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

‑‑‑‑S. 61‑‑‑Notice for production of books of account, etc.‑‑‑Purpose‑‑ Section 61 of the Income Tax Ordinance, 1979 manifestly spells out that merely the assessee's presence is required by the Assessing Officer at his office on a date specified in the notice issued thereunder to produce or cause to be produced any evidence in support of the income disclosed in the tax return, if any, filed by the assessee.

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

‑‑‑‑S. 61‑‑‑Notice for production of books of account, etc. ‑‑‑Procedure‑‑ Adjective law‑‑‑Substantive law‑‑‑Section 61 of the Income Tax Ordinance, 1979 speaks about adherence of a certain procedure to be followed prior to formulation of the assessment‑‑‑Issuance of a notice is nothing but a mode in which successive steps in litigation are taken‑‑ Such law relating to procedure is called adjective law" while the law defining principle or constituting substantive juristic principles is called substantive law".

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

‑‑‑S. 61‑‑‑Notie or production of books of accounts etc. ‑‑‑Procedural deficiency‑‑ Wherever uncertainty or deficiency is found to exist in the service of a statutory notice issued under S.58 or 61 of the Income Tax Ordinance, 1979, either on behalf of the Revenue or owing to the assessee's conduct who had withheld the evidence that amounts to be a procedural deficiency.

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

‑‑‑‑Ss. 110, 61 & 58‑‑‑Penalty for non‑compliance with notice, etc.‑‑ Legislature had only enshrouded the act of non‑observance of the statutory notices, issued under S.58 or 61 of the Income Tax Ordinance, 1979, at the instance of the assessee with penalty proceedings in terms of S.110 of the Income Tax Ordinance, 1979.

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

‑‑‑‑Ss.61, 13 & 65‑‑‑Notice for production of books of account, etc.‑‑ Procedure‑‑‑Order ab inito illegal‑‑‑Where the legislature has prescribed to be followed certain procedure consequent upon which a tax liability would be created, in such circumstances non‑compliance thereof certainly renders the order to have been made ab initio illegal and void because such eventuality falls within the para meters of substantive law for example non‑confrontation of the assessee under S.13(2) of the Income Tax Ordinance, 1979 while making the addition under S.13 of the Income Tax Ordinance, 1979 or improper service of a statutory notice issued under S.65 of the Income Tax Ordinance, 1979 to have been made without any lawful authority‑‑‑Reason being issuance of notice under S.13 of the Income Tax Ordinance, 1979 or proper service of statutory notice under S.65 of the Income Tax Ordinance, 1979 is the mandatory requirement of law and non‑observance thereof would be fatal.

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

‑‑‑‑S.61‑‑‑Notice for production of books of account, etc. ‑‑‑Assessment‑ Section 61 of the Income Tax Ordinance, 1979 did not vest any jurisdiction upon the Assessing Officer to pass an assessment order.

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

‑‑‑Ss. 62, 63 & 61‑‑‑Assessment on production of books of account, evidence etc.‑‑‑Purpose‑‑‑Ss. 62 and 63 of the Income Tax Ordinance 1979 are the provisions which authorize the Assessing Officer to assess the assessee's total income by an order in writing and determine the tax payable by him on the basis of such assessment where in a case any evidence is produced by the assessee in compliance to the notice issued under S.61 of the Income Tax Ordinance, 1979 or where he has failed to comply with any of the terms of notice issued S.61 of the Income Tax Ordinance, 1979.

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

‑‑‑‑Ss. 132(1)(a)(ii), 61 & 63‑‑‑Decision in appeal‑‑ ‑Annulment of assessment‑‑‑First Appellate Authority annulled the assessment on the ground that assessment had been completed without service of notice under S.61 of the Income Tax Ordinance, 1979 the ex parte assessment being illegal could not be sustained‑‑‑Validity‑‑‑Non‑observance of the terms of notice issued under S.61 of the Income Tax Ordinance, 1979 did not entitle the appellate authorities to annul/cancel the assessment made under S.63 of the Income Tax Ordinance, 1979 but to proceed to set aside the ex parte assessment.

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

‑‑‑‑S. 132(1)(a)(ii), 61 & 63‑‑‑Decision in appeal‑‑‑Annulment of assessment‑‑‑First Appellate Authority annulled the assessment on account of non‑compliance of the terms of notice, issued under S.61 of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Statutory notices issued under S.61 of the Income Tax Ordinance, 1979 remained un‑complied with on the part of assessee, though properly served, but in such circumstances it could not be held that the best assessment formulated by the Assessing Officer was without any lawful jurisdiction‑‑‑Ex parte assessment was certainly made by the Assessing Officer having lawful jurisdiction‑‑‑Non‑compliance of the terms of notice, issued under S.61 of the Income Tax Ordinance, 1979, by the assessee was a procedure deficiency, which could be cured by issuing a fresh notice thereunder‑‑ First Appellate Authority acted in flagrant violation of law in annulling the ex parte assessment or, account of non‑compliance of statutory notice issued under S.61 of the Income Tax Ordinance, 1979‑‑‑Order of First Appellate Authority was vacated by the Appellate Tribunal and that of Assessing Officer was set aside for de novo assessment in accordance with law.

Nemo for Appellant.

Nemo for Respondent.

Date of hearing: 14th November, 2003.

ORDER

The Revenue's sole objection in this case relates to annulment of the assessment order by the first appellate authority, in this regard it has been stated in the memo of appeals that the learned Appeal Commissioner was not at all justified in annulling the assessment in absence of assigning any cogent reasons.

