1989 PLP 800 (PTD)

AJMAL MIAN. J.--The petitioner by this petition has prayed for the following reliefs: (a) to declare the notices under section 65 dated 26-4-1988 (Annexure E-1 & E-2) and all proceedings there upon and thereafter and order dated 10-5-1988 (Annexure E-3) to be null and void ab initio, unmerited and of no legal effect, being without jurisdiction and to restrain the Respondent No.l or any other Officer from framing any assessment or creation of any demand of Income Tax there under and making any recovery or the adjustment of ascertained refunds; (b) to direct the refunds of the assessee to be issued forthwith along with additional refunds; (c) to award any other adequate remedy and to award in Brim relief; (d) to award cost of the Petition."

2. The brief facts leading to the filing of the above petition are that the petitioner is the sole proprietor of a firm known as M/s. H.M. Abdullah. He has been assessed under the Self-Assessment Scheme inter alia for the year 1987-88. It is the case of the petitioner that he was entitled to the refund of a sum of Rs.15 lacs. It has been averred that notices were issued in respect of the assessment years 1982-83, 1983-84 and 1984-85 against which the petitioner had filed Constitutional Petition No. D-340 of 1988, which was admitted for regular hearing and that upon the tiling of the above petition, respondents 1 and :' had issued refund vouchers of Rs.11,04,502 for the years 1985-86 and 1986-87 on 1.1-4-1988. It is also the case of the petitioner that the assessment for the year 1987-88 was finalised under the Self Assessment Scheme but in order to withhold the above refund amount respondent No.2 unauthorisedly and unlawfully ordered respondent No.l to reissue a notice under section 65 of the Income Tax Ordinance, 1979, (hereinafter referred to as the Ordinance), and to reopen the proceedings for the year 1987-88. The petitioner being aggrieved by the above notices has filed the present petition.

3. In support of the above petition Mr. Mohammad Nasim learned counsel for the petitioner has vehemently urged that the impugned notice is patently without jurisdiction inasmuch as the same has been issued on the basis of change of view and not on the Oasis of any additional definite information and that no income has escaped from assessment. It may be observed that in one of the above notices under section 65 of the Ordinance the grounds on which the notice has been issued are mentioned and one of the grounds is given in paras. 3 and 4 of the above notice which read as follows: "3.In a Cash system of Accountancy or No Account case, the assessee debits only those expenses which have been incurred (as distinguished from the ones which have been accrued) and credits only the actual receipts (as distinguished from the accrued receipts), at the time of occurrence of the said debit or credit. Therefore, the debit of duty of Rs.7,50,000 can only be claimed at the time of its actual payment. Either your claim for not maintaining books of accounts is wrong or the claim of this debit is wrong. Both of them cannot be right at the same time. This point is also strengthened by the fact that the details of, assets filed by you does not include any debtors. In other words, you credited only those sales, which were fully paid. No accrued sales were included. It 'follows that no accrued expenses can be included either.

4. You were confronted on this point and your A.R M/s. Mohammad Nasim & Co. has submitted his arguments vide his letter No. 1703/H (IT)/ 87-88/125, dated 31-3-1988 with, photocopy of Constitutional Petition No. D-1210 of 1986. The same reply was not considered enough and it is established that you have understated the profit by at least Rs.7,50,

000. As the same has escaped assessment, and requires additional assessment under section 65 of the Income Tax Ordinance, you are hereby given notice under Section 65 of the Income Tax Ordinance, 1979 for which prior approval of I A C Range-II, West Zone, Karachi has been obtained already."

4. We would not like to express ourselves definitely on the merits of the case as it may prejudice the petitioner before the Income Tax Authorities. However: we may observe that generally the Court does not entertain a Constitutional petition against a notice but in exceptional cases if a notice is patently illegal, a Constitutional petition is entertained. In the instant case according to the petitioner's own showing he was not maintaining any accounts and got his assessment of the various years finalised on the above basis under the Self-Assessment Scheme. If factually the petitioner was not maintaining any accounts, prima facie it seems to be doubtful that he could have claimed the aforesaid sum of Rs.7,50,000 referred to in the above quoted paras. 3 and 4 of the notice as a contingent liability adjustable against the amount of profit in the absence of maintaining mercantile system of accounts. However, Mr. Mohammad Nasim has referred to the case of Metal Box Company of India Ltd. v. Their Workmen reported in Income Tax Reports Vol. 73, 1969 at page 53 and the case of Commissioner of Income Tax, Delhi-II v. Hindustan Times Ltd. reported in Income Tax Reports Vol. 144, 1983 at page 670, in which it has been held that an assessee can clam portion of a sum set apart as provision for gratuity the basis of acturial valuation. In our view, the above cases have no application as in the' above cases regular accounts were maintained by the assessee. If it is to be held that the petitioner was not entitled to claim the above sum as a liability adjustable in that even it may be urged that it is a case where the income has escaped assessment in terns of sub-clause (1) of Section 65 of the Ordinance,

5. We are inclined to hold that art this stage we cannot hold that the impugned' notices are without jurisdiction as to entitle the petitioner to by-pass the machinery provided for contesting the notices under the Ordinance. We are, therefore, of the view that the proper remedy for the petitioner is to contest the above notices before the department and to avail of the various forums provided under the Ordinance, which inter alia include a reference to this Court after the decision of the Income Tax Appellate Tribunal. We would, therefore, dismiss the above petition in limine. We may clarify that the observations contained hereinabove are tentative in nature and they should be ignored by the forums provided under the Ordinance while considering the question of legality of the impugned notices or the merits of the case. These are the reasons in pursuance of a short order of even date. A.A/H-155/K. Petition dismissed.