I.T.As. Nos. 1870/LB to 1873/LB of 2006, decided on 8th February, 2007. VS I.T.As. Nos. 1870/LB to 1873/LB of 2006, decided on 8th February, 2007., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1740 (2007)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 154, 56, 65, 13 & 87(4)---Income Tax Ordinance (XLIX of 2001), Ss.114, 176, 121 & 111---Service of notice---Assessee, a non resident---Assessment year 2002-2003 and tax years 2003 to 2005---Assessment order neither had mentioned that appellant was ever served with any notice nor Assessing Officer had made any agent of the assessee despite the fact that he had accepted the status of the assessee as non resident---Assessee submitted an affidavit solemnly declaring on oath that none of the statutory notices under the Income Tax Ordinance, 1979 or the Income Tax Ordinance, 2001 for filing of Income Tax returns or for appearance before the-tax authorities or for production of any evidence or any document was ever served upon him personally or through post or messenger or through substituted service and that assessee had Pakistani and British citizenship and possessed passports from both the countries and in the years under consideration he was a non-resident---No rebuttal in this regard had been made on behalf of the Department despite the fact that similar affidavit was filed before the First Appellate Authority---Appellate Tribunal, without going into the merits of the case, vacated the order of First Appellate Authority on legal issue of `non-service of notice' and assessment orders passed under S.63 of the Income Tax Ordinance, 1979 were annulled in circumstances.

1995 PTD 1239; 1971 SCMR 618; 2002 PTD 102; PLD 1996 (West Pakistan) Lahore 126 and PLD 1995 Lah. 417; (1989) 6 Tax 1 (Trib.); I.T.As. Nos. 983 to 986/LB/1988-89; I.T.A. No.9830/LB of 1991-92 and (1999) 80 Tax 137 (Trib.) ref.

Ahmad Shuja for Appellant.

Mrs. Sabiha Mujahid, DR for Respondent.

ORDER

The appellant through these appeals has objected to the consolidated impugned order of the learned CIT(A), dated 25-7-2006 for the assessment year 2002-2003 and tax years 2003 to 2005 on the following common grounds:

"(1) That the impugned combined appellate order of the CIT(A) was unsustainable in law as having been made without proper application of mind.

(2) That the impugned ex parte assessment order was illegal as having been made without first proper service of statutory notices issued for submission of the income return and for appearance of the assessee.

(3) That the DCIT erred in proceeding to make the impugned assessment simultaneously under the Income Tax Ordinance, 1979 and 2001.

(4) That the impugned order was illegal as the DCIT had failed to assume jurisdiction for want of proper service of notice under section 56 or 65 of the Income Tax Ordinance, 1979 upon the appellant.

(5) That the DCIT was not justified in law to make the impugned assessment of the non-resident person without first nominating his representative in Pakistan as required by section 78 of the Income Tax Ordinance, 1979.

(6) That the DCIT erred in law in determining the ownership, purchase, sale, amount of consideration and the date of the transaction of all the properties assessed in the hands of the appellant on the basis of the statement, dated 16-12-2004 of Mr. Shahid Iqbal Property dealer which was legally inadmissible.

(7) That the impugned addition under section 13 of the Income Tax Ordinance, 1979 was illegal and unsustainable in law as the same was approved by the Additional commissioner of Income Tax who was not a competent authority under the above said Ordinance."

Mr. Ahmad Shuja, Advocate has appeared on behalf of the appellant and has contended that no proper service of the statutory notices for submission of income tax return, i.e. under section 114 of the Income Tax Ordinance, 2001 have been ever served upon the assessee. Even the notices under sections 176, 121 and 111 were not served upon the assessee. He has contended that even in the assessment order there is nowhere mentioned that any of the notices have ever been served upon the assessee though it has been mentioned that the notices were issued in this regard. He has contended that the appellant had submitted an affidavit before the learned CIT(A), which has also been submitted before this Tribunal to the effect that no any notice has ever been served upon the assessee as he was out of Pakistan. He has contended that the assessee in this case is admittedly a non-resident which fact has also been mentioned in the assessment order itself mentioning the status and residence as non-resident. The learned counsel in this regard has referred the decision of the Hon'ble Lahore High Court reported as 1995 PTD 1239 wherein it has been held as follows:--

"It is a common ground between the parties that no notice under section 16(2) was issued to the applicant and the Wealth Tax Officer has issued both notices on the same date and had passed the order of assessment according to law. This being the position, we have no difficulty in coming to the conclusion that the proceedings commencing from Wealth Tax Officer to Appellate Tribunal were qua non judice and, therefore, the orders passed by the Wealth Tax Officer First Appellate Authority and Tribunal, were clearly without any lawful authority and without lawful effect."

