1988 PLP (Trib (PTD)

The discussion with the two Representatives and the scrutiny of record brought out that assessments for the years 1980-81 to 1983-84 already framed were reopened by issuance of notice under section 65 on the basis of the information received from the Survey Wing. No return in response to this was filed, but a reply was given stating that the income, which the assessing officer intended to include, relate to a proprietary concern having the name and style of 'Mien Fazal-e-Subhan to Sons (hereinafter called the proprietorship) which was located in Sukkur, while the appellant, URF, has the name 'Mian Fazal-e-Subhan & Brothers (hereinafter called the Firm). The assessing officer, however, did not agree with this position and proceeded ex parte to frame assessments where he included the income from projects, which related to the Proprietorship at Sukkur. Assessments for 1984-85 and 1986-87, though framed- ex parte under similar circumstances were the first assessments on the basis of Return filed voluntarily. All these the learned A.A.C. confirmed. According to the learned counsel for the appellant, the assessments of the Proprietorship made at Sukkur were cancelled by resort to section 66-A of the Ordinance and the income clubbed with the income of the appellant. The assessment was, however, set aside by the learned Commissioner, Hyderabad Zone with the following directions on a revision petition filed under section 138 of the Ordinance: "(1) With the accepted genuineness of the firm Messrs Fazal-e-Subhan and Brothers the Income Tax Officer himself placed cogent evidence on record to establish that the other entities are identical with this firm. (2) In the alternative all the payment received in whatever names by Mr. Fazal-e-Subhan must be treated as individual business. It would, therefore, be for the Income Tax Officer to adopt any one of the two suggested courses of action depending on the evidence he can collect and establish." On re-assessment, the learned counsel canvassed, the assessing officer did not adhere to the directions by the Commissioner and repeated the same assessment under section 65 of the Ordinance, a:, had been framed by him earlier. The learned counsel attacked the ex parte proceedings also, contending that opportunity was denied and that the assessing officer adopted no independent basis for the assessment but adhered to the same figures of income as were taken in the orders framed under section 63 on 20-2-1985 and, therefore, the impugned assessment were unsustainable in law. Reference was made to noting dated 30-6-1986 on the order-sheet wherein an 'agreement' was said to have been made with the assessing officer to the effect that penalty would not be imposed, but the income of the proprietorship would bf clubbed with that of the Firm. This agreement was submitted (for approval) to the Assistant Commissioner but the succeeding assessing officer did hot honour the commitment and took up the proceeding: afresh through issuance of notice and finally framed the assessment. on 30-6-1987 at a different figure of income than was 'agreed to earlier in respect of the years now under consideration. The D. R. on his turn emphasised that the so-called agreement on the order-sheet did not bear the signatures of the assessing officer though it was signed by the appellant. It would, therefore, be unfair to claim that the agreement had attained finality and should have been honoured. On the other hand the learned D. R. drew our attention to notice issued under section 62 on 26-5-1987 in which the, assessing officer, after referring to the directions given by the Commissioner in his order under section 138, called upon the appellant to produce specified details, and warned that in case compliance was not made no alternative would be left with him but to frame ex parte assessments to the best of his judgment. Now, the D. R. asserted, it is too late in the day to argue that the assessments, as framed, were unsustainable because of lack of opportunity when the appellant themselves withheld the information/documents/details summoned by the assessing officer. '

4. After considering the facts and circumstances of the case as also the material on record, we are of the view that the agreement for assessment at a particular quantum can be treated as a binding contract when both the sides give willing consent for some consideration. The so-called agreement on the record does not qualify for such respect especially when it was not signed by one of the parties. It, therefore, can at best be treated as a proposal from the side of the appellant which could be treated as final and binding,, only when it was accepted by the other party (i.e. the I.T.O.). It. definitely cannot be called as finally 'agreed figure for assessment') as is generally understood. (Assessment years 1980-81 to 1984-85 and 1986--87).

