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I. T. As. Nos. 1168 to 1176/ KB of 1982-83, decided on 8th November, 1984.

---Ss. 61. 56 & 63--Notice--Service--Mode of service by affixation=-Held, before ordering service by affixation it was incumbent upon the Income-tax Officer to establish that the address on which he wanted the notice to be affixed was really place of residence or business of the assessee--Income-tax Officer was duty bound to record a finding that assessee was avoiding service of notices--Where no such finding was recorded by the Income-tax Officer, he was not justified in taking resort to the mode of service by affixation.

C. I. T. v. M. I & S. Ws. (1949) I T R 478; (1970) 77 I T R 954: (1967) 66 I T R 414; (1957) 32 I T R 393; (1963) 47 1 T R 775; (1965) 58 I T f 419; 1984 P T D (Trib. ) 143; 1982 P T D 73 and (1970) 77 I T R 954 ref.

---S. 129--Appeal--Limitation--Notice by affixation on not permanent address of assessee who actually was living abroad at relevant time- Assessee's affidavit in this respect not controverted by Department-- Service of demand notice and assessment order was to be taken to have been effected when the copies of same were received by the asses see--Period of limitation started running from the day when said copies were received by the assessee.--[Limitation].

(1957) 32 1 T R 393; (1963) 47 I T R 775; 1984 P T 1) (Trib.) 143 and 1982 P T D 73 ref.

---S. 131--Ex parte assessment-- Assessee not present at time of assessment because of irregular service of notice--Where tile case of assessee was that no notice was ever served on him, naturally he could not have been in a position to adduce evidence before Income-tax Officer, Appellate Assistant Commissioner, held, rightly admitted evidence produced before him and his decision based upon such evidence was sustainable in law--Appellate Assistant Commissioner is debarred from admitting any documentary material or evidence which were not produced before Income-tax Officer unless he was satisfied that the assessee was prevented by sufficient cause from producing such material or evidence before Income-tax Officer.

---S. 13--Deemed income--Before an assessing officer can add income under S.13, he has to seek prior approval of the Inspecting Assistant Commissioner--Where the assessing officer failed to obtain such approval, he cannot be permitted to cover up his negligence or deficiency by taking resort to general provisions of law.

(1981) 43 Tax 18 (SC) distinguished.

Muhammad Farid, D.R. for Appellant.

Muhammad Naseem for Respondent:

Date of hearing: 4th November, 1984.

These departmental appeals are directed against the order of learned Appellate Assistant Commissioner recorded on 8th January, 1983, in Income-tax Appeals Nos. 3799, 3800 and3082 of 1982 and recorded on the same date in Income-tax Appeals Nos. AAC (D) 3804, 3806 and 3807 of 1981. I propose to deal with all these appeals by a consolidated order, as similar points of facts and law are involved in all the appeals

2. The brief facts giving rise to these appeals are that the Department learnt that the respondents, husband and wife and hereinafter referred to as 'respondents Nos. 1 and No. 2, had purchased two plots of land bearing Nos. D/84/4 and D/88/4 in Scheme 5 at Clifton, Karachi, in their respective names. The Department learnt on 29th June, 1981 that respondent No. 1 had purchased aforesaid plot on 9th June, 1976. A notice under section 56 was, therefore, issued. Since respondent No. 1 was not contactable at the given address, the service was effected by the Inspector by affixation. Subsequently, on 23rd July,. 1981, notice under section 61 was issued which was against served on 25th July, 1981 by affixation as the respondent No. 1 was not available. Subsequently, the Income-tax Officer, as a matter of abundant precaution, issued yet another notice under section 61 on 6th August, 1981. It was again served by affixation and when no body turned up on 12th August, 1981, which was the date fixed the Income-tax Officer framed assessment under section 63 of the Income-tax Ordinance, hereinafter referred to as "the Ordinance". Following the assessment order a demand notice was issued on 16th August, 1981. Let me point out here that the notice issued was regarding assessment years 1976-77, 1977-78, 1978-79 and 1980-81 and the Income-tax Officer assessed income of the respondent No. 1 at Rs.60,000 for the assessment year 1976-77 and Rs.50,000 in all subsequent assessment years.

