2004 PLP (Trib (PTD)

Black's Law Dictionary: Give notice. --To communicate to another, in any proper or permissible legal manner, information or warning of an existing fact or state of facts or (more usually) of some intended future action; e.g. tenant giving landlord thirty-day notice of termination of tenancy; employee giving employer two weeks notice intention to quit; to give notice of appeal to appellant.

8. The word "Notice" in its turn has been given the following meaning:-- Notice. --Information; the result of observation, whether by the senses or the mind; knowledge of the existence of a fact or 'state of affairs; the means of knowledge: Intelligence by whatever means communicated. Any fact which would put an ordinarily prudent person on inquiry. That which imparts information to one to be notified. Notice in its legal sense is information concerning a fact, actually communicated to a person by an authorized person or actually derived by him from a proper source, and is regarded in law as "actual" when the person sought to be affected by it knows thereby of the existence of the particular fact in question. It is knowledge of facts which would naturally lead an honest and prudent person to make inquiry, and does not necessarily mean knowledge of all the facts: In another sense, "notice" means information, an advice, or written warning, in more or less formal shape, intended to apprise a person of some proceeding in which his interests are involved, or informing him of some fact which it is his right to know and the duty of the notifying party to communicate.. A person has notice of a fact if he knows the fact, has reason to know it, should know it, or has been given notification of it.

9. In the matter of "opportunity" and "reasonable opportunity" the learned A.R. has drawn our attention to the Commentary of Kanga and Palkiwala supra, relevant portions of which are reproduced as under:-- "Opportunity" The Assessing Officer exercises quasi judicial functions and should be governed in his procedurally judicial considerations and must conform to the rules of natural justice. This is to say, he must proceed without bias and give sufficient opportunity to the assessee to place his case before the Department; he must conduct himself in accordance with the principles of justice, equity and good conscience. The ITO cannot rely on any evidence or any fact in arriving at his conclusions without first pointing out the same to the assessee and giving him a reasonable opportunity of meeting the case which is ultimately made out in the assessment order. In Dhakeswarl Cotton Mills Ltd. v. CIT where these fundamental principles of justice were violated, the Supreme Court set aside the assessment, (See further post under "Private sources of information", p. 849 and "Comparable cases", P.850) sub-sections (2) and (3) of section 142 now give express statutory recognition to principles which were judicially established under the 1922 Act, viz. that the ITO is entitled to make such inquiry , as he considers necessary and that the assessee should be given an opportunity of being heard in respect of any material proposed to be utilized for the purpose of assessment under this section even in the material be the past assessee of the assessee himself. But in any case the ITO is not to to settle, as it were, the issues between himself and the assessee or in the presence of the assessee to call all the evidence and marshal and exhibit the documents. "Reasonable opportunity,

The notice under this subsection must give the assessee art enable opportunity to comply with its requirements; the assessee is entitled to a reasonable opportunity not merely to collect and produce his books but to support or supplement his bongs by any other evidence on which he might rely.

10. It is thus clear from the extensive quotations made above that the purpose of giving mandatory notice referred to in the proviso to section 62(1) will be served for all legal. intents if the defects in accounts and preferably warning of some intended future action are communicated or brought to the knowledge of the assessee in any proper or permissible manner and reasonable opportunity to explain the defects is provided to the assessee. Lance this has been done and if the assessee gives an explanation, then after 'recording the explanation 'of the -assessee in the P assessment order, the DCIT cannot still jump in the dark and estimate income but he is supposed to give the basis of computation of total income in the assessment order. The opportunity to the assessee is to be given to meet with the defects pointed out in the accounts and to explain his point of view regarding these defects. The basis of computation of income is legally to forma part of the assessment order and not that of the notice to the assessee which mandatory is required so as to confront the defects in the accounts.

11. There is no denying the fact that order-sheet generally contains recording of the day to day proceedings. However, this may not always be the position. We feel that if the defects in accounts are confronted to an assessee or his authorized representative through recordings on the order-sheet, which is obviously a permissible mean of communication, C this means that the Assessing Officer has duly given a notice of the defects to the assessee and the first two parts of the proceedings on first occasion referred to in para.5 supra thus stand fulfilled in this way. With this criteria in view let us now examine the order-sheet entries dated 30-5-2002 and 31-5-2002, the relevant portions of which are reproduced below:-- 30-5-2002: "Mr. Javed Alvi, A. R. of the assessee attended . . Stated that direct expenses under the heads repairs and maintenance, printing and stationery, telephone, travelling and conveyance, entertainment, postage and miscellaneous expenses have un-verifiability due to cash payment and internal vouchers only. Requested for adjournment to furnish vouchers of administrative and selling expenses. Adjourned till 31-5-2002." (Sd.) (Sd.) DCIT A. R. 31-5-2002:-- "Mr. Javed Alvi-, A. R. of the assessee attended , ............... . . Ire is confronted for addition of donation declared being inadmissible, repair and maintenance expenses, printing and stationery, telephone, traveling and conveyance, entertainment and miscellaneous expenses. Definite instances of non verifiability and internal vouchers have been confronted to the A.R. and hence suitable add backs to be made under these heads. Also confronted for vehicles -personal use and depreciation expense disallowance thereon. Case discussed Books of accounts examined and returned back and A.R. agree of add backs out of direct expenses and P&L account. (Sd.) Signed A.R. DCIT 31-5-2002 Assessed as per I.T.

30. Issued DNNC and a copy of the order to the assessee. Signed DCIT (Underlining is by us)

12. As observed in the foregoing paragraphs the order-sheet generally is not a substitute for statutory notice under section 62, if it records only the proceedings of the day. As against this, here we find that the entries made on the order-sheet on 30-5-2002 and 31-5-2002 quoted supra especially the portions underlined by us are tantamount to a "notice" and "giving a notice of the defects in the accounts" to the assessee. The Assessing Officer, however, concluded the proceedings without getting a written explanation from the assessee due to the fact that the learned A.R. had agreed to making suitable add backs out of direct expenses and P&L account and this agreement meant nothing but the explanation on behalf of the assessee as required in the proviso to section 62(1). This explanation has duly been made part of the assessment order by the DCIT. In our view the mandatory requirements of the said proviso were duly met in the circumstances of this case. Had the Commissioner gone minutely through the records in the way we have done, he would have instead of setting aside the case decided the matter at this level. However, since setting aside by the learned CIT(A) is in no way prejudice to the interest of the appellant, we refrain from interfering in the order of the learned CIT(A).

13. Before parting with the appeal we would like to observe that under section 50(8) of the Ordinance the sums deducted or collected, or purported to have been deducted or collected under section 50 are to be treated as payment of tax on behalf of assessee and under section 51 of the Ordinance every person deducting or collecting tax under section 50 is to issue a certificate at the time of making payment of the sum from which tax has been deducted or collected, and therefore, an assessee becomes entitled to the credit of tax when withholding agent as representative of the Federal Government withholds tax from the payment made to the payee. In case the withholding agent does not comply with the statutory requirements of timely depositing the tax into the Government exchequer, then the department can proceed against the withholding agent with all consequences as provided under the law.

14. Consequently the appeal fails and is dismissed with the observations as made above. C.M.A./992/Tax(Trib.) Appeal dismissed.