Ch. MUHAMMAD ARIF VS COMMISSIONER OF INCOME TAX COMPANIES ZONE, ISLAMABAD, 2009 PTD-ISLAMABAD 1620 (2009)

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

----S.64---Completion of assessment process---Plea that such process would complete not merely on passing of assessment order, but only after service of such order and demand notice---Validity---Assessment order would be deemed to be made, when Assessing Officer assessed total income of assessee and determined tax payable thereon---Mentioning of tax payable in assessment order not essential, but mere entry thereof in Register by Assessing Officer would be sufficient.

Commissioner of Income Tax and Wealth Tax, Sialkot Zone, Sialkot v. Messrs Thapur (Pvt.), Sialkot 2002 PTD 2112; Ali Akbar v. The State 1969 PCr.LJ 1307; Mian Aftab A. Shaikh and others v. Income Tax Appellate Tribunal 1988 SCMR 50; State of Punjab v. Amar Singh Harika AIR 1966 SC 1313 and Kalyankumar Ray v. Commissioner of Income Tax 1992 PTD 243 ref.

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

----S.156(4)---Period of four years, computation of---Scope---Such period would be computed from date of service of order sought to be rectified.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss.121 & 122(2)(4)---Assessment order---General complaint against Assessing Officer of putting an earlier date on such order---High Court emphasized on legislature to provide safeguard to assessees---Method stated.

There is a general complaint that the Assessing Officer put an earlier order on the order of assessment. High Court emphasized that the legislature should provide a safeguard against it. A provision can be added in the Income Tax Ordinance, 2001 to the effect that the order of assessment passed under section 121 or any order passed under subsection (2) or subsection (4) of S.122 along with notice of demand shall be sent by the Commissioner within 14 days of the order passed through registered post to the assessee and the assessment be considered to have been made or amended on a date deducting 14 days from the date of sending of the order and notice of demand to the assessee.

Hafiz Muhammad Idrees for Petitioner.

Hafiz Munawar Iqbal and Rai Azhar Iqbal and Sarfraz Ahmad, Commissioner Legal, RTO, IBD for Respondents.

Date of hearing: 15th May, 2009.

JUDGMENT

MUHAMMAD MUNIR PERACHA, J.---This judgment shall dispose of Tax References Nos. 61, 66 and 67 of 2007.

2. The following questions of law have been framed by the petitioner:--

"Whether under the law and circumstances of the case the learned income tax appellate tribunal (hereinafter referred as ITAT) was justified in holding the order passed by the Taxation Officer is within time?

Whether under the law and circumstance of the case the order passed within 30th June, 2005 but served after last date of limitation is hit by limitation as prescribed in section 64 of repealed Income Tax Ordinance, 1979 and order of ITAT is against the verdict of superior Court?

Whether under the law and circumstance of the case the word "made" includes the service as given in section 64 of the repealed Ordinance, 1979?

Whether a valid and enforceable order come into existence by only writing and service on the assessee is not essential within limitation provided in section 64 of the repealed Ordinance?"

Whether under the law and circumstances of the case the ITAT was justified in holding that the entries in Register complete the process of assessment whereas the making of assessments includes calculation of income, calculation of tax, passing of order and service of order demand notice on assessee?

Whether under the law the word "made" used in section 64 of the repealed Income Tax Ordinance, 1979 is synonyms to word "passed" used in section 156 of the repealed Income Tax Ordinance, 1979?

