1985 PLP (Trib (PTD)

FARHAT ALI KHAN, J. These are appeals filed by an individual, hereinafter referred to as "the appellant", to impugne the order of learned Commissioner of Income‑tax (Appeals) recorded on 10th January 1982 in Income‑tax Appeals Nos. 323, 324, 325 and 326, 363, 364, 365, 366, 296, 297, 298, and 299 regarding assessment years 1977‑78 to 1980‑81.

2. The brief facts giving rise to these appeals are that the appellant was assessed under self‑assessment scheme at F ..for assessment years 1977‑78 to 1980‑81 on 5th October, 1977, 26th April, 1979, 18th October, 1979 and 23rd August, 1980, respectively, regarding his income as a partner in a registered firm known as Messrs C. B, S. Subsequently the Department discovered that the appellant was carrying on business of manufacturing and sale of tin‑containers at to different places in the city of F. The information which was received on 18th September, 1980, disclosed that the applicant was carrying on business under the name and style of Messrs D. M. C. at b. S. S E. F. and under the name and style of Messrs A. J. C. at S. E. F. of which he was the proprietor. Consequently, statutory notice was issued and the appellant claimed that he was assessed at X. for his income arising from Messrs D. M. C. and Messrs A. C. at K. The proceedings were dropped but the Com missioner of Income‑tax F. took up the matter with the Central Board of Revenue who ultimately by its letter, dated 29th January, 1981, transferred both the cases from K...to F... Thereafter the, assessment from 1975‑76 to 1980‑81 was re‑opened by the Income‑tax Officer by means of notice under section 65 of the Income‑tax Ordinance, herein after referred to as "the Ordinance", after obtaining the approval of the Inspecting Assistant Commissioner. The Appellant, however, sought adjournment on the ground that the Central Board of Revenue, hereinafter referred to as "the C. B. R.", was approached to re‑consider the transfer of cases from K. to F. and also for the reason that records of the appellant were in the custody of the Martial Law Authorities at F. It appears that on 27th May, 1981, the Central Board of Revenue finally rejected the representation of the appellant and ultimately on 13th June, 1981 he filed his return for the assessment years 1975‑76 to 1980‑

81. Let us men tion at this stage that the returns were filed under protest, However, no supporting evidence was filed in support of the returns. Neither any computation of income showing expenses of trading and Profit and loss account nor showing net income on receipts declared were filed. Returns of income from 1977‑78 to 1980‑

81. Showing the income of the appellant from Messrs D: M. C. and A. J. C. 3/4th share from Messrs N. G. B. S. were filed which are reproduced hereinbelow: Assessment year Supplies on estimate in the name of Income shown Rs. Rs. 1977-78 (1) Messrs A J C 10,05,826 15,325 (2) Messrs D M C 19,00,200 52,822 (3) 25%share in Registered Firm Messrs N G B S R B F..Rs

3,390 Total 29,06,026 71,537 1978-79 (1) Messrs A J C 23,31,693 13,800 (2) Messrs D M C 7,50,000 37,800 (3) 25%share in Registered Firm Messrs N G B S R B F..

3,202 Total 30,81,693 54,802 1979-80 (1) Messrs A J C 21,91,027 18,300 (2) Messrs D M C 7,70,000 32,000 (3) 25%share in Registered Firm Messrs N G B S R B F.. 9,37,937 7,312 (sic) Total 29,61,027 57,612 1980-81 (1) Messrs A J C 48,50,000 30,500 (2) Messrs D M C 14,18,000 60,563 (3) 25%share in Registered Firm Messrs N G B S R B F..

8,437 Total 62,68,000 99,500 The Income-tax Officer assessed the income under section 62 read with section 65 of the Ordinance, as under:- 1977-78 1978-79 1979-80 1980-81 Receipts shown Rs. 29,06,026 30,81,693 29,61,027 62,68,000 Receipts adopted Rs. 29,60,260 60,81,693 30,49,299 62,68,000 G.P. rate shown - - - - G.p. rate applied 25% 25% 25% 25% Expenses allowed Rs. 50,000 50,000 50,000 50,000 Expenses claimed Rs.- - - - Income declared(Including the share income from R.F.) Rs. 71,537 54,802 57,612 99,500 Assessed income (1) income from manufacture and sale of tin-containers Rs. 6,090,065 7,20,423 7,12,325 14,67,000 (2) Share from R.F. Messrs G.B. S.F. as assessed Rs. 11,212 11,001 7,312 8,437 (3)Income from Brokerage in the line of Textile Machinery Parts Rs. 15,325 15,500 18,300 31,750 Total Income assessed. Rs. 7,16,602 7,46,324 7,37,937 15,07,187

3. Having been aggrieved the appellant went up in appeal. After carefully considering all the submission made before him, the learned Commissioner of Income‑tax (Appeals) come to the conclusion that all the appeals were devoid of merits and accordingly dismissed them. However, regarding imposition of additional tax under sections 18‑A/87 and 45/88 the learned Commissioner of Income‑tax (Appeals) directed the Income‑tax Officer to examine as to whether all the payments claimed were duly accounted for. Let us also mention at this juncture that penalty Was also imposed by the Income‑tax Officer under section 91 (1) for all assessment years and separate appeals were filed regarding each assessment year right from 1977‑78 to 1980‑

