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I.T. As. Nos. 136 to 143/IB of 1985-86, decided on 17th November, 1986.

---S 61--Income-tax Officer made assessment ex parte on 12-12-1984 vide order-sheet entry of the same date but through an oversight in his own handwriting he mentioned the date of completion of assessment as 7-12-1984 instead of 12-12-1984--Assessment framed on 12-12-1984, held, could not be said to be illegal on account of such mistake.

---Ss. 65 & 56--Escaped assessment--Notice under S. 65 a prerequisite for making assessment in accordance with law--Where such notice was not issued and instead assessment was finalised for default of a notice under S. 56, assessment so made, held, was illegal in the eye of law.

(1984) 49 Tax 34 (Trib.) and I.T.A. No. 254/IB/83-84 ref.

---Ss. 65, .56 & 61--Escaped assessment--Simultaneous issue of notice under Ss. 56 & 61--Assessment made after such notices, held, was illegal.

---Ss. 56 & 61--Notice under S. 61 could only be issued where assessee had filed return of total income for any income year or upon whom a notice had been served to furnish such return--Where assessee had not filed a return in response to notice under S. 56, a notice under S. 61 could not be served on such assessee-=Where assessee was also not served with a notice under S. 56 calling upon him to file a return of his total income, service of notice under S. 61 was illegal on this count as well--Notice under S. 61 is required to follow notice under S. 56--Where both the notices are under S. 56 and the other under S. 61 were issued simultaneously and that too for eight years through .one notice only, such notices, held, were not issued in accordance with law and were thus ab initio illegal--Assessments resulting from such notices would be of no legal consequence in the eye of law Tribunal annulled said assessments.

---Ss. 56 & 61--Consolidated notice under S. 56 issued to assessee for 1976 to 1984--Consolidated notice under S. 56, after it has been held to be illegal for charge years 1976-1977, 1977-1978 and 1978-1979, held, would also cease to be legal for rest of the years--Assessment of such years would also be annulled accordingly.

Javed Ahmed Qureshi for Appellant.

Maqbool Hussain Shah, D.R. for Respondent.

Date of hearing: 17th November, 1986.

These eight appeals on behalf of the assessee are directed against the impugned order of learned A. A. C. by virtue of which he set aside assessments relating to the charge years 1976-77 to 1983-84.

2. Brief facts giving rise to these appeals are that the case of Messrs Khalid & Co., B. K.O. was started on the basis of a communication slip received from the I.T.O. Survery and Collation, Sargodha. In consequence thereof, to start with notices under section 56 and section 61 of the Income-tax Ordinance, 1979 (hereinafter called the Ordinance, were issued. As compliance to these notices was not made by the assessee, fresh notices under section 56/61 of the Ordinance were again issued on 11-3-1982. These notices were received back unserved. Thereafter notice under section 65 of the Ordinance for the charge years 1976-77 to 1981-82 was issued on 12-11-1984 and got served on the assessee through Circle Inspector on 13-11-1984 in the presence of two witnesses. At this stage it is relevant to put on record that for default of the notice under section 65 for the charge years 1976-77 to 1981-82 action under section 63 of Ordinance was not taken against the assessee. Instead the I.T.O. again ordered issue of notice under section 56 of the Ordinance for the charge years 1976-77 to 1984-85. Simultaneously notice under section 61 of the Ordinance for the production of books of accounts, etc was also issued in respect of the said years for presence on 12-12-1984. It is, however, interesting to put on record that the impugned assessments were finalized on 7-12-1984 i.e. before the due date on which the assessee was required to be present for hearing. Proceeding under section 63 of the Ordinance income of the assessee for the charge years 1976-77 to 1983-84 was assessed as under:-

3. Incomes as assessed above were contested in appeal before the learned A. A. C. who by virtue of Appeals Nos. 243 to 250 dated 23-4-1985 set aside assessments relating to the charge years 1976-77 to 1983-89 The assessee having taken exception to setting aside of assessments filed second appeals before the Tribunal. In this connection objections of the assessee are listed below:-

(i) that the learned A. A. C. was not justified in setting aside the assessments. He should have annulled them.

(ii) that the learned A. A. C. committed an error in ignoring the fact that the I.T.O. first issued notice under section 56 and thereafter under section 65 of the Ordinance simultaneously which was illegal. It was accordingly prayed that order of the I.-T.O. in respect of each year may be annulled by the Tribunal.

4. First objection of learned counsel of the assessee relates to the fact that while notice under section 61 dated 6-12-1984 was meant for presence of the assessee on 12-12-1984, the assessment was finalised in respect of each year on 7-12-1984. He has pointed out that on account of this admitted fact each assessment should have been annulled by learned A.A.C. Learned D.R. on his part has drawn my attention to order sheet entry, dated 12-12-1984 which is set out below for facility of reference: -

"None attended nor any application for an adjournment received till the close of office hours. Assessed under section 63 as per assessment order and I.T. 30. Issue demand notice and challan with the copy of assessment order. "

5. Learned D.R has submitted that according to the order sheet entry dated 12-12-1984 assessment for each year was made under section 63 of the Ordinance on that date. However, the I.T.O. through an oversight mentioned the date of making each assessment as 7-12-1984. Based on this fact he has stated that assessment for each year was actually finalized on 12-12-1984 and, therefore, no default was committed by the I.T.O. After weighing the evidence on record I have no hesitation in coming to a conclusion that the I.T.O. actually made each assessment ex parte on 12-12-1984 vide order sheet entry of the same date. However, though an oversight in his own handwriting he mentioned the date of completion of each assessment as 7-12-1984 instead of 12-12-1984.' Therefore, on account of this mistake assessments framed on 12-12-1984 cannot be held to be illegal. However, as the discussion will show hereafter assessments for the charge years 1976-77 to 1983-84 were not made in accordance with law.

