1990 PLP (Trib (PTD)

These five appeals arise out of the assessments made on the appellant for the charge years 1957‑58,1958‑59,1959‑60 supplementary and 1960‑61.

2. We will first deal with the question of limitation which arises only in respect of the assessment for the year 1957‑

58. The precise objection is that the assessment for this year is time‑barred, having been made after the expiry of four years from the end of the year in which the income first became assessable and that the assessment is not saved by the provisions contained in subsection (2A) of section 34 of the Act. It was contended that the last date for making the assessment was 31st March 1962, whereas it was actually finalised on the 6th August 1962, i.e., beyond the period of four years. This contention was also raised before the Appellate Assistant Commissioner, but he brushed it aside and relying on subsection (2A) of section 34 enacted by the Finance Ordinance, 1959, which lays down that in case where no return of income is filed the notice be issued at any title and no assessment or reassessment made or any other proceeding taken in consequence of such notice shall be called in question in any Court etc., held that the notice under section 34 issued in the instant case on 6‑6‑1962 was valid in law.

3. The appellant's Counsel urged before us that section 34(2A) was enacted by the Finance Ordinance, 1959 and as such it did not apply to the assessment for the year under consideration since this subsection had not been given retrospective effect. The point he wanted to bring out was that the notice could have been issued only upto 31st March 1962 as in view of the construction placed on the word `year' by the Supreme Court in the case of Messrs Nagina Silk Mills v. The Income‑tax Officer, A‑Ward, Lyallpur the period of four years expired on that date. A plain reading of this subsection, however, does trot support the contention of the learned counsel. It is true that no law should be construed to have a retrospective operation, but if such a construction appears very clearly or arises by necessary implication it should be given retrospective effect to the extent the language of the Act renders it necessary. This subsection in clear terms lays down that a notice under subsection (1) of section 34 may in a case in which the assessee has not tiled any return under subsection (1) or subsection (2) of section 22 be issued by the Income‑tax Officer at any time notwithstanding that at the time of issue of such notice the. period of eight years specified in the said subsection before its amendment had expired and that no assessment or re assessment made or any other proceeding taken in consequence of such notice shall be called in question in any Court; Tribunal, or any other authority. The proviso appended to this subsection is to the effect that no notice under subsection (1) shall be issued in respect of any income etc., which accrued or arose or be deemed to have accrued or arisen to an assessee before the 14th day of August 1947. The proviso places the matter beyond any pale of doubt that a notice under subsection (1) of section 34 can be issued in respect of incomes of all assessment years excepting the income which arose before the 14th day of August 1947. Thus the period prior to 14th August 1947 has only been excluded from the purview of the subsection and from this it also clearly follows that in cases where there is concealment of income or no return of income has been filed the legislature intended to bring within the fold of this subsection all income arising after the 14th August 1947 even though the time limit specified in the subsection before its amendment may have already expired. As a matter of fact the limitation of eight years which applied only to cases of concealment of income was done away with by the Finance Ordinance, 1959 whereby in such cases assessment could be made without any time limit. It was in 1961 that the cases in which no return had been filed were brought at a par with cases of concealed income and necessary amendments made in section 34(1) and section 34(2A) providing for assessment or re‑assessment and issue of notices in such cases without any time limit. Admittedly for the year under consideration the appellant in the instant case did not file any return and thus his case is covered by the mischief aimed at by the subsection. There can be therefore no escape from the position that the income‑tax Officer was in the instant case competent to issue notice under section 34 on 6‑6‑1962 and the assessment made or any other proceeding taken in consequence of the issue of that notice cannot be challenged in any Court, Tribunal, or before any other authority merely on the ground that the notice was issued at the time beyond the limitation period. This plea is, therefore, of no avail to the appellant and the assessment cannot be held to be time‑barred.

