I. T. A. NO. 3376 OF 1982-83, I. T. A. NO. 3377 OF 1982-83 AND I. T. A. NO. 337B OF 1982-83 Versus I. T. A. NO. 3376 OF 1982-83, I. T. A. NO. 3377 OF 1982-83 AND I. T. A. NO. 337B OF 1982-83

ORDER

ABRAR HUSSAIN NAQVI (MEMBER) ‑For the charge years 1975‑76, 1976‑77 and 1977‑78 the appellant, an A.O.P., comprising of three persons filed returns on 15‑9‑1975, 15‑10‑1976 and 29‑9‑1977 declaring income at Rs. 60,000, Rs. 2,63,195 and Rs. 1,64,868. These returns were filed under section 22 (1) of the Repealed Income‑tax Act, 1922 (hereinafter referred to as the 'Act'). Declared income being from poultry farming was claimed to be exempt under SRO 142 (l)/70, dated 1‑7‑1970. In response to various notices issued under sections 22(4) and 23(2) of the Act, the appellant filed an agreement dated 20‑12‑1974 made by Mr. M. I. one of the members of the A. O. P. with Mr. F M. son of H. A. D. (hereinafter called as `Landowner') for obtaining on lease constructed sheds and stores for running of a poultry farm. An affidavit of Mr. M. I. dated 2‑3‑1978 regarding obtaining on lease the constructed sheds of poultry farm w.e.f. 0‑12‑197‑1 and closure of that business on 31‑5‑1977 was filed. Intimation regarding closure of business with effect from 31‑5‑1977 was also submitted. On 8‑3‑1978 the I.‑T. O. passed the following order :‑

"Present Mr. C supplied S.R.O. Notification regarding exemption, application dated 2‑3‑1978, wealth‑statements computation chart and lease agreement placed on the file. Income is exempt. No action is called for without going into the merits of the income returned for years 1975‑76, 19 76‑77 and 1977‑78."

Proceedings were filed vide D. C. R. entries Nos. 317/C to 319,1C.

2. On 16‑2‑1981 the I. T. O. received an intimation from I.‑T. O., Companies Circle B‑II, Karachi asking for copies of the latest wealth statements of Mr. Muhammad Bashir and Mr. Muhammad Saleem, two members of the appellant A. O. P. This information was required as the said persons bad made capital investment in a newly floated company styled as Messrs Sh. Muhammad Daud Limited, Karachi. On receipt of this communication slip the I. T. U. made a corresponding entry of even date on the order‑sheet. Thereafter on 25‑7‑1981 the I. T. O. passed the following order: ‑

"The case was marked to Income‑tax Inspector for enquiries on the ' specific points to displace the made up affairs, if any which appeared to me to be so). Authority from the then I.A.C. (Mr. Nasir Ahmad) was also obtained. No progress was made. No enquiry was conducted. The case came under discussion with the present I.A.C. Issue informal notice confidentially to the owners of the land."

On 10‑8‑1981 the I.‑T. O. recorded statement of the land owner who denied to have leased out any portion of his land to the appellant for running of poultry farm. The I.‑T. O. directed the landowner to file certificates from Lambardar of the village and Municipal Councillor to the effect that no poultry farm was constructed on his land. On 16‑8‑1981 certificates of these persons were produced. The Income‑tax Inspector contacted Messrs Manzoor Ahmad, Niaz Rasool and Abdul Jabbar Ghazi and recorded their statements. All these persons expressed their ignorance regarding existence of any poultry farm in Chak No. 203/R.B. The Inspector also obtained certificates from Messrs Arbor Acres (Pak.) Limited, Lahore and Messrs K & N's Poultry Farms, Karachi dated 29‑1 I‑1981 stating that no poultry feed was purchased from them by Messrs Iqbal Poultry Farm. An affidavit of the landowner dated 15‑8‑1981 attested by an Oath Commissioner was also obtained by the Inspector. Contents of the affidavit were similar as of statement made on 10‑8‑1981. Thereafter the I. T. O. on 30‑1 .1981 issued notice under section 65 of the Income‑tax Ordinance, 1979 (herein after called as the Ordinance) for each of the year under consideration. These notices were issued for escaped assessment, under assessment, assess ment at too low a rate and due to excessive relief.

3. The appellant objected to re‑opening of assessment on the issue of laches. The I. T. O. discarded the appellant's plea and proceeded on merits.

On 8‑12‑1982, the landowner deposed before a Magistrate 1st Class, that he had made earlier statement due to the I. T. O.'s pressure and fear of levy of income‑tax. It was admitted that sheds and stores were rented out to the appellant with effect from 20‑12‑19/4 at the rate of Rs. 450 p. m. and the appellant had done poultry business therein till 31‑5‑1977. The appellant also filed report of Naib‑Tehsildar dated 15‑11‑1982 wherein existence of poultry farm in Chak No. 203/R.B., was admitted to have been recorded in the revenue record from 1974 to 1977. On 17‑2‑1982 cash book and ledger for 1976‑77 and 1977‑78 was produced. The appellant filed copy of Invoice No. 3911, dated 1‑4‑1976 whereby 5,000 one day old chick% were purchased by it from Messrs P------- D------ P------B------11/C, N-----M-----T S------ L-------This invoice for Rs. 20,000 was issued in the name of the appellant. On receipt of statement of the landowner made before a Magistrate in the form of an affidavit dated 8‑I 2‑1982 the I ‑T. O. went to Chak No. 203/RB, F-----------and again recorded statement of the land owner. In that statement dated 28‑12‑1982 it was recorded that the land owner had not rented out any sheds and store to the appellant and he disowned his earlier deposition. This statement was signed as a witness by Mr. A--------S------As both the statements of the land owner were recorded in the appellant's absence and no opportunity was afforded by the I.‑T. O. to the appellant to cross‑examine the land owner, C.I.T. F-------Zone. F------was approached who vide letter dated 7‑2‑1983 directed the I. A. C., F------to afford opportunity to the appellant. The I. T. O. summoned the land owner who in his statement dated 31‑1‑1983 resiled from his earlier statements and affidavit dated 15‑8‑1981. It was stated that earlier statements and affidavit's were given due to fear of levy of tax. He stated that he had leased out his sheds and stores to the appellant in 1975 for running a poultry farm and an agreement to that effect was duly executed. Statement made before a Magistrate on 8‑12‑1982 was owned and admitted to be correct. Finally the I.‑T. O. for all the years under review made re‑assessments on 24‑2‑1983 assessing the appellant's declared income as to be income from other sources under section 30 of the Ordi nance. It was concluded by the I.‑T O. that the appellant's poultry farm never existed.

