VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 383 (2008)

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

----Ss.56 & 155---Notice for furnishing return of total income---Issuance of single notice for five years---Cause of prejudice---Department contended that by issuance of single notice no prejudice had been caused to the assessee and notice and the proceedings were proper under the provisions of S. 56 of the Income Tax Ordinance, 1979---Validity---Basis of prejudice and the prejudice which had been caused both had been expressed by the Appellate Tribunal in a reported judgment 2005 PTD (Trib.) 234 by making us understand firstly that for each year separate return was to be filed which was to be again assessed as per each year and on the basis of each year, income was to be assessed, that separate tax demand was to be created---Assessee was required to explain 'each year's income separately; it had become clear that single notice had caused a prejudice and S.155 of the Income Tax Ordinance, 1979 had duly referred to the situation where no prejudice was caused---Appellate Tribunal had thus established that issuance of single combined notice had caused prejudice---Word "notice" and the words "assessment year" appearing in S.56 of the Income Tax Ordinance, 1979 meant only the singular and not the plural, because in this very section reading a singular as plural would not be appropriate.

2006 PTD (Trib.) 1862 rel.

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

----S.56---Notice for furnishing return of total income---Objection on the point of issuance of single combined notice under S.56 of the Income Tax 'Ordinance, 1979 after becoming a party by getting completed the assessment proceedings for each independent year---Validity---Assessee in response to a single combined notice under S.56 of the Income Tax Ordinance, 1979 filed returns for each year and had become a party to the proceedings for each year before the Assessing Officer---Requisite details had also been filed for each year and in such a situation no prejudice had been caused---Appellate Tribunal disapproved the issuance of single combined notice but with the participation by the assessee in the assessment proceedings the lacuna had disappeared---Assessee had waived the right to agitate the same---Objection of the assessee in the circumstances was rejected being not tenable and the assessment on the issuance of combined notice was declared to be in order---After becoming a party by getting completed the assessment proceedings for each independent year then objecting on the point of issuance of single combined notice under S. 56 of the Income Tax Ordinance, 1979 would be just a hypertechnical objection because such contention could no longer be justifiable both factually and legally---Assessee had duly submitted details in respect of each year which had been discussed separately and separate tax liability had been created---Little justification thus was left to follow the earlier findings of the appellate Tribunal on the issue in circumstances.

2005 PTD (Trib.) 234 distinguished.

2005 PTD (Trib.) 234; 2006 PTD (Trib.) 1862; (1971) 82 ITR 821; 1995 PTD (Trib.) 1100; PTCL 1996 CL 1(sic); 1986 PTD Trib 314; 1990 PTD 1; 1999 PTD 4037; 1990 PTD 389; 2002 CLD 264 and PLD 1963 Kar 551 ref.

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Gift in kind---Wife of the assessee purchased land and got registered in the. name of assessee---Wife of the assessee made payment directly to the seller and it was not routed through assessee---Addition in the hands of assessee---Deletion of such addition---Validity---No dispute was about payment of purchase consideration through cross cheque by wife of the assessee---One could say that wife of the assessee purchased land, gifted the same to her husband/assessee which meant that the gift was made in kind which did not fall under purview of S. 12 (18) of the Income Tax Ordinance, 1979---Addition was deleted by the First Appellate Authority and Appellate Tribunal maintained such deleting of addition under S.12(18) of the Income Tax Ordinance, 1979 in circumstances.

Shahid Jamil, L.A. for Appellant (in I.T.As. Nos.6477/LB to 6481/LB of 2004).

Siraj-ud-Din Khalid for Respondent (in I.T.As. Nos.6477/LB to 6481/LB of 2004).

Siraj-ud-Din Khalid for Appellant (in I.T.As. Nos.6557/LB to 6561/LB of 2004).

Shahid Jamil, L.A. for Respondent (in I.T.As. Nos.6557/LB to 6561/LB of 2004).

ORDER

Both the Revenue Department as well as the assessee have assailed a single order dated 12-8-2004, where each have taken up its respective issues which are commonly arising in all the impugned years, so common grounds have been set forth for the years in appeal by both regarding its identical issues taken up before us. Sections referred to in this order are of the Repealed Income Tax Ordinance, 1979.

2. The department is commonly contesting the reduction in transport business income receipts as not proper in the year under appeal. Contesting the deletion of addition under section 12(18) solely exists in assessment year 2000-01. The appellant/assessee is mainly contesting the simultaneously holding valid as well as void ab initio the assessments by ignoring own clear cut findings on noticing the legal defect of combined notice under section 56 for all the impugned years and also thereafter single notice under section 61. The appellant/assessee has also contested the reduction in income as yet not sufficient.

