Lawyers Directory Listing
Unlock direct contact details for up to 10 lawyers so you can call or WhatsApp the right legal professional and move your matter forward with confidence.
I.T.As. Nos. 341 and 342 (IB)/1985-86, decided on 19th January, 1987.
----Ss. 22(a), (4-A) & 23(2)--Civil Procedure Code (V of 1908), O.V, R.17--Service of notice--Service by affixture having preceded the directive of Income-tax Officer, held, rendered the service invalid in the eye of law.
---Ss.22 (4), (4-A), 23(2) & 34--Civil Procedure Code (V of 1908), O.V, R.17--Service of notice-- Defect--Annulment or quashment of assessment when can be ordered.
Under the Income-tax Act, 1922 jurisdiction to assess income was assumed either under section 22(2) or under section 34. The I.T.O could also assume jurisdiction under section 22(1) where the return was filed suo motu. Where the notices under section 22(2) or 34 were correctly served on the assessee, relationship of assessor and assessee was established in consequence thereof. The service of such notices had to be strictly in accordance with law as the entire superstructure of assessment was built on them. Any shortcoming in service in respect of such notices could render the assessment liable to annulment or quashment of proceedings. On the other hand notices requiring the assessee to produce books of accounts or render explanation on specific points, if not served in accordance with law will not render the entire superstructure of the assessment liable to be annulled or quashed. In such cases assessment could only be set aside. Where notices under sections 22(4-A), 22(4) and 23(2) were merely of procedural character their defective service would not render the entire superstructure of assessments as ab initio illegal
1981 P T D (Trib. ) 22 distinguished.
---Ss. 22(4) (4-A), 23(2) & 34--Civil Procedure Code (V of 1908), O. V. , R.17--Where for non-compliance of notices meant for a particular date ex parte assessment is not made on that date or soon after, assessment could at best be set aside and, not annulled.
1967 P T D 189 distinguished.
Muhammad Zahid Yasin Mufti for Appellant.
Maqbool Hussain Shah, D.R for Respondent.
Date of hearing: 14th January, 1987.
.--These two appeals on behalf of the assessee are directed against the impugned order of learned C.I.T. (Appeals) as a result of which he set aside assessments to be made de novo after providing the assessee a reasonable opportunity of explaining her case for the charge years 1974-75 and 1975-76.
2. Brief facts giving rise to these appeals are that the assessee was charged to tax on net incomes of Rs.40,000 and Rs.20,000 in respect of the charge years 1974-75 and 1975-76 respectively by virtue of ITO's order dated 28-6-1978. These assessments were however, vacated by learned I. A. C. Range 1, Faisalabad under section 34-A of the Income-tax Act, 1922 (hereinafter called the Act) by virtue of his order dated 8-4-1979. In consequence there of re-assessments were made for both the years on the following incomes:-
| |
|
| (i) Income from property . | Rs. 4,200 |
| (ii) Unexplained investment on the construction of a hotel. | Rs.20,000 |
| |
|
| (i) Income from property | Rs. 4, 200 |
| (ii) Unexplained investment in the purchase of agricultural land to the extent of 250 Kanals. | Rs.1, 33, 500 |
| (iii) Unexplained investment in the purchase of land in the name of Mst. Khushnuda Begum (assessee's daughter) | Rs.50,000 |
| Total Income. | Rs.1,87,700 |
3. Incomes as assessed above were contested in appeal before learned C.I.T. (Appeals) who by virtue of Appeals Nos. 237 and 781, dated 11-6-1981 set aside both the assessments in the following words:-
"The appellant contends the action of the Assessing Officer to be unjust arbitrary and capricious. It is contended by the A. R. of the appellant that the so called service of statutory notice is totally a table work as is reflected by the records. It is pleaded that the order sheet maintained for both the years is not signed by the Assessing Officer. It is argued that the service of notice through affixture was statedly made by the Inspector on 28-5-1980 white as per order sheet the I.T.O. ordered to effect the sere ice of notice on 29-5-1980. It means that the Inspector of the Circle served the notice by affixture one day before the I.T.O.'s order. It is argued that the impugned assessments were completed by the learned I.T.O. on the basis of this false service. As such the assessments are illegal. It is also argued that the appellant is a resident of Ward No.12, Bhera, while notices were sent to Ward No.9, Bhera. Otherwise also the service of notice was not proper. The notices were issued for 31-5-1980 while the assessment was completed on 30-6-1980 for which date no notice has been issued. "
4. The assessee having taken exception to setting aside of assessments, rather than their annullment, filed second appeals before the Tribunal. In this connection grievances of the assessee for both the years are set out below: -
(i) that the impugned order passed by learned C.I.T. (Appeals), for both the years were bad in law and against the facts of the case.
