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I.T. A s. Nos. 922 to 925/ KB of 1983-84, decided on 4th July, 1987

23(4)--Ex parte assessment--Requirements--Assessing Officer, putting up a note on the order-sheet on the date for which he had issued notice to assessee that case be put, up before him for framing of order under S.23(4) on a certain date and on that date he framed ex parte assessment accordingly--Assessing Officer, held, acted quite legally.

---S. 23(4)--Ex parte assessment--Duty of Assessing Officer-- Evolvement of basis for assessment-- Assessee to be confronted with parallel cases- -Assessee, though was not present before Assessing Officer at the time of assessment, nevertheless it is duty of Assessing Officer to mention at least those cases on which he was relying in his assessment order thus not to cause miscarriage of justice to the assessee--While framing ex parte assessment, assessment order should not appear to be penal or unreasonable--Whenever Assessing Officer estimates income he should Always evolve some basis not only for his estimated sales or income but also for application of G.P. rate--Any parallel case to be relied upon be mentioned to assessee to enable him to confront same.

Rehmat Ali Sheikh for Appellant.

Abdul Ghani Channa, D.R. for Respondent:

Date of decision: 4th July, 1987.

These four appeals are directed against two consolidated orders of learned A.A.C. recorded by him on 23rd July, 1983 and 29th May, 1983. The first order is relating to the assessment year 1974-75, 1975-76 and 1976-77 whereas the second order deals with assessment year 1977-78.

The brief facts giving rise to these appeals are that during the relevant assessment years the appellant, a building contractor, declared his receipts for assessment year 1974-75, 1975-76 and 19,76-77 at Rs.83,500, Rs.'27,'200 and Rs. 1,03,800 with NP rate of 7 % in each assessment year yielding net income of Rs.6,262, Rs.2,040 and Rs.7,810. However, subsequently the appellant failed to turn up before the Income-tax Officer and he was constrained to frame ex parte assessment under section 23 (4) of the repealed Income-tax Act. He estimated the receipts at Rs.1,00,000, Rs.1,00,000 and Rs.1,20,000 and applying NP rate of 12 % assessed the appellant at net income of Rs.12,500, Rs.12,500 and 15,000 in assessment year 1974-75, 1975-76 and 1976-77 .respectively. For assessment year 1977-78 the respondent did not file any return and the ITO was very much constrained to frame assessment under section 23 (4) of the repealed Income-tax Act and on the basis of the estimate its net income at Rs.15,000 as was done in immediately preceding year. Having been aggrieved and dissatisfied the appellant went up in appeal against all the four assessment orders. The learned AAC by his impugned order regarding assessment near 1974-75, 1975-76 and 1976-77 confirmed the order of the 110. However, regarding assessment year 1977-78 the learned A A C came to the conclusion that the appellant was out of time in tiling the appeal before him. Consequently, he held the appeal time-barred anti rejected it accordingly. The appellant, however, still feels aggrieved and has come up in second appeal before me.

Mr. Rehmat A. Shaikh, the learned counsel for the appellant firstly argued that as far as the first impugned order was concerned, it was illegal in view of a decision of Lahore High Court reported as 1981 PTD 210 CIT v. Sakhi Contractors and Engineers, Multan. The learned counsel submitted that the notices issued under section 23 (2) rind section 2-3(4) required the appellant to be present before the ITV on 23rd March, 1977. He argued that the ITO was required by law to record his ex parte order a/s 23(4) on that date if he wanted to proceed ex prate against the appellant. AS he framed the assessment orders on 1st April, 1977 without giving any notice to the appellant, the learned counsel vehemently contended that in view of Sakhi Contractor's case his orders were illegal. Mr. Abbul Ghani Channa, the learned DR, however, supported both the officers below.