4. On appeal the learned C.I.T. (A) repelled the appellant's plea regarding the re‑assessments to be time‑barred. It was held that though under section 34 (2) of the Act, assessment or re‑assessment could be made within two years from the end of the year in which the income, profits, gains were first assessable; yet there existed an exception in respect of cases in which the assessee had concealed the particulars of his income or deliberately furnished inaccurate particulars of such income or omitted or failed to disclose material facts necessary for the assessment for that year. The appellant's case was held to be covered by section 34 (I‑A) (h) of the Act wherein limitation period was six years from the end of the year in which assessment for such year was first made. On merits the learned C.I.T. (A) concluded that the appellant failed to produce any evidence before the I.‑T. O. in support of its plea of running of poultry farm. A general observation was made regarding existence of evidence on record in the form of deposition of the land owner, Lambardar and Patwari but that evidence was not discussed. Re‑assessment for all the years was upheld.

5. The appellant's A. R. challenged the re‑assessment made by the I.‑T. O. on 24‑2‑1983 as to be time‑barred. It was contended that very issuance of notice under section 65 of the Ordinance was erroneous and without any jurisdiction. The period off limitation prescribed for re opening of assessment under section 34 (1) of the Act having already expired much before issuance of notice under section 65 of the Ordinance, re‑assessment was urged to be time‑barred and without any lawful authority. The appellant's A. R. further submitted that after expiry of the prescribed period of limitation a vested right had accrued to the appellant and pro vision of section 65 of the Ordinance was neither attracted nor avail able for re‑opening of such finalized assessments. The appellant's case was that the declared income for all the years under considera tion having been accepted by a specific assessment order dated 8‑3‑1978 and exemption having been allowed the income being from poultry farming, notice under section 34 (1) of the Act could have been issued on the basis specified therein and re‑assessment had to be made within two years from the end of the year which the income, profits or gains were first assessable as provided in subsection (2) of section 34 of Act. Re‑assessment thus could have been made by or before 30th June, 1980.

The next alternate plea of the appellant's A. R. was that section 34 of the Act having not been saved in entirety under section 166 of the Ordinance; it ceased to be effective after repeal of the Act on 1‑7‑1979. Thereafter as per the appellant's A.R. notice under section 65 of the Ordi nance could have been issued on the basis specified in the savings clause and therein, too, re‑assessment was to be made before expiry of period of limitation as prescribed under subsection (2) of section 34 of the Act.

The D. R. while adopting the reasoning advanced by the learned C. I. T. (A) contended that the appellant's case was covered by section 34 (1‑A) (b) of the Act and limitation therein being of six years, re‑assessments were not time‑barred.

For resolving the controversy, legal issues requiring our determina tion are whether proceedings filed by the I. T. O. in the appellant's case on 8-3-1978 tentamount to assessment the appellant case was covered by the provision of section 34 (1) or 34 (1‑A) of the Act. The other issue is the extent and scope of application of section 65 of the Ordinance as no notice under section 34 was issued in the appellant's case till repeal of the Act.

7. Before examining the issues it is pertinent to bring on record provisions of section 34 of the Act. It provides for two types of cases. Under section 34(1) a notice could be issued by the I.‑T. O. if for any reason income profits or gains chargeable to income‑tax.

(i) have escaped assessment in any year

(ii) or have been under‑assessed ;

(iii) or have been assessed at too low a rate ; and

(iv) or have been subject of excessive relief or refund under the Act.

Availability of definite information with the I. T. O. and prior approval of the I.A.C. were the prerequisite conditions. Limitation for decision of such cases is provided under subsection (2) of section 34 which lays down that no order of assessment under section 23 or assessment or re‑assessment under subsection (1) of this section shall be made after the expiry of two years from the end of the year in which the income, profits or gains were first assessable, except

"(i) in any case in which the assessee has not filed any return under subsection (1) or subsection (2) of section 22 ;

(ii) or concealed the particulars of his income ;

(iii) or deliberately furnished incorrect particulars of such income ; and

(iv) or omitted or failed to disclose all material facts necessary for the assessment for that year. . .

Second type of cases which come within the mischief of section 34 of the Act are of section (1‑A) which provides that notice may be served by the I.‑T. O.

"(a) at any time in any case in which no return has been filed under subsection (1) or subsection (2) of section 22 ;

(b) in any case within six years from the end of the year in which the assessment for such year was first made and where no such assessment has been made within six years from the end of the last year in which assessment for such year could be made if the I.‑T. O. has reason to believe that

(f) the assessee has for any year concealed the particulars of his income ;

(ii) or deliberately furnished inaccurate particulars thereof ;

(iii) or omitted or failed to disclose all material facts necessary for the assessment for such year.

There exists a glaring distinction between the cases falling under sections 34 (2) & 34 (1‑A) of the Act and that is why the Legislature provided separate periods of limitation for both types of cases. In the appellant's case' there is no element of concealment as income was offered for assessment.

The appellant having neither furnished any inaccurate particulars nor' omitted any material fact for the assessment already made, its case come she under purview of section 34 (1) of the Act.

On 1‑7‑1979, Income‑tax Act, 1922, was repealed and by virtue of savings clause as per section 166 (1) of the Ordinance section 34 was not raved in its entirety, The Legislature made specific provisions for certain types of cases wherein proceedings for re‑assessment could be initiated by issuance of notice tinder section 65. Sub‑clause (c) (ii) of sub section (2) of section 166 containing the savings provision lays down:

Where in respect of any assessment year

(i) any income chargeable to tax had escaped assessment ;

(ii) or had been under‑assessed or assessed at too low a rate ;

(iii) or had been subject of excessive relief or refund ; and no proceedings under section 34 of the said Act in respect of any such income are pending at the commencement of this Ordinance, a notice under section 65 may be issued with respect to that assessment year and all the provisions of this Ordinance shall apply accord ingly.

A bare perusal of the savings clause, leaves us in no doubt that it specifies the cases wherein notice under section 65 of the Ordinance could be issued for re‑opening of assessment provided no proceedings under section 34 of the Act regarding such income were pending at the commence ment of the Ordinance. In such like cases basis as mentioned in sections 34 (1) and 34 (1‑A) of the Act ceased to be operative with effect from 1‑7‑1979 onwards. In the savings clause concealment of particulars of income has not been provided as one of the basis for re‑opening of assessment by issuance of notice under section 65 of the Ordinance.