3. Patently and undisputedly facts in brief of the case are that a single combined statutory notice under section 56 was issued. Thereafter single statutory notices under section (s) 58 (1) and 61 for all the impugned years have also been in the same manner issued i.e. single notice for all the impugned years.

4. Before us the learned AR at very outset of his arguments drew the attention to the following para of the learned First Appellate Authority's order:--

"After perusal of assessment record, and following the above citations, it is held that statutory notice under section 56 of the Income Tax Ordinance, 1979 should have been issued separately for each year which has not been done. As proceedings have been initiated on the basis of invalid notices which is against law and ab initio void. "

The learned AR by referring the para. reproduced supra has forcefully submitted that the learned first appellate authority after categorically so recording the findings has expressed it very clearly where any subsequent deviation could not be possible. The learned AR has also referred to orders of this Tribunal as 2006 PCTLR 12 Lah. (Trib.) and (2004) 90 Tax 36 (Trib.) to support the contention that issuance of single combined notice for all the years has made the assessments as illegal. The learned AR from the order cited as (2004) 90 Tax 36 (Trib.) has read out paras 6 & 7. The learned AR has also read out paras. from the other order of this Tribunal where in respect of wealth tax proceedings against the present assessee/appellant for framing the wealth tax assessment a single combined notice under section 17 of the Wealth Tax Act was issued, as a result of it the assessment framed were annulled by the Tribunal. The learned AR has further elaborated his arguments by firstly submitting that it is by issuing separately single notice under section 56 for each impugned assessment year that proper lawful assumption of jurisdiction for exercising authority and for conducting the proceedings could be legally possible, so when the assumption of jurisdiction by when singly issuance of notice under section 56 has been done then exercise of authority, the proceedings and the order should be declared null and void. The learned AR by referring to following citations with the findings in brief has drawn the support that in a situation like the instant case the defect in jurisdiction caused by a single notice under section 56 then the assessment order is liable to be declared as null and void--.

(i) "If the notice issued is invalid for any reason, the entire proceedings taken are void;

(1971) 82 ITR 821 (SC Ind.) and 1995 PTD (Trib.) 1100.

(ii) Order without jurisdiction---such order along with super-structure must fall to ground.

PTCL 1996 CL 1 (HC Lah.)(sic)

(iii) Combined notice for several years not valid. 2006 PTD (Trib.) 1862 and 2005 PTD (Trib.) 234.

(iv) Jurisdiction cannot be given by consent and filing or return is not a waiver.

1986 PTD (Trib.) 314; 1990 PTD 1; 1999 PTD 4037; 1990 PTD 389.

(v) Jurisdiction provisions are mandatory and cannot be waived. (1978) 113 ITR 22

(vi) Where the basic order was without jurisdiction then the super-structure raised thereon would fall to ground auto matically.

2002 CLD 264.

(vii) Jurisdiction includes assumption & exercise of jurisdiction. PLD 1963 Kar. 551"

The learned AR also produced before us photostat copies of statutory notices issued under sections 56/58 and 61 which are single but are in respect of all the impugned years.

5. The learned Legal Advisor has supported the issuance of single combined notice with the submission that it being merely a defect in the form of notice do not vitiate proceedings supported this contention by reading out the provisions of section 155 of the repealed Income Tax Ordinance, 1979. The learned LA has submitted that in the earlier order of this Tribunal, the findings have been recorded by not taking into consideration the provisions of section 155 ibid so it is a matter of first impression where this Tribunal is to express itself by recording findings. The learned LA has specifically pointed out as to how the expressed findings in para. 7 of the order cited as (2004) 90 Tax 36 (Trib.) could be ignored. The learned LA submitted that by issuance of a single notice no prejudice has been caused to the appellant/assessee so notice and the proceedings are proper under the provisions of section 56 ibid.

6. On this preliminary legal issue we have heard both sides and also perused the relevant record available on file. The orders as cited before us have minutely been studied by us. We have gone through the provisions of section 56 as well as of section 155 of the repealed Income Tax Ordinance, 1979. This Tribunal in the order cited as (2004) 90 Tax 36 (Trib.) has recorded the clear cut findings while disposing of reference application filed on behalf of Revenue. For convenience relevant portion from page-7 of this cited order is being reproduced as under:--

"However, in our judgment, just as an assessee is required to file return of income separately for each year so it is that statutory notice should also be issued separately for each year. Thus, where an assessee in required to file returns of income for eight years, the assessee cannot disclose lump sum income for eight years but has to bifurcate his income for each year separately and file separate returns of income on a yearly basis. The law as propriety requires that the Assessing Officer compute income separately for each year even when a consolidated order of assessment is passed. By calling on the assessee to file returns for eight years through a single notice followed by notice under section 61 for a similar period, the assessee is caused prejudice insofar as the assessee may feel constrained to explain the income arising in these eight years in a single appearance before the assessing officer. Imagine the assessee discomfiture in an accounts case where accounts and supporting documentation for many years have to be produced before the Assessing Officer on a single date for which a combined notice has been issued. This is certainly not which statute contemplates. The text of the statute [section 56 of the repealed Income Tax Ordinance, 1979] unequivocally refers to assessment in the singular. Nowhere in the statute is `assessment' referred to in the `plural'. We are aware that think it appropriate to read the provisions in this manner here."

