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Writ Petition Nos. 11 to 36 of 1987, decided on 8th June, 1987.
--Ss. 145 & 146--Survey--Person who is an existing assessee, can be dealt with and the premises where he carries on business can be entered into for the purpose of making any enquiry.
--Ss. 145, 146 & 5--Survey--Jurisdiction of Income-tax Authorities-Person who did not enjoy the status of Income-tax Officer on relevant date, held, could not be lawfully deputed to conduct survey--Survey conducted by such a person being unlawful, would have no legal effect.
---Ss. 145 & 146--Survey--Powers of Income-tax Officer to make assessment when he himself had conducted survey of assessee--Such Income-tax Officer who was not otherwise incompetent, held, was not disqualified to pass assessment orders merely for the reasons that he had conducted the survey of the income of assessee.
--Ss. 145 & 146--Survey--Business position of assessee as determined by the Income-tax Officer may be correct but such state of affairs of business, could, at the most be accepted to exist on or after the date of enquiry and it could not be allowed to raise presumption that such state of business of assessee existed at any time earlier than the date of enquiry without any other evidence.
---S. 65--Re-assessment--Prerequisite and conditions.
To authorise an I.T.O. to open the case of an assessee for re-assessment and issue notices therefore, it is necessary for him either to have definite information in his possession to the effect that there was income of an assessee which escaped assessment or he has obtained permission from the I. A. C. to make reassessment. This is a prerequisite and existence of either of those conditions, is essential to validate the action.
---Ss. 65, 145 & 146--"Definite information"--Meaning--Escapement of income of assessee--Re-assessment--Powers of Income-tax Officer-Information obtained by Income-tax Officer after conducting survey of business position of assessee after June, 1986, alone, held, could not be accepted to be a "definite information" in his possession about the escapement of the assessment for the year 1985-86.
The term "definite information" has not been defined in the income-tax Ordinance, 1979, it will be assumed that the Legislature intended to give ordinary dictionary meanings to it, whenever it is required to be dealt with. The word "information" when it is qualified with the word "definite", would mean that the said information in all probabilities, is correct in all respects and there is no likelihood of its being wrong or untrue and there is no necessity to conduct probe to be satisfied about its correctness and there is no chance of its being untrue.
The Legislature, while given powers to conduct reassessment of the income of an assessee, had laid down in section 65 of the Ordinance that action could only be taken under this section if an I.T.O. had definite information in his possession about escapement of the assessment or he had obtained permission from the I.A.C.
The information obtained by the I.T.O. after conducting survey of the business position of the assessee after June, 1986, cannot be accepted to be a definite information in his possession about the escapement of the assessment for the year 1985-86 because the survey reports are based on estimations and in every case, there can be possibility of fluctuation and adjustments hence these reports cannot acquire the standard of "definite information". As the I.T.O. did not have any other information except the survey reports and the same cannot be termed as a definite information, I. T .O. did not have lawful authority to proceed against the assessee and issue the notices to them as contemplated by section 65 of the Ordinance.
---S. 44--Income-tax Ordinance (XXXI of 1979), S. 65--Remedies provided in statute--Invocation of constitutional jurisdiction when justified.
Ordinarily a person aggrieved of an order of a statutory authority under the Income-tax Ordinance, must avail himself of the remedies provided in the Ordinance and he is not entitled to bypass those remedies and seek civil judicial review of the said order, right away when the order was passed by the authority, in exercise of the powers vested in him but if the order sought to be reviewed or quashed, was passed by the said authority without jurisdiction or in exercise of a colourful jurisdiction or the spirit of natural justice was violated or the order was passed without providing an opportunity of being heard to the aggrieved person and it was patently illegal and no adequate remedy was available against it, the relief sought for by way of writ petition, cannot be refused.
Muhammad Afzal and Muhammad Manzoor for Petitioners.
Basharat Ahmed Sheikh for Respondents.
Dates of institution: 11th to 22nd March, 1987.
Through the above-titled 26 writ petitions, the notices, as contemplated by Section 65 of the Income Tax Ordinance, 1979 (hereinafter to be called as Ordinance), issued by the respondent No.1 and order dated 5th of March, 1987, passed by the respondent No.4 have been assailed.