(ii) that assessment orders passed by the I.T.O. under section 23(4) of the repealed Act being illegal should have been annulled by 'Learned CA. f. (Appeals) on the basis of ratio of decision in (1980) 42 Tax 62(Trib.). It was accordingly prayed that the Tribunal may issue directions for cancellation of both assessments.
5. On the basis of evidence that we have gathered from assessment record it has come to our notice that Mr. Saleem Hussain appeared before the I. T. O. on 24-4-1980 when the following order sheet entry was recorded:-
"Present Mr. Zahid Hussain Mufti, A. R. of the assessee alongwith Mr. Saleem Hussain. Requests for an adjournment as the requisite documents could not be prepared by them. Case is finally adjourned to 30-4-1980. No further adjournment shall be so allowed. Informed. "
6. The above order sheet entry was not signed by the I.T.O. but it is decidedly in his own handwriting. Thereafter, on 30-4-1980 nobody cared to attend before the I.T.O. nor was any application filed requesting for another date. In this view of the matter I. T.O. by virtue of order sheet entry dated 30-4-1980 ordered that the case be fixed again for disposal. We find that this case was ordered to be refixed for disposal by virtue of order sheet entry dated 21-5-1986 and notices were issued in consequence thereof under sections 23(2) and 22(4) of the Act for presence on 27-5-1980. In spite of service of these notices on Mr. Saleem Hussain compliance was not made as a result of which by virtue of order sheet entry dated 27-5-1980 fresh notices were ordered to be issued under sections 23(2), 22(4) and 22(4-A) of the Act for compliance on 31-5-1980. These notices for compliance on 31-5-1980 were refused by the assessee vide order sheet entry dated 29-5-1980. This report of the process-server is not on record. The I. T. O. however, on the strength of process-server's report ordered his inspector to effect service on the assessee by whatever means possible. The said notices on which endorsement of the process server is not available were served by the Inspector through affixture on the last known address of the assessee by virtue of order sheet entry dated 30-5-1980. On 31-5-1980 the I. T. O. recorded the following observation in the order sheet.-
"Nobody attended nor any application for adjournment received. I am left with no other alternative but to complete assessments ex parte under section 23(4) to_ the best of my judgment and knowledge. Send draft assessment order for approval "
7. Learned counsel of the assessee has pointed out that according to Inspector's report dated 28-5-1980 assessee refused to receive notices under sections 22(4), 22(4-A) and 23(2) of the Act as a result of which service was made through affixture. In this connection he teas submitted that the I T O ordered service of notices which were received back unserved with a report from the process-server by affixture through the Inspector on 29-5-1980. He has stated how the notices under consideration could be served by the Inspector on 28-5-1980 when these were actually ordered to be served on the assessee on 29--5-1980. This aspect of service was brought to the notice o.1 learned D.R. who has not been able to tender any acceptable explanation with regard to discrepancy in the report of the Inspector dated 28-5-1980 and content of the order sheet entry dated 29-5-1980.
8. In para. 6 we have made a passing reference with regard to the fact that according to report of the process-server the assessee's refusal to accept the notices under consideration is not on record. Since notices are the same, it is our considered opinion, that no report was tendered by the process-server. Therefore, conclusion of the Income-tax Officer that notices may be served by whatever means possible does appear misconceived. Even the direction of the Income-tax Officer to the Inspector is ambiguous as the former did not order service of notices under Order V, Rule 20, of the Code of Civil Procedure. On the other hand, service by affixation according to Order V, Rule 17, C.P.C. is also defective because while the Income-tax Officer ordered service by fixture vide order sheet entry dated 29-5-1980, the Inspector had already served the notices on 28-5-1980.There is no, denying the fact that according to Order V, Rule 17, C.P.C., the Inspector could suo Motu serve notices on the assessee on the basis of her refusal but as these were served on a directive from the Income-tax Officer then the service should have followed his order. In the present case, service by affixture having preceded the directive of the Income--tax Officer, renders the service invalid in the eyes of law. At this stage, next question for consideration before us is whether on facts and in the circumstances on this case, assessments should have been annulled by learned C. I. T. (Appeals) or not In this connection, learned counsel of the assessee has stated that both assessments should have been annulled and in support of his contention has relied on the ratio of a decision cited as 1981 P T D (Trib.) 22. Learned D. R. on behalf of the department has pointed out that even though learned Chairman of the Tribunal has held the ex parte assessment to be bad in law and liable to be quashed" yet opinion of the third Member contained in paragraph 10 of page 76 does not lead to a finding which either sports annullment or quashment of ex parte assessment. For facility of reference paragraph 10 of page 76 is set out below:---
"I, therefore, agree with the reasoning as well as finding of learned President on the issue that the substituted service made on the assessee was not valid in law and hence ex parte assessment shall stand cancelled. The department will now proceed afresh after proper service of notices according to provisions of law."
