ASIA PETROLEUM LTD. through Managing Director VS PAKISTAN through Secretary, Ministry of Finance (Revenue Division) and Ex-officio, Chairman, Central Board of Revenue, Islamabad and another, 2005 PTD-KARACHI-HIGH-COURT-SINDH 2345 (2005)

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

----Preamble---Assessment year 2002-2003, is covered by the Income Tax Ordinance, 1979.

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

----Ss. 61, 62, 55, 56 & 65---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Issuance of notices under Ss. 61 & 62 of the Income Tax Ordinance, 1979 to the assessee---Contentions were that said notices were issued without jurisdiction as neither a return of total income was filed under S.55 of the Ordinance nor any notices were issued under Ss. 56 or 65 of the Ordinance, calling upon the assessee to file the return of total income; that the notices under Ss. 61 and 62 of the Ordinance could be issued during the course of proceedings of assessment, after assumption of jurisdiction either on filing of return of total income under S. 55 or filing of return of total income in response to the notices under Ss. 56 & 65 of the Ordinance, or in case of failure of the assessee to file the return of total income in response to the said notices and that when the jurisdiction was not assumed by the Assessing Officer in accordance with law, the notice under Ss. 61 & 62 of the Ordinance were without jurisdiction and void ab initio which could not be acted upon and all the proceedings/orders in pursuance of such notices were without jurisdiction, which were liable to be struck down-Validity---Held, in the realm of normal tax regime, under the Scheme of law contained in the Income Tax Ordinance, 1979, an Assessing Officer shall acquire jurisdiction to initiate the assessment proceedings on filing of return of total income, under S.55 of the Ordinance or in case of default on the part of assessee, who was required to file the return of total income, on issuance of notice under Ss. 56 or 65 of the said Ordinance as the case may be---Impugned notices were without jurisdiction and consequently, void ab-initio and thus Assessing Officer was not empowered to take any proceedings in pursuance' of said notices---Contention that the issuance of notices under Ss. 61 & 62 of the Ordinance fulfilled the requirements of calling upon an assessee to file return of total income had no substance---High Court, however, clarified that notwithstanding the present judgment, the department shall be at liberty to issue the notice under the relevant provisions of law calling upon the assessee to furnish the return if it deemed same fit and proper with equal liberty to the assessee to take pleas of facts and law---Principles.

A perusal of section 61 of the Income Tax Ordinance, 1979 shows that according to it, 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's office or to produce, or cause to be produced, any evidence on which such person may rely in support of the return. The provision is very clear and there is no ambiguity requiring any clarification or interpretation. A plain reading of section 61 of the said Ordinance shows that the Deputy Commissioner can issue a notice under this section to a 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. The evidence required under section 61 is filed in support of the return. Thus, in the absence of any return or notice to furnish return the Deputy Commissioner cannot issue any notice under section 61. Likewise, it is provided in section 62 that the Deputy Commissioner, after considering the evidence on record including evidence, if any, produced under section 61 and such other evidence as the Deputy Commissioner may require, on specific points, shall, by an order in writing, assess the total income of the assessee and determine the tax payable by him on the basis of such assessment. It has nowhere provided that the assessment proceedings can be undertaken by an Assessing Officer without filing of return of total income or issuance of notice calling upon the assessee to file a return of total income.

In the realm of normal tax regime, under the scheme of law contained in the Income Tax Ordinance, 1979 an Assessing Officer shall acquire jurisdiction to initiate the assessment proceedings on filing of return of total income, under section 55 or in case of default on the part of assessee, who is required to file the return of income, on issuance of notice under section 56 or 65 as the case may be.

Contentions that the issuance of notice under sections 61 and 62 fulfilled the requirement of calling upon an assessee to file the return of total income, had no substance.

Notices under sections 61 and 62 of the Ordinance, issued by the department were without jurisdiction and consequently, void ab initio. The Assessing Officer was not empowered to take any proceedings in pursuance of these notices, which were also illegal, without jurisdiction and void ab initio.