Facts in short forming background of the issue in hand are ‑that the assessee filed no suo motu returns of total income on the due dates. Even the statutory notices issued under section 56 calling for returns of income were, also received back with the Notice Server's report that the assessee had refused to receive the notices. An enquiry was also got conducted through the Circle Inspector on 17‑3‑2000 and was placed on file. Thereafter, statutory notices, under section 61 of the Income Tax Ordinance, 1979 were issued by the Assessing Officer on five occasions, requiring the assessee to attend or to produce or caused to be produced such accounts or documents, which were allegedly to have been properly got served upon the assessee. Neither anyone prosecuted nor any adjournment was sought on behalf of the assessee. Finally, a notice under section 61, dated 21‑3‑2002 coupled with it a typed notice bearing No.2187 were got served by affixture through the Circle Inspector, which met same fate too. Resultantly, ex parte assessment was formulated by the Assessing Officer in terms of section 63 of the Income Tax Ordinance, 1979 at net income of Rs.40,000, Rs.50,000; Rs.60,000, Rs.70,000, Rs.80,000 and Rs.90,000 respectively for the years under appeal. When this treatment was challenged before the Appeal Commissioner, he annulled the assessment by observing that since the assessment has been completed without service of notice under section 61, the ex parte assessment being illegal cannot be sustained. This appellate order has compelled the Revenue to come up in appeal before the Tribunal.

The precise question, which came up for my consideration, is as to whether the Appeal Commissioner was competent to annul the assessments on account of non‑compliance of the terms of notice issued under section 61 of the Income Tax Ordinance, 1979. Before dilating upon this question, it would be appropriate to re‑produce section 61, hereunder in order to resolve the question mentioned supra:‑‑

"61. Notice for production of books of account etc.‑‑‑The (Deputy Commissioner) may serve upon any person who has furnished a return of total income for any income year, or upon whom a notice has been served to furnish such return, a notice requiring him on a date specified therein to attend at the (Deputy Commissioner) office or to produce, or cause to be produced, any evidence on which such person may rely in support of the return, if furnished and such accounts, documents or evidence (including accounts or documents) relating to any period prior or subsequent to the said income year) as the (Deputy Commissioner) may require.

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.)"

Plain reading of this section manifestly spells out that merely the assessee's presence is required by the DCIT at his office on a date specified in the notice issued thereunder to produce or cause to be produced any evidence in support of‑the income disclosed in the tax return, if any, has been filed by the assessee. So, in a nutshell this section speaks about adherence of a certain procedure to be followed prior to formulation of the assessment. In other words issuance of a notice is nothing but a mode in which successive steps in litigation are taken. Such law relating to procedure is called "adjective law" while the law defining principles or constituting substance juristic principles is called "substantial law". Thus, whatever uncertainty or deficiency is found to exist in the service of statutory notices issued under section 58 or 61 of the Income Tax Ordinance, 1979, either on behalf of the Revenue or owing to the assessee's conduct who has withheld the evidence, that is tantamount to be a procedural deficiency. That is why the legislature has only enshrouded the act of non‑observance of the, statutory notices, issued under section 58 or 61, at the instance of the" assessee with penalty proceedings in terms of section 110 of the Income) Tax Ordinance, 1979.

But where the legislature has prescribed to be followed certain procedure consequent upon which a tax liability would be created, in such circumstances non‑compliance thereof certainly renders the order to have been made ab initio illegal and void. Reason being such eventuality falls with the parameter of substantive law. For example non‑confrontation of the assessee under section 13(2) of the Income Tax Ordinance which making the addition under section 13 or improper service of a statutory notice issued under section 65 of the Income Tax Ordinance, 1979 boils down the impugned addition or the re‑assessment framed under section 65 to have been made without any lawful authority. Reason being issuance of notice under section 13 or proper service of statutory notice under section 65 of the Income Tax Ordinance, 1979 is the mandatory requirement of law and non observance thereof would be fatal.

Undoubtedly, section 61 of the Income Tax Ordinance does not) vest any jurisdiction upon the DCIT to pass an assessment order. Rather, section 62 or section 63 of the Income Tax Ordinance, 1979 are the sections which authorize the DCIT to assess the assessee's total income by an order in writing and determine the tax payable by him on the basis of such assessment where in a case any evidence is produced by the assessee in compliance to the notice issued under section 61 or where he has failed to comply with any of the terms of notice issued under section 61 of the Income Tax Ordinance. It is, therefore, concluded that non‑observance of the terms of notice issued under section 61 does not entitle the appellate authorities to annul/cancel the assessment made under section 63 of the Income Tax Ordinance, 1979 but to proceed to set aside the ex parte assessment.

Here before me the case is that statutory notices issued under; section 61 of the Income Tax Ordinance, 1979 remained un-complied with on the part of the assessee, though properly served, but in such circumstances it cannot be held that the best assessment was formulated by the DCIT without any lawful jurisdiction. The ex party assessment was certainly made by the DCIT having lawful jurisdiction. However, non‑compliance of the term of notice, issued under section 61, by the assessee is a procedural deficiency, which can be cured by issuing a fresh notice thereunder. In the given scenario it is held that the Appeal Commissioner has acted in flagrant violation of law 'in annulling the ex parte assessment on account of non‑compliance of statutory notice issued under section 61 of the Income Tax Ordinance. This would result into vacation of the Appeal Commissioner's order, dated supra and setting aside that of the Assessing Officer for de novo assessment in accordance with law.

The departmental appeals are disposed of.

C.M.A./35/Tax (Trib.) Order accordingly.