceedings carried out in consequence of service of notice on employee of assessee by presuming the service to have been effected upon the assessee, would stand vitiated because mandatory requirement of law for a proper and valid service of notice to be made upon the assessee, had not been complied with by the department‑‑‑Case was in fact a case of annulment/cancellation of assessment rather than setting aside the assessment‑‑‑Order of setting aside the assessment by the First Appellate Authority was modified with that of the cancellation of assessment by Appellate Tribunal and consequently declared version was accepted.  

(1967) 15 Tax 103 and (1961) 3 Tax 68 rel.

Mansoor Ali Malik for Appellant.

Noshad Ali Khan, D.R. for Respondent.

Date of hearing: 4th December, 2003.

ORDER

INAM ELLAHI SHEIKH (CHAIRMAN).‑‑‑This appeal of the assessee has been directed against an order, dated 23‑12‑2002 (hereinafter referred to as the impugned order) of learned CIT(A), Islamabad whereby he has set aside the assessment order with the direction that either the Assessing Officer will prove beyond doubt that the `Short Document Notice' was duly and timely and validly served upon the assessee or will have to accept the declared income under section 59A of the Ordinance.

2. Beside terming both the orders of the forums below as bad in law and contrary to the facts of the case, the assessee has contested the impugned order on the following grounds:‑‑

(i) that the learned CIT(A) in his order at page 4 has mentioned that the Taxation Officer has not proved regarding service of short documents notice upon assessee;

(ii) that on the basis of admission of the Assessing Officer that short documents notice was not served upon assessee the learned CIT(A) recorded has findings in the said para. at page 4 that the proceeding entailing as a consequence of such notice, cannot be sustained; and

(iii) that considering the above mentioned facts the learned CIT(A) was not justified to set aside the assessment, as the assessment framed by the Assessing Officer was ab initio illegal, void, which was liable to be annulled/cancelled.

3. Hence the prayer through this appeal for the vacation of the orders of both the forums below and for direction to the Assessing Officer to accept the declared version.

4. We have heard the learned representatives of the parties and perused the respective orders of the forums below.

5. Briefly, the relevant facts are that the assessee being an individual deriving income from house, property as well as business income as a property dealer declared net income at Rs.112,600 for the year under consideration. The case was excluded from SAS due to non compliance of the short documents notice for the submission of wealth statement. A complaint was also received about the assessee being an investor in different properties and not paying tax thereon. The assessee was informed about the said complaint and he submitted reply thereto. The Assessing Officer issued notice for short documents but to no compliance. Thereafter, the Assessing Officer issued notice under section 148 in respect of ownership of assessee of different properties as detailed in the assessment order and the assessee filed written statement bud did not attend the office. Thereafter, another notice was issued under section 148 and the assessee attended and subsequently on adjourned date the assessee filed wealth statement as on 30‑6‑2000 declaring net wealth at Rs.1,350,000 and annual expenditure at Rs.90,000. Then the assessee was asked to file reconciliation of wealth alongwith documentary evidence. The sources of investment were stated‑to be out of foreign currency encashment. The Assessing Officer noticed that the encashment was made on 1‑6‑1998 whereas the house was constructed and completed in 1992. The assessee pleaded that the house was constructed with loan from family members but he did not produce evidence in that regard. Accordingly, the Assessing Officer issued notice under section 62 read with section 13(1)(aa) and asked the assessee to file copy of Bank statements and‑copy of passport etc. The assessee in response thereto requested for adjournment. Again notice under section 61 was issued and then AR of the assessee attended the office and filed reply to the notice under section 62 read with section 13(1)(aa) as detailed in the assessment order. Thereafter, again the Assessing Officer issued notices under section 62 and 13(1)(aa) as reproduced in the assessment order. In response thereto the assessee requested for adjournment and then AR of the assessee submitted written reply as detailed in the assessment order. Again, a show- cause notice under section 13(1)(aa) was issued as detailed in the assessment order and assessee sought adjournment. Thereafter, again a notice under section 13(1)(aa) was issued and in response to which the assessee filed reply, dated 13‑5‑2002 as detailed in the assessment order. The Assessing Officer did not accept the replies and contentions of the assessee and accordingly made an addition under section 13(1)(aa) with the approval of the IAC at Rs.685,500 and finalized the assessment while estimating the income from business at Rs.600,000 and making add backs out of P&L account expenses and also adding income from house property to calculate net income at Rs.1,282,988.

6. Against the said treatment, the assessee went in appeal before the First Appellate Forum and the learned CIT(A) vide impugned order set aside the assessment with 'direction to the Assessing Officer as indicated above.

7. Now the assessee has agitated the said action of the learned CIT(A) before this Tribunal on the grounds enumerated above.

8. The learned AR of the assessee, at the very outset contended that the case in the given facts and circumstances was not a case of setting aside as has been done by the learned CIT(A) but a case of annulment/cancellation of the assessment. He further contended that the learned CIT(A) has given the findings that the Taxation Officer failed to produce the Dispatch Register which could verify the dispatch of short document notice and the short document notice was not available which was evident from the Short Document Register. On a question by the Bench as to whether the filing of wealth statement was the requirement under SAS for the year under consideration, the learned AR of the assessee referred the requirements as laid down in para. 3 to support that the copy of wealth statement was to be filed with the return. He then contended that no notice was served upon the assessee for short document and hence it was not a case of setting aside the assessment as has been done by the learned CIT(A) but a case of annulment/cancellation of the assessment.

9. On the other hand, the learned DR could not rebut the contentions of the learned AR of the assessee that there was no proof with the department for service of short document notice upon the assessee and rather he could not controvert the findings of the learned CIT(A) with regard to the factual position of the service of the short document notice which was statedly served upon the servant of the assessee.

10. We have considered the respective contentions of the parties and have perused the respective orders of the forums below.

11. The question for determination for us is to whether the service of short document notice upon the servant of the assessee could be regarded as proper service on the assessee or not? This proposition can be easily answered by resorting to the provisions of section 154 of the Ordinance, 1979 regarding service of notice prescribing for service either by post or in the manner provided for service of a summons issued by a Court under the Code of Civil Procedure, 1908. The service of notice on the servant of an assessee cannot be regarded as a proper or valid service because other than service by post the service can be made firstly on the assessee in person or upon his agent empowered/authorized to accept service and in their absence then upon an adult male member of the family of the assessee. A servant/employee of a person cannot be taken to be an authorized or empowered person to accept service on behalf of his master except when he has been specifically empowered or autohirzed to accept the service. For this, we gather support and place reliance on a case from Honourable Supreme Court of Pakistan reported as (1967) 15 Tax 103 and a case from the Honourable Karachi High Court reported as (1961) 3 Tax 68. In this situation, the proceedings which have been carried out in consequence to the service of notice on the, employee of the assessee by presuming the service to have been effected upon the assessee would stand vitiated because mandatory requirement of law for a proper and valid service of notice to be made upon the assessee has not been complied with by the department. Therefore, we agree with the contention of learned AR that the case in hand was in fact a case of annulment/cancellation of the assessment rather than setting aside the assessment as has been done by the learned CIT(A). Accordingly, the impugned order of setting aside the assessment shall stand modified with that of the cancellation of assessment and consequently acceptance of declared version. The Assessing Officer is directed to pass order accordingly.

12. Resultantly, the above appeal shall stand accepted.

C.M.A./27/Tax(Trib.)Appeal accepted.