I have heard both the learned counsel for the appellant and the learned DR. From perusal of the order sheet it transpired that on 29th March, 1977 the I.T.O. put a note on the order sheet that the cases be put up before Lim for framing of the order under section 23 (4) of the repealed Income-tax Act on 1st April, 1977 and on this date he framed the ex parte assessment accordingly for all the three assessment years involved. I think that the ITO acted quite legally and the learned A.A.C. rightly entered into the merits of the appeals. From perusal of the Sakhi Contractor's case it appears that the ITO had not recorded on the order sheet the fact of proceeding ex parte against the assessee hence their Lordships held that the ITO should have given a fresh notice for 15th December, 1971 on which date he actually recorded ex parte order instead of 2nd December, 1971- for which date he had issued the notices. However, as pointed out earlier in these appeals the ITO has recorded on the order sheet the order, which I have reproduced above. This legal objection of the learned counsel is, therefore, fails.

The next submission of the learned counsel for the appellant is that both the officers below failed to evolve any basis for the estimated sales as well as the application of NP rate. Mr. Channa, the learned DR, on the other hand, submitted that the appellant himself failed to produce the certificate of receipts and thus failed to turn up before the ITO. Mr. Rehmat Ali Sheikh vociferously argued that the order of both the officers below was wrong because they failed to confront the appellant with the parallel cases. Mr. Channa argued that the appellant himself failed to turn up and the ITO had no occasion to confront him with parallel cases. It is true that the appellant was not before the learned assessing officer. Nevertheless it was his duty to, mention at least those cases on which he was relying in his assessment order, which he did not. 'Thus miscarriage of justice has been caused. However, since the income of the appellant for assessment year 1978-79 and 1979-80 has been assessed at Rs.12,100 each, I think it could be made basis for assessing the income for assessment years 1974-75, 1975-76 and 1976-77. I, therefore, assess the income of the appellant at 88.11,500, Rs.12,000 and Rs.12,100 for each assessment year respectively. The contention of Mr. Rehmat Ali Sheikh that the appellant did not carry on any business during the assessment years 1978-79 and 1979-80 does not appear to be right for the simple reason, that the appellant did not tile any appeal against assessment orders of these two assessment years. It does not appeal to common sense that a man assessed at an income of fts.12.100, would not go in appeal particularly in view of the fact that he did not carry on any business in those assessment years The appeals regarding assessment years 1974-75 to 1976-77 are disposed of accordingly.

Now turning to assessment year 1977-78 it appears that the demand notice was allegedly served on 24th June, 1978. The appeal was, however, filed on 7th February, 1981, Thus the learned A.A.C. held it to be time-barred. However, it appears that the appellant moved an application before the ITO for supplying him the copies of the assessment orders for assessment years 1974-75, 1975-76 and 1976-77 and the same were supplied to him on 28th January, 1981. He therefore, filed three appeals for these three assessment years on 7th February, 1981 and the learned AAC did not raise any objection regarding these appeals. Now if these three appeals were not time-barred under same and similar circumstances, how the 4th appeal for assessment year 1977-78 should be held to be time-barred. I think that this appeal is also within time as were other appeals for other three assessment years. However, I do not think that in this assessment year the ITO rightly estimated the income of the appellant at Rs.15,000 particularly in view of the subsequent assessment year 1974-75, 1975-76 and 1976-77. Under the facts and circumstances of these appeals I think that the estimated income of Rs.l2,100 could be made basis for assessment year 1977-78 as well. 1, therefore, estimate the income of the appellant at Rs.12,100 for assessment year 1977-78. Before parting with these appeals let me mention here that whiles framing the ex parte assessment, the assessment order should not appear to be penal or unreasonable. Moreover whenever an assessing officer is estimating income he should always evolve some basis not only for his estimated sales or income but also for application of GPI rate. Similarly whenever any parallel case is to be relied upon, the appellant must be confronted with it.

In view of discussion made above all the four appeals stand disposed of in the manner and to the extent as indicated above.

M.B.A. /412/T Order accordingly.

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