8. The appellant had admittedly tiled returns offering income from running a poultry farm, sheds of which were taken on lease from the land owner as per agreement dated 20‑121974. The appellant had declared income but claimed exemption from tax. The I.‑T. O. filed the proceed ings. The question, which arises for consideration is as to whether filing of proceedings in the appellant's case amounts to "assessment". Decision of Supreme Court reported as (1961) 3 Tax Part II 266 is that

"Even if a return is fried declaring "`no assessable income" an I.‑T. O. closes the assessment stating no proceedings', such an order meant that the I.‑T. O. accepted the return and assessed the income as Nil', Thereafter if there were reasons to believe that full and true material facts necessary for assessment for that year were not disclosed, a notice far re‑assessment could be issued under section 34 (1)."

Following the Supreme Court's decision (supra) we hold that the learned C. I. T (A) erred in holding that the appellant's case was covered by section 34 (1‑A) and period of limitation therein was of six years. If the I.‑T. O. had any doubts regarding existence of tire appellant's poultry farm, it was a case of escaped assessment, notice for which could be issued under section 34 (1) and period of limitation for doing so was of two years. If he appellant's case was nut covered by any of the exceptions as provided in subsection 12) of section 34 as returns were filed, quantum and particulars of declared income were neither concealed nor were incorrect as is apparent froth the fact that even in re‑assessments same income has been adopted and all tire material facts for assessment were disclosed in the form of evidence. The position that boils down is that in the appellant's case notice under section 34 (1) of the Act could be issued and re‑assessment had to be made by or before the end of the year in which income was first assessable i.e. 30‑6‑1980. Finding of the learned C.I.T.(A) on this issue is thus overruled.

As the Act was repealed much after completion of the appellant's assessment but during availability of period of re‑assessment under section 34 (1), if any, the question that crops up is that what is the effect of repeal of the Act. Admittedly, neither any notice under section 34 was issued till repeal of the Act i.e. 1‑7‑1979 nor any notice under section 65 of the Ordinance was issued till expiry of period of limitation under section 34 (1) of the Act i.e. 30‑6‑1980. Had the Act not been repealed the appellant would have acquired a vested right in respect of its assess ments made on 8‑3‑1978 for all the years under consideration and after expiry of period of limitation of re‑opening of assessments on 30‑6‑1980 the assessments would hive become past and closed transaction. There is no difference between Repeal and Amendment of any provision of law as held by the Supreme Court of Pakistan in the case of Saeed Ahmad v. State (P L D1964 S C 266). By virtue of section 6 of the General Clauses Act the assessee's liability once extinguished under the Repealed Act cannot be revived by operation of the amended provision. It was observed.

"At the same time there is no difference in principle between repeal and amendment arid if in the case of a total repeal the proceedings can be continued as if there was no repeal why should the proceedings not to be continued in the case of an amended provision."

In somewhat similar circumstances as of the appellant's case matter in the case of Eastern Federal Union Insurance Company v. C.I.T. came up for consideration before the High Court, wherein it was held as under:‑‑

"Thus there is no difference in principle between repeal and amend ment and section 6 of the General Clauses Act is applicable to the present case. Under this provision of law the repeal does not affect any right, privilege, obligation or liability, acquired, accrued or incurred under any enactment so repealed. It is not disputed that under section 14 of the Business Profits Tax Act, as it existed before its omission, the Income‑tax Officer had no jurisdiction to assess any escaped or under‑assessed income beyond four years. The assess ment for the chargeable accounting year 31st December, 1952, would therefore, be outside the jurisdiction of the Income‑tax Officer after the expiry of four years which admittedly took place by the end of 31st December. 1956."

In that case the matter was taken up by the C. I. T. in appeal and the Supreme Court in its decision reported as P L U 1982 S C 247 reprodu ced the facts as under:

"Now, the facts material for the present appeal, are that the respondent on 15‑1‑1958, voluntarily filed Returns under the Business Profits Tax Act, 1947, for five chargeable accounting periods ending with the calendar year 1952 to 1956. The Income‑tax Officer passed the assessment order thereon on 31‑1‑1958 levying business profits tax its respect of all these Returns. The respondent challenged the assessment before the Appellate Assistant Commissioner, inter alia, on the ground that section 34 of the Income‑tax Act, 1922, was made applicable from 4‑7‑1958, when modifications therein were notified by an amend ment of the Business Profits Tax Rules, 1946, by the Central Board of Revenue, and as the assessments were completed on 31‑1‑1958, they had become time‑barred by then. This was rejected by the Appellate Assistant Commissioner as untenable, on the reasoning that since the aforesaid modifications were given retrospective effect from 1‑4‑1957, section 34 was applicable from the said date and, therefore, all the assessments were validly made. The respondents appealed against this decision before the Income‑tax Appellate Tribunal, Karachi, who by order dated 26‑4‑1960 held that the modifications by rules made by the Central Board of Revenue, having been published in official Gazette on 4‑7‑1958, retrospective effect given to them from 1‑4‑1957 was illegal, for, no such power was given to the Central Board of Revenue under the Finance Act, 1957. However to the opinion of the Tribunal, since section 14 was deleted with effect from 1‑4‑1957, the Assessing Officer was free from the fetters of limita tion imposed by that section and notwithstanding the expiry of such limitation under the original provision, as far as the two chargeable accounting periods ending 131‑12‑1952 and 31‑12‑1953, the assessment made in respect thereof on 31‑1‑1958 was competently made. As regards the subsequent 3 years the time limit had not expired even under the old section 14. On these grounds the Tribunal upheld all the assessments and dismissed the respondent's appeal."

After a good deal of discussion on various principles of law their Lordships maintained the order of the Nigh Court holding that:‑

"On the expiry of the period of four years, under section 14, the assessee had, therefore, clearly acquired a right and the assessment for the said year became a past and closed transaction. This right could not, therefore, be taken away giving retrospective opera tion to the amended statutory provisions extending the period for assessment."

A similar view was taken by the Supreme Court of Pakistan in the case of Koh‑i‑Noor Textile Mills Limited v. C.I.T. (P L D 1974 S C 284) wherein it was held:‑

"After the expiry of four years from the end of the year in which the assessment had first to be trade, no further step could be taken to recover the tax which had escaped assessment or had been under assessed or had been the subject of excessive relief even, though, a notice under section 11 (1) was issued within the period prescribed in the original section 14 of the Business Profits tax Act."

