P L D 1975 Lahore 1317 (PLP)

MUNAWAR ELAHEE RANA, J.‑This is an application made by the Commis sioner of Income‑tax, Lahore under section 66(1) of the Income‑tax Act (Act XI of 1921) referring the following question of law said to arise out of order dated 27th December 1971 passed by the Income‑tax Appellate Tribunal , Lahore in Income‑tax Appeal No. 2005 of 1971‑72 relating to the assess year 1966‑67 "Whether on the facts and in the circumstances of the case, the Tribunal was justified in holding that the Income‑tax Officer could resort to action under section 23(4) of the Income‑tax Act only on 26‑6‑1971 when the default occurred and not on any subsequent date of which no notice had been given to the respondent?"

2. The brief facts relevant for the disposal of this reference are that the respondent‑assessee is a partner of Messrs M. B. Qureshi & Co., Mangle Road, Jhelum and also a member of Association of Persons known as M. B. Qureshi & Co., 29‑E, Gulberg Market, Lahore. In con nection with the assessment proceedings for the assessment year 1966‑67, notices under sections 22(4) and 23(2) of the Income‑tax Act were issued to the respondent at his Lahore address but in spite of the efforts by the Income‑tax Offcer, the service could not be effected on him personally. Ultimately he was served with these notices by affixation for 26‑6‑1971. but in the order‑sheet on the file there is nothing to show that any proceedings were in fact taken by the Income‑tax Officer on ?6‑6‑1971. Nonetheless the Income‑tax Officer completed ex parte assessment against the assessee under section 23(4) of the Act on 28‑6‑1971,

3. The assessee went up in appeal (I. T. A. No. 2005 of 1971‑72) against the order before the Income‑tax Appellate Tribunal (Pakistan), Lahore. In appeal the assessee did not dispute the validity and mode of service of the notices thus effected on him for 26‑6‑1971. He merely raised an objection to the effect that the Income‑tax Officer did not complete the assessment under section 23(4) of the Act on 26‑6‑1971 itself but on 28‑6‑1971 for which date no notice was issued to the assessee. The Tribunal gave effect to this objection and in accepting the appeal before it set aside the assessment in question to be made de novo.

4. In these circumstances the Commissioner of Income‑tax has filed this application referring the above question of law said to arise out of the appellate order passed by the Tribunal to the High Court for its opinion. We have heard the learned counsel for the parties. According to the Tribunal in the circumstances of the case the Income‑tax Officer was entitled to proceed ex parte and complete the assessment ex parte against the assessee under section 23(4) of the Act on 26‑6‑1971 only for which date the service was effected on him by affixation and not afterwards on 28‑6‑1971 for which date the assessee had no notice of hearing. In this connection the Tribunal observed that :‑ "As rightly contended by the learned counsel the default occurred on 26th and the Income‑tax Officer could on that date resort to the provisions of section 23(4) but not for default of appearance on a subsequent date of which no notice had been given to the appellant."

5. As a first step towards the assessment proceedings an assessee is required to file a return of his income as laid down under subsection (1) of section 22 of the Act. Subsection (2) of section 22 of the Act also provides that the Income‑tax Officer may serve l,. notice upon any person, whose total income, in the opinion of the I. T. O., is of such an amount as to render such person liable to income‑tax, and require him to furnish within a period speci fied in the notice a return in the prescribed form setting forth his total income during the previous year. There is a proviso that the I. T. O. may in his discretion extend the date of delivery of the return. In this connection subsection (4) of section 22 lays down that "The Income‑tax Officer may serve on any person who has made a return under subsection (1) or upon whom a notice has been served under subsection (2) a notice requiring him on a date to be therein specified, to produce or cause to be produced, such accounts or documents relating to any period prior or subsequent to the previous year, as the Income‑tax Officer may require, there is also one proviso attached that the Income‑tax Officer shall not require the production of any accounts relating to a period more than three years prior to the previous year." The actual machinery for the assessment is provided in section 23 of the Act. It lays down that ;‑ "(1) If the Income‑tax Officer is satisfied without requiring the presence of the assessee or the production by him of any evidence that a return made under section 22 is correct and complete, he shall assess the total income of the assessee, and shall determine the sum payable by him on the basis of such return, (2) If the Income‑tax Officer is not satisfied without requiring the presence of the person who made the return or the production of evidence that a return made under section 22 is correct and complete, he shall serve on such person a notice requiring him, on a date to be therein specified, either to attend at the Income tax Officer's office or to produce, or to cause to be there produced, any evidence on which such person may rely in support of the return. (3) On the day specified in the notice issued under subsection (2), or as soon afterwards as may be, the Income‑tax Officer, after hearing such evidence as such person may produce and such other evidence as the ‑ Income‑tax Officer may require, on specified points, shall, by an order in writing, assess the total income of the assessee, and determine the sum payable by him on the basis of such assessment. (4) If any person fails to make the return required by any notice given under subsection (2) of section 22 and has not made a return or a revised return under subsection (3) of the same section, or fails to comply with all the terms of a notice issued under subsection (4) or sub-section (4-A) of the; same section or, having made, a return, fails to comply with all the terms of a notice issued under subsection (2) of this section, the Income‑tax Officer shall make the assessment to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment and in the case of a firm, may refuse to register it or may cancel its registration if it is already registered."

5. Sh. Abdul Haque, the learned counsel for the petitioner has urged that notices under section 22(4) anti section 23(2) of the Act were necessary which have been given properly. There is no dispute about the correctness of the address and mode of service. According to him, once a due service was made on the assessee‑respondent, the Income‑tax Officer was competent under section 23(4) of the Act to complete the assessment on any subsequent date he considered convenient. There was then no statutory obligation on the assessing officer to wait and call the respondent time and again.