2. As in all the petitions, the authority of the respondent No.1 to issue the aforesaid notices and the validity of the orders passed by the respondent No.4 whereby the objections on the petitioners that the respondent No.1 who had conducted the survey of their income, was not competent to assess their income, were rejected, have been called in question, therefore, I have proposed to dispose of all of the above-titled writ petitions through this single order.
3. The petitioners" case is that they were old and regular assessees and their income for the year 1985-86 was assessed after thorough scrutiny and the respondent No.1 who did not have the authority to conduct survey of their income, in spite of the objections, made reassessment of their income for the assessment year 1985-86 on the basis of survey conducted by him after June, 1986, therefore, it was an unlawful action. It was alleged that the notices under Section 65 of the aforesaid Ordinance were issued out of malice and bias and so was made reassessment of their income hence these are liable to be quashed. They have also challenged the validity of the order dated 5th of March, 1987 passed by the respondent No.4, whereby their applications to challenge the competency of the respondent No.1 to act as an I.T.O. and make reassessment of their income, were rejected.
4. The respondents controverted the stand taken up by the petitioners, denied the allegations of bias and malice made against the respondent No.1 and asserted that the respondent No.1 was fully competent to conduct the survey of the income of the petitioners and he had the authority to issue notices under the aforesaid section and make reassessment on the basis of survey conducted by him. The competency of the writ petition was also impeached.
5. The petitioner"s Counsel has canvassed the following points in support of the grounds agitated in the petitions to call in question the impugned notices and orders and has cited a lot of case-law in support of his contentions:-
(i) the petitioners are old and regular assessees and survey of their income was not permissible;
(ii) the respondent No.1 had no sanction to conduct the survey of the income of the petitioners and he was not competent to issue the aforesaid notices;
(iii) it was not lawful of the respondent No.1, after survey of the income of the petitioners, to act as an I.T.O. and assess their income for tax purposes;
(iv) the effect of survey conducted after June, 1986, could not have been given to the previous assessment years, i.e. 1985-86;
(v) the aforesaid notices were outcome of bias and malice; and
(vi) the petitioners" income was assessed by the competent I.T.O. after due scrutiny which was, in a way, confirmed by the respondent No.4 and there was no reason for the respondent No.1 to issue the aforesaid notices when he neither had a definite information with regard to the escapement of assessment nor he had obtained previous sanction from the respondent No. 3
6. The learned Counsel for the respondents controverted the stand taken up by the petitioners" Counsel about the incompetency of the respondent No.1 to conduct the survey of the income, to act as an I.T.O., to issue notices under Section 65 of the Ordinance and make reassessment of the petitioners" income. He also challenged the competency of the writ petitions.
7. I have paid my anxious thought over the point raised before me, have gone through the record of the case, the relevant law and the case-law cited at the Bar.
8. The first objection raised by the learned Counsel for the petitioners is that the petitioners are old and regular assessees and the respondent No.1 had no authority to conduct survey of their income. He made reference to Order No. Tax/IAC/IT /2514172-85/86, dated the 26th of June, 1986 and pointed out that the respondent No.1 was directed to trace out new assessees, to investigate and bring on record other sources of the existing assessees for the purpose of the income assessment and to report their present business position. He also made reference to Section 2 (6) of the Ordinance wherein the term "assessee" has been defined and Section 145 which deals with the powers of the I.T.O. and other Income Tax Authorities to make survey of the person liable to pay tax and maintained that the assessee is a person by whom any tax or any sum of money is payable under the Ordinance. The term "assessee" when read with, in the light of the provisions of Section 55 of the Ordinance, means and also covers the case of a person whose income has exceeded the maximum amount which is not chargeable to income tax and who has not been taxed. Section 145 of the Ordinance gives authority to the I.T.O. among others to enter into any premises to make survey of the persons liable to tax whereas Section 146 of the Ordinance authorises him to enter into the premises in which a person carries on business for the purpose of making any enquiry.
