1988 PLP 1014 (PTD)

Rs. 5,00,000 (b) Unexplained cost of Plot N.268-B, Model Town Extension Scheme, Lahore. Rs. 55,000 (c) Unexplained Bank deposit Rs. 6,028 Total: Rs.6,11,028 1982-83 (i) The income from Profession re-assessed Rs.60,000 Total: Rs.60,000 1983-84 (i) The income from profession re-assessed. Rs.70,000 (ii) Additions because of difference of cost of construction of House No.268-P, Model Town Extension Scheme, Lahore. Rs.28,000 Total: Rs.98,000

3. Aggrieved by the orders of the Income-tax Officer, the petitioner preferred an appeal before the Commissioner Income-tax (Appeals) who under his order dated 14-2-1987, granted some relief. The addition of Rs.11,000 in the assessed income for the year 1980-81 was deleted. Likewise, the additions of Rs.55,000 and Rs.6,028 in the estimated income for the year 1981-82 were struck down and further the professional income was reduced by Rs.5,

000. Consequently, the assessed income for 1981-82 stood fixed at Rs.66,

028. For the year 1982-83, the professional income was brought down from Rs.60,000 to Rs.50,

000. The assessed professional income for the year 1983-84 as well was reduced by Rs.10,

000. In other respects, including the unexplained investments in immovable properties the order of the Assessing Officer was not interfered with.

4. The petitioner then went in second appeal before the Income-tax Appellate Tribunal. The Department also preferred an appeal questioning the grant of relief to the petitioner under the appellate orders of the Commissioner. It is on the record that the name of the petitioner's wife was, Mst. Mumtaz Begum. In the proceedings before the Income-tax Officer, a controversy arose regarding the name of her father. According to the assessment order Mst. Mumtaz Begum filed a suit against the LDA in respect of property No.899-N, Samanabad, Lahore. To establish that the lady who brought the suit was the petitioner's wife, the I.T.O. examined the complainant namely Mr. Naveed Ashiq Alvi Advocate under section 148 of the Income-tax Ordinance, who had acted as a counsel for the plaintiff in the civil suit heard by the Senior Civil Judge, Lahore. As per complainant's version in the civil suit, Mst. Mumtaz Begum was shown to be the daughter of one Muhammad Sharif and further the Senior Civil Judge passed an order in which the petitioner was enlisted amongst her heirs. In the order of the I.T.O., the petitioner has been accused of changing the identity of his wife. In this behalf the I.T.O referred, to a statement attributively made by the petitioner in an inquiry before the L.D.A. The latter, however,' denied to have given any such statement. To controvert his contention the I.T.O. heavily relied upon the statement of the complainant. In his appeal before the Tribunal, the petitioner assailed the validity of the orders of the authorities below on a number of grounds including the plea that neither the Senior Civil Judge passed any such order nor was he confronted with the statement' of Mr. Naveed Ashiq Alvi, advocate The petitioner's submissions prevailed with the Tribunal who by order dated 1-7-1987 under challenge in this writ petition maintains- "... The learned D.R., however, could not produce the documents, which were considered in the assessment order to identify Mst. Mumtaz Begum as wife of the appellant. The very fact that:- (i) there was no order of the learned Civil Judge available on record on the basis of which the officers below have their findings: (ii) the appellant was never confronted with the statements of Naveed Ashiq; and (iii) no statement was ever given by the appellant to LDA in connection with the inquiry as alleged on page 7 paragraph 2 of the Assessment order. In short, there is nothing on record to support the fin& of the Assessing Officer. We also realise that the assessee was not provided proper opportunity, which he was legally entitled to. In view of the above, such an order cannot be sustained in law. We, therefore, set aside all the four assessments to be completed afresh."

