1985 PLP (Trib (PTD)

Provided that no such rectification shall be made, having the effect of enhancing an assessment or reducing a refund unless the Commissioner, the Assistant Commissioner or the Income‑tax Officer, as the case may be, has given notice to the assessee of his intention to do so and has allowed him a reasonable opportunity of being heard. (2) The provisions of subsection (1) apply also iii like manner to the rectification of mistakes by the Appellate Tribunal. (3) Where any such rectification has the effect of reducing the assessment, the Income‑tax Officer shall make any refund which may be due to such assessee. (4) Where any such rectification has effect of enhancing the assess ment or reducing a refund the Income‑tax Officer shall serve on the assessee a notice of demand in the prescribed form specifying the sum payable, and such notice of demand shall be deemed tote be issued under section 29, and the provision of this Act shall apply accordingly. (5) Where in respect of any completed assessment of a partner in a firm it is found on the assessment or re‑assessment of the firm or any reduc tion or enhancement made in the income of ‑ the firm under section 3 1, section 33, section 33‑A, section 34‑A, section 65 or section 66‑A, that the share of the partner of the profit or loss of the firm has not been included in the assessment of the partner or, if included is not correct, the inclusion of the share is the assessment or the correction, thereof as the case may be, shall be deemed to be a rectification of a mistake apparent from the record within the meaning of the section, and the provision of the subsection (1) shall apply thereto accordingly, the period of four years referred to in that subsection being completed from the date of the final order passed in the case of the firm. (6) Where the excess profits tax of the business profits tax payable by an assessee has been modified in appeal, revision or any other proceeding, or where any excess profits tax has been assessed after the completion of the corresponding assessment for Income‑tax, and in consequence thereof it is necessary to re‑compute the total income of the assessee chargeable in Income‑tax, such re‑computation shall be deemed to be rectification of a mistake apparent from the record within the meaning of this section, and the provisions of subsection (1) shall apply accord ingly, the period of four years referred to in that subsection being computed from the date of the order making or modifying the assess ment of such excess profits tax or business profits tax. Explanation.‑For the purposes of subsection (6) where the assessee is a firm, the provision of subsection (5) shall also apply as they apply to the rectification of the assessment of the partners of the firm. (7) Where, as a result of proceedings initiated under subsection (1) ‑of section 34, a firm or an association of persons is assessed or re‑assessed, and the Income‑tax Officer concerned, is of opinion that it is necessary to compute or recompute the total income of a partner in the firm or a member of the association of persons, as the case may be, Income‑tax Officer may proceed to compute or re‑compute the total income and determine the sum payable on the basis of such computation or re‑com putation as if the computation or re‑computation is a rectification of a mistake apparent from the record within the meaning of this section, and the provisions of subsection (1) shall apply accordingly, the period of four years specified therein being reckoned from the date of the final order passed in the case of the firm or association of persons, as the case may be."

5. Since the learned Commissioner of Income‑tax (Appeals) made reference to section 156 of the Income‑tax Ordinance, it also can be reproduced with advantage. It is as follows. "

156. Rectification of mistakes‑Any income‑tax authority or the Appellate Tribunal may amend any order passed by it to rectify any mistake apparent from the record on its own motion or on such mistake being brought to its notice by any other income‑tax authority or by the assessee. (2) No order under subsection (1), which has the effect of enhancing an assessment or reducing a refund or otherwise increasing the liability of the assessee, shall be made unless the parties affected thereby have been given a reasonable opportunity of being heard. (3) Where any such mistake is brought to the notice of any income‑tax authority by the assessee and no order under subsection (1) is made by such authority before the expiration of the financial year next follow ing the date in which it was so brought to its notice, the mistake shall be deemed to have been rectified and the provisions of this Ordinance shall have effect accordingly. (4) No order under subsection (1) shall be made after the expiration of four years from the date of the order sought to be amended."