9. Following the pronouncements of the Supreme Court of Pakistan in the cases reported as P L D 1974 S C 284 and P L D 1982 S C 247 we feel no hesitation in holding that in the appellant's case on 30‑6‑1980, assess ments made on 8‑3‑1978 became past and closed transaction and period of limitation for se‑opening of such assessments was covered by section 34 (1) of the Act irrespective of the fact that the Act stood repeated on 1‑7‑1979. A notice under section 65 of the Ordinance could have been issued on the basis stipulated in section 166 of the Ordinance as section 34 of the Act was not saved in its entirety from 1‑7‑1979 onwards but re‑assessment therein could be made till 30‑6‑1980. Not only that re‑assessment was not made by 30‑6‑1980 even no notice under section 65 of the Ordinance was issued by then. As a result, re‑assessment made on 24‑2‑1983 on the basis of notice issued under section 65 of the Ordinance on 30‑12‑19h2 are time‑barred. All the impugned assessments being void and without any lawful authority are annulled.

10. Before discussion of merits of the case, we would like to hold that proceedings before the I.‑T. O. are judicial in nature and principle of natural justice ate applicable to such proceedings. For use of any evidence, the effected person is not only to be confronted with such evidence rather an opportunity is to be afforded for rebuttal, if any.

In P L D 1959 S C (Pak.) 45, in the case of Chief Commissioner, Karachi v. Mrs. Dina Sohrab Ketrak, it was held:‑

"It cannot be disputed that it is a principle of natural justice that no one should be de. It with to his material disadvantage or deprived of his liberty or property without having an opportunity of being heard and making his defence."

In the same case, the Supreme Court laid down that:‑

"Maxim Audi alieram partem---------"no man shall be condemned unheard", applies to judicial as well as adminis trative bodies. "

It was further laid down:‑

"-----The above rule of justice is not confined to proceedings before the Courts but extends to all proceedings, by whomsoever held, which may effect the person or property or other right of the parties concerned in the dispute As a just decision in such contro versies is possible only if the parties are given the opportunity of being heard, there can be as regards the right of hearing, no difference between proceedings which are strictly judicial and those which are in nature of judicial proceedings though administrative in form."

"A similar view was expressed by the Supreme Court of Pakistan in P L D 1964 S C 410 in the case of Commissioner of income‑tax, East Pakistan v. Fazal‑ur‑Rehman

"At the same time it should be pointed out that the right to be heard is not confined to proceedings which are judicial in form. As has been already held by this Court in the case of Chief Commissioner, Karachi v. Dine Sohrpk Katrak---Maxim, no man shall be condemn ed unheard is not confined to Courts but extends to all proceedings by whomsoever which may effect the person or property or other right of the parties concerned in the dispute and the maxim will apply with no less force to proceedings which effect liability to pay a tax."

In (1978) 37 Tax 155, it was concluded that:‑ "assessment proceedings before the I.‑T.O. are judicial proceedings and the principles of natural justice are applicable to such proceedings. The elementary principle of natural justice is that the assessee should have knowledge of the material that is going to be used against him so that he may be able to meet it. The assessee has a right to inspect the records and all relevant documents before he is called upon to lead the evidence in rebuttal."

In 1979 P T D 58, it was held as under: ‑

"The I. T. O. has power to collect evidence from any source but it is his duty to put it to the assessee before making it the basis of his assessment. If the assessee denies the information collected by the I.‑T. O., it is the duty of the I.‑T. O. to satisfy himself by making independent enquiry from source considered reliable by him and decide whether the information passed on to him is true or not. If as a result of his own independent enquiry he comes to the con clusion that the information received by him is true, he is at liberty to act thereon after disclosing it to the assessee and affording him a reasonable opportunity of rebutting it."

In (1951) 20 I T R 287, it was laid down that: ‑

"Although the strict letter of the law might not require it, natural justice at best requires that before charging any person with financial liability he should be informed of the material on which the charge is going to be imposed and given an opportunity to rebut the effect of the material, if he can."

In view of judicial pronouncements, we hold that the I. T. O. was required to afford an opportunity to the appellant to rebut the evidences to be used against it. Any evidence recorded before issuance of notice foal re‑opining of assessment could from basis of definite information but for final decision the appellant was required under law to be confronted with that evidence and afforded an opportunity for rebuttal, if any.

11. We now take up the merits of the case as well. After hearing the representatives of both the parties and on detailed scrutiny of record, we find that the departmental officers have relied on evidence of Mr. F--------M--------the land owner, statements of Messrs M--------A--------N-------- R. --------4--------J--------K-------- K ---------and A---------S ---------Documentary evidence in the form of reports of the revenue authorities and letters of Messes A---------A---------(Pak.) Limited and Messrs K & N's P. ---------B---------F evidence is that of the land owner 'this person had made three statements before the I.‑T O. alongwith two affidavits. First statement made on 13‑8‑1981 was in the preliminary/secret enquiry conducted by the I. T. O. wherein the appellant was not associated. The I. T. O had the authority to make such preliminary enquiry but that evidence could be relevant for the purpose of definite information only. This statement at the maximum could have evidential value of using it as definite information but in no case it is a good piece of evidence for final determination of the issue. Similar is the position regarding affidavit dated 15‑8‑1981. No sanctity can be attached to the statement of the land owner recorded by the I. T. O. in his village as thereafter he resiled from his earlier statements. The land owner's statement made on 31‑ 1‑1983 in the presence of the appellant is the only piece of evidence which can be used for determination of the issue. Therein the landowner categorically denied his earlier state ments made before the I.‑T. O. and admitted that he had made those state ments due to fear of levy of income‑tax and pressure of the I: T. O. Renting out of sheds and stores by execution of an agreement was admitted.