High Court clarified that notwithstanding, the present judgment the department shall be at liberty to issue the notice under the relevant provision of law calling upon the assessee to furnish the return if deemed fit and proper. If the department feels that there was any other manner of deciding the issue the department shall be at liberty to adopt the course in accordance with law. The assessee is also at liberty to take all the pleas of facts and of law, before the Departmental Officer and other forums available to it.

Dr. Muhammad Farogh Naseem for Petitioner.

Nemo for Respondent No.1.

A.R. Akhtar for Respondent No.2.

Date of hearing: 21st June, 2005.

JUDGMENT

MUHAMMAD MUJEEBULLAH SIDDIQUI, J.---The petitioner, a non-listed Public Limited Company, is aggrieved with the issuance of notices under sections 61 and 62 of the Income Tax Ordinance, 1979 pertaining to the assessment year 2002-2003. Both the learned advocates for the parties agree that the assessment year 2002-2003, is covered by the Income Tax Ordinance, 1979.

2. Briefly stated the relevant facts are that up to the assessment year 2000-2001 the petitioner filed return of total income under section 55 of the Income Tax Ordinance, 1979 (hereinafter referred as Repealed Ordinance). In the assessment year 2001-2002, the petition r did not file return of total income under section 55 of the Repealed Ordinance and filed statement under section 143 of the Repealed Ordinance, on the plea that the income earned by them was covered under the presumptive tax regime by virtue of section 80C of the Repealed Ordinance. The plea was accepted by the department. (As stated by Mr. Farogh Naseem).

3. Likewise, no return of total income under section 55 was filed in the assessment year 2002-2003, and statement under section 143 of the repealed Act, was filed. However, for the assessment year 2002-2003, the Assessing Officer, respondent No. 2 did not accept the plea that the petitioners were covered under presumptive tax regime under section 80C of the Repealed Ordinance and issued notices under sections 61 and 62 of the Repealed Income Tax Ordinance.

4. The main contention raised by Mr. Farogh Naseem, learned counsel for the petitioner is that these notices are without jurisdiction as neither a return of total income was filed under section 55 of the Repealed Ordinance nor any notices were issued under section 56 or 65 of the Repealed Ordinance, calling upon the petitioner to file the return of total income. He has submitted that the notices under sections 61 and 62 can be issued during the course of proceedings of assessment, after assumption of jurisdiction either on filing of return of total income under section 55 or filing of return of total income in response to the notices under section 56 or 65, or in case of failure of the assessee to file the return of total income in response to the above notices. He has urged that when the jurisdiction was not assumed by the Assessing Officer in accordance with law, the impugned notices are also without jurisdiction and void ab initio which cannot be acted upon, and all the proceedings/ orders in pursuance of such notices are also without jurisdiction, which are liable to be struck down.

5. The petitioner has raised some other issues also but on account of the order which we propose to pass presently, we would not like to consider any other issue in this case.

6. Mr. A.R. Akhtar, learned counsel for the respondent No.2 has contended that the issuance of notices under sections 61 and 62 of the Income Tax Ordinance, were within the jurisdiction of the Assessing Officer and have been competently issued. Mr. A.R. Akhtar, has conceded that the petitioner has not filed any return of total income for the assessment year 2002-2003 and no notice either under section 56 or 65 of the Income Tax Ordinance, 1979 has been issued. He has stated that the petitioner has filed the statement under section 143 of the Repealed Ordinance, which according to him is not in consonance with the law as such statement is to be filed by a person deriving income covered under the presumptive tax regime and the petitioner is not covered under the presumptive tax regime and is governed under the normal tax regime.

7. Mr. A.R. Akhtar was asked to show that an Assessing Officer acquires jurisdiction if return of total income is not filed and notice under section 56 or 65 of the Repealed Ordinance is also not issued calling upon the assessee to file the total income. He contended that the Assessing Officer acquires jurisdiction to make an assessment as soon as return of total income is filed or a statement under section 143 of the Repealed Ordinance is submitted. So for, the first part of the contention is concerned, there is no cavil to the proposition. Mr. A.R. Akhtar was asked to show the law, that with the filing of statement under section 143 of the Repealed Ordinance, an Assessing Officer acquires jurisdiction for assessment proceedings under normal tax regime. Mr. A.R Akhtar was not able to show any law, to substantiate his contention.