6. In this case before us, the two notices under sections 22(4) and 23(2) of the Act were issued and the date specified therein was 26‑6‑1971. This was a date of hearing fixed by the Income‑tax Officer for proceeding under subsection (31 of section 23 of the Act. In the event of failure of the assessee to comply with those notices on the date specified in them the Income tax Officer could complete a summary assessment to the best of his judgment as laid down under section 23(4) of the Act.

7. But in this case there is no record of proceedings, if any, actually taken by the Income‑tax Officer on 26‑6‑1971. The record is altogether silent on the point. On the face of the record .there is nothing to show if this case was in fact taken up by the Income‑tax Officer for hearing on 26‑6‑1971 or that in spite of the notices the assessee had failed to comply with them on the date specified in them. The case of the assessee is that he filed a sworn affidavit before the Tribunal stating that he had all the day long remained present outside the office of the income‑tax Officer with his books of account and the evidence but that his case was not called and he was not informed of the next date of hearing fixed in his case. The Tribunal does not seem to have even adverted to this plea and has, instead, set aside the assessment for the reason that the assessee had no notice when the Income‑tax Officer completed the impugned against him.

8. It was argued before us that the proceedings before the Income‑tax Officer were not judicial in nature and he was not expected to maintain a complete record of the day to day proceedings. The proceedings before the income‑tax Officer are quasi‑judicial in their nature. In this connection page 14 of the "Income tax Office Manual", Second Edition, revised up to 31st January 1966, containing the departmental instructions issued by the Central Board of Revenue lays down that :‑ "Miscellaneous record (l. T. 38).‑This should start with an order-sheet (I. T. 39) and comprise office copies of all notices, Acknowledgement receipts and all correspondence with the assessee. The papers should be arranged in chronological order, the latest letter, etc., being on the top. The papers should be page‑numbered. The order‑sheet (

1. T. 39) is intended to be a complete record of the proceedings of a case from the stage of the receipt of a return under section 22(1) on the issue of a notice under section 22(2)/34 up to the stage of collection. All orders directing the issue of notices under sections 22(2)/34, 22(4)‑A, .'3(2), 29, 37 etc., should be recorded on the order‑sheet. When an application for time for the submission of a return, or for payment of tax, etc,, etc., or any other letter from the assessee is received, a suitable entry should be made in the order‑sheet and the orders of the Income‑tax Officer obtained thereon. The compliance of the orders should be noted in the third column of this form. All entries should be serially numbered and dated. A number of such entries can also be made by means of a rubber stamp, for instance, the orders regarding the issue of notices under section 22(2), etc., etc., Commissioner of Income‑tax should arrange to provide the Income‑tax Officers with a sufficient number of rubber stamps covering routine entries to ensure uniformity and speed‑and the Income‑tax Officers should see that the rubber stamps are made full and proper use of by the clerks. The miscellaneous record should be kept in the file for three years and thereafter sent to the record room for being retained for nine years. It should be destroyed after 12 years." The form I. T. 39 is reproduced at page 147 of the Manual showing three columns i.e. serial number and date, brief order, mentioning reference, if necessary and how complied with and date of compliance.

9. In the face of these clear and unequivocal instructions it is not permissible to go behind the order‑sheet maintained by the Income‑tax Officer and rely on something which is not on record. There is nothing to show that this case was actually called and taken up for hearing by the Income‑tax Officer on 26‑6‑1971, the date specified in the two notices served on the assessee. This conclusion is inescapable on the face of the record. There fore, in the absence of any hearing held by the Income‑tax Officer on 26‑6‑1971 it cannot be positively said that the assessee had in fact committed any default in making compliance with the two notices served on him. For the order‑sheet does not make mention of any such default allegedly com mitted by him on 26‑6‑1971.

10. Section 23(3) correctly lays down that on the day specified in the notice issued under subsection (2), or "as soon afterwards as may be," the Income‑tax Officer after bearing shall finalize the assessment. This clearly postulates the power in the Income‑tax Officer to grant adjournments also during the course of the inquiry before him. Indeed at times it may be very necessary for him to allow an adjournment. But that does not mean that the assessee is always entitled to a fresh notice intimating him about the next date fixed in the case. If the assessee does not appear or produce his evidence on the specified date in response to the notices, it is expected of the Income‑tax Officer to bring the default on the record. Once that is done he need not proceed to judgment and complete the ex pate assessment forthwith under section 23(4) of the Act. It may not be possible for him to do so and he may in his discretion like to adjourn the case. After the assessee has committed the default and the Income‑tax Officer has decided to proceed ex parte against him, he is not, as of right, entitled to further notices of the adjourned hearings.

10. As a result of this discussion on the facts and in the circumstances of this case, and our own reasons given above, we find that the Tribunal was not justified in holding that the Income‑tax Officer could resort to action under section 23(4) of the Act only on 26‑6‑1971 when the default allegedly occurred and not on any subsequent date. At the same time we find that the question referred to the High Court is not properly framed. It has been erroneously assumed that default had in fact occurred on 26‑6‑1971 although there is nothing on the record to warrant this assumption. Therefore, in the absence of any order on the record to show that the assessee had defaulted on 26‑6‑1971 the Income‑tax Officer was not justified to proceed ex pane and complete the summary assessment against him afterwards on 28‑6‑1971 for which date he had no notice. We, therefore, return our answer in affirmative. But there shall be no order as to costs in the circumstances of this case. K. B. A. Reference answered.