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I.T. As. Nos. 26(IB) to 30(IB) of 1985-86, decided on 6th January, 1987.

---S. 56--Assessment--Combined notice issued to assessee in respect of charge years 1975-76 to 1983-84--Such notice in respect of charge years prior to enforcement of Income-tax Ordinance, 1979, i.e. 1975-76, 1976-77, 1977-78 and 1978-79 being illegal, assessments based thereon annulled--Assessments for remaining charge years, being based on such combined illegal notice, held, ab initio illegal.

---Ss. 55, 56 & 65--Assessment--Interpretation of Ss. 56 & 65- Assessments in consequence of a notice issued under S.56 are of no legal consequence--Person not filing return required under S.55 could be called upon under S.56 to file the same--Return contemplated under S.56 is, however, for the current year only--Notice under 5.65 may be issued to assess income in respect of eventualities listed in subsections (1)(a) to (c) of said section- Assessment having once been made under 5.56 for a certain income year, any income having escaped assessment could only be charged to tax by issuing a notice under S.65--Similarly, where for any reason, notice had not been issued under S. 56 for charging to tax income of a current year, it could only be charged to tax under S. 65 as income that had escaped assessment--Interpretation that under S. 56 income of previous years could also be assessed would render S. 65 redundant which could not be intention of Legislature--Order of Appellate Assistant Commissioner annulling assessments based on notice issued under S. 56, and not S. 65, upheld.

--- Section of a statute should be so interpreted as not to render other section on a similar point redundant.

Maqbool Hussain Shah, D.R. for Appellant.

Ejaz Hussain Jaffery for Respondent.

Date of hearing: 6th January, 1987.

These five appeals on behalf of the department are directed against the impugned order of learned A. A. C. by virtue of which he annulled assessments relating to the charge years 197 y-80, 1980-81, 1981-82, 1982-83 and 1983-84.

2. Brief facts giving rise to these appeals are that the assessee who is an individual derives income from the purchase, and sale of timber and manufacture and sale of wooden doors and windows. He filed returns in lianwise income as under:-

3. The I. T. 0. in view of observations recorded in a combined assessment order for the charge years 1975-76 to 1983-84 computed income of the assessee in respect of the charge .years 1979-80, 1980-81, 1981-82, 1982-83-,1983-84, as under:-

4. The quantum of above assessed incomes was contested in appeal before learned A.A.C. who vide Appeals Nos. 239 to 247 dated 28-11-1884, annulled assessments relating to the charge years 1975-76 to 1978-79, on the ground that instead of issuing a notice under section 65 of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance), the I.T.O. issued and served a notice under section 56 of the Ordinance which could only be issued for the charge year 1979-80 and onwards. In so far as assessments relating to the charge years 1979-80 to 1983-84 are concerned, these too, were annulled by learned A. A. C. on the ground that in respect of these assessments notice under section 65 should have been issued and served on the assessee rather than a notice under section 56 of the Ordinance. Another reason given for annulling assessments was that the Income-tax Officer had issued a combined notice under section 56 of the Ordinance in respect of the charge years 1975-76 to 1983-84. It was held by learned A. A. C. that as this notice was illegal in respect of the charge years 1975-76 to 1978-79, it could not be valid for second set of assessments relating to the charge years 1979-80 to 1983-84. The departments having taken exception to these findings of learned A. A. C. as a result of which assessments were annulled for the charge years 1979-80 to 1983-84, filed second appeals before the Tribunal for the redress of its grievances. In this connection, objections of the department are listed below:-

(i) That learned A. A. C. was not justified in annulling assessments for the charge years 1979-80 to 1983-84.

(ii) That learned A. A. C. committed an error in relating on the Indian provisions for annulling assessments, which are markedly different from the Ordinance.

(iii) That learned A. A. C. fell into an error in holding that section 56 of the Ordinance is at par with section 22 (2) of the Repealed Income-tax Act, 1922 (hereinafter called the Act). It was accordingly played that order of the Income-tax Officer in respect of the charge years 1979-80 to 1983-84 may be restored by the Tribunal.

5. On the basis of evidence that has been furnished before me, I find that a combined notice under section 56 of the Ordinance was issued on 11-12-1983, and served on the assessee on 21-12-1983, directing him to file returns of income for the charge years 1975-76 to 1983-84. In compliance thereto, assessee filed returns for these years and was assessed accordingly. However, at first appeal stage, assessments for the charge years 1975-76 to 1978-79 were annulled on the ground that a notice under section 56 of the Ordinance could only be issued after coming into force of the Ordinance, w.e.f. 1-7-1979. On this finding of the Tribunal, department is not in second appeal before the Tribunal. In other words, department has accepted the legal position that a notice under section 56 of the Ordinance in respect of assessment years prior to the assessment year 1979-80 could not be issued. In so far as assessments for the charge years 1979-80 to 1983-84 are concerned, these too, were annulled by learned A. A. C. on the ground that in respect of these assessments notice under section 56 should have been issued and served on the assessee rather than a notice under section 56 of the Ordinance. Learned A. A. C. also held that as notice under section 56 of the Ordinance was illegal in respect of the charge years 1975-76 to 1978-79, it could not be valid for the second set of assessments relating to the charge years 1979-80 to 1983-84. Therefore, based on this additional ground, assessments relating to the charge years 1979-80 to 1983-84 were held to be of no legal consequence and were accordingly annulled. Learned counsel of the assessee in support of the findings recorded by learned A. A. C. has stated that according to scheme of Ordinance section 56 of the Ordinance is at par with section 22 (2) of the repealed Act. Hence, according to him with the object of charging to tax income of the assessee service of notice under section 65 of the Ordinance was a pre-requisite. He has further pointed out that notice under section 56 of the Ordinance having been found illegal in respect of the charge years 1975-76 to 1978-79 could not be legal for the second set of assessments relating to the charge years 1979-80 to 1983-84. He has therefore, made a plea for maintaining order of learned A. A. C.