3. Similarly, on 26-9-1981, it transpired to the Department that respondent No. 2 had purchased the plot mentioned above on 9-9-1976. Consequently, the Income-tax Officer issued notice under section 56 for assessment years 1977-78, 1978-79, 1979-80 and 1980-81. Since the respondent No. 2 was not available on the given address, the notice was served by affixation on 15th July, 1981. Thereafter on 23rd July, 1980 notice under section 61 was issued which was again served by affixation for the same reason. The Income-tax Officer again, by way of abundant precaution issued yet another notice under section 61 of the Ordinance, which was again served by affixation. Since respondent No. 2 failed to turn up on the date fixed the Income-tax Officer framed assessment under section 63 of the Ordinance, assessing the income of the respondent No. 2 in assessment year 1977-78 at Rs.60,000 and at Rs.50,000 in each subsequent assessment year. In his case also the demand notice was issued.

4. Now, before the properties of the respondents could be attached and sold in the public auction both the respondents not only filed appeals against the ex parte assessment orders but also filed Constitutional Petitions bearing No. 1126/81 and No. 1127181 in Sind High Court at Karachi, whereby they sought the stay of the recovery of the tax till disposal of their departmental appeals.

5. The learned Appellate Assistant Commissioner before whom the assessment orders were attacked on multiple grounds, allowed the appeals of both the respondents and cancelled the assessments against both the respondents. Having been aggrieved and dissatisfied the Department has come up in appeal before me.

6. Mr. Muhammad Farid, the learned Department Representative in support of the departmental appeals firstly contented that all appeals were time-barred. Inviting my attention to section 130 of the Income-tax Ordinance, the learned Departmental Representative pointed out that all the appeals should have been filed within 30 days from the date of the service of the notice of demand relating to assessment, which, according to the learned Departmental Representative, were served on 16th August, 1981, whereas the appeal was filed on 1st November, 1981. The learned Departmental Representative further argued that if the respondents were out of time, they should have moved application for condonation of delay on which the learned Appellate Assistant Commissioner should have recorded his finding. In order to fortify his submission the learned Department Representative referred to C.I.T. v. M. I. & S.Ws. (1949) ITR 478. Referring to the impugned order the learned Departmental Representative submitted that the learned Appellate Assistant Commissioner had failed to record his finding that the appeals were not barred by time.

7. Mr. Muhammad Naseem appearing for the respondent, on the contrary, vehemently argued that both the impugned orders of learned Appellate Assistant Commissioner were unexceptionably sound. Referring to the affidavits filed by the respondent in Constitutional Petitions Nos. 1126 of 1981 and 1127 of 1981, the- learned counsel for the respondents submitted that on 11th October, 1981 the respondents received the information, for the first time, about the assessment proceedings and the demand notice. According to Mr. Naseem the respondents on 15th October, 1981 instructed the brother-in-law of respondent No. 1 to make necessary enquiries, who, subsequently, learnt about the ex parte assessment and the circumstances under which both the assessment order were framed. Subsequently, on 19th October, 1981 the application for copies was moved and the necessary fees was paid accordingly. The learned counsel added that on 24th October, 1981 the copies were received and subsequently, on 1st November, 1981 the appeal were filed. On these facts the learned counsel submitted that the period of limitation started running from 24th October, l98; when copies were received. Hence, appeals were filed well within time, Turning to the service of the notices at various stages of both the cases Mr. M. Naseem vehemently contended that before the service by affixation could be effected the Income-tax Officer should have positive knowledge regarding place of residence, or business, on which the assessee was to be served. In this connection he relied upon (1970) 77 ITR 954, and (1967) 66 ITR 414. Mr. M Nasseem next contended that it was incumbent on Income-tax Officer to obtain evidence on avoidance of service of notice by the assessee before he could order the service to be effected by affixation. In support of his contention he referred to (1957) 32 ITR 393 and (1963) 47 ITR 775. Mr. M. Naseem, the learned counsel for the respondent then turned to the report of Inspector who effected the service all the time and reading from his report of 19th July, 1981 argued that after the knowledge that the respondents were not living in Pakistan, the service by affixation became meaningless. In support of this proposition he relied upon (1965) 58 ITR 419. In order to fortify the submission that his both the appeals were well within time, he further relied upon 1984 PTO (Trib.) 143 and .1982 PTD 73.

