I.T.A. No. 936/LB of 2005, decided on 23rd February, 2007. VS I.T.A. No. 936/LB of 2005, decided on 23rd February, 2007., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1203 (2007)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 63, 61 & 58(1)---Best judgment assessment---Passing of assessment order on next following the defaulted date with the remark in the order sheet "non compliance"---Validity---Ex parte assessment had been made on a date for which the case was not fixed for hearing---Assessing Officer had not recorded ex parte proceedings on the defaulted date and proceeded to make his own judgment on the subsequent date which was not permissible under the law---Nothing was shown that case was actually taken up for ex parte proceedings on the date specified in the statutory notices for appearance---Assessee's absence was marked on that date---Merely making absence of the assessee in the order sheet, without observing to pass ex parte assessment or order, could not be possibly held that the Assessing Officer had made up his mind to proceed ex parse on the defaulted date and in such eventuality it was necessary to issue a fresh notice or to adjourn the case---Ex parte assessment having been made on a subsequent date qua the defaulted date, the exercise of powers by the Assessing Officer under S.63 of the Income Tax Ordinance, 1979 was not sustainable in law---Assessment order was annulled/cancelled by the Appellate Tribunal in circumstances.

M.A. Malik, FCA for Appellant.

Sheraz Mirza, D.R. for Respondent.

ORDER

RASHEED AHMED SHEIKH (JUDICIAL MEMBER).-Vide this, appeal, the assessee-appellant has called into question the order passed by CIT(Appeals), Zone-I, Lahore, dated 1-2-2005 in respect of assessment year 2002-2003.

2. The assessee-appellant has assailed the order on legal as well as on factual grounds. First contention was that the order passed by the Assessing Officer on 18-3-2006 was void illegal, hence merited cancellation thereof. Both the learned representatives appearing at the bar have been heard in this regard. The facts as emerged are that total net income was returned by the assessee at Rs.138,000 under the scheme of self-assessment (SAS). However, the said return of income was excluded out of the ambit of SAS being selected for total audit through computer random balloting. As the assessee did not participate in the assessment proceedings, accordingly the Assessing Officer proceeded ex parte by resort to section 63 of the Repealed Income Tax Ordinance, 1979 and in this manner net income was computed at Rs.417,200. Before the first appellate authority, the appeal was partly succeeded on the point of estimation of receipts and besides that, the additions' made in profit and loss expenses was deleted. However, initiation of ex parte proceedings under section 63 of the Income Tax Ordinance, 1979 were maintained by the first appellate authority.

3. At this juncture it was pleaded that the last statutory notices issued under sections 61 and 58(1) of the Income Tax Ordinance were, dated 5-3-2003, the compliance of which was to be made on 17-3-2003. Those notices were statedly to be served upon the assessee but no compliance thereof was made at the instance of the appellant. However, the assessment order was passed by the Assessing Officer on 18-3-2003 meaning thereby next following the defaulted date. To corroborate the contention, photocopy of the order sheet has been placed on record. Perusal thereof vividly spells out that on 17-3-2003. The Assessing Officer remarked in the order sheet "non-compliance". On 18-3-2003 it was recorded in the order sheet as follows:-

"Despite repeated statutory notices under section 61 and specific notice under section 62, 'neither the assessee nor the A.R. attended the proceedings, under these circumstances I am constrained to finalize the assessment under section 63.

4. Section 63 of the Income Tax Ordinance clearly envisages that:--

(a) where any person fails to furnish a return of total income required to be furnished by him under section 56, subsection (3) of section 72 or subsection (3) of section 81 or

(b) fails to comply with any of the terms of a notices issued under section 58 or 61 and the Deputy Commissioner intends to make best judgment, he may by an order in writing, assess the total income of the assessee to the best of his judgment and determine the amount of tax payable by him. But all this exercises has to be made on the defaulted date and not prior to the date fixed for hearing or on the subsequent date.

5. It is imperative to mention here that the order sheet (I.T. 39) is intended to be a complete record of the proceedings of a case starting from the stage of receipt of a return under section 55 or 56 or 65 of the Income Tax Ordinance, 1979 upto the collection of tax. All orders directing issuance of notices under different sections of the Income Tax Ordinance are required to be recorded in the order sheet. Moreover application seeking extension of time for submission of the return, or any other letter/form is received from the assessee, a suitable entry is to be made in the order sheet and also the Assessing Officer's order, if any, obtained thereon. Even compliance of the notices, orders etc. is also to be noted in the third column of the order sheet. All the entries should be serially numbered and dated as well as signed or initiated by the concerned officer and even rubber stamp of the circle can be embossed on the order sheet.

6. But if the assessee does not appear or produce his evidence, in compliance to the statutory notices or letters issued by the Assessing Officer, it is obligatory on his part to bring on record default of the assessee on the given date and to order for proceeding ex parte. Once that is done he can proceed to pass the judgment or complete the assessment forthwith in terms of section 63 of the Income Tax Ordinance, 1979. So far as passing the order is concerned that can be dictated subsequently but date of rendering the order would be written "the defaulted date".

7. Reverting to the facts of the case, evidently ex parte assessment in the instant case has been made by the Assessing Officer on date for which the case was not fixed for hearing. If the Assessing Officer has not recorded ex parte proceedings on the defaulted date and proceeds to make his own judgment, by resort to section 63 of the Income Tax Ordinance, 1979, on the subsequent date which is not permissible under the law. There is nothing to show that this case was actually taken up for ex parte proceedings on 17-3-2003, the date specified in the statutory notices for appearance. Rather the assessee's absence was marked by the Assessing Officer on this date as is manifest from the order sheet. Thus, merely marking absence of the assessee in the order sheet, without observing to pass ex parte assessment or order, it cannot be possibly held that the Assessing Officer had made up his mind to proceed on parte on the defaulted date. In such eventuality it was necessary for the Assessing Officer to have issued a fresh notice for 18-3-2003 or should have adjourned the case.

8. As is apparent from the order sheet entry, dated 17-3-2003, the Assessing Officer has not shown his intention to proceed further on the defaulted date, instead the powers under section 63 of the Income Tax Ordinance, 1979 have been exercised on a subsequent date i.e., 18-3-2003 for which date no notice was issued. Since, factum of passing the ex parte assessment has been made on a subsequent date qua the defaulted date, therefore, exercise of powers by the Assessing Officer under section 63 of the Income Tax Ordinance, 1979 on 17-3-2003 was not sustainable in law corollary of which would be annulment/cancellation of the assessment order.

9. In the result, the assessee's appeal succeeds.

C.M.A./15/Tax (Trib.)Appeal accepted.