8. Mr. A.R. Akhtar next contended that the issuance of notices under sections 61 and 62 fulfilled the requirement of calling upon an assessee to file the return of total income. Mr. A.R. Akhtar was not able to substantiate this contention as well, with any provision of law in the Repealed Ordinance.

9. We have carefully considered the contentions raised by the learned advocates for the parties and the material placed on record.

10. We are persuaded to agree with the contention of Mr. Farogh Naseem, learned counsel for the petitioner that, in the realm of normal tax regime, under the scheme of law contained in the Repealed Ordinance, an Assessing Officer shall acquire jurisdiction to initiate the assessment proceedings on filing of return of total income, under section 55 or in case of default on the part of assessee, who is required A to file the return of total income, on issuance of notice under section 56 or 65 as the case may be.

11. The contention of Mr. A.R. Akhtar that the issuance of notice under sections 61 and 62 fulfils the requirement of calling upon an assessee to file the return of total income, has no substance. Sections 61 and 62 of the Repealed Ordinance are reproduced below, for the sake of convenience.

"Section 61

Notice for production of books of accounts, 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's office or to produce, or cause to be produced, any evidence on which such person merely in support of the return, if furnished and such accounts, documents or evidence (including accounts or documents relating to any period prior to 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 period more than three years prior to the income year.

Section 62

Assessment on production of accounts, evidence etc.---(1) The Deputy Commissioner, after considering the evidence on record (including evidence, if any, produced under section 61) and such other evidence as the Deputy Commissioner may require, on specific points, shall, by an order in writing, assess the total income of the assessee and determine the tax payable by him on the basis of such assessment.

Provided that where the assessee produces books of account as evidence in support of the return, the Deputy Commissioner shall, before disagreeing with such accounts, give a notice to the assessee of the defects in the accounts and provide an opportunity to the assessee to explain his point of view bout such defects and record such explanation and the basis of computation of total income of the assessee in the assessment order.

(2) Where a person is authorized by the Central Board of Revenue under section 7 to assist the Deputy Commissioner in making an assessment and the Deputy Commissioner disagrees with the opinion of such person on any point concerning assessment, the Deputy Commissioner shall record, in the order under subsection (1), the opinion of such person and the reasons for his disagreement with such opinion."

12. A perusal of section 61 shows that according to it, the Deputy Commissioner may serve upon any person who has furnished a return of B 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's office or to produce, or cause to be produced, any evidence on which such person may rely in support of the return. The provision is very clear and there is no ambiguity requiring any clarification or interpretation by this Court. A plain reading of section 61 shows that the Deputy Commissioner can issue a notice under this section to a 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. The evidence required under section 61 is filed in support of the return. Thus, in the absence of any return or B notice to furnish return the Deputy Commissioner cannot issue any notice under section 61. Likewise, it is provided in section 62 that the Deputy Commissioner, after considering the evidence on record including evidence, if any, produced under section 61 and such other evidence as the Deputy Commissioner may require, on specific points, shall, by an order in writing, assess the total income of the assessee and determine the tax payable by him on the basis of such assessment. It has nowhere provided that the assessment proceedings can be undertaken by an Assessing Officer without filing of return of total income or issuance of notice calling upon the assessee to file a return of total income.

13. For the forgoing reasons, it is held that the impugned notices under sections 61 and 62 of the Repealed Ordinance, issued by the respondent No.2 are without jurisdiction and consequently, void ab initio. The Assessing Officer is not empowered to take any proceedings in pursuance of these notices, which are also held to be illegal, without jurisdiction and void ab initio.

14. Since the impugned notices have been held by us to be without jurisdiction, therefore, we would not like to dilate upon the merits of the contentions and further pleas on the part of the parties.

15. We would like to clarify that notwithstanding, the above decision the department shall be at liberty to issue the notice under the relevant provision of law calling upon the petitioner to furnish the return if deemed fit and proper. If the department feels that there is any other manner of deciding the issue the department shall be at liberty to adopt the course in accordance with law. The petitioner is also at liberty to take all the pleas of facts and of law, before the Departmental Officer and other forums available to it.

16. The petition is allowed in the above terms.

M.B.A./A-210/KPetition allowed.