The witnesses also accepted his affidavit dated 8‑12‑1982 deposed before the Magistrate 1st Class as to be correct. In fact, the land owner was the only person who could accept or deny renting out of sheds and stores to the appellant for funning the poultry' farm. He having accepted the tenancy, statements of all the other witnesses become secondary in nature. In the presence of primary evidence, no reliance can be placed on secondary evidence Even otherwise, statements of Messrs M---------N---------R---------and A---------J are general in nature as they have stated that they did not have any business relations with Messrs I---------P--------- F---------Statement of Mr. K---------K--------I--------dated 28‑11‑1982 cannot be relied upon as that runs counter to the statement of the landowner who ultimately admitted renting out of sheds and stores on the basis of an agreement. Similarly, the letters obtained by the Inspector from Messrs A. --------A.--------(Pak.) Limited and Messrs K & N's P. --------.B--------F--------have no relevant evidential value as their reply is that they had never made any supplies to Messrs I. --------P--------F--------Nothing has been said about existence or non‑existence of the appellant's poultry farm and rightly so, as they had no direct knowledge of the same. The position about revenue record is self‑contradictory. Patwari in his report stated that in the records no entry of any poultry farm is made in the land owned by the land owner. On record there exists another report of Naib‑Tehsildar wherein it has been stated that as per revenue record from 1974 to 1977 there existed a poultry farm in the land of the land owner. To resolve this contradictory stand of the revenue authorities, the I.‑T. O. failed to procure copies of the revenue record. That having not been done, no sanctity can be attached to the self‑contradictory reports of two functionaries of the Revenue Department. Even otherwise the funds mental principle of law is that if two types of evidence as available, the one favouring the subject is to be relied. The finding of the I. T. O regarding invoice dated 1‑4‑1976 produced by the appellant is erroneous as invoice was for purchase of 5,000 chicks for Rs 20 000 whereas the Inspector in 1982 contacted the present occupants as I I/C‑B--------M--------T--------L who expressed their ignorance regarding existence of Messrs P--------D--------P--------B-------- The authors of invoice were being traced after expiry of a period of seven years. 11/C, N--------M--------T--------could be big commercial premises. No effort was made to find out further details of the premises and the tenants. Mere denial statement of the present occupants of that premises in 1982 was not enough to dislodge the documentary evidence regarding purchases made by the appellant ride a receipt in 1976. The I. T O. did not issue any notice to the appellant in this behalf. Documentary evidence regarding purchases made for poultry farm as been discarded on erroneous and flimsy grounds Land owner's statement dated 31‑1‑1983 as well as agreement dated; 20‑12‑1974 was neither discussed nor discarded by the departmental officers. In these circumstances, we hold that on the basis of statement of Mr. F--------M--------dated 31‑1‑1983 and agreement deed dated 20‑12‑1974, the departmental officers fell in error, in disbelieving the existence of the appellant's poultry farm in the year, under consideration. The tenancy having been admitted by the land owner, the appellants business of poultry farming in the years under review, stands duly established. Income from poultry farming being exempt, declared income was rightly allowed exemption from tax.

12. The re‑assessments made by the I. T. O. having been held to be time‑barred on legal score and untenable on merits as well, the orders of the officers below are illegal and without any lawful authority. In this view of the matter, we refrain from adjudicating the other two issues i.e. re assessment of the A.O.P. and reassessment of income under section 30 of the Ordinance as income from undisclosed sources. Our reason for doing so is that it will be just an academic discussion only.

13. The upshot of the above discussion is that the impugned order of the departmental officers are annulled. The appellant's income for the years under review was rightly declared as exempt. All the appeals filed at the instance of the assessee succeed accordingly.

(Sd.)

(MIAN ABDUL KHALIQ),

Judicial Member.

As per Mr. Zaffar Hussain, A. M.

14. In this case appeals have been tiled by Messrs I--------P--------F--------F--------from the orders of the C. I. 'f. (Appeals) in respect of the assessment years 1975‑76, 1976‑77 and 1977‑78. The appellant, an A.O.P. comprises of three members who arc brothers viz., Mr. M--------I-------- Mr. M--------B --------and Mr. M--------S--------sons of Mr. M--------M--------O--------H-------- M--------D--------The two issued involved in the appeals are:‑

(i) Whether the evidence produced in support of the claim of exemp tion of income by the assessee was acceptable that the income declared was earned from poultry farming and thus exempt from Income‑tax under the relevant notification, and

(ii) Whether notices issued and the assessments made under section 65 of the Income‑tax Ordinance, 1979 for these years are barred by limitation?

In the order, by my learned brother, a finding has been given that the notices issued and assessments made under section 65 of the Income‑tax Ordinance, 1979 were barred by time and that the assessee had earned income from poultry farming which is exempt from tax. He has annulled the assessments. Since I do not agree with these findings on both the issues, hence this separate order.

15. The brief facts of the case are that Messrs I--------P--------F--------F--------filed suo motu returns of income under section 22 (t) of the Income‑tax Act, 1922 (since repealed and referred to hereafter as the `Act'). The return for 1975‑76 declaring an income of Rs. 60,000 was filed on 15‑9‑1975, the return for 1970‑77 was filed on 15‑10‑1976 declaring an income of Rs. 2,63,195 and for 1977‑78 on 29‑9‑1977, declaring an income of Rs. 1,64,868. In respect of all the three returns the word "exempt" was mentioned against the figure of income shown in the returns. The I.‑T. O. issued under section 23 (2)/22 (4) of the Act calling upon the assessee to discuss the position of the case. First time the notice was issued on 1 I‑11‑1916 for 22‑1 t‑1976, but none was present. Again these notices were issued on 13‑4‑1977 for 11‑5‑1977, but none was present again. The case was then adjourned from time to time. Ultimately on 8‑3‑1973 one Mr. C--------A. R. appeared on behalf of the assessee and the I.‑T. O. recorded the following observations in the order‑sheet:

"Present. Mr. C--------supplied S. R. O. notification regarding exemption application dated 2‑3‑1978, wealth statement, computation chart and lease agreement deed placed on file on 70‑12‑1974.Income is exempt. No action is called for without going into the merits of the income returned for 1975‑76, 1976‑77 and 1977‑78."

In other words the proceedings had resulted in no "assessments".

16. Here it may be stated that income of an assesses which he derives from poultry farming was exempt vide notification No. S.R.O. 142 (1)/70, dated 1‑7‑1970 earned during the period, 1st July, 1970 to 30th June, 1975. This exemption was extended which covered these years.

17. Thereafter two letters dated 6‑2‑1980 were received from the I. T. O., Companies Circle, B‑2 K. --------who had asked for the copies of wealth statements in respect of Mr. M--------B--------and Mr. M--------S-------- ex‑members of the A. O. P. of Messrs I--------P--------F--------F--------who had become share‑holders in the company, Messrs M--------D--------& Co. K,--------in which they invested Rs 2,80,000 and Rs. 2,20,000 respectively. The I. T. O. had, earlier filed the proceedings as indicated above. On receipt of the letter from I. T. O. Karachi the successor I. T. O. felt suspicious and with a view to verify whether any business of poultry farming had, in fact, been carried on by the A.O.P. from which ' the income was alleged to have been earned and invested in Messrs S--------M--------D--------Ltd., -------- K--------took certain steps to make preliminarily enquiries and recorded a statements on the order sheet on 10‑8‑1981 of one Faqir Muhammad son of Hashim Ali Dogar, in whose land the assessee A,O.P. is alleged to have set up the poultry farm. The statement recorded was to the effect that no such poultry farm was set up. F--------M-------- son of H--------A--------D--------stated that he and his younger brother F--------A--------were the owners of 7 Acres of agricultural land and they themselves cultivated it. They have never cons tructed poultry sheds on their land, nor was it given on rent, nor have they carried on poultry farming themselves. He does not know M. --------I--------or M-------- B--------or M--------S-------- sons of S--------M--------M--------The agreement deed dated 20‑12‑1974 on the stamp paper written in English allegedly shows his thumb‑impression which is not genuine. Since he had not given any land for setting up poultry farm, spurious thumb‑impression has been applied on the deed. He would produce an affidavit to this effect. F--------M--------then produced an affidavit date 15‑8‑1981 on stamp paper duly attested by the Oath Commissioner. He has deposed as under in the affidavit.