The relevant para. as produced supra has properly dealt with the first objection of the learned LA that earlier by referring to the provisions of section 155 the matter has not been dilated upon. As per underlined portions of reproduced para supra the basis of prejudice and the prejudice which has been caused both have been expressed by the learned Division Bench by making us understand firstly that for each year separate return is to be filed which is to be again assessed as per each year and on the basis of each year, income is to be assessed, that separate tax demand is to be created. Thus the assessee is required to explain each year's income separately. So with such findings it has become clear that single notice has caused a prejudice and section 155 has duly referred to the situation where no prejudice is caused. In this cited case the Tribunal has established that issuance of single combined notice has caused prejudice. The other issue which has been dealt within this cited order of the Tribunal is firstly that the word "notice" and the' words "assessment year" appearing in section 56 meant only the singular and not the plural, because in this very section reading a singular as plural would not be appropriate.

7. In the instant case before us the assessee in response to a single combined notice under section 56 has filed returns for each year and has become a party to the proceedings for each year before the Assessing Officer the requisite details have also been filed for each year so keeping in view the facts, we do not find any justification to agree with the contentions that any prejudice has been caused in this very instant case as per facts which are on record. We deprecate and also not approve issuance of single combined notice but with the participation by the assessee in the assessment proceedings the lacuna has disappeared. The appellant/assessee has waived the right to agitate the same. So in this very instant case we do not find any illegality on subsequent joining the proceedings by the appellant/assessee. The objection of the learned AR being not tenable which is rejected and the assessment on the issuance of combined notice has to be declared in order. After becoming a part by getting completed the assessment proceedings for each independent year then objecting on the point of issuance of single combined notice under section 56 would be just a hyper-technical objection because such contention could no longer be justifiable both factually and legally. The assessee has duly submitted details in respect of each year which have been discussed separately and separate tax liability has been created. Then for us little justification is left to follow the earlier findings of this Tribunal on this very issue.

10(sic) As far as deciding the case on merit we have heard both the parties on the issue of addition under section 12(18) where undisputedly the transaction by transfer of amount through cheques/banking channel has taken place. The cheques have been issued by the appellant/assessee's wife to the seller of the property. It was by subsequent mutation dated October, 2001 that impugned land became the property of wife of the appellant/assessee. Admittedly the consideration for purchase of land has passed on through banking channels which fact has been not denied by the Assessing Officer. The learned first appellate authority by recording the following findings has deleted the addition:--

"As regards the addition amounting to Rs.23,330,000 under section 12(18) of the repealed Income Tax Ordinance, 1979, it is observed that the contention of the appellant that his wife namely Mst. Haleema Asia purchased agricultural land measuring 12 Acres agir. Land at Chak No.14/NP Tehsil Sadiqabad and got registered in the name of appellant for seeing issues like possession and pre-emption. On the other hand the plea of the learned Taxation Officer is that the land is owned by the appellant as he admitted before the Honourable Court of 1st class Civil Judge, Sadiqabad in the pre-emption suit No.391. Further, the appellant is earning income from such land as the same has been shown in wealth reconciliation statement. He added Rs.23,330,000 under section 12(18) of the repealed Income Tax Ordinance, 1979 as the appellant's wife made payment directly to the seller and it was not routed through assessee, hence, it is obvious that there is no dispute of payment of purchase consideration through cross cheque by wife of the appellant. The AR of the appellant also produced the copy of agreement between wife and husband. According to which the wife purchased land measuring 127 Acres and got the same registered on the name of appellant.

After the perusal of documentary evidence produced by the appellant, case law referred and office record of the Circle-25, Rahimyarkhan it is established that wife of the appellant purchased said land and got registered in the name of appellant. In other words, we can say that she purchased said land and gifted the same to her husband which means the gift was made in kind which did not fall under the purview of section 12(18). Therefore, addition amounting to Rs.23,330,000 is hereby deleted."

10-A. So keeping in view the discussion supra and also reasons as recorded in the impugned order we maintain the deleting of addition under section 12(18). 'As far as estimation of business income is concerned which is yet to be excessive so it is reduced to Rs.45,000 of every year under appeal.

11. The departmental appeals as well as assessee's appeals are disposed of as above.

C.M.A./4/Tax(Trib.)Order Accordingly.