In another case referred by the learned counsel for the appellant reported as 1971 SCMR 618 it has been held that the defect at initial stage would remain incurable even if opportunity of being heard is afforded at subsequent stage. It has further been observed in this decision of the Hon'ble Supreme Court that "The principle, so far as this country is concerned, is-accordingly well-settled that where notice required to be given by the statute is a mandatory notice, then the failure to comply with such a mandatory requirement of the statute would render the act void ab initio as being an act performed in disregard of the provisions of the statute. Furthermore any further action taken on the basis of such a void order would also be vitiated and the defect at the initial stage would be incurable by a hearing at a subsequent stage."

In another decision reported as 2002 PTD 102 Karachi High Court it has been held that primarily the question pertaining to service of notice on a party is a question of fact, but when an issue pertaining to jurisdictional notice is raised it becomes a mixed question of fact and law and it has been further observed that if an assessee is able to demonstrate that either the jurisdictional notice was not served at all or it was not served on assessee or a person duly authorized by the assessee in this behalf, the jurisdiction acquired by an Assessing Officer, which is contingent on a proper service of notice on the assessee or his legally authorized agent, shall result in violation of the entire proceedings."

The learned counsel in this regard has also placed before us the decisions of the Hon'ble High Court reported as PLD 1996 (West Pakistan) Lahore 126 and PLD 1995 Lah. 417. The learned counsel has also referred the decision of this Tribunal reported as (1989) 6 Tax 1 (Trib.) wherein it has been held that "on account of this lacunae assessment made by the ITO has been rendered illegal in the eyes of law because for each year an agent has to be treated as such in accordance with law, notwithstanding the fact that he may have acted on behalf of the assessee for earlier years."

In this regard the learned counsel has also placed before us the decisions of this Tribunal, dated 22-7-1996 in I.T.As. Nos. 983 to 986/LB/1988-89 and I.T.A. No.9830/LB of 1991-92 (Assessment years 1984-85 to 1988-89) in the case of Messrs Engineering Science, Faisalabad wherein it has been held that "the impugned assessments were illegal as they were made on the assessee after the ITO was possessed of the information that it was a non-resident and had left the country and the ITO failed to formally nominate any person as its agent in Pakistan. It has further been observed in this order that section 87(4) requires appointment of an agent for each year otherwise assessment becomes in-valid and the assessments were annulled."

On behalf of the assessee in this regard the decision of this Tribunal reported as (1999) 80 Tax 137 (Trib.) has also been referred. The learned counsel in this regard has also placed before us the order sheets.

After considering the above said decisions and the documents placed before us, we have found that in this case in the assessment order neither it has been mentioned that the appellant was ever served any notice or the Assessing Officer has made any agent of the assessee despite the fact that he has accepted the status of the assessee as non-resident. We have further noticed that the assessee in this case has submitted an affidavit solemnly declaring on oath that none of the statutory notices under the repealed Income Tax Ordinance, 1979 or the Ordinance, 2001 for the assessment year 2002-2003 to tax year, 2005 for filing of the Income Tax returns for any of the above said years or for appearance before the tax authorities or for production of any evidence or any documents for these years was ever served upon him personally or through post or messenger or through substituted service. It has further been declared in the affidavit that the assessee had Pakistani and British citizenship and possessed passport from both the countries and in the years under consideration was a non-resident in Pakistan. No rebuttal in this regard has been made on behalf of the respondent-Department despite the fact that similar affidavit was filed before the learned CIT(A).

In view of these facts and circumstances of this case, we, therefore, without going into the merits of the case, vacate the impugned order of the learned CIT(A) on the legal issue of non-service of the notices and the assessment orders passed under section 63 of the Income Tax Ordinance, 1979 for all the four years under review are annulled.

All the four appeals filed by the assessee are allowed.

C.M.A./47/Tax (Trib.)Appeals allowed.