It is not disputed that the assessment orders passed by the Assessing Officer bear the date 30-6-2005 and if the passing of the order is treated to be "assessment made" within the meaning of section 64 of the Income Tax Ordinance, 1979, the assessment order is not hit by the limitation. However, the point raised by the learned counsel for the petitioner is that merely passing of the assessment order does not complete the process of assessment and the assessment can be said to be made only when the assessment and the demand notice has been served on the assessee. In this respect, the learned counsel for the petitioner relied on cases, reported as:--

"Commissioner of Income Tax and Wealth Tax, Sialkot Zone, Sialkot v. Messrs Thapur (Pvt.), Sialkot (2002 PTD 2112)"

"Ali Akbar v. The State (1969 PCr.LJ 1307)

"Mian Aftab A. Shaikh and others v. Income Tax Appellate Tribunal (1988 SCMR 50)

"State of Punajb v. Amar Singh Harika, (AIR 1966 Supreme Court 1313)

"Kalyankumar Ray v. Commissioner of Income Tax (1992 PTD 243)"

"Commissioner of Income Tax West Bengal-III v. Balkrishna Malhotra (sic)"

"Commissioner of Income Tax, West Bengal-III v. Mahabir Prasad Poddar) (sic).

3. On the other hand, the learned counsel appearing for the department submits that the "assessment is made" as soon as the order of assessment is passed by the Assessing Officer. Section 64 of the Income Tax Ordinance, 1979 reads as under:--

"No assessment under (section 59A) section 62 or section 63 shall be made after the expiration of two years from the end of the assessment year in which the total income was first assessable.

(2) Notwithstanding anything contained in subsection (1) where a return of total income has been filed after the end of the financial year in which the last date of filing of such a return specified in section 55 falls, no assessment under section 59A, section 62 or section 63 shall be made after the expiration of two years from the end of the financial year in which the said return is filed.

(3) Notwithstanding anything contained in subsection (1), where, for any income years, an assessee has failed to furnish the return of total income no assessment under section 62 or section 63 shall be made after the expiration of two years from the end of the financial year in which notice under section 56, subsection (3) of section 72 or subsection (3) of section 81, as the case may be, was served.

Sections 59-A, 62 and 63 are reproduced:--

"59-A.---(1) If the Deputy Commissioner is satisfied without requiring the presence of the: assessee section 55 is correct and complete, he shall, by an order in writing assess the total income of the assessee and determine the tax payable on the basis of such return.

(2) The provisions of subsection (3) of section 59 shall apply to an assessment determination under this section as they apply to and assessment and determination under that section.

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 accounts as evidence in support of the returns, the Deputy Commissioner shall, before defects in the accounts and provide an opportunity to the assessee to explain, his point of view about such defects and record such explanation and the basis of computation of total income of the assessee in the assessment order.

(2) Whether 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 sub-section (1), the opinion of such person and the reason for his disagreement with such opinion.

(63) Best judgment assessment.--where any person:--

(a) 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 notice issued under sections 58 or 61,

the Deputy Commissioner 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."

