2003 PLP 1530 (PTD)

NASIM SIKANDAR, J.

In this further appeal under section 136 of the late Income Tax Ordinance, 1979, the appellant is an individual and at the relevant time in the year 1992-93 derived income from running a medical store in Sheikhupura. The original assessment was completed in his respect on 12-12-1991 at the declared net income of Rs.35,000 under section 59(1) of the said Ordinance. Subsequently his case was re-opened under section 65 of the Ordinance on the ground that he had understated the value of a 7-1/2 Marla plot shown to have cost him at Rs.1,45,000 including incidental charges. The declared value of the plot; in view of the Assessing Officer, being on the lower side he made resort to the provisions of section 65 and on the proceedings that followed an additional assessment was framed on 20-5-1996 at total income of Rs.4,34,521.

2. On appeal the assessee failed to convince the Commissioner of Income Tax, Zone-C Lahore that re-opening of his case both on legal plane as well as on facts was unjustified.

3. On further appeal before the Tribunal the assessee succeeded inasmuch as his legal objection prevailed that in absence of an assessment order a resort to the provisions of section 65 of the late Ordinance could not have been made. The learned Division Bench of the Tribunal observed that despite repeated directions the Department failed to produce record to controvert the assertion of the assessee that no formal order in his case was passed under section 59 of the Ordinance. In the view of the learned Bench since the very basis for recording an additional assessment did not exist the submissions made by the assessee must prevail. Apparently the learned Member disagreed with the Revenue that on issuance of IT-30 Form containing computation of income as well as determination of the tax due if any, there was no need for recording of any formal assessment order. Accordingly through their order, dated 4-11-1997 they set aside the impugned order under section 65 of the Ordinance leaving the assessment framed under section 59(1) to remain in the field.

4. According to the appellant CIT Lahore Zone-C Lahore the said order of the Tribunal has given rise to the following questions of law:

(i) "Whether on the facts and in the circumstances of the case the learned ITAT was justified to vacate the order of re-opening on the basis that no formal order was passed under section 59(1)? (ii) "Whether on the facts and in the circumstances the learned ITAT was justified to entertain new ground which was not taken at lower stage? (iii) "Whether on the facts and in the circumstances of the case the learned ITAT was justified in holding that case was re-opened on mere change of opinion and at the whims of the Assessing Officer?

5. However, on 7-2-2001 the following admission note was recorded by us:

"The contention that after introduction of, sub-clause (c), subsection (1) of section 65 with retrospective effect the Assessing Officer could frame an additional assessment under the provisions of the Ordinance-, needs consideration. Admit. Notice."

6. After hearing the learned counsel for the parties we are in agreement with the learned Members that in absence of an assessment order mere issuance of Form IT-30 does not amount to an assessment order which could have possibly been re-opened under section 65 (additional assessment) of that Ordinance. The parties agree that the provisions of subsection (c) were added to section 65 by Finance Act 1992 and were deemed to have always been so substituted. The amended provision provided that the provisions of section 65 could also be invoked where the total income and the tax payable by an assessee has been assessed or determined under subsection (1) of section 59 (self assessment) or under section 59-A (assessment on the basis of return) or was deemed to have been so assessed or determined. The parties further agree that the deeming provisions in section 59(1) comprising in proviso to subsection (4) were added only by Finance Act No. 1 of 1995 dated 2-7-1995. This however, implies that although the deeming provisions found their way in the form of sub-clause (c) in section 65 of the Ordinance as early as the year, 1992 the corresponding deeming provisions to which a reference was made therein were made part of the statute in the form of proviso to subsection (4) of section 59 only w.e.f. 2-7-1995. Therefore, the legal position that emerges indicates that at the time of introduction of sub-clause (c) in section 65 by Finance Act, 1992 till the addition of the proviso to subsection (4) of section 59 w.e.f. 2-7-1995 there was no authority in law under which an assessment could be deemed to have been framed in absence of an assessment order in writing recorded under section 59(1) of the Ordinance. Therefore, irrespective of the retrospective effect given to sub-clause (c) added in section 65 in the year 1992 in absence of any change in the provisions of 1 section 59 and section 59-A till the said addition of proviso by Finance Act No. l of 1995 w. e. f. 2-7-1995, there was no question of deeming the existence of an assessment order under section 59 or 59-A to enable invocation of provisions of section 65 of the Ordinance to make an additional assessment. It needs to be noted that sub-clause (c) of section 65 in fact is an enabling clause authorizing an Assessing Officer to proceed to make an additional assessment even in those cases where either assessments had actually been framed under section 59 or section 59-A or the total income or tax payable was deemed to have been so assessed or determined. The addition of this clause i.e. sub-clause (c) to section 65 did not by itself made any addition to section 59(1) or even section 59-A. A deeming clause being necessarily a fiction of law cannot be taken to be a part of another provision unless it is expressly so provided. The Legislature by employing legal fiction can deem a thing to be in existence although it does not actually so exist. That fiction of law however, cannot be transposed or read into another provision unless such transposition is expressly so provided in the main provision.

