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I.T.A. No. 471/IB/80-81, decided on 12th October, 1986.
---Appeal before Tribunal--Question of law--Appellant allowed to argue a point on question of law notwithstanding the fact that it was not taken up before Appellate Assistant Commissioner.
---S. 64 [as amended by Finance Ordinance (XII of 1982)]--Object of amendment.
Section 64 of the Income-tax Ordinance, 1979 as originally enacted and after its amendment read together, leads to the inescapable conclusion, that amendment was brought in section 64 with the object of removing a lacuna which did not permit the making of an assessment if return of income was filed after the expiry of two years from the end of the year in which the income was first assessable. Whereas in the amended section subsections (1) and (3) contain provisions of the originally enacted section, subsection (2) of the amended section provides that assessment in cases where return is voluntarily filed after due date would be made within two years from the end of the Financial year in which the said return is filed.
---S. 64 [(as amended by Finance Ordinance (XII of 1982)]--Provisions of S. 64 (as amended) are applicable prospectively.
Ghulam Sarwar Chaudhry for Appellant.
Maqbool Hussain Shah, D.R. for Respondent.
Date of hearing: 12th October, 1986. .
--This appeal on behalf of the assessee is directed against the impugned order of learned Appellate Assistant Commissioner in consequence of which he reduced estimate of turnover from Rs.2,70,000 to Rs.1,50,000.
Brief facts giving rise to this appeal are that the assessee who is an individual derives income from running a brick kiln. He filed a return to disclose net profit of Rs.12,200 under the self-assessment scheme. The Income-tax Officer on his part, in view of circular No.3 of the C.B.R., set apart this case for assessment under subsection (3) of section 23 of the repealed Income-tax Act, 1922. In consequence thereof net income of the assessee was determined at Rs.90,000. In this connection computation of net income as adopted by the I. -T.O. is set out below:----
| Capacity of the kiln is taken at | 3,00,000 |
| Total bricks burnt in a year by burning 4 rounds | 12,00,000 |
| Less wastage and Bhatta consumption on estimate as it was the first year of business | 1.20,000 |
| Balance bricks sold | 10,80,000 |
| Sale rate is applied at Rs.250 per thousand. Total sales 10,80,000 x 250/1,000 = Rs.2,70,000 | |
| Net profit @ 33-1/3% is applied as in other parallel cases | Rs. 90 , 000 |
3. Income as assessed above was contested in appeal before the learned A.A.C. who by virtue of Appeal No. 826 , dated 10-2-1981 reduced the estimate of turnover from Rs.2,70,000 to Rs.1,50,000. As the assessee did not feel satisfied with the adequacy of relief he filed second appeal before the Tribunal for the redress of his grievances. In this connection objections of the assessee are listed below:
(i) that the quantum of assessed income in relation to capital employed in the business was excessive even after relief allowed by learned A. A. C.
(ii) that learned A.A. C. committed an error in not giving a finding in respect of net rate of profit which was also agitated in appeal before him.
4. At this stage it is relevant to mention here that the assessee raised an additional ground of appeal which is set out below:
"that as at the relevant time there was no provision for making assessment for the charge year 1976-77 pursuant to a voluntary return after the expiry of 2 years from the end of the year in which the income was first assessable, assessment so made for the charge year 1976-77 was ab initio void."
5. Since question raised by the assessee refers to a question of law we have allowed learned counsel of the assessee to argue it notwithstanding the fact that it was not taken up before the learned A.A.C. In support of additional ground of appeal learned counsel of the assessee has drawn our attention to para. 11 of Circular No.8 of 1982. This para. for facility of reference is incorporated below:
"A person can voluntarily file return of income for any of the past years. In the present law, however, there was no provision for making an assessment if such return was filed after the expiry of two years from the end of the year in which the income was first assessable. In order to remove this lacuna section 64 has been redrafted. Subsections (1) and (3) contain the old provisions. Subsection (2) lays down that assessment in cases where return is filed voluntarily after due date would be made within two years from the end of the financial year in which the said return is filed." '
6. Before we proceed further it is desirable to refer to section 64 of the Income-tax Ordinance, 1979 before its amendment by virtue of Finance Ordinance, 1982:-
"64. Limitation for assessment.-- No assessment under section 62 or section 3 shall be made after the expiration of two years from the end of the assessment year in which the total income was first assessable:
Provided that where for any income year, an assessee has failed to furnish the return of total income under section 55, the said period of two years shall commence 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."
7. The above section after its amendment by virtue of Finance Ordinance, 1982 reads as under:---
"64. Limitation for assessment.-- No assessment under 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 under section 55 has been filed after the end of the financial year in which the last date of filing of such return specified in that section falls 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 the said return is filed.
(3) Notwithstanding anything contained in subsection (1), where, for any income year, 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.
8. Section 64 as originally enacted and after its amendment read together, have led us to the inescapable conclusion, that amendment: was brought in section 64 with the object of removing a lacuna which, did not permit the making of an assessment if return of income was filed after the expiry of two years from the end of the year in which the income was first assessable. Whereas in the amended section subsections (1) and (3) contain provisions of the originally enacted section, subsection (2) of the amended section provides that assessment in cases where return is voluntarily filed after due date would be made within two years from the end of the financial year in which the said return is filed. As present assessment relates to the charge year 1976-77 it is governed by section 64 of the Ordinance as originally anacted.
9. In this case the assessee filed his return voluntarily vide Entry No. 1083, dated 20-12-1979. Therefore, proviso to section 64 of the Ordinance as originally enacted is inapplicable in respect of the charge year 1976-77. In this view of the matter assessment for the charge year 1976-77 could only be made by 30-6-1979 while it was finalized on 17-7-1980. Hence, assessment for the charge year 1976-77 is ab initio illegal as amended section 64 of the Ordinance is applicable prospectively. Therefore, appeal of the assessee succeeds on a preliminary legal objection.
10. The assessee having succeeded on a preliminary legal objection, it is not necessary for us at this stage to give a verdict on the other grounds of appeal agitated by him before us.
M.B.A. Order accordingly.
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