8. I have heard both the learned Departmental Representative and the counsel for respondents at length and I am of the view that learned Appellate Assistant Commissioner rightly held that the appeals were within time. The report of the Inspector of 19th July, 1981 as reproduced by learned Appellate Assistant Commissioner reads:-

Before her marriage with Mr. Talat Saeed the lady was working with Travel Centre, PIA Building. Karachi. It appears that she remained and worked in Pakistan till 1976-77.

Similarly, his report dated 9th July, 1981 regarding respondent No.l is as follows:-

"His sources of income in Pakistan are not known assessees standard of living in Pakistan was high."

Thus, it is clear that the Department knew very well that both the respondents were not living in Pakistan in 1981. In this connection the affidavits sworn by the respondent in the Constitutional Petitions, mentioned above, were also produced before the learned Appellate Assistant Commissioner alongwith some other documents from the employers of both the respondent duly countersigned by the Embassy of Pakistan to show that both the respondents were holding British Passports and that the respondent No.l was settled in England after her marriage with respondent No.2 in March 1977. The duly attested certificates further show that respondent No. 2 came to Pakistan in 1977 for a very short duration and for the purpose of his marriage. It is thus established by ever-whelming evidence that both the respondents were not in Pakistan. As such, the service of notices by affixation was meaningless. I think Mr. Naseem has rightly relied upon (1965) 58 ITR 419. Similarly, there is nothing on record to show that the respondents were living at the address where the service by affixation was effected. Mr. Muhammad Farid, it is true, pointed out that the notices were issued to the address, which was mentioned by the respondent in tile documents whereby they were transferred the plots of land mentioned above. However, I do not think that it is enough particularly in vie": of indisputable evidence produced before the learned Appellate Assistant Commissioner and the report of the Inspector. Following (1970) 77 (1TR) 954 and (1967) 66 ITR 414, I am of the view that before ordering the service by affixation it was incumbent upon the Income-tax Officer to establish that the address on which he wanted the notices to be affixed were really place of residence or business of the respondents. It all the more became necessary in view of the report of the Inspector. Similarly, in view of (1957) 32 ITR 393 and (1963) 47 ITR 775, it was the duty of the Income-tax Officer to record a finding that the respondents were avoiding service of notices. Hence he was not justified t in taking resort to the mode of service by affixation, which he did. As such, I am of the view that the period of limitation did not start running from the date when demand notice was served by affixation of service as contended by the learned Departmental Representative. On the contrary, there is the indisputable evidence in shape of affidavits duly sworn by the respondents in the Constitutional Petitions as mentioned above, which have not been controverted by the Department, although the Income-tax Officer was respondent in those proceedings. Thus, from this uncontroverted piece of evidence the service of demand notice and assessment order is to be taken to have been effected on 24th October, 1981, when the copies of the same were received. With due respect, I think that the period of limitation started running from this date. Hence, the appeal filed on 1st November, 1981 is well within time. Please see 1984 P T D (Trib.) 143 1.982 PTD 73. Thus, I am of the view that the appeals have been rightly entertained by the learned Appellate Assistant Commissioner. The first condition of Mr. Muhammad' Farid is, therefore, rejected.

9. The next point argued by the learned Departmental Representative was that the learned Appellate Assistant Commissioner erred in allowing all sorts of evidence to be adduced before him, which he never disclosed to the assessing officer. With due respect, I do not find any force in this submission as well. From the perusal of impugned orders it appears that the learned Appellate Assistant Commissioner served the Income-tax Officer with notices twice by taking abundant precaution. The Income-tax Officer himself did not elect to attend and resist or controvert the' evidence produced by the respondents before the learned Appellate Assistant Commissioner. Moreover, under section 131 of the Ordinance, the learned Appellate Assistant Commissioner is debarred from admitting any documentary material or evidence, which were not produced before the Income-tax Officer unless he is satisfied that the appellant was prevented by sufficient cause from producing such material or evidence before the Income-tax Officer. Since it is the case of both the respondents that no notice was ever served on them, naturally they could not have been in position to adduce any evidence before the Income-tax Officer. Under the facts and circumstances of the case, think the learned Appellate Assistant Commissioner rightly admitted the evidence produced before him and his decision based upon it is sustainable in law.