In all the three sections mentioned above, a duty has been cast on the Deputy Commissioner to assess the total income of the assessee by an order in writing and determine the tax payable thereon. Recovery of the tax is dealt with by a different chapter, chapter IX. Subsection (1) of section 85 provides that where any tax is payable in consequence of any assessment, the Deputy Commissioner shall serve upon the assessee a notice of demand in prescribed form specifying the sum payable and thereupon the sum so specified shall be paid to the credit of the Federal Government within time specified in the said notice. Additional tax can be charged only if the sum payable is not paid to the credit of the Federal Government within the time specified in the notice of demand. The period of limitation for filing appeal against the order of assessment is provided under subsection (2) of section 130, which provides that where the appeal relates to any assessment or penalty, the period of limitation shall be 30 days from the service of the notice of demand relating to the said assessment or penalty. Learned counsel for the petitioner heavily relied on section 156 of the Ordinance to contend that the rectification order cannot be passed after the expiration of four years from the date of the orders sought to be rectified. He submits that if the assessment order is not served on the assessee, how would he know that the order of assessment requires rectification in terms of section 156 of the Ordinance. On the basis of this, the learned counsel submits that the order of assessment should be deemed to be made only when the order of assessment and the notice of demand is served on the assessee. We invited his attention, to section 160(a) of the Ordinance and his reply was that it would only be applicable while computing the period of limitation for filing of an appeal, an application and the period of four years mentioned in subsection (4) of section 156 cannot be calculated from the date of service of the order sought to be rectified. However, we are of the opinion that if the order of rectification is being made on the application of the assessee, the period of four years should be computed from the date of service of the order sought to be rectified. However, on the basis of this argument we will not hold that the order of assessment is made only when the notice of demand has been served on the assessee. We are of the opinion that the order of assessment is made when the Assessing Officer assesses the total income of the assessee and determines the tax payable thereon. We have been told that in the Register, the total income of the assessee, the permissible deductions, the exemptions, taxable income, 'the liability of income tax, the amount of tax already paid and the balance to be paid is mentioned. On 30th of June every year, the Commissioner of Income Tax signs the said Register and takes it into the possession, excluding the possibility of making the entries later. In Tax Reference Nos.61 of 2007 and 67 of 2007, in the assessment order itself, the income tax determined has been mentioned. However, in Tax Reference No.66 of 2007, only the total income has been given by the Assessing Officer. In case reported as "1992 PTD 243" the Supreme Court of India observed that assessment involves determination of total income as well as tax but both need not be in the same sheet of paper called assessment order. In case reported as "2002 PTD 2112", the High Court of Lahore came to the conclusion that the word "assessment" normally connotes the entire process commencing from the submission of return till the determination of tax liability. The Supreme Court of India also in case reported as "Commissioner of Income Tax v. Balkrishna Malhotra", held that the assessment means determination of the total income and the tax payable. The cited case of "Commissioner of Income Tax v. Mahabir Parasad Poddar", is not on the subject under discussion. The case reported as "1969 PCr.LJ 1307" is distinguishable because in the said case, the judgment was not signed by the judges and only a draft judgment was sent by one judge after his retirement to his companion Judge. Similarly, in case reported as 1988 SCMR 50 it was held by the Hon'ble Supreme Court:--

"Now up to the moment the judgment is delivered. Judges have the right to change their mind. There is a sort of `locus paeniteniae' and indeed last minute alterations often do occur. Therefore, however, much draft judgment has been signed beforehand, it is nothing but a draft till formally delivered as the judgment of the Court. Only then does it crystallize into a full fledged judgment and become operative. It follows that the Judge who "delivers" the judgment, or causes it to be delivered by a brother Judge, must be in existence as a member of the Court at the moment of delivery so that he can, if necessary stop delivery and say that he has changed his mind. There is no need for him to be physically present in Court but he must be in existence as a member of the Court and be in a position to stop deliver and affect an alteration, should there be any last minute change of mind on his part. If he hands in a draft and signs it, and indicates that he intends that to be the final expository of hiss views, it can be assumed that those are still his views at the moment of delivery if he is alive and in a position to change his mind but takes no steps to arrest delivery."

The judgment was not signed by all the members of the bench.

The case reported as "AIR 1966 Supreme Court 1313" was altogether on a different situation, because the order which was being examined by the Hon'ble Supreme Court of India was an order passed with regard to a Government Officer and it was held that such an order would become effective either on publication or communication to the officer concerned.

4. In view of what has been said above, we have come to the conclusion that the assessment order is made within the meaning of section 64 of the Income Tax Ordinance, 1979, when the total income of the assessee and the tax payable thereon is determined by an order in writing by the Assessing Officer. It is not essential that the tax payable should be mentioned in the assessment order. The entry in the register is sufficient.

5. There is a general complaint that the Assessing Officers put an earlier date on the order of assessment. We are, therefore, of the opinion that the legislature should provide a safe-guard against it. A provision can be added in the Income Tax Ordinance, 2001, to the effect that the order of assessment passed under section 121 or any order passed under subsection (2) or subsection (4) of section 122 along with notice of demand shall' be sent by the Commissioner within 14 days of the order passed through registered post, to the assessee and the assessment be considered to have been made or amended on a date deducting 14 days from the date of sending of the order and notice of demand notice to the assessee. A copy of this judgment be sent to the Ministry of Law, Ministry of Parliamentary Affairs and the Federal Board of Revenue. The Tax References stand disposed of.

S.A.K./M-481/Isl.Order accordingly.