6. Learned D.R. on behalf of the department has pointed out that section 56 of the Ordinance is markedly different from section 22(2) of the Act. This section for facility of reference is set out below:-

22. Every person whose total income during the previous year exceeded the maximum amount which is not chargeable to tax and every person, whatever his income in the previous year who was assessed to tax for any year within five years preceding that year, shall furnish a return setting forth (alongwith such other particulars as may be prescribed) his total world income during the previous year ....

7. Learned D. R. has stated that under section 56 of the Ordinance the I. T.O. may, at any time by notice in writing, require any person who in his opinion, is chargeable to tax for any income year to furnish a return of total income for such year within 30 days from the date of service of such notice or such longer or shorter period as he specified in such notice or as the Income-tax Officer may allow". He has submitted that the words "any income year" under section 56 of the Ordinance are distinct from "previous year" under section 22 of the repealed Act. He has elaborated this point by stating that while under section 22 of the Act only income of the previous year could be charged to tax, the position is somewhat different under section 56 of the Ordinance under which income of "any income year", could be charged to tax. Therefore, according, to learned D.R. a notice under section 56 of the Ordinance could be issued in respect of escaped assessments of earlier years.

In this case, proceedings were initiated admittedly on the basis of a notice issued under section 56 of the Ordinance on 11-12-1983 and served on the assessee on 21-12-1983. This notice was held to be illegal by learned A.A.C. in respect of the charge years 1975-76 to 1978-79. Consequently, assessments for these years were annulled by learned A. A. C. and department is not in second appeal before the Tribunal on this point. There is thus no matter of doubt left with me that a combined notice under section 56 of the Ordinance issued on 11-12-1983 is illegal for the second set of assessments relating to the charge years 1970-80 to 1983-84. Hence assessments based on this notice are ab initio illegal.

9. Even according to scheme of Ordinance assessments in consequence of a notice issued under section 56 are of no legal consequence as the discussion will establish hereunder. According to section 55 of the Ordinance, every person is required to file voluntarily a return if his income exceeds the maximum amount which is not chargeable to tax for any income year or who has been charged to tax for any of the four income years immediately preceding the said income year. If a return is not so filed, the assessee can be called upon to file it under section 56 of the ordinance. The return contemplated under section 56 of the Ordinance is, however, for the current year only. In so far as section 65 of the Ordinance is concerned, notice under it may be issued to assess income in respect of the eventualities listed from subsections (1) (a) to (1) (c) of the Ordinance. This is set out below for facility of reference:-

"65. If, in any year, for any reason,-

(a) any income chargeable to tax under this Ordinance has escaped assessment; or

(b) the total income of an assessee has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief of refund under this Ordinance; or

(c) the total income of an assessee or the tax payable by him has been assessed or determined under subsection (1) of section 59 and no order of assessment has subsequently been made under this section or any other provision of this Ordinance, the Income-tax Officer may, at any time, subject to the provisions subsections (2), (3) and (4) issue a notice to the assessee containing all or any of the requirements of a notice under section 56 and may proceed to assessee or determine, by an order in writing, total income of the assessee or the tax payable by him, as the case may be, and all the provisions of this Ordinance shall, so far as may be, apply accordingly:

Provided that the tax shall be charged at the rate or rates applicapable to the assessment year for which the assessment is made.

10. Reading the two sections together, it is abundantly clear that while under section 56 only a return for the current assessment can be called from the assessee, under section 65 of the Ordinance, assessee can be asked to file returns of income "if for any reason any income chargeable to tax under this Ordinance has escaped assessment; or total income of the assessee has been under-assessed or assessed at too low a rate or has been subject of excessive relief or refund under this ordinance; or the total income of the assessee or the tax payable by him has been assessed or determined under, section (1) of section 59 and no order of assessment has subsequently been made under this section or any other provision of this Ordinance. At this stage, it is relevant to put on record that as stated earlier through a notice under section 56 of the Ordinance a return for the current year can be demanded from the assessee. This conclusion is based primarily on the interpretation of section 65 subsection (1) clause (a). To elaborate this point, it may be mentioned here that once an assessment has been made under section 56 for a certain income year then any income having escaped assessment could only be charged to tax by issuing a notice under section 65 of the Ordinance. Similarly, where for any reason, notice has not been issued under section 56 for charging to tax income of a current year, it could only be charged to tax under section 65 as Income that had escaped assessment. In arriving at this conclusion, I have sought further support from the fact that a certain section of the statute should be so interpreted as not to render the other section on a similar point redundant. In the present case if I were to interpret that under section 56 incomes of the previous years could also be assessed then it will certainly render section 65 of the Ordinance redundant. This however, could not be intention of the National Assembly. Therefore, in my opinion, section 65 excludes section 56 of the ordinance.

11. Learned A. A. C. while holding that it was necessary to issue notice under section 65 of the Ordinance has relied on scheme of the Indian Income Tax Act while I have based my conclusion on interpretation of the two sections i.e. 56 and 65 of the Ordinance and its scheme according to which income of the assessee for a certain income year is charged to tax.

12. On account of above discussion by agreeing with findings of learned A.A.C. I hereby upheld his order annulling assessments for the charge years 1979-80 to 1983-84. Therefore the departmental appeals being devoid of any merit are hereby dismissed.

S. Q. /356/ T Appeal dismissed.

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