The pharaseology used in Section 145 shows that it is intended to deal with the person who is liable to pay tax but who has not yet been subjected to make the payment of it and it is not applicable to existing assessees but the language used in section 146 of the Ordinance indicates that even a person who is an existing assessee, can be dealt with and the premises where he carries on business, can be entered into for the purpose of making any enquiry. As an I. T. O. is authorised under section 146 of the Ordinance to conduct inquiry to find out the income of an existing assessee and the respondent No.1 on the authority of latter mentioned in paragraph 8 of this order, whereby he was empowered to take steps under section 146 of the Ordinance, inspected the business position of the petitioners who were existing assessees which an I.T.O. can do, therefore, the objection raised by the learned Counsel for the petitioners fails.
9. The second objection relates to the competency of the respondent No.1 to conduct survey. The contention of the petitioners" Counsel is that respondent No.1 held the status of Deputy Collector Excise and Taxation and was not serving under the respondents Nos. 3 and 4, as such, those respondents did not have the authority to appoint as an I.T.O. and depute him to conduct survey. To support his point of view, he made reference to section 5(1)(c) and section 145 of the Ordinance and urged that the respondent No.1 was not subordinate to the respondents Nos. 3 and 4, hence those respondents did not have the powers to appoint him as an I.T.O. or to invest him with the powers of an I.T.O. and only an I.T.O. was empowered to conduct survey. The respondent No.1 lacked the sanction to conduct the survey of the income of the petitioners hence the survey report prepared by him, was prepared without lawful authority and was of no legal consequence. This view was controverted by the learned Counsel for the respondents on the authority of the Notification, dated the 23rd of August, 1979 and it was contended that the functions of the Excise and Taxation Department were transferred to the Azad Jammu and Kashmir Council and so was transferred the respondent No.4 and his staff and as the respondent No.4 held the powers of the Collector Excise and Taxation as well, therefore, he was fully competent to appoint the respondent No.1 to act as an I.T.O. to conduct survey of the income of the petitioners.
10. The stand taken up by the learned counsel for the respondents, I believe, is not correct. Section 145, authorizes an I.T.O. to conduct the survey and section 5 of the Ordinance authorizes the Commissioner Income-tax to appoint an I.T.O. to perform his functions in respect of persons or classes of persons or assessees as he may direct. The Income-tax Department and Excise and Taxation Department may be sister departments yet the Excise and Taxation Department is controlled by the Azad Kashmir Government and only its functions were transferred to the Azad Jammu and Kashmir Council for the time being. The Excise and Taxation Department is headed by the Collector Excise and Taxation and the respondent No. 1 who enjoyed the status H of the Deputy Collector, was subordinate to the Collector and not to the Commissioner Income-tax. In any case, section 5 of the Ordinance, authorizes the Commissioner Income-tax to appoint an I.T.O. to perform functions in respect of the persons or assessees as he may direct and as the respondent No. 1 did not enjoy the status of an I.T.O. on 26th of June 1986, therefore, he could not have been lawfully deputed to conduct the survey, consequently the survey conducted by him, was done without lawful authority, hence it is of no legal effect.
11. The third objection of the petitioners" counsel is that the respondent No. 1 who conducted the survey of the income of the petitioners became a witness, therefore, it was not lawful for him to act as an I.T.O. to assess the income of the petitioners on the basis of his own evidence. He elucidated his point of view and argued that when an I.T.O. makes assessment of the income, he gives judgment after determination of income of an assessee and if a person who was deputed to make survey of the business of a person is appointed to assess his,-income for the tax purposes, it will amount appointing a witness to decide a case on the basis of his own testimony. It will even offend against the dictates of natural justice and the principle "Nemo potest cese simul actor at Judex", and his contention finds support from the cases reported in P L D 1957 (Custodian) Peshawar 54, P L D 1957 SC (India) 346 and P L D 1971 SC 585. This view was countered by the learned counsel for the respondents on the ground that the act of conducting survey of the respondent No.1 cannot debar the said respondent to act as an I.T.O. and to pass assessment orders.