"He has given his agricultural land in Chak 203‑B in M--------contract or lease in 1974 or before. He himself cultivates his land and has never given it or its parts for any business till today since the inception of Pakistan, nor is there any poultry farm in existence. He swears on oath that Fe does not know personally M. --------I--------M--------B--------or M--------S-------- or the so‑called Iqbal Poultry Farm. He has never given his land for poultry farm and has not signed nor put his thumb impression on any stamp paper. If any agreement deed on stamp paper has been prepared in his name it is fake and not genuine. He his nothing to do with it. He has not purchased any stamp paper on 20‑12‑1974 nor has he written any agreement nor put his thumb‑impression."

18. This statement on oath has also been attested on 16‑8‑1981 by one M--------K--------K--------Numberdar of Chak No. 203‑R.13. Mananwala. This was further attested after verification by Abdul Qadir, Municipal Councillor by his statement dated 17‑8‑1981 to the effect that no poultry farm has ever been set up on agricultural land 'of F--------M--------son of --------H--------A, C-------- No. 203 R. B. M--------since 1974, in fact since the inception of Pakistan till todate. Incidentally it may be stated here that all the statements and the affidavit by F--------M--------were duly signed by him whereas the alleged agreement dated 20‑12‑1974 produced by the assessee in support of having given out land on monthly rent of Rs 450 bears the thumb‑impression of F--------M --------

19. All these preliminary enquiries were made by the I. T. O. in order to ascertain whether the income returned by the appellant was derived from poultry farming or some other source. The I. T. O. did not confront the assessment at this stage with the result of these preliminary enquiries. Under tire law he is nut required to give the assessee at this stage all opportunity of being heard before he decides to operate the power conferred by section 34 of the Act, as laid down in the case of Indian National Tannery (1941 1 T R 618). After carrying out the preliminary enquires he obtained the approval of the I.A.C. for re‑opening the assessments under section 65 of the Income‑tax Ordinance, 1979 for all the assessment years 1975‑76, 1976‑77 and 1977‑78, which was granted ride his letter No. 1351, dated 30‑12‑1981. Accordingly notices under section 65 of the Ordinance were issued on 30‑12‑1981 in response to which the returns were filed for these years repeating incomes already declared.

20. In response to notices under section 61 of the Income‑tax Ordi nance, l979 the A. R. for the assessee produced on 17‑2‑1982 the cash book and ledger for the assessment year 1976‑77 whereas in respect of the earlier year 1975‑76 and the subsequent year 1974‑78 no books were produced on the plea that these were not traceable. After making preliminary enquiries the I. T. O. issued a notice under Section 62 of the Income‑tax Ordinance, 1979 informing the assessee that he had made all possible enquiries and there is not a single piece of evidence to confirm the existence of poultry farming by the assessee in Chak No. 203‑R.B. Mananwala, Faisalabad and that he has come to the conclusion that the income declared by the A.U.P. for the three years was earned from the sources other than poultry farming. The assessee was called upon to explain why the declared income should not be assessed us income from undisclosed source. The assessee, however, took the plea that income shown in the returns was earned from poultry farming and drew the attention of the I. T. O. to the agreement deed dated 20‑12‑1974, bearing the thumb‑impression of F--------M--------according to which he is alleged to have given on rent the sheds cons tructed by him alongwith store for the purposes of poultry farming at monthly rent of Rs. 450. This was further supported by a photostat copy of the affidavit of F--------M--------dated 8‑12‑1980 before a Magistrate wherein he stated that he had entered into agreement with M--------I--------on 20‑12‑1974 for a period of two years and that they had been carrying on the poultry farming from 20‑12‑1974 to 31‑5‑1977 when it was stopped. This affidavit says that in 1974 he had given on rent Katcha shed and one store for poultry farming to M--------I--------son of M--------M-------- for two years at a rent of Rs. 450 per month. They wound up this business on 31‑5‑1977. When the I. T. O. had called him on 10‑8‑1981 to had denied having given any land on rent as at that time there was no shed or poultry farm. He had made the statement as he was afraid of levy of Income‑tax. This affidavit is accompanied by a report dated 13‑12‑1982 and attested by the Naib‑Tehsildar. The report says that M--------I--------son of M--------M--------etc. submitted that they have been carrying on poultry farming on the land of F--------M--------from 1974‑1977 which has since been wound up and the land returned to the owner. The Naib‑Tehsildar repeating tae above‑attested the statement.

21. Thereafter the I.‑T.O. again recorded the statement of F--------M--------at his residence on 28‑12‑1982 in which he stated that there has never been any poultry farm in Mananwala. The reality that he has nothing to do with the affidavit given after his first statement. This fresh statement was attested by two witnesses A. --------S--------and M--------A--------The I. T. O. also requested the Assistant Commissioner, F--------vide his letter No. 334, dated 27‑1‑1983 to intimate to him the position about the existence of poultry farm to the name of Messrs I--------P--------F--------during the period, 1‑7‑1974 to 30‑6‑1977 in Chak No. 203‑RB, M from Mal Record of Patwari. The Assistant Commissioner marked this letter to the Tehsildar and on this the Naib‑ Tehsildar reported that he has checked up record of "Khasra Gardawari", in regard to the land of F--------M--------son of H--------D--------and he did not find any entry about Poultry Farm during 1974‑77. On 31‑1‑1983 the I.T.O. confronted the assessee with this material and also recorded in his office the statement of F--------M--------son of H--------D--------in the presence of A. R. K--------M--------H-------- and A. R. Mr. M--------C--------Advocate. In this statements F--------M--------stated that on 10‑8‑1981, he had given a statement in the presence of I.‑T. O. that there was no poultry farm on his land, because he was afraid of levy of Income‑tax. Thereafter he had filed an affidavit, which was also attested by A--------Q--------D--------and Numberdar--------K--------K-------- This affidavit was given by him willingly. The sited was demolished later on. No electric connection was obtained and they were using lamp. During cross‑examination he owned the affidavit made before the Magistrate.

