1986 PLP (Trib (PTD)

Rs. 9,89,837 1981‑82 Rs. 1,10,059

5. On receipt of the above information the concerned I. T. O. referred the case to the

1. A. C. Range‑II, Peshawar with ‑a request to re‑open the case under section 65 of the Ordinance. This request was conceded on 14‑2‑1982.

6. The assessee on receipt of the notices under section 65 of the Ordinance replied as under: ‑ "It is stated that I did not conceal any income and the figures of my income are true. You are, therefore, requested to kindly with draw/cancel the notices/letters and file the proceedings for which, I shall be highly obliged."

7. The assessee, however, did not file the returns of income in response to notices under section 65 of the Ordinance received by him for the charge years 1979‑80, 1980‑81 and 1981‑

82. In this view of the matter the I.‑T. O. finalized assessments ex parse under section 63 read with section 65 of the Ordinance. The particulars of income so assessed are given below: - 1979‑80 Rs. 2,33,856 1980‑81 Rs. 2,03,677 1981‑82 Rs. 49,422

8. Against the income so assessed the assessee filed appeals before the learned C.

1. T. (Appeals) who by virtue of appeals Nos. 1116, 11 1.7 and 1118, dated 30‑4‑1983 set aide the impugned assessments. In this connection relevant para of the findings is set out below: ‑ "The appellant contended that the information supplied by Messrs Swat Ceramics Ltd., is baseless and incorrect, and that in this connection he has filed a Civil Suit before the Civil Judge, Noshera against Messrs Swat Ceramics Co., Ltd., and others who purchased the sanitary goods from Swat Ceramics Ltd., by misusing the appellant's name. (A copy of the suit has been submitted before me at the time of hearing, which has been seen and placed on file). It is also contended that in response to the appellant's suit, the respondents (Sanitary Works owner) have confirmed before the Court that invoices referred to by Messrs Swat Ceramics Ltd., were not in the appellant's favour but they had purchased the sanitary goods (disputed purchases) against those invoices. A photostat copy of "Jawab‑i‑Dawa" has been annexed by the appellant alongwith his written arguments, dated 30‑4‑1983, which have been seen and placed on file. The appellant's contention seems to be confirmed by these documents. Further, the appellant also stated that the I.‑T. O. was requested that proceedings in his case may be kept pending till the decision of his case, but the appellant was told that the matter concerned the principals and their agents, and that the I. T. O. had v nothing to do with it. The appellant has been heard. The facts of the case have been considered. No record or report has been submitted by the I. T. O. concerned. In view of its operative/facts and factors, it would be fair if the case for all three years under appeal is set aside for regular reconsideration on merit, especially in view the light of the suit in the Civil Court referred to earlier, which is sub judice. Such an important case should not be decided ex parte."

9. Against setting aside of the assessments at the level of learned C. I. T. (Appeals) the assessee filed second appeal before the Tribunal.

10. At the outset it is desirable to put on record that the learned counsel of the assessee only raised legal objections with regard to the re‑opening of assessments under section 65 and their eventual completion under section 63 of the Ordinance. He first drew our attention to section 63 of the Ordinance, which is set out below: ‑ "Where any person: ‑ (a) fails to furnish a return of total income required to be furnished by him under section 56, subsection (3) of section 72 or sub section (3) of section 81 ; or (b) fails to comply with any of, the terms of a notice issued under sections 58 or 61; the I.‑T. O. may, by an order in writing, assess the total income of the assessee to the best of his judgment and determine the amount of tax payable by him."

11. The learned counsel of the assessee has submitted that a best judgment assessment cannot be made for failure to comply with the terms of a notice issued under section 65 of the Ordinance. In support of his contention, he has relied on tire absence of section 65 in section 63 of the Ordinance. He has thus prayed that the impugned assessments may be cancelled (annulled on a preliminary legal objection.

12. The learned D. R. disagreeing with the arguments of the learned counsel of the assessee has invited our attention to clause (c) of sub section (1) of section 65 of the Ordinance. This is reproduced below: ‑ "If in any year, for any reason; the total income of an assessee or the tax payable by him has been assessed or determined under subsection (1) of section 59 and Rio order of assessment has subsequently been passed under this section or any other provision of this Ordinance, the Income‑tax Officer may, at any time, subject to the provisions of 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 mat'' ' ' y proceed to assess or determine by an order in writing the 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."

13. The learned D. R. has submitted that sections 56, 63 and 65 of the Ordinance have to be read jointly and has further stated that sections 63 and 65 do not mutually exclude each other. In support of this conten tion he has invited our attention to clause (c) of subsection (1) of section 65 of the Ordinance, which also contains reference to section

56. In a nutshell his of reasoning is that where an assessment has been made under section 59(1) and no order of assessment has subsequently made under section 65 or any other provision of this Ordinance, the I. T. O. can issue a notice under section 65 subject to the provisions of subsections (2), (3) and (4) and such a notice will undoubtedly contain all or any of the requirements of a notice under section

56. According to the proposed legal position the case of the learned D. R. is that notwithstanding the absence of section 65 in section 63, a best judgment assessment can still be made for failure to comply with the terms and conditions of a notice under section 65 as a notice under this section has been equated with section ‑

56. In saying so reliance has been placed on clause (c) of sub section (1) of section 65 of the Ordinance. It has been stated that as action under clause (c) of subsection (1) of section 65 has been equated with section 56 and as this section is one of the sections the non compliance of which enables a best judgment assessment, the completion of proceedings by the concerned Income‑tax Officer under section 65 of the Ordinance for all these years is legally valid.

14. There is no denying the fact that section 65 has not been specifically mentioned either under clause (a) or clause (b) of section 63 of the Ordinance enabling an Income‑tax Officer to make a best judgment assessment. However, when we carefully read clause (c) of subsection (1) of section 65 we find that where total income of the assessee has been determined or assessed under subsection (1) of section 59 and no order of assessment has been made under section 65 or any other provision o this Ordinance, the I. T. O. can subject to the provisions of subsections (2), (3) and (4) of section 65 issue a notice to the assessee containing all or any of the requirements of a notice under section

56. In other words by virtue of clause (c) of subsection (1) of section 65, section 56 has been, equated with it. The result of this conclusion is where a completed assessment under section 59 (1) of the Ordinance is reopened, section 65 becomes applicable. Thus a notice issued in pursuance to clause (c) of subsection (f) of section 65 can be equated with a notice under section

56. In fact such a notice stands merged with the requirements of a notice under section

56. That being the legal position according to us, under the circumstances of this case, non‑compliance of notices under section 65 entitled the I. T. O. to make assessments under section 63 of the Ordinance. In this view of the matter, preliminary, objection raised on behalf of the learned counsel of the assessee is turned down. Consequently we uphold the action of the I. T. O. in re‑opening of the assessments under section 55 of the Ordinance.

15. The impugned assessments sere set aside by the learned C. I. T. (Appeals). After hearing both the parties we have no hesitation in stating that these assessments were right y set aside by the C. I. T. (Appeals) to be made de novo in accordance with the facts of this case. As setting aside of assessments has been confirmed, it is not necessary for us at this stage to pass a judgment with regard to the quantum of turn‑over in respect of sanitary were and other related items as also rates of profits. Similarly, at this stage on account of confirmation of the setting aside of the assessments it is not desirable to hand out a verdict on the quantum of expenditure allowed at the assessment stage.

16. In a nutshell appeals filed by the assessee fail in respect of all these years. M. Y. H Appeals dismissed