4. We now take up the other point raised by the appellant's Counsel which is common to all the assessment years under consideration. Appeals against these assessments were rejected by the Appellate Assistant Commissioner since he was of the opinion that the appellant having agreed to be assessed on a particular amount could not be allowed to challenge that agreement in appeal. The agreement recorded in the order sheet of the assessment file is in the appellant's own handwriting and duly signed by him whereby he. agreed to be assessed on an amount of Rs. 70,000 for four assessment years beginning from 1957‑58 assessment. This amount was regarded by the Income‑Tax Officer as income from undisclosed source and in pursuance of that agreement he spread over this amount over all these years beginning from the year 1957‑

58. The only contention raised in this behalf was that this agreement was not in the nature of a consent decree against which no appeal could be preferred. The provisions of C.P.C. do not admittedly as such apply to income‑tax proceeding unless these are by express words in the Income‑tax Act made applicable, but the principles underlying the C.P.C. can be properly invoked in aid just as rules of natural justice are invoked and applied. A case involving the same point came up before the Karachi Bench of the Tribunal I.TA. Nos. 1008 to 1010 of 1960‑61 1986 P T D (Trib.) 779 and it was held that such agreements were binding on the assessee who has consented to them and has agreed to the adoption of particular quantum of income, sales and the rates of profit and he should not be allowed to question the same at a subsequent stage and at the back of the Income‑tax Officer with whom such agreements had been entered into. It will be also advantageous to refer in this connection to the observations made by the learned Judges of Allahabad High Court in the case reported as Seth Gujar Mal Modi and others v. Commissioner of Income‑tax, Uttar Pradesh and another (1963) I.T.R. 101 in which also precisely the question was involved: "There is yet another serious obstacle in the way of the petitioners and that is that in substance their claim is for quashing a term of the settlement voluntarily made, which was arrived at on the basis of an offer made by the petitioners and accepted by the Central Board of Revenue. Such a settlement was of a contractual nature. It was a voluntary one, which had the effect of completely bypassing the normal procedure provided in the Income‑tax Act for assessment, levy of penalty and the rates at which the income was to be assessed under the relevant Finance Act. By agreement the parties could fix not only the quantum of the escaped income but also the, rate at which the tax was to be levied and also whether penalty would be exigible or not. Once the normal procedure has been given the go‑by and the dispute is of a contractual nature, it is well‑settled that the Court will not interfere in the exercise of its extraordinary jurisdiction in such disputes." In the face of the clear agreement made by the appellant which was not repudiated at any stage‑‑not even before us‑‑and the authorities cited above we must hold that the agreement is binding on the appellant. The Income‑tax Officer was, therefore, right in treating this amount as income from undisclosed source and charging it to tax in the various years.

5. There now remains to be decided only one point which arises only in respect of the assessment for the year 1959‑60 (supplementary). The taxable income for this year consisting of three months amounted to Rs. 4,

933. It was contended that the income being below the taxable limit should not have been charged to tax. What the Income‑tax Officer appears to have done is that in pursuance of the instructions contained in Central Board of Revenue Circular C. No. 48(4)‑TTP/59, dated the 9th April, 1959 he multiplied the income by 4, worked out the tax thereon and then divided the same by four which he determined as the tax for the period of three months covered by this assessment. The appellant's Counsel objected to this treatment which, he urged, was not warranted by any provision of law and in support of his contention relied on the decision of the Tribunal reported in (1963) 8 Taxation 1 (Trib.). The relevant excerpt from the decision of the Tribunal may better be re‑produced here: "The appellant contended that, without prejudice to the legality of the assessment so framed; the Income‑tax Act does not give any authority to the assessing officers to work out the tax payable on the actual income of the previous year comprising of three months on a notional basis. It was contended that as stated above, this method of computing tax was specifically designed by the Legislature for assessees having salary income and the notional concept of the income was, therefore, kept restricted to the income chargeable under the head `salary' alone. We are in agreement with the view expressed by the appellant's representative as we do not find anything in the Income‑tax Act or in the Finance Ordinance, 1959, permitting the determination of the notional income or the computation of the tax by an artificial process so far as the incomes other than salary incomes were concerned. Since the determination of the present income, at Rs. 23,207 is not objected to, the appellant's contention that the same should be taxed under the normal laws at the rates prescribed by the Finance Ordinance, 1959, appears to us to be well‑founded. We accordingly direct that the computation of the tax in this case should be made in accordance with the provisions of the Finance Ordinance, 1959 and not on the basis of the instructions of the Central Board of Revenue referred to above." The instant case is on all fours with the case cited above and following that decision we are of the opinion that for the computation of tax for the year 1959‑60 (supplementary) the provisions of Finance Ordinance, 1959 have to be relied upon and the assessment should not be made on the basis of the instructions contained in the Central Board of Revenue's circular referred to above. Since the income worked out for that year falls below the taxable limit it cannot be charged to tax. Order accordingly

6. In the result the appeal for the year 1959‑60 (supplementary) is allowed as indicated above, whereas all the other appeals are dismissed. M.B.A./892/T Order accordingly