22. The detailed proceedings before the I. T. O. in regard to the evidence of F-----M-----son of H-----D-----show that he has been making contradictory statements. Therefore, these statements cannot be relied either by the Department to prove that no poultry farm was set up or by the assessee that such a farm .vas set up though the first affidavit of F-----M----- dated 15‑8‑1981 duly attested by M-----K-----K----- Numberdar and the Municipal Councillor A-----Q-----made apparently without any pressure, has more evidencial value. His subsequent averment that he had given his first statement under fear of levy of Income‑tax cannot be believed as the rent of Rs. 450 per month was far below the taxable limit.

23. In any case if this evidence is discarded the appellant should have been able to produce documentary evidence in the form of accounts and voucher in support of the income having been earned from poultry farming. It has to be borne in mind that substantial income as shown below was said to have been earned from Poultry Farming

Assessment year

Net income declared

1975‑76

Rs. 60,000

1976‑77

Rs. 2,63,195

1977‑78

Rs. 1,64,868

This would apparently necessitate operation of a bank account also. But the position on the other hand is that not only no documentary evidence was produced even the accounts produced for the assessment year 1976‑77 were entirely deficient. Besides, the plea taken regarding the accounts for 1975‑76 and 1977‑78 being not traceable could hardly carry any conviction. Obviously for earning such a large amount of income the assessee should have maintained some records which could show that poultry farming' was carried on and that the income was derived from this source.

23. The Income‑tax Officer called upon the assessee to show the posi tion about: ‑

(a) the purchase of one day chicks ; and

(b) purchase of poultry feed. .

Without which the business of poultry farming cannot be carried on. The assessee produced a photostat copy of only one receipt dated 1‑4‑1976 from Messrs P-------D-------P-------Breede,s 11‑C N M-------T-------L------- showing sale of 5,000 chicks at the cost of Rs. 20,000 to Messrs I-------P-------F-------Faisalabad. No other receipt has been produced and it would not be enough to have carried on business for three years on the basis of only 5,000 chicks. No receipt for purchase of poultry feed was, however, produced. To verify this receipt the I. T.O. sent a letter under section 144 of the Income‑tax Ordinance, 1979 to Messrs P-------D-------P-------B-------about the sales of one day chicks which was received back undelivered. Then the Income‑tax Inspector visited the premises of the concern on 20‑12‑1982 and found that J.V.C. company was working is that building since 1974. On enquiry Mr. R-------son of F-------M-------Administrative Officer of the company stated that he has been working in J.V.C. Company since 1974 and that Messrs P-------D-------had wound up their business before 1974; in other words, before the alleged commencement of business (on 20‑12‑1974) by Messrs I------- P------- Likewise Mr. F-------I-------son of K-------I-------retired Special Security Officer of J.V. C. also stated that he was working in J.V.C. since 1976 and P-------D-------P-------B-------had wound up their business before 197‑1. The I. T. O. concluded that the photostat copy of the sale invoice had been prepared to hoodwink the department. Later the appellants changed their earlier stand in their letter dated 6‑2‑1983 and stated that they had made the purchases from local agents and that it was an order placed by one Mr. E-------for which no advance had been paid by the assessee. This further strengthened the suspicion of the I. T. O. that the copy of the voucher produced was not genuine. The I. T. O. applied another test to find out whether the books of accounts produced (only for one year i.e. the assessment year 1976‑77) were at all genuine. The invoice alleged to have been issued by P-------D-------B-------on 1‑4‑1976 was found to have been entered in the accounts on 20‑4‑1976, that is, 19 days after the order of Mr. E-------on the Poultry Breeders. The statement of Trading account for the account year 1974‑75 (corresponding to the assessment year 1975‑76) indicated closing stock of Rs. 1,00,000 as on 30‑6‑1975. This was never reflected as the opening stock for the next year viz. account year 1975‑76 as it should have been done. Instead purchase of hens was shown at Rs. 1,20,000, the I. T. O., therefore, concluded that the balance‑sheet had been balanced without the figures of opening stock. The accounts were obviously fake and he recorded that no reliance could be placed on the same. He has also mentioned in the order that entries in the account books were full of over-writings. The I. T. O. treated the income declared by the assessee from undisclosed source and assessed the abovementioned amounts as income from undisclosed sources.

24. I am of the view that since documentary evidence in the shape of account books or vouchers for purchases of chicks and poultry feeds was not produced by the assessee the mere affidavit cannot prove that the income was earned from poultry farming. One cannot imagine that poultry farming on such large scale could be carried out without keeping a record of the details.) At least details of purchases could definitely be produced in support of the claim but no such evidence has been produced. The C.I.T. (A) also arrived at the conclusion that the appellant did not produce any evidence before the assessing officer to support of their contention that the income derived was through poultry farming. The irresistable conclusion is that the assessee did not carry on poultry farming and that the income declared was from undisclosed source, which was rightly assessed as such under the Income‑tax Ordinance, 1979.

25. Notices under section 65 of the Income‑tax Ordinance, 1979 were issued for the three years 1975‑76 to 1977‑78 on 30‑12‑1981 calling upon the assessee to file returns of income which had escaped assessment for these years. This was a clear case of concealment of income or at least where deliberately inaccurate particulars of income had been furnished and income had escaped assessment oil that account. Here it will be advisable to refer to the history of section 34 (1‑A) of the Act. This subsection was introduced in 1969. Prior to this it was a part of the main subsection (1) of section 34. Under section 34 (1), before its amend ment in 1959 the time limit for service of notice was (i) 8 years in case of concealment of particulars of income or deliberately furnishing inaccu rate thereof, and (ii) 4 years in other cases. The Finance Ordinance, 1979 removed the period of limitation of 8 years with the result that in cases of concealment notice could be issued at any time without any bar of limitation. In other cases the limitation of 4 years, however, remained the same. In other words sections 34 (1) and 34 (I‑A) of the Act have been merged in section 65 (1) of the Ordinance, 1979 acid both in respect of cases involving concealment of income and deliberately furnishing of inaccurate particulars of income as well as for cases where income has escaped assessment, tile uniform period of 10 years has now been pres cribed for framing assessments or reopening the assessments where income has escaped assessment. Returns for these years were filed under protest repeating the previous figures and claiming the exemption as before. These returns were received on 14‑2‑1932 and the assessments were finalised by the I.‑T.O. on 24‑2‑1983. Notices under section 65, as stated earlier, were issued with the approval of tile I.A.C.

26. The second issue, therefore, which needs consideration, relates to the decision of the C.I.T.(A) which confirmed the I.T.O's order and rejected the appeal of the assessee on the point that the assessments under section 65 of the Income‑tax Ordinance, 1979 were barred by limitation.

