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

----S.65, 59-A & 63---General Clauses Act (X of 1897), S.24-A---CBR Circular No. 11 of 1986, dated 12-5-1986---CBR Circular No. 17 of 1988, dated 22-2-1988---Educational institution---Additional assessment-- Definite information---Escape assessment---Under assessment-- Assessments stood completed under S.59-A of the Income Tax Ordinance, 1979---Anonymous, complaint---Reopening of assessment-- Validity---Complaint did not embody any factum relating to expenses-- Law had not required from assessee to show the gross receipts or fee structure and allowing assessee to file a prescribed single page return showing income---Test of definite information meant that a material which causes a reasonable belief -of said evidence which might lead to a definite conclusion of escape or under-assessment---If information relating to number of students and fee was taken as true, even then the aspect of the expenses was missing in such anonymous complaint which could not be treated as "definite information" to reopen the finalized assessment---Anonymous complaint even if given weight qua substance/ material embodied in it, it could not be treated as exact and "definite information" ---Evidence for reopening of case under S.65 of the Income Tax Ordinance, 1979 must be self-contained in its information---In anonymous complaint evidence qua the expenses was not self-contained rather it had been assessed and differed by the First Appellate Authority---When there could be two independent opinions about a fact, it could not be termed as "definite information" ---By finalizing original assessment neither books of accounts were produced nor any enquiry was conducted for which a substance of fact could be brought on record, which subsequently proved to be false---Case had been reopened without definite information---Department could not say that income was -understated if it lacked the knowledge of expenses incurred specifically, when the case came out from the ambit of "definite information" ----Assessments made under Ss.63/65 of the Income Tax Ordinance, 1979 were annulled " and original assessments were restored by the Appellate Tribunal.

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

----S.65----Additional assessment--Jurisdiction---Change of status into a private limited company---Reopening of assessments by the Assessing Officer not holding jurisdiction over the company --- V.alidity--41f the Department had come to the knowledge of the change of status the proper course would had been adopted for initiating the action under S.65 of the Income Tax Ordinance, 1979 by the concerned authority-- Order passed, held, was without jurisdiction.

Naushad Ali Khan, D.R. (in I.T.As. Nos.465-IB and 466-IB of 2003).

Waseem Ahmed Siddiqui, F.C.A. (in I.T.As. Nos.465-IB and 466-IB of 2003).

Waseem Ahmed Siddiqui, F.C.A. (in I.T.As: Nos.370-113 and 371-IB of 2003).

Naushad Ali Khan, D.R. (in I.T.As. Nos.370-IB-and 371-IB of 2003).

Date of hearing: 6th August, 2003.

ORDER

MUNSIF KHAN MINHAS (JUDICIAL MEMBER).--These four cross, appeals, two filed by the assessee and two by the department against the order dated 29-5-2003 recorded by the learned CIT(A), Zone-II, Islamabad for the assessment years 1997-98 and 1998-99.

2. We have heard Mr. Waseem Ahmed Siddiqui, F.C.A. the learned A.R. of the assessee and Mr. Naushad Ali Khan, the learned D.R. who appeared on behalf of the Revenue.

3. The relevant facts in brief are that the assessee, an individual, derives income from running an educational institution under the name of Preparatory School, Islamabad. Original assessments for the assessment years 1997-98 and 1998-99 stood completed under section 59-A as under:--

1997-98Rs.1,25,953

1998-99Rs.2,03,600

The case was reopened under section 65 vide notice dated 11-6-2001 and 18-6-2001 of the Income Tax Ordinance, 1979 on receipt of a complaint against the assessee vide RCIT. Northern Region Islamabad's Letter No.50-III-I(3)-184/2000-2001/373 dated 24-7-2000. The assessee was duly confronted to the allegations contained in complaint through show-cause notices vide No.249 dated 2-8-2000 and No.952 dated 29-5-2001. The reply of the assessee is hereby reproduced as under:--

"In this regard, before a proper reply of above subject notice is submitted to you, you are requested please to provide a copy. of the documentary evidence relating to the information received from CBR dated 22-7-2000 alongwith clarification as to what and how much receipts/sales and number of students were shown incorrectly suppressed in the relevant I. Tax assessment years 1997-98 and 1998-99.

A proper reply of above subject notice will be given after a reply is received from you."