81. These appeals were also dismissed alongwith the main appeals. Now the appellant has come up in appeal before us.

4. Mr. A. A. the learned counsel for the appellant firstly contended before us that the order of the Central Board of Revenue regarding transfer of case from K to F was illegal on two grounds. The first ground, accord ing to the learned counsel, was that the Central Board of Revenue did not afford an opportunity of hearing to the appellant before making an order of transfer of cases from K. to F. Secondly, the learned counsel went on, the Central Board of Revenue acted illegally as the Commis sioner of Income‑tax of F. had no jurisdiction to request for the transfer. Mr. A. A. the learned counsel for the appellant, cited before us P L D (1964) S. C 451 in support of the proposition that the principles of Natural Justice should be read in each and every statute of this country unless they were expressly excluded by the legislature. Relying on this decision Mr. A. A. vehemently argued that the Central Board of Revenue acted illegally when they recorded the transfer order without hearing the appellant. We respectfully agree with the view expressed by their lordships in the aforesaid Supreme Court case. However, with due respect to Mr. A. A. we do not think that the order of the Central Board of Revenue is illegal. Of course, it appears that originally when the transfer order was .;corded, the appellant was not given an opportunity of hearing. How ever, it is the admitted position that the appellant subsequently made the representation to the Central Board of Revenue in writing which was ultimately rejected on 27th May, 1981. Thus, the illegality of Central Board of Revenue, if there was any was cured by the subsequent representation made by the appellant and its rejection by the Central Board of Revenue after due consideration. Let us point out that the principle Natural Justice requires that nobody should be condemned un heared. In this case, the appellant has not been condemned unheard. He made the representation, which was considered and rejected. It is trite law that the right of hearing does not mean and include a right of personal hearing. (Please see Syed Akbar Ali Bukhari v. State Bank (1981 S C M R 81). The first submission of Mr. A. A. therefore, is rejected.

5. As far as the next contention is concerned, it arises from the pro vision of section 5 (4) of the Income‑tax Ordinance, which reads: "Where a question arises as to whether an Income‑tax Officer has jurisdiction to assess any person, the question shall be determined by the Commissioner, or where the question is one relating to the jurisdiction of different Commissioners by the Regional Commissioner or Regional Commissioner concerned and if they are not in agreement by the Central Board of Revenue."

6. It appears from the perusal of the aforesaid subsection that the question regarding the jurisdiction of Income‑tax Officer could be decided by Central Board of Revenue only when the Regional Commissioners are not in agreement with each other. Since the record shows that it was the Commissioner of Income‑tax who referred the matter to the Central Board of Revenue, the contention of Mr. A. A. is that the Central Board of Revenue was not seized of the jurisdiction. We are afraid, we cannot subscribe to the view of the learned counsel for the simple reason that there is nothing on record to show that the Commissioner of Income‑tax F. had not referred the matter to the Central Board of Revenue after a disagree ment between his Regional Commissioner of L. and the Regional Commis sioner of K. Furthermore, section 5 (3) gives jurisdiction to Income‑tax Officer‑according to place of business or profession or according to the re sidence of an assessee. Section 5 (4) of the Ordinance deals' with disputed matters where the final authority lies with the Central Board of Revenue. But, in the instant case, we are concerned with the power of transfer of one assessment case from one region to another region. Obviously such power lies in the Central Board of Revenue in view of section 3 and section 4 of the Ordinance. The jurisdiction has been determined by the Central Board of Revenue itself and being the superior‑most authority in tax hierarchy under the Ordinance it has all the powers of transfer within Pakistan. Looking at the problem from yet another angle it appears that all the orders, instructions and directions of the Central Board of Revenue are binding on all the officers and persons employed in the execution of the Ordinance under section 8 thereof. The order of transfer of the cases from K. to F. in any case, is an order under section 8 of the Ordinance, which would be binding on all officers. It matters little as to whether such order is made suo motu or at the instance of Commissioner of Income‑tax F. Moreover, section 155 of the Ordinance has been `enacted regarding certain mistake v which do not vitiate assessment. If there is any mistake, which is relied upon for getting the assessment annulled it should be of substantial nature and must prejudicially affect the assessee. Mr. A. A. the learned Departmental Representative, let us point out at this stage, opposed the submission of Mr. A. A. and the ground that this plea was given up before the learned Commissioner of Income‑tax (Appeals), hence it could not be canvassed before us. With due respect to Mr. A. A. we do not see any force in his submission. The plea, which has been taken by Mr. A. A. is purely a legal plea which could be taken at any stage. Needless to say that there is no estoppel against law. Mr. A.A. had E further opposed the contention of Mr. A A. on the ground that an assessee who had been getting himself assessed at K. fraudulently shall not be entitled to raise such objection. We are afraid, in do not see any force in his submission again. Whether the appellant acted fraudulently is entirely a different question and has to be kept apart while dealing with legal objection of Mr. A. A. In our view, if we may repeat it, the contention of Mr. A. A. has no force because, in any case, the alleged mistake, if at all it was committed, if not of substantial nature prejudicially affecting the appellant. The contention of Mr. A. A. is also rejected.

