I.T.A. No.2764/LB of 2003, decided on 18th February, 2004. VS I.T.A. No.2764/LB of 2003, decided on 18th February, 2004.
2004 P T D (Trib.) 1784
[Income‑tax Appellate Tribunal Pakistan]
Before Rasheed Ahmed Sheikh, Judicial Member
I.T.A. No.2764/LB of 2003, decided on /01/.
th
February, 2004. (a) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑S.154‑‑‑Civil Procedure Code (V of 1908), O.V, R.10‑A & 15‑‑ Service of notice‑‑‑Mode of service of notice‑‑‑Service by registered post/acknowledgment due‑‑‑Section 154 of the Income Tax Ordinance, 1979 had provided two modes of service of the notice: First one was that a notice, order or requisition issued under the Income Tax Ordinance, 1979 might by served on the person therein named by post and the other one was to follow the procedure prescribed for service of a summon issued by a Court under the Code of Civil Procedure, 1908‑‑‑Cumulative reading of both said provisions clearly spelled out that service of the notice shall be made on the person named in the notice or his Authorized Agent or adult male member of the family residing with the person named in the notice in the case of an individual‑‑‑1n Income Tax Ordinance, 1979 only the word "post" had been used while in the Code of Civil Procedure the words "Registered post acknowledgement due" had been used for the purpose of substituted service of the notice‑‑ Where mode of substituted service of notice, order or requisition was to be adopted, i.e. through post then acknowledgement due receipt must be annexed with the envelope in which the notice had been sent‑‑‑Object behind annexing acknowledgement due alongwith the envelope was to ensure proper service of the notice, order or requisition.
(b) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑Ss. 154 & 65‑‑‑Service of notice‑‑‑Where the statute required that notice shall precede a certain action, the notice to be issued under S.65 of the Income Tax Ordinance, 1979 became a jurisdictional fact and the authority wanting to proceed against such persons had no jurisdiction to do so unless it was proved that the notice which was a pre‑condition had in fact been issued and served upon the assessee.
(c) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑Ss.65 & 154‑‑‑Additional assessment‑‑‑Service of notice‑‑‑Service by registered post/acknowledgement due‑‑‑Additional assessment rests upon proper service of notice under S.65 of the Income Tax Ordinance, 1979‑‑‑Non‑annexing acknowledgement receipts alongwith the registered letter certainly would create doubt regarding proper service of the statutory notice issued under S.65 of the Income Tax Ordinance, 1979‑‑ In such‑like situation it was not possible to ascertain upon whom and on which date the envelope containing the notice was received‑‑‑If, statutory notice had been sent through post alongwith acknowledgment receipts and in case the acknowledgement receipt had been received back by the Assessing Officer showing receipt of the notice by assessee, it would have to be held to be a valid service.
(d) Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑Ss. 65 & 154‑‑‑Additional assessment‑‑‑Service of notice‑‑‑Service by registered post‑‑‑Where service of statutory notice issued under S.65 of the Income Tax Ordinance, 1979 upon the assessee was not established it means the said notice was never served upon the assessee.
(e) Income Tax Ordinance (XXXI of 1979)‑‑‑---
‑‑‑‑Ss. 65 & 154‑‑‑Additional assessment‑‑‑Service of notice‑‑‑For purpose of application of provisions of the Income Tax Ordinance, 1979, issuance of notice under S.65 and service thereof was a sine qua non and no further proceedings could be taken against the assessee.
(f) Income Tax Ordinance (XXXI of 1979)‑‑--
‑‑‑‑S. 61‑‑‑Notice for production of books of accounts, etc.‑‑‑Issuance of notice‑‑‑Where neither the return was filed nor any notice was served on assessee to furnish the, return, notice under S.61 of the Income Tax Ordinance, 1979 could not be issued to the assessee in circumstance.
(g) Income Tax Ordinance (XXXI of 1979)‑‑‑--
‑‑‑‑Ss. 65, 63 & 154‑‑‑Additional assessment‑‑‑Service of notice‑‑‑Notice under S.65 of the Income Tax Ordinance, 1979 was sent by registered post without acknowledgement due‑‑‑Non‑attendance‑‑‑Ex parte assessment‑‑‑Validity‑‑‑Framing of additional assessment on the basis of notice which had been sent through registered post, without annexing acknowledgment receipts, was not valid service and framing of an ex parte assessment by resort to S.63 of the Income Tax Ordinance, 1979 consequent upon service of such statutory notice was not sustainable in law‑‑‑Annulment of assessment by the First Appellate Authority on account of improper service of statutory notice issued under S.65 of the Income Tax Ordinance, 1979 was upheld by the Appellate Tribunal and Departmental appeal was dismissed for want of merits.
Mian Javed‑Ur‑Rehman, D.R. for Appellant.
Nemo for Respondent.
Date of hearing: 18th February 2001.
ORDER
1. Sole objection of the Revenue in this case relates to annulment of the assessment order made under section 63/65 of the Repealed Income Tax Ordinance, 1979.
