1989 PLP 1302 (PTD)

SALEEM AKHTAR, J.--We propose to dispose of these petitions by this judgment as the questions of law and facts involved are common. The petitioner is a partner in a registered firm known as Brigstock Eduljee & Co. The petitioner submitted return under self-assessment scheme for the assessment years 1982-83 and 1983-84. It has been alleged that the petitioner was served with the notice of demand without copy of assessment order passed by the Income-tax Officer. It has also been alleged that the principles of calculation of the maximum tax payable by a partner of registered firm as decided by the High Court in I.T.C. Nos. 90, 91 92 and 93 of 1969 have not been followed. The petitioner contested and filed an appeal against the demand but it was dismissed ex parte as being time-barred. The petitioner has challenged these proceedings on the ground that the demand notice issued by the Income-tax Officer is without jurisdiction as it was served before passing any assessment order in the matter. It has been specifically mentioned in the petition that the Income-tax Officer did not pass any assessment order as required under section 59 of the Income-tax Ordinance and therefore the entire proceedings were illegal and without jurisdiction. In the counter-affidavit filed on behalf of the respondents it has not been specifically denied that the assessment order was not passed but it merely states that "non-existence of assessment is denied as I.T. 30 assessment form shows the working tax which was calculated on the basis of income already determined therefore enquired from Mr. Wahid Faruqui, the learned counsel for responding No.l to ascertain whether any assessment order had been passed. He took time to ascertain this fact. Today he produced two files relating to the assessment in which except the following notes in the order sheet no assessment order seems to be available. The note is reproduced as follows: "Assessment completed under Section 59 (1) Issued D.N. and I.T. 30 as under 1.90 Total declared 10,87,424 Under Section 53 02,49;748 Under Section 54,90,000 Interest 00,06,218 Balance payment71,41,458 Similar endorsement is also found in the file of the other partner viz. Miss Ferora Marker except the figures which are different. It is therefore clear that regular assessment order is not available on record. The unrebutted averments and the endorsement in the files lead to the conclusion that assessment order was not passed by the Income Tax Officer. He only accepted the declared income and giving credit to the tax paid in advance issued the demand notice for the balance payable without passing .any assessment order. The assessment order is made under section 59 (1) which is reproduced as under:

59. Self-assessment.- (1) Where the return of total income for any income year furnished by the assessee under section 55 qualifies for acceptance in accordance with the provisions of a scheme of self- assessment made by the Central Board of Revenue for that year or under any instructions or orders issued thereunder, the Income-tax Officer shall assess, by an order in writing, the total income of the assessee on the basis of such return and determine the payable the basis of such assessment. (2) ........................ (3) In assessing the total income and determining the tax payable under subsection (1), the Income-tax Officer may make such adjustments as may be necessary, including any adjustment under section 34. 35, 36,37, 38, 50, 53 or 54, the rules made under section 165, the First Schedule and the Third Schedule. (4) No order under subsection (1) shall be made in any case after the thirtieth day of June of the financial year next following the income year in respect of which a return of total income has been furnished under Section

55. The mandatory requirement of this provision is that the Income-tax Officer is required to pass an order in writing assessing the total income of the assessee and determine the tax payable on the basis 'of such assessment. Therefore the assessment order should not only contain the total income assessed but also the tax payable on that basis. The assessment order is a result of proper application of mind by examining the facts, claims, adjustments and allowances and thus determine the total income and the tax payable.. It is after passing such proper assessment order that demand notice can be issued under section 85 of the Income-tax Ordinance which is reproduced as follows: "

85. Payment of tax on demand.- (1)Where any tax is payable in cons pence of any assessment or other order under this Ordinance, the Income-tax Officer shall serve upon the assessee, or any other person liable to any such tax on behalf of the assessee, a notice of demand in the prescribed form specifying the sum payable; and thereupon the sum so specified shall be paid to the credit of the Federal Government within the time specified in the said notice. (2) Notwithstanding anything contained in subsection (1), where the assessee or any other person on whom a notice under the said subsection has been served makes an application for granting stay of payment of tax or for allowing payment in installments, the Inspecting Assistant Commissioner may, subject to the provisions of section 89, stay the payment of tax till such time as he thinks fit or allow the payment of tax in such installments as he may determine." A perusal of these provisions makes it very clear that the demand notice can be issued only after an assessment order has been passed by the Income-tax Officer. Unless this pre-condition is satisfied no demand notice can be issued. Similar provision was contained in section 29 of the Income Tax Act 1922. While considering section 29 the Supreme Court in Civil Petition No. K-246 of 1980 Commissioner of Income-tax West Zone, Karachi v. Anwerally Haji Noor Mohammad after referring, to various judgments observed as follows: "The sum and substance of these decisions and the express language of section 29 is that there must be an application of mind followed by an order on the basis of which notice of demand can issue. Mere incorporation of the demand in the is not sufficient to satisfy the requirement of the law." This observation equally applies to the present case where the assessment order has not been passed and demand notice has been issued. We therefore declare that the demand notice was issued and the impugned order was passed without lawful authority and are of no legal effect. We direct the Income-tax Officer to pass assessment order according to law after notice to the petitioner. M.B.A./M-918./S Order accordingly.