12. As an I. T. O., while functioning as such," has to perform dual duty. He has to find out the real income of an assessee and to arrive at a decision, he can conduct enquiry about the business position of the assessee. He can enter into the premises where the assessee carries on business and can inspect documents and the stock. He can prepare inventory of the stock articles and can make use of the results of the enquiry at the time of passing the final assessment order. Keeping in view the scheme of the Income-tax Ordinance. I think, the respondent No. 1, if he was not otherwise incompetent, was not disqualified to pass assessment orders for the reasons that he had conducted the survey, of the income of the petitioners. Thus, the objection raised by the learned counsel fails.
13. The fourth objection is that the survey team although had no sanction to act yet its task was also limited. It was created to trace out the new assessees, to find out other sources of the existing assessees and to bring on record their present business position, however, in any case, it was accepted that the respondent No. 1 was empowered to perform his task, it will have to be assumed that he had strictly complied with the directions issued through order, dated 26th of June, 1986 and had made report about the other sources of the petitioners" income and their business position which existed on the date, the survey was conducted.
14. The business position of the petitioners as determined by the I respondent No.1, may be correct but this state of the business can, at the most, be accepted to exist on or after the date of enquiry and no canon of justice, can allow to raise presumption that such state of business of the petitioner existed at any time earlier than the date of enquiry. The perusal of the assessment order, whereby the income of the petitioners was reassessed shows that the respondent No. 1, on the sole basis of the survey report prepared after June, 1986 reassessed the petitioners" income for the year 1985-86 and there was no other evidence, whatsoever, before him to make assessment, therefore, the reassessment made by him for the assessment year 1985-86 on the basis of the survey report prepared after June, 1986, is illegal and cannot be sustained.
15. The objection that the notices under section 65 of the Ordinance, were caused out of bias and the reasons advanced in its support are that the respondent No.1, in order to gain reward, showed extraordinary zeal and by passing all reasonableness, at the first instance, prepared a fake survey report about the business position and income of the petitioners and thereafter turned down the objection with respect to his competency to act as an I.T.O. and passed the assessment orders on the basis of his own evidence. This objection, I think, cannot be allowed for the reasons that it is a duty of every Public servant to put every reasonable effort to discharge his duties honestly, faithfully and efficiently and if the respondent No.1 carried out the work entrusted to him with all zeal, it will be unjust to presume that he did any wrong to anybody and took wrong steps in order to gain reward. When the objection with regard to his competency to at as an I.T.O. and make reassessment of the income of the petitioner, was raised, he took off his hands and did not take any further steps till the objection was attended to and was rejected by the respondent No.3.
16. The last objection of the petitioners" counsel is that the respondent No.1 did not have any definite information with regard to the escapement of the income of the petitioners therefore, he did not have the authority to issue the aforesaid notices.
17. To authorise an I.T.O. to open the case of an assessee for reassessment and issue notices therefore, it is necessary for him either to have definite, information in his possession to the effect that there was income of an assessee which escaped assessment or he has obtained permission from the I. A. C. to make reassessment. This is a prerequisite and existence of either of those conditions, is essential to validate the action.
18. In the cases in hand, the respondent No.1 did not obtain permission from the I.A.C. to make reassessment of the income of the petitioners. The respondents" case is that the respondent No.1 had definite information with regard to the escapement of the assessment of the income and the base of the information is a survey report prepared by the respondent No.1 under the directions of I.A.C. (respondent No.3) conveyed to him through the letter, dated 26th of June, 1986. As to whether the respondent No.3 can appoint the respondent No. 1 as an I.T.O. and can authorize him to conduct survey of the income of the petitioners, has been dealt with in the earlier part of this order and it has been found that the I. A. C. did not have any such authority but if in any case, it is assumed that respondent No.3 had the power to appoint the respondent No.1 to conduct the survey it has yet to be seen as to whether the survey conducted and the report prepared by him, would become a definite information as envisaged by section 65 of the Ordinance or not.
19. The order, dated 26th of June, 1986 was issued by the I.A.C. when he felt that it was necessary to trace out the new assessees and to investigate and bring on record the other sources of existing assessees for the purposes of income assessment, therefore, he directed the respondent No.1 to trace out the other sources of the assessees, conduct shop to shop survey and to bring on record other sources of income of the existing assessees for the purpose of income-tax assessments.