2. The precise question which came up for my consideration is as to whether service of statutory notice, issued under section 65 of the Repealed Income Tax Ordinance, 1979, through registered post without annexing acknowledgment receipt, is a valid service to invoke the provisions of section 63 of the Income Tax Ordinance, 1979 and, whether the additional assessment made consequent upon such notice can be held to be sustainable in law or not?
3. Facts leading for disposal of the issue in hand are that the assessee is an employee of National Bank of Pakistan whose original assessment was completed in terms of section 59(1) of the Income Tax Ordinance whereby only the salary income declared by the assessee was stood accepted. Subsequently the case was reopened by the Assessing Officer by invoking the provisions of section 65 of the Repealed Income Tax Ordinance, 1979 on the ground that the assessee besides enjoying salary income was also earning rental income by letting out the house to the Bank at the monthly rent of Rs.4608 (Rs. 55,296 per annum) which had not been declared alongwith the salary income As is evident from the assessment order quite a number of opportunities were afforded to the assessee‑respondent to participate in the assessment proceedings but no compliance was made at the instance of the assessee. Resultantly, an ex pane assessment was made by the Assessing Officer whereby the income from house property was also assessed in the assessee's .hands consequent upon which total net income for the assessment year 1996‑97 was re‑assessed at Rs. 142,805 against originally assessed at Rs.98568.
4. This order was appealed before the CIT(A) Gujranwala Zone Gujranwala who by virtue of his order dated 4‑3‑2003 annulled the additional assessment. This order, passed by the First Appellate Authority compelled the Revenue to come up in appeal before the Tribunal.
5. Subsection (1) of section 65 of the Income Tax Ordinance, 1979 clearly envisages that the Deputy Commissioner may at any time, subject to the provision of subsections (2), (3) and (4), issue a notice to the assessee (underlined by me) containing all or any of the requirement of a notice under section 56 and may proceed to assess or determine by an order writing the total income of the assessee or the tax payable by him, as the case may be. When this subsection is read with subsec tion (1) of section 154 in order to determine as how and upon whom the notice would be served. Section 154 has provided two modes of service of the notice. First one is that a notice, order or requisition (hereinafter referred to as notice) issued under this Ordinance may be served on the person therein named by post and the other one is that to follow the procedure as has been prescribed for service of a summon issued by a Court under the Code of Civil Procedure, 1908 (V of 1908). Cumulative reading of both these sections clearly spells out that service of the notice shall be made on the person named in the notice (the assessee) or his Authorised Agent or adult male member of the family residing with the person named in the notice in the case of an individual. In the Income'` Tax Ordinance only the word "post" has been used while the in Code of Civil Procedure the words "Registered post acknowledgement due" have been used for the purpose of substituted service of the notice. So, where mode of substituted service of notice, order or requisition is to be adopted, i.e., through post, then acknowledgment' due must annex with the envelope in which the notice etc; has been kept. The purport and the tenor behind annexing acknowledgement due alongwith the envelope is toy ensure proper service of the notice, order or requisition. Actually the notices are always issued for the benefit of those to whom they are directed. Where the statute require that notice shall precede a certain action, the notice to be issued under section 65 of the Repealed Income Tax Ordinance, 1979 becomes a jurisdictional fact and the authority wanting to proceed against such persons has no jurisdiction to do so unless it is proved that the notice which is a pre‑condition had in fact been issued and served upon the assessee.
5. Reverting to the facts of the present case, it is noted that a notice under section 65 was dispatched through registered post without enclosing acknowledgement receipt thereof. It is pertinent to mention here that this is a notice (i.e. issued under section 65), which confers jurisdiction upon the assessing officer to formulate the additional assessment. So, service of notice to be issued under section 65 is of a paramount importance because the entire superstructure of the additional assessment shall rest upon proper service of this notice. Non‑annexing acknowledgment receipts alongwith the registered letter certainly creates doubt regarding improper service of the statutory notice issued under section 65. Because in such‑like situation it is not possible to ascertain upon whom and on which date the envelope containing the notice was received. Conversely, if the statutory notice has been sent through post alongwith acknowledgement receipts and in case the acknowledgement receipt has been received back to the Assessing Officer showing receipts of the notice by assessee, it would have to be held to be a valid service. Since service of the statutory notice issued under section 65 upon the assessee is not sure it means that said notice was never served upon the assessee. It is now a settled law that for the purposes of the application and other provisions of the Income Tax Ordinance, 1979, issuance of notice thereof under section 65 and service thereof is a sine qua non aid no further proceedings can be taken against the assessee. Even the notice under section 61 cannot be issued to the assessee as neither the return was filed by him nor any notice was served on him to furnish the return.
6. I therefore, do not feel any hesitation in holding that framing of additional assessment on the basis of notice which has been sent through registered post, without annexing acknowledgement receipts, is not a; valid service and framing of an ex parte assessment by resort to section 63 of the Income Tax Ordinance, 1979 consequent upon service of such statutory notice is not sustainable in law. Thus the findings of the Appeal Commissioner whereby he has annulled the assessment or, account of improper service of statutory notice issued under section 65 are hereby endorsed by me. Consequently the departmental appeal fait and is dismissed for want of merits.
C.M.A./84/Tax (Trib.)Appeal dismissed