9. Even though learned Accountant Member also opined that the ex parte assessment shall stand cancelled yet his eventual finding is that the department will proceed afresh after proper service of notices in accordance with law. The only conclusion that can be drawn from this finding is that ex parte assessment was ordered to be set aside to be made de novo after proper service of notices in accordance with law. Learned counsel of the assessee has relied on the foregoing decision of the Tribunal on account of the use of the words annulled and quashed without appreciating the operative part of the order contained in para, 10. Therefore, this case has been wrongly roped in by learned counsel of the assessee to support annullment of proceedings in respect of the case before us.
10. Learned counsel of the assessee during the course of hearing of these appeals pointed out that notices were not served on correct address of the assessee. In support of this contention he has pointed out that while assessee is a resident of Ward No.12, Bhera the notices were sent to her on the address of Ward No.9, Bhera. This contention after perusal of relevant record has been found incorrect. On looking into the relevant returns it has come to our notice that given address of the assessee is H. No.324, Ward No.9, Bhera. Therefore, the I T O was justified in sending notices on the address given on the returns relating to the charge years 1974-75 and 1975-76.
11. Before proceeding further, it is desireable to state that under the repealed Act jurisdiction to assess income was assumed either under section 22(2) or under section 34. The I.T.O. could also assume jurisdiction under section 22(1) where the return was filed suo Motu. Where the notices under section 22(2) or 34 were correctly served on the assessee, relationship of assessor and assessee was established in consequence thereof. The service of such notices had to be strictly in' accordance with law as the entire superstructure of assessment was built on them. Any shortcoming in service in respect of such notices could render the assessment liable to annulment or quashment of proceedings. On the other hand notices requiring the assessee to produce books of accounts or render explanation on specific points, if not served in accordance with law will not render the entire superstructure of the assessment liable to be annulled or quashed. In such cases assessment could only be set aside. In respect of the cash before us notices under sections 22(4-A), 22(4) and 23(2) were merely of procedural character and therefore, their defective service has not rendered the entire superstructure of assessments as ab initio illegal.
12. Next objection of learned counsel of the assessee relates to the fact that for non-compliance of notices under sections 22(4) and 23(2) of the repealed Act meant for 31-5-1980 ex parte assessments should have been completed on that very date instead of making them on 30-6-1980. Even here contention raised by learned counsel of the assessee is not well founded. Where for non-compliance of notices meant for a particular date ex parte assessment is not made on that date or soon after, the assessment could at best be set aside and not annulled. This opinion is held by all benches of the Tribunal without exception.
13. Finally a passing reference is also made to 1967 P T D 189, namely Commissioner of Income-tax, Northern Zone, West Pakistan, Lahore v. Muhammad Idris Barri and Company, Lahore. In this case question for consideration before Supreme Court was "Whether there was any material in support of the Tribunal's finding that Mr. Habib-ur -Rehman was the assessee's agent empowered to accept service of notice within the meaning of Order V, Rule 12 of Code of Civil Procedure, read with section 63(1) of the Income-tax Act." The Supreme Court agreeing with the holding of West Pakistan High Court answered the question referred to it in the negative. Therefore, our conclusion is that this case is distinguishable from the facts of the case before us. We say so because in the case of Mst. Wajida Begum, it is not the case of the assessee that Mr. Saleem Hussain was not the assessee's agent empowered to receive notices. On the other hand, in this case, legality of assessments was contested on the ground that as the Income-tax Officer had ordered service through affixture by virtue of order sheet entry dated 29-5-1980, service made through fixture by the Inspector on 28-5-1980 was invalid and, therefore, assessments made in consequence thereof should have been annulled. On the other hard, in the case of Mr. Muhammad Idris Barri & Co. question referred to Supreme Court of Pakistan for adjudication related to the fact whether in the absence of specific authority, Mr. Habib-ur-Rehman, could be considered as the assessee's agent empowered to accept service of notices. From consideration of these questions, we have been left in no manner of doubt that the case of C. I. T., North Zone, West Pakistan Lahore v. Muhammad Idris Barri & Co. , Lahore is not attracted here.
14. On account of the reasons recorded in paragraphs 5 to 13 we have been left with no other alternative but to state that the C.I. T. (Appeals) rightly ordered setting aside of assessments rather than their annulment in respect of the case before us. In this view of the matter, appeals of the assessee being devoid of any merit are hereby dismissed.
M. B. A./351/T Appeals dismissed.
Dealing with a matter like this? Connect with a verified advocate in your city — free on SJP Lawyers Directory.
🔍 Find a Lawyer