5. I have heard the learned counsel for the parties. Mr. Muhammad Amin Butt, learned counsel for the petitioner has assailed the impug ned order only to the extent it gives a direction for completion of the assessment afresh. Thus, so far as the setting aside of the assessment by the lower Income-tax Authorities, is concerned he fully supported the same. His objection to the validity of the de novo hearing by the Assessing Officer, was, that the department mustered entire evidence and on perusal thereof the Tribunal rendered a definite finding that the allegations against the petitioner regarding concealment of income were not established. It was argued that though remand of the case to the I.T.O. for assessment afresh, was within the discretion of the Tribunal yet this discretion had to be exercised in consonance with the judicial principles. The submission was that it was for the I.T.O. to have established before the Tribunal that the income escaped assessment and he collected entire evidence in this behalf but failed to prove any concealment on the part of the petitioner: In these circumstances, according to Mr. Butt, the Tribunal failed to exercise its discretion in an objective manner and, therefore, the direction as to the recommencement of the assessment, was not rested on any judicial ground. He referred to Maharani Nanak Kumari Sahiba v. Commissioner of Income-tax Bihar and Orissa 1955 (XXVIII) I.T.R. 462) to substantiate his submission that the remand of the case to the I.T.O. for assessment afresh was wholly invalid.

6. On behalf of the Department it has been argued that section 133 of the Income-tax Ordinance 1979 fully empowers the Tribunal to set aside the assessment, if it is not found to be in conformity with law and direct the Income-tax Officer to make assessment afresh. It was emphasised that the remand of the case to the Income-tax Officer was well within the jurisdiction of the Tribunal and such an order cannot be subjected to judicial review.

7. The powers of the appellate Tribunal are given in section 135 ibid, which in so far as relevant for the purpose of this case is reproduced below:- (1) ............................................................. (2) ............................................................. (3) .............................................................. (4) If the Appellate Tribunal is satisfied that an assessment which is the subject of appeal:- (a) Ought to be reduced or annulled, it shall reduce or annul the assessment accordingly; or (b) is insufficient, it shall enhance the assessment accordingly; or (c) Ought to be set aside, it shall set aside the assessment and direct the Income-tax Officer to make a fresh assessment. (5) If the Appellate Tribunal is satisfied that an order which is the subject of appeal, ought to be interfered with, it shall cancel or vary the order accordingly and shall issue such consequential directions as the case may require. (6) ..................... ..................... ..................... (7) ............................................................. (8) ........................................................ (9) ............................................................. It is to be seen that the powers conferred on the Tribunal in hearing an appeal are fairly wide and under subsection (4)(c) as an appellate Authority it can set aside the assessment and give a direction to the Assessing Officer to make fresh assessment. But the appellate Tribunal is a quasi-judicial Tribunal. The nature of powers conferred on it and the consequences ensuing from the exercise of those powers necessarily entail that while hearing the appeal it must be governed by judicial considerations. The expression "if ....satisfied" appearing in the opening clause of subsection (4) does not confer an absolute and subjective authority on the Tribunal but according to the long line of decisions interpreting this expression, it does not import any arbitrary or capricious satisfaction but must be construed to mean "reasonable satisfaction" capable of scrutiny in an objective manner.

8. With this analysis of the powers of the Tribunal, it has now to be considered as to whether or not the direction given by it to the Assessing Officer to commence re-assessment proceedings afresh, is, in conformity with law. It is to be remembered that burden tot show, that within the meaning of section 65, the income escaped assessment or was under-assessed or assessed at too low a rate lies on the department. Reference in this respect may be made to Commissioner of Income-tax Bombay v. Gopal Vaijnath Manohar AIR 1935 Bom.

410. Following this precedent, Beaumont, C.J. in: Chimanram Motilal v. Commissioner of Income-tax (Central) Bombay A I R 1943 Bom. 132 observed:- "Income cannot be held to have escaped assessment merely on the ipse dixit of the income-tax Officer. As held by this Court in (1935) 3 I T R 372 it is for the Income-tax Officer to establish to his own satisfaction on the assessment, and subsequently before any appellate Tribunal, that income has escaped assessment; it is not for the assessee to prove that the original assessment was right, and that no income has escaped assessment " It is evident from the impugned order that the Tribunal came to a clear cut conclusion that the Income-tax Officer failed to establish that there was non-disclosure of material facts by the assessee and that his income escaped assessment. The Tribunal found that his order was not anchored on any reliable evidence and thus adjudged illegal. It was therefore, rightly set aside by the Tribunal. The Tribunal's order gives an impression that in setting aside the orders of the Income-tax Authorities, the omission on the part of the Income tax Officer to provide proper opportunity to the petitioner to defend himself also weighed with it. But a careful reading of the impugned order unequivocally conveys that what really prompted the Tribunal to quash the assessment order was that the allegation of concealment of income was not at all substantiated against the petitioner. The mention of the I.T.O's failure to extend reasonable opportunity of hearing to the petitioner is merely an additional ground supplementing the decision to set aside an untenable assessment order. In these circumstances a direction as to fresh assessment amounts to allowing the department to muster additional evidence to patch up lacunary re-assessment proceedings.

