1989 PLP 252 (PTD)

Ali Mohammad Baig for Appellant. Mohammad Aslam for Respondent. Date of hearing: 5th December, 1988. Brief facts giving rise to this appeal are that in this case assessments upto the charge year 1985-86 were made in the hands of Mr. Mohammad Ashiq, by treating hint as an individual, residing in Pakistan. However, the assessee is reported to have gifted his property bearing No.43, Street No.37. F-6/1, Islamabad with effect from 1-7-1985, to his wife Mst. Bani Begum. In consequence thereof return relating to the charge year 1986-87 was filed by Mst. Bani Begum in the status of an individual. Despite this fact the I.T.O. made assessment in the hands of Mr. Mohammad Ashiq through his agent Mr. Mohammad Yasin for the charge year 1986-87, under section 62 read with Section 78 of the Income-Tax Ordinance, 1979 (hereinafter called the Ordinance). In consequence thereof disclosed income was accepted but nevertheless the assessee was assigned the status of a non- resident. This manner of making assessment having been objected to by the assessee was made the subject of an appeal before learned A.A.C who by virtue of Appeal No. 275 dated 18-6-1987, confirmed assessment relating to the charge year 1986-87, thereby resulting in the filing of second appeal on behalf of the assessee before the Tribunal. This appeal after hearing has been disposed of today and my decision on it follows in the paras hereafter.

2. After hearing representatives of the parties and looking into the evidence available on record, it has come to my notice that, since return for the charge year 1986-87 was filed by Mst. Bani Begum, the I.T.O. was not justified in treating it as a return on behalf of Mr. Mohammad Ashiq by treating Mr. Mohammad Yasin as his agent under Section 62 read with Section 78 of the Ordinance. In reaching this conclusion I have been fortified by the fact that if the I.T.O. wanted to assess income from property in the hands of Mr. Mohammad Ashiq, he should have requisitioned a return from the latter and proceeded under section 62 read with section 78 of the Ordinance. However, this course of action was not adopted, and therefore, the whole superstructure of assessment made on Mr. Mohammad Ashiq falls. Even other wise assessment made by' the I.T.O., which was subsequently confirmed by learned A.A.C. cannot be sustained on another legal issue which is discussed hereunder.

3. In this case Mr. Mohammad Yasin was treated as an agent of Mr. Mohammad Ashiq under section 78 of the Ordinance. However, before declaring Mr. Mohammad Yasin as an agent of Mr. Mohammad Ashiq; the former was not given any opportunity of being heard as is required under Section 78 '(4) proviso (b) of the Ordinance. On account of this lucuna assessment made by the I T O has been rendered illegal in the eyes of law because for each year an agent has to be treated as such in accordance with law, notwithstanding the fact that he may have acted on behalf of the assessee for earlier years. In reaching this conclusion. I have with advantage relied on a case reported as P. L. J. 1978 Tr.C (Income Tax) 15, the relevant part of which is set out below for facility of reference:- "We have given our earnest consideration to the arguments raised on behalf of the respective parties and it appears to us that the issuance of a notice under section 43 is sine qua non to the assumption of jurisdiction by the Income-tax Officer in the case of non-resident who is, being assessed through his agent in Pakistan. As has been held by the Supreme Court of India in the case, reported as, (1969) 71 I.T.R. 457 the appointment of a person as statutory agent of non-resident under section 43 of the Income-Tax Act extends only to the liability for the assessment years for which the appointment is made and cannot be extended to the liability for any other assessment year. This - clearly implies that the appointment of a person as a statutory agent of .a non-resident under section 43 should be made for each year of assessment and as such notice has to be given by the Income-Tax Officer for each assessment year 'to appoint a person as an agent. Admittedly no such notice has been issued in any assessment year under consideration."

4. Since in respect of the case before me a notice as contemplated under Section 78 (4) proviso (b) was not served on Mr. Mohammad Yasin before treating him as an agent of Mr. Mohammad Ashiq, the very basis of assessment proceedings was rendered illegal in the eyes of law. In consequence thereof assessment made by the I.T.O. which was subsequently upheld by learned AA.C. cannot be sustained and is accordingly annulled. The I.T.O. is directed to give effect to this order. M.BA/567/7 Order accordingly.