Needless to mention here that even in response to subsequent notices, the assessee's AR remained stuck to the same and did not prefer to file the new return. Resultantly, the Assessing Officer made. ex parte assessment at Rs.51,06,653 and Rs.85,68,653. for the assessment years 1997-98 and 1998-99 respectively. The Assessing Officer allowed expenses of Rs.45,00,000 and Rs.48,00,000 in both of the years against the total estimated gross receipts of Rs.95,28,000 and Rs.1,32,90,000 respectively. The learned CIT(A) has enhanced the expenses from Rs.45,00,000 to Rs.55;00,000 and from Rs.48,00,000 to Rs.60,00,000 in the assessment years 1997-98 and 1998-99 respectively, which have been agitated by the department in the departmental appeals in hand. On the, other hand', assessee's version is that assessment order is coram-non-judice. Secondly, impugned order passed on the basis of complaint not shown to the assessee amounts to condemn'' the assessee unheard. The complaint did not constitute definite information as required under section 65(2) of the Ordinance. Information regarding number of students and fee receipts does not authorize the department to invoke the provision of section 65 of the Ordinance, as the assessee, while submitting the returns, was not required under the law to submit any figure of fee receipts or number of students. It was only one page return requiring the assessee to disclose only, the, net income and nothing else beyond that: The impugned order is violative to section 24-A of the General Clauses Act, 1897.

4. The learned A.R. has .argued that anonymous complaint does not constitute the definite information. He has referred two Income Tax circulars of the CBR which are reproduced as under:--

"Income Tax Circular No. 11 of 1986 ;

It has been represented to the Board that Income-tax Officers initiate enquiries on the basis of anonymous/pseudonymous complaints. Such enquiries,- besides causing harassment to tax payers, also result in waste of time as no tangible benefit accrues to the Revenue.

The matter has been considered in the Board and it has been decided that as. a rule, complaints manifestly, frivolous non specific, anonymous or pseudonymous will be destroyed or filed as per Government orders already extent on the subject. However, it may be added that complaints prima facie containing some substance or specific material can be looked.' into after securing the permission-of the next higher officer e.g. IAC in case of I.T.O., CIT. in case of I.A.C., RCIT in case of CIT and so on, but without, in the first instance, involving the tax-payer concerned.

Circular No. 17 of 1988

In partial modification of Board's Circular No. 11 of 1986 dated 12 May, 1986 it has been decided that complaint against tax-payers prima facie containing some substance or specific material shall be looked into after securing permission of the next higher officer as under:--

(i)Where the complainant is known and can be contacted, he should first be required to file an affidavit in support of the complaint; and

(ii)Where the complainant is not known or traceable, the anonymous/pseudonymous complaint should not be entertained unless the contents thereof are supported by documentary evidence,

All concerned may please note for strict compliance."

In her case, it is an admitted fact that the complaint is anonymous. It is again admitted fact that contents in the body of complaint are not supported by any documentary evidence. As far as this issue that in anonymous complaint substance or specific material can be looked into after securing the permission of the next higher officer, is concerned, the complainant has disclosed in his complaint as number of students and fate of fee while he has not disclosed the expenses incurred by the assessee. Under the law, the assessee was not bound to disclose gross receipts and expenses. He was only obliged to fill one page return showing the net income. So, it is neither a case of under-assessment nor escaped assessment. Nothing has been concealed by the assessee. So, the complaint cannot fall under the head of definite information from any corner whatsoever. He has further argued that on 18-10-2000, the status of the assessee changed to that of a private limited company. Mrs. Shabnum Ashraf in her capacity as. Director and Chief Executive Officer of a company namely Messrs Aspire (Pvt.) Ltd. ran and managed Preparatory School, Islamabad. So, it had fallen within the jurisdiction of Circle-O1, Companies Zone, Islamabad. The Assessing Officer of Circle-O1, Companies Zone, Islamabad had the jurisdiction for initiating the proceedings under section 65 of the Ordinance. The proceedings to initiate the action under section 65 ibid taken by the DCIT, Circl-02, Islamabad are totally illegal and coram-non-judice. He has further argued that question of jurisdiction is purely a legal one and it can be raised at any stage at any forum. He has further argued that it is the duty of the department before reopening of the case under section 65 to be in possession of definite information regarding the department's assertion against the assessee. The expr6ssion "definite information" certainly meant much more than mere material so as to cause a reasonable belief of even such evidence which might lead to a definite belief of escaped assessment or under-assessment. Unless there is definite direct information and there is no further need to put the said definite information to trial by putting in further supporting material, already finalized assessment cannot be reopened. The learned A.R. has drawn our attention towards the orders of both the officers below that even expenses have been estimated. The learned CIT(A) has not agreed to estimate of expenses by the Assessing Officer and he has chosen to enhance these expenses. The order passed by both of the officers below amounts to one estimate against another negating the concept of definite information. He has specifically attacked the observations made by the learned CIT(A) that "if the Assessing Officer had no evidence regarding concealment"; this fact does not conclusively prove that there had been no concealment. As per learned A.R. It is the bounded duty of the department to come forward with specific evidence to justify the reopening under section 65. Such an observation of the learned CIT(A) by admitting the fact that Assessing Officer has no evidence regarding the concealment and justifying the reopening of the case does not provide any stand to the department to stand upon. These are whimsical and sketchy observations. The law itself has provided a refuge to the assessee by allowing him to file a prescribed single page return. The learned D.R. has supported the averments of the impugned order.