6. Now turning to the contention of Mr. Muhammad Farid, the learned Departmental Representative, I am afraid, I am unable to persuade myself to accept it. In the abovementioned appeal before the Tribunal, the learned Appellate Assistant Commissioner had held that imposition of additional tax under section 45‑A after expiry of 4 years was time‑barred under section 35 of the repealed Income‑tax Act. The learned Division Bench of the Tribunal addressing itself to the problem made the allowing observation: ‑ "There is nothing in section 45‑A which may lead to the conclusion that the impugned order passed by the Income‑tax Officer formed a part of the assessment order and hence it may be taken as rectification of the assessment order. There is, therefore, obviously no question of the application of section 35 of the Act to the facts of the instant case." Subsequently, the learned Division Bench of the Tribunal made further observation as under "It is thus evident that the order under section 45‑A was necessarily to be passed at a time subsequent to the making of the assessment. The order passed under section 45‑A cannot, therefore, be said to be an order of rectification of assessment order." With due respect to Mr. Muhammad Farid, the learned Departmental Re presentative, I am unable to see that the aforesaid decision of this Tribunal lays down the law that no notice under section 45‑A is required, however, I agree with him that the direction of learned Commissioner of ‑Income‑tax (Appeals) that notice be issued under section 156 is hit by the aforesaid decision of the learned Division Bench of this Tribunal. Section 156 of the Ordinance, generally speaking, is successor of section 35 of the Income‑tax Act and the learned Division Bench has held, with which 1 respectfully agree that the proceedings under section 45‑A of the repealed income‑tax Act, were not rectification proceeding falling within ambit of section 35 of the Income-tax Act. As such neither the proceedings under section 45‑A can become time‑barred in view of the period of limitation prescribed by section 35, nor A a notice as envisaged by section 35 is necessary. Nevertheless I am of the view, with due respect to learned Division Bench of this Tribunal, that under the) facts and circumstances of this case notice was necessary I am fortified in my view by a plethora of case law. 7, Bree v. Amalgamated Engineering, Lord Denning M. R. (1971) All B R 1148) has crystalised ages old wisdom when he observed that if the person has some right interest or legitimate expectation, he has a right of hearing. Similarly in Abdul Rehman v. Collector, (P L D 1964 S C 461) our Supreme Court provided new dimension to right of hearing when it held that principles of Natural Justice were to be read in every statute: Recently a Division Bench of Lahore High Court has reiterated the same view when it held that even if a statute was making no mention of giving of opportunity of hearing to affected persons, a right of hearing, nevertheless, was to be read in the statute unless it was specifically excluded (Please see Crescent Sugar Mills v. Central Board of Revenue, Islamabad (P L D 1982 Lah. 1).

8. Now turning to the merits it appears from the perusal of the facts of this case that the additional tax under section 45‑A was imposed after almost two years from the date of the assessment. This period is long enough to give rise to many questions wh.ch might require an explanation from the assessee. It is true that if the Income‑tax Officer commits any mistake in passing an order under section 45‑A at the back of assessee, it can be sub sequently rectified at different forum. But the policy of law favours the burial o stillborn matter at the earliest. It is also established principle of law that every controversy should be nipped in the bud before it gathers roots and becomes more troublesome. As such, in my humble opinion, it is the requirement of common law that if Income‑tax Officer records an order under section 45‑A after assessment, it should not be passed at the back of the assessee. In my humble view a notice must be served on an assessee before recording such order. After all an order under section 45‑A is an order which creates a financial liability of an assessee, hence he should be heard before it is recorded. Let me mention at this stage that the Income‑tax Officer had neither amended any order nor had rectified any mistake. He rather proceeded under sec tion 45‑A of the repealed Income‑tax Act.

9. To conclude, I confirm the order of learned Commissioner of Income‑tax (Appeals) that the Income‑tax Officer should issue a notice to the assessee before recording an order under section 45‑A. But let me mention that it would not be under section 156 of the Ordinance. As I have observed earlier, it is requirement of common law of this land and the notice would be required under it. Consequently, I find no force in this departmental appeal and it is rejected accordingly. M. B. A. Appeal dismissed.