7. As noted earlier the addition of sub-clause (c) to section 65(1) empowered an Assessing Officer to lay his hands upon those assessments in which not only the declared version had been accepted formally by writing even a single sentence order indicating acceptance or filing of the return but also in. those cases where such an assessment was deemed to have come into existence under section 59 or section 59-A. These provisions, however, remained in effective till a corresponding deeming provision was actually made in the form of proviso to subsection (4) of section

59. Till the time of addition of proviso to subsection (4) of section 59(1) in the year 1995 no re-opening under section 65 .for framing of additional . assessment could possibly be made in respect of deemed assessments. Till the time of addition of that proviso to sub-clause (c) of subsection (1) of section 65 could be invoked only in cases where an assessment order had actually been made under different provisions of the late Ordinance including section 59 or 59-A.

8. As far a mere insertion in the assessment Form of IT-30 or in any other similar form conveying a demand is concerned, the view adopted by their Lordships of the Karachi High Court in re: CIT Karachi v. Malik Walayat Hussain & Sons Ltd., Quetta (1976) 33 Tax 285 still appears to be in the field. That judgment was recorded with reference to the provisions of section 18-A and section 29 of the late Income Tax Ordinance, 1922 (XI of 1922). After introduction of the above deeming clauses in section 59 and 65 respectively in the year 1995 and in the year 1992 the effect of the judgment of their Lordships stand somewhat diluted. However, in absence of these deeming clauses the principle expounded in the judgment continues to be a good law. The hall-mark of F the judgment being that a formal order is a condition precedent for service of demand on an assessee.

9. There is no dispute that under section 59(1) of. the late Ordinance which provides for self-assessment an Assessing Officer is required to assess "by an order in writing, the total income of the assessee on the basis of such return and determine the tax payable on the basis of such assessment". The assessment order under section 59 needs to be in writing which goes to determine not only the total income of the assessee though on the basis of return filed but also the tax payable on the basis of such assessment. The provisions of section 59-A titled "Assessment on the basis of return" contains similar provisions that an F assessment order will be in writing assessing the total income of the assessee as also determining the tax payable. Subsection (2) of section 59-A contained a reference to subsection (3) of section 59 as also to the "determination" under section 59-A in the same manner in which an assessment or determination is to be made under section 59(3) of the late Ordinance. An IT-30 Form on the other hand simply comprises of different blocks and columns meant to be filled in containing all information with regard to nature, volume and extent of business or occupation of an assessee as also other relevant information which the department will normally require of an assessee. This printed form which owes its legitimacy to ingenious arrangement of a host of information needed by the department rather than any provisions of law or the rules framed thereunder. In law we have a concept of an assessment order in writing which not only betrays an application of mind but also the fact that the concerned human mind was adequately possessed with the faculty to demonstrate its application. An IT-30 Form filled in by the subordinate officials in the Department and though signed by an officer will not answer the legal requirement of an order in writing which goes to "determine" the tax payable on the basis of an assessment made prior thereto.

10. In the case in hand original assessment was completed on 12-12-1991 and the additional assessment was completed on 20-5-1996. The assessee was served with notice for framing of additional assessment/re-opening of the assessment on 17-1-1995 much before introduction of proviso to subsection (4) of section 59 of the late Income fax Ordinance, 1979. As observed earlier the introduction of these provisions providing for deeming of an assessment after a certain period. he addition of sub-clause (c) in section 65(1) of the late Ordinance was no significance at all. The day on which re-opening was initiates though amended provisions of section 65(1)(c) were very well in the field yet in absence of the corresponding amendment providing for leeming an assessment under section 59 or 59-A that action was not legally possible. In other words in absence of an assessment order in writing till the addition of proviso by Finance Act No.1 of 1995, dates 2-7-1995 in section 59(1) no additional assessment could be framed unless the order sought to be re-opened was an assessment order in writing under any of the provisions of the late Ordinance.

11. Therefore, for what has been discussed above we will hold that after introduction of sub-clause (c) to subsection (1) of section 65 even with retrospective effect an Assessing Officer could frame an additional assessment only after the corresponding amendment was made in section 59(1) of the late Ordinance by the Finance Act No.1 of 1995. dated 2-7-1995. providing for deeming of an assessment under section 591 or 59-A of that Ordinance.

12. Appeal succeeds. S.A.K./C-198/L Appeal accepted.