5. After hearing the respective contentions of the parties and perusal of the record, we have looked into the matter and find that the original assessments have been reopened by the department on an anonymous complaint. As per learned A.R. this is anonymous complaint and even substance/material embodied in the complaint does not constitute definite information and the case could not be reopened. After considering the references to the cited case-law on the issue of definite information in terms of section 65 of the Ordinance, we are of the considered view that this complaint does not embody any factum relating to the expenses. The law has not required from assessee to show the gross receipts or fee structure. The law itself provided a concession to assessee by allowing him to file a prescribe single page return showing the income. The test of the definite information means that 'a material which causes a reasonable belief of said evidence which might lead to definite belief of escape or under-assessment. In this case for the sake o argument even the information relating to the number of students and fee etc. is taken as true, even then the aspect of the expenses is missing in this anonymous complaint. So, it cannot be treated as definite information to reopen the finalized assessment. In the orders passed by both of the officers below expenses have again been estimated while finalizing the reassessment. The learned CIT(A) has not agreed with the observation made by the Assessing Officer and enhanced the expenses from 45,00,000 to 55,00,000 and 48,00,000 to 60,00,000 for the assessment years 1997-98 and 1998-99 respectively. So, the anonymous complaint in this case even given weight qua substance/material embodied in it, it cannot be treated as exact and definite information. For reopening of the case under section 65 evidence must be self contained in it information. .In this case of anonymous complaint evidence qua the expenses is not self-contained rather it has been assessed and differed by the learned First Appellate Authority. Needless to say that when there can be two independent opinions about a fact, it cannot be termed as "definite information". By finalizing the original assessment neither books of accounts were produced nor any enquiry was conducted for which a substance of fact could be brought on record which subsequently proved to be false. So, the case has been reopened without definite information. How can the department say that income is understated if it lacks the knowledge of expenses incurred specifically. So, the case comes out from the ambit of the "definite information". As far as. the issue of jurisdiction is concerned, it has been argued by the learned A.R. that after 18-10-2000 status of the assessee was changed to that of private limited company. Hence, the jurisdiction to reopen the case only vested within Circle-O1, Companies Zone, Islamabad and action of initiating the proceedings under section 65 by the DCIT, Circle-02, Islamabad was coram-non-judice. The learned A.R. has argued that it was the duty of the assessee to inform the department that its status has changed into a private limited company. The learned A.R. has been asked as to whether it has been provided s in law that assessee shall inform the department about change of the status prior to filing of the return. The assessee had to file the return at proper time in its respective Zone and Circle. The Assessing Officer if did not find the return in the subsequent year. he could have issued a notice under section 65 for filing of the return and in response thereof exact' and factual position would have come into his knowledge. Of course, if the department had come into the knowledge of the change of status subsequently the proper course would have been adopted for initiating the action under section 65 by the concerned competent authority. The order passed by the DCIT, Circle-02 is without jurisdiction.

6. Nutshell of the above discussion, the assessments made under section 63/65 are hereby annulled and original assessments are hereby I restored. As a result, the appeals of the assessee succeed while the departmental appeals are dismissed.

C.M.A./958/Tax (Trib.)Assessee's Appeal accepted