20. The perusal of the order, dated 26th June, 1986 shows that respondent No.1 was directed to carry out survey of the shops etc. being run in Mirpur district because the I.A.C. was of the view that the business position of the traders had considerably improved and there was likelihood of tracing out new assessees. The petitioners were the old assessees, therefore, there was no need to conduct survey of their income and it is not possible to assume that the survey of the petitioners" shops was meant for this purpose. But the respondent No.1 was also directed to find out the other sources of the existing assessees and their present business position, therefore, he was authorized to conduct survey of the petitioners" business position, provided the authority given to him, was valid.
21. If for any reason, it is accepted that survey of the shops of the petitioners was meant by the aforesaid order and the survey conducted by the respondent No.1 was authorized, even then it will witness the business position of the petitioners which existed at the date, the survey was conducted i.e. after June, 1986 and it will not be an information, much less the definite information with regard to the business position of the petitioners for the assessment years, 1985-86.
22. The term "definite information" has not been defined in the Ordinance it will be assumed that the Legislature intended to give ordinary dictionary meanings to it, whenever it is required to be dealt with. The word "information" when it is qualified with the word "definite", would mean that the said information in all probabilities, is correct in all respects and there is no likelihood of its being wrong or untrue and there is no necessity to conduct probe to be satisfied about its correctness and there is no chance of its being untrue.
23. The Legislature, while giving powers to conduct reassessment of the income of an assessee, had laid down in section 65 of the Ordinance that action could only be taken under this section if an I.T.O. had definite information in his possession about escapement of the assessment or he had obtained permission from the I.A.C.
24. As the information obtained by the respondent No. 1 after conducting survey of the business position of the petitioners after June, 1986, cannot be accepted to be a definite information in his possession about the escapement of the assessment for the years 1985-86 because the survey reports are based on estimations and in every case, there can be possibility of fluctuation and adjustments hence these reports cannot acquire the standard of "definite information". As the respondent No.1 did not have any other information except the survey reports and the same cannot be termed as a definite information. I, therefore, hold that the said respondents did not have lawful authority to proceed against the petitioners and issue the aforesaid notices to them as contemplated by section 65 of the, Ordinance.
25. The objection that the writ petitions are not competent because the Ordinance provides remedies to the petitioners against the impugned notices and there is no reason for the petitioners to avoid them and bypass the special forum created by special law i.e. the Ordinance and seek this vertical review by invoking extraordinary jurisdiction of this Court, now remains to be considered.
26. It is correct that ordinarily a person aggrieved of an order of a statutory authority under the Income-tax Ordinance, must avail himself of the remedies provided in the Ordinance and he is not entitled to bypass those remedies and seek civil judicial review of the said order, right away when the order was passed by the authority, in exercise of the powers vested in him but if the order sought to be reviewed or quashed, was passed by the said authority without jurisdiction or in exercise of a colourful jurisdiction or the spirit of natural justice was violated or the order was passed without providing an opportunity of being heard to the aggrieved person and it was patently illegal and no adequate remedy was available against it, the relief sought for by way of writ petition, cannot be refused.
27. The respondent No.1 who basically enjoyed the status of Deputy Collector, Excises and Taxation Department and who worked under " the subordination of the Collector Excise and Taxation Department (A.K. Government), was appointed as an I.T.O. to conduct survey of the business of the trading community within the limits of Mirpur district and was also "authorised to make assessment of the income of the existing assessees i.e. petitioners, therefore, the authority-given to him by the respondent No.4, who, at the relevant time, was holding the status of the Commissioner Income-tax and was not serving under the Azad Jammu and Kashmir Government, was not valid and he was not competent to confer jurisdiction over the respondent No.1 to act as an I. T.O. and conduct the survey of the business position of the petitioners.
28. In the light of what has been discussed above, I hereby allow all the 26 writ petitions and hold that the respondent No.1 did not have the definite information in his possession about the escapement of the assessment by the petitioners for the assessment years, 1985-86, thus he had no lawful authority to issue the impugned notices to the petitioners as contemplated by section 65 of the Ordinance and make reassessment of their income for the assessment years, 1985-86. Keeping in view the circumstances of the case, .I pass no order as to costs.
M.B.A./334/H.A. Petitions allowed.
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