6. On looking into the assessment record I find that assessments were finally completed under section 56 of the Ordinance for the charge years 1976-77 to 1983-84. At this stage--it is relevant to put on record that a notice under section 56 could not be issued in respect of -the charge years 1976-77, 1977-78 and 1978-79- in view of section 166 (2) (c) (ii) of the Ordinance. The relevant clause c (ii) is incorporated below:

"Where in respect of any assessment year--any income chargeable to tax had escaped assessment or had been under assessed or assessed at too low a rate, or had been the subject of excessive relief or refund or the total income or the total world income and the tax payable had been determined under subsection (1) of section 23 of the repealed Act and no proceedings under section 34 of the said Act in respect of any such income are pending at the commencement of this Ordinance a notice under section 65 may be issued with respect to that assessment year and all the provisions of this Ordinance shall apply accordingly.

7. In this case income of the assessee for the charge years 1976-77 to 1978-79 had escaped assessment and therefore; under the repeal and savings section issue of r, notice under section 65 of the Ordinance a prerequisite for making of assessments in accordance with law. However, as the said notice was not issued and instead assessments were finalized for default of a notice under section 56 of the Ordinance, the assessments so made are illegal in the eyes of law, In support of this conclusion I have with advantage relied on a reported case (1984) 49 Tax 34 (Tribunal). 'The same view was taken by a Division Bench of Islamabad vide I.T.A. No. 254/IB/83-84 for the assessment year 1976-77 dated 30-9-1984.

8. The assessments made are also illegal on account of the additional factor that the I.T.O. simultaneously issued a notice under sections 56 and 61 of the Ordinance. These sections read as under:-

56. "The Income-tax Officer 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 thirty days from the date of service of such notice or such longer or shorter period as may be specified in such notice or as the Income-tax Officer may allow."

61. "The Income-tax Officer' may serve upon any person who has furnished a return of total income for any income year, or upon whom a notice has been served to furnish such return, a notice requiring him, on a date specified therein, to attend at the Income-tax Officer's office or to produce, or cause to be produced, any evidence on which such person may rely in support of the return, if furnished and such accounts, documents or evidence (including accounts or documents relating to any period prior or subsequent to the said income year) as the Income-tax officer may require. "

9. From a plain reading of the above two sections I have been left in no manner of doubt that a notice under section 61 of the Ordinance could only be issued where the assessee has filed return of total income for any income year or upon whom a notice has been served to furnish such return. In the present case assessee had not filed a return in response to notice under section 56 and therefore, a notice under section 61 of the Ordinance could not be served on it. The assessee was also not served with a notice under section 56 calling upon it to file a return of its total income and hence service of a notice under section 61 of the Ordinance was illegal on the second ground as well. At this stage it is relevant to point out that in point of time notice under section 61 is required to follow notice under section 56 of the Ordinance. As in this case both the notices were issued simultaneously and that too for all the years through one notice only, the said notices) were not issued in accordance with law and are consequently ab initio illegal. In consequence of such notices resulting assessments have been rendered of no legal consequence in the eyes of law. Therefore, I have no hesitation in annulling assessments relating to the charge years 1976-77, 1977-78 and 1978-79.

10. Learned counsel of the assessee arguing further has submitted that even for the assessment years 1979-80 to 1983-84 the said notices are illegal. He has pointed out that once it is conceded that notice under section 56 of the Ordinance issued for the charge years 1976-77 to 1984-85 is held to be illegal for the charge years 1976-77, 1977-78 and 1978-79, it will also become illegal for the rest of the years as a consolidated notice was issued for all the years with effect from 1976-77 to 1984-85. His contention is that as only one notice was issued by the I.T.O. on 26-11-1984 for the charge years 1976-77 to 1984-85, it could not be legal for the charge years 1979-80 to 1984-85 and illegal for the charge years 1976-77 to 1978-79. Having heard both the parties I have reached the inescapable conclusion that consolidated notice under section 56 of the Ordinance after it has been held to be illegal for the charge years 1976-77, 1977-78 and 1978-79 will also cease to be legal for rest of the years. Hence consequential assessments in response to notice under section 56 of the Ordinance being illegal are hereby annulled for the charge years 1979-80 to 1983-84, These assessments are also illegal on account of reasons given in para. 9.

11. In view of the above discussion all appeals of the assessee succeed to the extent and in the manner indicated above.

M. B. A./353/T Appeals accepted.

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