5. Coming to the validity of the assessing officer's ex pane action, we are inclined to agree with the D. R. that due and proper opportunity in clear and unequivocal terms was extended and the assessing officer, made a legitimate attempt to find out whether the appellant was a genuine firm, different from the proprietorship at Sukkur. He mad' specific demand for the details which could help him to determine the income at a fairly accurate quantum. However, no co-operation was extended from the appellant's side which left the assessing officer' with no choice but to proceed ex parte of which a clear warning was given by him in unambiguous terms in the notice under section 62, dated 26-5-1987. We, therefore, UPHOLD the ex parte action in all the years under-consideration moreso when it is not the case of the appellant that the notice dated 26-5-1987 was complied with in any manner. (Assessment years 1984-85 and 1986-87).

6. As respects the quantum of income assessed, the learned counsel agitated against this only in the assessment years 1984-85 and 1986-87. In these two years the assessing officer applied and N. P. of 12.5% though in earlier years he had himself worked out the income at the rate of 6%. The D. R. acting as large-hearted contender, conceded that the Assessing Officer had not recorded any reasons for deviating with the rate applied by him in the earlier years, hence his action was unsound. In view of this gracious concession we see no hazard in ORDERING that the receipts in these two years' should be subjected to N. P. @ 6% as in earlier years. (Assessment years 1982-83, 1984-85 and 1986-87). 7 The learned counsel pointed out that subletting, which is an established practice in the supply contracts, was altogether ignored and no benefit was allowed in the assessment. According to the learned counsel, subletting was done in 1982-83 to the extent of Rs.1,650,000 out of total contract value of Rs.2,884,275; at Rs.2,200,000 out of Rs.4,552,175 in 1984-85 and in 1986-87 at Rs.2,000,000 out of Rs.4,137,

122. On these commission was earned @ 3% in 1982-83 and @ 1% in the other two years. No consideration was however, shown and the entire Receipts were subjected to the normal rates of N. P. at 6% in the first year and at 12.5% in the other two years. The learned D. R. on his turn pointed out that full opportunity was extended and, if the arrangement of subletting existed, the same should have been shown to the assessing officer particularly when the Receipts from the Army were in the name of the appellant and not in the name of any sub-contractor. Again, no evidence was tendered to the assessing officer to establish that the subletting was permitted by the authorities awarding the contracts. Moreover, the number of persons in R. F. stood at 11, which is indicative that too many working hands were available with the Appellant and there was no necessity of subletting. In the circumstances brought to our notice we feel satisfied that if any arrangement to associate sub-contractors was unavoidable that could normally be done only after approval by the authorities awarding the contracts. The onus thus fell on the appellant to establish existence of such an arrangement. This was not done despite; opportunity extended by the assessing officer clearly showing hiss mind to proceed ex parte in case of non-compliance. The Appellant, was in full knowledge of the intention of the Department to club the: income and to subject the same to a consolidated rate, still no endeavour, seems to have been made to establish, beyond reasonable doubt, the position which is now taken up before us. We, therefore, see no wrong in REJECTING this ground. PENALTY (Assessment years 1981-82 to 1983-84)

8. With regard to appeals relating to penalty imposed under section 111 of the Ordinance, it was submitted by the learned counsel that no notice under section 116 was served and they were not called upon to show-cause nor did assessments contained even a passing reference about the intention to initiate penalty proceedings which vitiates the impugned orders. For this assertion the learned counsel placed reliance on the Karachi High Court decision reported as 1975 PTD 56 and P L D 1981 SC (Azad J & K)

47. The D.R. on his turn pointed out that the penalty order, begins with the words "As discussed in the body of the order under section 62/138, the assessee did not declare the true particulars of its income....It was thus obvious that penalty proceedings were taken up together with the assessment proceedings, hence there was no necessity of any fresh opportunity as was suggested by the learned counsel. It was asserted that the opportunity is necessary in a situation where penalty proceedings are separately initiated and not when these are carried on side by side with the assessment proceedings.

9. We do not feel persuaded by the argument advanced by the learned D.R. especially when it clearly emerges that no opportunity as envisaged by section 116 of the Ordinance, was extended with regard to the assessment finally made on 30-6-1985. We feel no hesitation in CANCELLING the penalties in the years 1980-81 to 1983-84. For the reasons recorded hereinabove the penalty appeals for the four years (1980-81 to 1983-84) SUCCEED fully. The appeals against assessment for the years 1984-85 and 1986-87 SUCCEED partly. The remaining appeals relating to assessment year 1980-81 to 1983-84 FAIL. M. B.A/550/T Order accordingly.