9. I have examined the case of Maharani Nanak Kumari cited on behalf of the petitioner. It lends support to his contentions In that case the assessee carried on manufacturing business and after promulgation of the High Denomination Bank Notes (Demonetization) Ordinance, she exchanged high demonination notes of the value of Rs.3,97,

000. This money was not declared by her in the total income return in the relevant assessment year and was called upon by the income-tax Officer to disclose the source of the amount. Her explanation was that the money belonged to her husband, Maharaja of Dumraon. The Income-tax Officer did not accept this explanation and treated the amount as her undisclosed income. In appeal, the Appellate Assistant Commissioner on the basis of the evidence before him agreeing with the assessee, maintained that the currency notes exchanged by her formed part of the surplus collections of the Dumraon Estate which from time to time were withdrawn by the Maharaja from the Bank. The Income-tax Department went in further appeal before the appellate Tribunal, which was allowed and the case remanded to the income-tax Officer, to investigate the assessee's claim that the amount represented the cash balance of her husband. The assessee agitated against the correctness of the remand order in the Patna High Court and opposed the remand on the plea that the matter had already been investigated by the Appellate Assistant Commissioner, who examined the account books of the assessee s husband which confirmed her version and thus, further investigation through remand was unwarranted. The D.B. seized of the case, was influenced by this argument and maintained:- "

the appellate Tribunal had no justification for making the order of remand to the Income-tax Officer to bring on record further evidence on the same point. It is true that section 33(4) has granted a very wide statutory discretion to the Income-tax Appellate Tribunal in disposing of an appeal but the discretion given under thin section to the Income-tax Appellate Tribunal is a judicial discretion, which must be exercised in accordance with legal principles and got, an arbitrary or capricious manner. The principle to be applied in such a case is pointed out by Lord Halsbury in Susannah Sharp v. Wakefield (1891 A.C. 173); "An extensive power is confided to the justices in their capacity as justices to be exercised judicially; and 'discretion' means when it is said that something is to be done according to the rules of reason and justice, not according to private opinion . Applying this principle to this case it is manifest that the order of remand made by the appellate Tribunal is not a legally valid order."

10. The jurisdiction of the Income-tax Officer to re-open the case was circumscribed by the conditions laid down in section

65. In the absence of those conditions he had no jurisdiction to embark upon re-assessment. Before commencing re-assessment proceedings against the petitioner, he was required to have objectively satisfied himself that the facts constituting the foundation of his jurisdiction subsisted and there was material before him to support the existence of such facts. His action was subject to scrutiny by the appellate Authorities. As already observed, the Tribunal set aside the assessment order for lack of such material. It is nobody's case that complete picture of the case was not before the Tribunal and some aspects thereof required elucidation necessitating remand to the I.T.O. The power to remand is discretionary in nature. But such discretion is to be exercised reasonably and fairly indicating the reasons for remand. The impugned order does not satisfy this test. Upon the facts obtaining on the record, there was no valid ground to send back the case to the Income-tax Officer for fresh assessment. The direction given by the Tribunal in this respect is wholly illegal and most likely shall expose the petitioner to another round of cumbersome proceedings and unnecessary harassment. Such a direction is liable to be struck down in exercise of constitutional jurisdiction of this Court.

11. For all these reasons this writ petition is accepted and the impugned order to the extent of ordering the fresh assessment by the I . T . O. , is, declared to have been passed without lawful authority and of no legal effect. The parties are left to bear their own costs. M. B.A./M-935/1. Order accordingly.