10. The next argument of the learned Departmental Representative was regarding the observation of learned Appellate Assistant Commissioner about the jurisdiction of the assessing officer. Mr. Farid, the learned Departmental Representative pointed out that vide Notification No. Jud. 3(1)/S2/81-82/598, dated 8th August, 1981, the Commissioner of Income-tax (Appeals) had assigned the jurisdiction to the assessing officer. Mr. Muhammad Naseem, on the contrary, argued that as far as respondent No. 1 was concerned, she was assessed on Pith June, 1977 by Assistant Income-tax Officer of Salaries Circle-8, for assessment year 1976-77 and subsequently for assessment year 1977-78, she was again assessed by the same assessing officer in June, 1978. According to him the learned Commissioner of Income-tax (Appeals) who allegedly vested jurisdiction in the assessing officer was himself lacking it. Regarding respondent No. 2 tie submitted that the assessing officer had no jurisdiction as lie had not earned any income in Pakistan in any of the relevant assessment years. I think, here against the submission of Mr. Muhammad Naseem carries much weight, since respondent No.1 was already an assessee in salaries Circle, the same assessing officer would have assumed jurisdiction to issue notices. Similarly, the assessing officer could not have any jurisdiction regarding a person who was neither a resident nor otherwise deriving any income in this country.

11. The learned Departmental Representative finally submitted that the order of learned Appellate Assistant Commissioner should be modified and the cases be set back to Income-tax officer for further investigation. Mr. Muhammad Naseem, of course, vehemently opposed this submission as well. I have given my very careful consideration to this aspect. From the perusal of the impugned order regarding respondent No.2, I noted that two challans were produced before the learned Appellate Assistant Commissioner to show that Rs.15,000 were paid on 24th November, 1975 and again on 19th March, 1976, whereas it was also contended before him that the respondent invested Rs.30,000 in buying the plot mentioned above from his earnings abroad and from money received from his fattier, who was well to do person, and money received on account of his marriage. His marriage admittedly was solemnised in March, 1977. Hence, he could not have obtained its.30,000 or even part there of from his in-taws when he paid Rs.30,000 on 24th November, 1975 and March 19, 1976 wherefrom he obtained this money is still a question to be probed into. Similarly, the question as to whether respondent No. 1, or for that matter both the respondents, had or have any source of income in Pakistan, remains open to the assessing officer in spite of the disposal of these appeals. He would not be precluded from discovering any concealed income and then initiating tile proceedings under section 65 of the Ordinance, No doubt, initially I was very much inclinded to send both the cases back to the assessing officer for further investigation, but I found so many insurmountable obstacles which, in my opinion, the Income-tax officer could not have: jumped over. I thought it better to allow the order of learned Appellate Assistant Commissioner to attend keeping into consideration the legal position that the Department was not prejudiced in any way as far as the proceedings under section 65 of the Ordinance are concerned. Let me mention also at this stage that the submission of Mr. Muhammad Farid that in view of Mrs. Samina Shaukat Ayub Khan's case, (1981) 43-TAX 18 (Supreme Court), the Income-tax Officer had jurisdiction to make addition under general provision of law. With due respect to him, Samina Shaukat Ayub Khan's case is not an authority for the proposition that in fact of violation of the specific provision of law, the Income-tax Officer can take resort to the general provision of law. To be more precise, section 13 of the Ordinance has dealt with deemed income and before an assessing officer can add income under that section, he had to seek prior approval of the Inspecting Assistant Commissioner. If he has failed to do so, he cannot be permitted to cover up his negligence or deficiency by taking resort to the general provision of law. The Supreme Court has not considered this question all. But, otherwise there is plethors of case law both from Indian as well as Pakistani jurisdiction and both under tile old and new Income-tax Law.

12. In view of the discussion made above, I find san force in all these departmental appeals and, consequently they stand rejected.

M. B. A. /359/T Appeals dismissed.

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