7. The next submission of Mr. A. A. was that proceedings under section 65 can only be started after service of notice. According to him since no notices regarding the assessment year 1980‑81 was served on the appellant, the whole proceedings regarding this year were null and void. Mr. A. A., the learned Departmental Representative, however, showed the notice served upon the appellant to Mr. A: A. We think that Mr. A. A. was laboring under some mistake when he made above‑noted submission. It is, therefore, also rejected.

8. The next contention of Mr. A. A. the learned counsel for the appellant, which he very vehemently argued, was regarding the application of Gross Profit rate of 25%. The learned counsel submitted that it was the duty of the learned Commissioner of Income‑tax (Appeals) to confront the appellant with all the parallel cases which he relied upon and which he cited in his order in support of the application of Gross Profit rate of x 25 /o. According to the learned counsel, since the Commissioner of Income tax (Appeals) had failed do so, the Gross Profit rate applied by him was not applicable. In support of his contention the learned counsel relied upon a recent decision of Sind High Court Messrs Karachi Textile Dyeing and Printing Works v. C. I. T. (1) in which it has been held that an assessee should be confronted with even these parallel cases on which the Department wants to reply upon for Gross Profit rate. The observation of the learned Division Bench of High Court may be reproduced here with' advantage. It reads: "For the relevant year the Department had relied on some cases of other art silk manufacture and on that basis fixed the rate of profit at 25 %. These comparable cases were not brought to the notice of the applicant before relying upon it. The nature of business, the machinery employed, the location and all other factors governing the accounting results were neither considered nor any opportunity was given to the applicant to examine and rebut them. Identical and comparable cases can be relied upon against the assessee only when all such materials are disclosed to him and proper and fair opportunity is given to rebut it. No party can be condemned on basis of evidence or information adduced behind his back and without any notice to him."

9. Mr. A.A. appearing for the Department submitted that the learned Commissioner of Income‑tax (Appeals) was right in affirming the Gross Profit rate of 25% as proposed by the assessing officer simply because it was the appellant himself who did not operate with assessing authorities at all. According to the learned Departmental Representative, the appellant was provided opportunities from time to time right from 5th March, 1981. According to him, the Income‑tax Officer went very much out of his way in contacting the Martial Law authorities and persuading them to allow the appellant‑assessee to his record seized by them but, the learned Depart mental Representative went on, the appellant himself failed to avail such opportunity. The learned Departmental Representative contended that under the circumstances the Income‑tax Officer was left with no alternative but to adopt the Gross Profit rate of 25%. We are afraid, we are not persuaded to accept the argument of Mr. A. A. Even if his contention is true, we cannot justify the assessing officer to rely upon parallel cases without confronting the appellant with them, for the reasons disclosed by the learned Division Bench in K. T. case (supra). Apparently its appears to be a punitive measure which cannot be permitted, to stand. We agree with Mr. A.A. that we cannot substitute the Gross Profit rate of 25 /u with any other figure without having any basis for doing so. Under these circumstances, we are left with no alternative but to send the case back to Income‑tax Officer so that he could confront the appellant with the compar able cases and allow him to lead such evidence as he deems fit to rebut the effect of parallel cases.

10. Mr. A. A. further argued that in the assessment year 1977‑78 the appellant was doubly taxed. Mr. A. A. however, has disputed his contention Mr. A. A, further submitted that the photo‑copy of the chart regarding computation of income about charge year 1977‑78 was also submitted before the learned Commissioner of Income‑tax (Appeals) but Mr. A. A. submitted that there was no such chart of computation of income available on the file of Income‑tax officer. Be it as it may, we think that the matter needs to be further thrashed out.

11. To conclude, we hold that the learned Commissioner of Income tax (Appeals) erred in upholding the Gross Profit rate, of 25 % which was based on comparable cases with which the, appellant was never confronted or given an opportunity to rebut them. We, therefore, allow the appeals Nos. 130 5 to 1308 and send them back to Income‑tax office with the direction that he should (1) confront the appellant, with all the comparable cases and allow him to lead such evidences as he deems fit in rebuttal of such cases; (2) ascertain and examine as to whether the payments claimed to have been made by the appellant under sections 18‑A187 and 45/88 have been accounted for or not according to law, (3) examine the contention of the appellant that he has been doubly taxed regarding his income from Messrs A...J...C...and Messrs D...M...C...(4) examine as to whether the appellant produced chart of computation of income regarding assessment year 1977‑78 if so what is its effect.

12. We should make it clear that no other ground has been pressed before us by the learned counsel for the appellant and none should be allowed to be agitated by the assessing officer except those mentioned in the directions. The appeals regarding imposition of penalty also stand disposed of accordingly as they could be finally decided by the assessing officer after complying" with the directions. In other words, they are also remanded back to the Income‑tax Officer alongwith the main appeals.'

13. All the appeals thus stand disposed of. M. B. A. Case remanded.