27. In his order the Judicial member has discussed this issue on two grounds. Tile first, that the time allowed under section 34 (1) for reopen ing and completing the assessment was 2 years and that the reopened assessments could be completed on or before 30‑6‑1980. On the other hand the reopened assessments were completed on 24‑2-1983, i.e. after more than 2 years of the end of the year when these assessments could first be made Secondly the period of six years was available only under section 34 (I‑A) and this provision having not been saved under section 65 or section 166 of the Ordinance the assessments could only be finalized before 30‑6‑1980. Hence the assessments made wore invalid. In other words the period of six Sears which is available under section 3‑l (1‑A) of the Income‑tax Act, 1922, was allowed only in respect of cases where income is found to have been concealed Since the provisions relating to the reopening of cases in respect of congealed income have not been saved in section 166 of the Income‑tax Ordinance, 1979, therefore, the period of six years was not available to the I. T. O. for framing the reopened assessments. Since the I. T. O. has finalised revised assessments after the expiry of 2 years from the and of the year in which the income was first assessable, therefore, these are barred by time. The Judicial Member has accordingly annulled the assessments.

28. In my view the provisions of section 34 of the Income‑tax Ac are not applicable in this case. Even if it is that these provi sions were applicable then the assessments are not barred by time even under the Income‑tax Act, 1922. This was a case of concealment of income as the assessee had deliberately furnished inaccurate particulars of income and had illegally claimed exemption of income on the plea of having been earned through poultry farming. The revised assessment could thus be completed within the enhanced time of six years allowed for completing the assessments on concealed income. In this case notices under section 65 read with section 166 (2) (c) of the Income‑tax Ordinance were issued on 30‑12‑1981. Since the period allowed under section 34 (I‑A) of the Act for issuing the notices is six years from the end of the year in which the assessments were made (in this case the year in which the `nil' assessments were made was the year 1977‑78 ending on 30‑6‑1978) these notices could be issued upto 30‑6‑1984. These notices were, therefore, validly issued. Likewise the assessment could be made before 30‑6‑1981 i.e. within one year of the end of the year in which notices were issued as laid down in clause (ii) of the proviso to section 34 (2) of the Act. As these assessments were made as 24‑2‑1983, these were valid assessments having been made accordingly.

29. In regard to the proposition that the concept of escaped income as contained in section 34(1‑A) of ‑the Act has not been preserved in the Income‑tax Ordinance, 1979, my learned brother has referred to sec tion 166(c)(ii) of the Income‑tax Ordinance, 1979, which reads as follows: ‑

"Where in respect of any assessment year any income chargeable to tax had escaped assessment, or had been under assessed or assessed at too low a rate, or had been the subject of excessive relief or refund or the total income or the total world income and the tax payable had been determined under subsection (I) of section 23 of the repealed Act and no proceedings under section 34 of the said Act in respect of any such income are pending at the commence ment of this Ordinance a notice under section 65 may be issued with respect to that assessment year and all the provisions of this ordi nance shall apply accordingly."

30. The view taken is that what has been saved in section 166 of the Income‑tax Ordinance, 1979, is only an ordinary case where income has escaped assessment and that the provisions relating to concealment of income that found place in section 34(1‑A) of the Act, have not been saved as such. To my mind this inference cannot be drawn from the relevant provisions of the Income‑tax Ordinance, 1979. Section 65 which refers to the additional assessment that can be made in cases where income bas escaped assessment is couched in the following, language:

"65. Additional assessment.‑(1), if, in any year, for any reason‑

(a) any income chargeable to tax under this Ordinance has escaped Assessment; or

(b) the total income of an assessee has been under‑assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund under this Ordinance; or

(c) the total income of an assessee or the tax payable by him has been assessed or determined under subsection (I) of section 59 and no order of assessment has subsequently been made under this section or any other provision of this Ordinance, the Income‑tax Officer may, at any time, subject to the provisions of subsections (2), (3) and (4), issue a notice to the assessee contain ing all or any of the requirements of a notice under section 56 and may proceed to assess or determine, by an order in writing, the total income of the assessee or the tax payable by him, as the case may be, and ail the provisions of this Ordinance shall, so far as maybe, apply accordingly.

(2) -----------------------------------------------------------------------------

(3) Notice under subsection (1) in respect of any income year may be issued within ten years from the end of the assessment year in which the total income of the said income year was first assessable."

31.We are concerned with subsection (1) an` subsection (3) of this section. These provisions clearly apply to the case under consideration before the Tribunal. This section refers to any income that has escaped assessment in any year and for any reason. The period allowed for passing an order under section 65(3) in respect of escaped income is 10 years from the end of the assessment year in which the income was first) assessable. The income for the assessment year 1975‑76 was first assessable under the Income‑tax Act, 1922, upto 30th June, 1976, for the assessment year 1976‑77, upto 30th June, 1977, and for 1977‑78 upto 30th June, 1978. 1n the present case the notice under section 65 were issued on 30‑12‑1981 and all the assessments completed on 24‑2‑1983 Both the issuance of notices as well as completion of assessments being within 10 years of the date on which these assessments were Post assessable, the notices were issued within time and the assessments, likewise were made within the period allowed under section 65(3) of the Income‑tax Ordinance, 1979. The assessments made are, therefore, valid assessments.

32. Let us now examine the position of section 166(2)(c) (U) of the Income‑tax Ordinance, 1979. My learned brother has stated in para. 5, at page 5 of the his order as follows,

"The next alternate plea of the appellant's A. R. was that section 34 of the Act having not been saved in entirety under section 166 of the Ordinance, it ceased to be effective after repeal of the Act on 1‑7‑1979. Thereafter as per the appellant's A. R. notice under section 65 of the Ordinance could have been issued on the basis specified in the savings clause, and therein, too, re‑assessment was to be made before expiry period of limitation as prescribed under subsection (2) of section 34 of the Act."

Before the provision in the saving clause l66(2)(c)(ii) is analysed, let it be clarified that the position stated in the above paragraph is fallacious. If once we say that section 34 of the Act ceased to be effective after repeal of the Act and section 166(2)(c)(ii) applied in this case then period allowed for framing the assessments, under section 65(3) of the Ordinance would apply and the limitation prescribed in section 34(2) of the Act will not stand in the way.

33. Now let us see what has been saved out of section 34 in sec tion 166(2)(2) of the Income‑tax Ordinance, section 166(2)(c)(ii) has been reproduced in para. 17 above. The Judicial Member has taken the view that the words "concealed the particulars of his income or deliberately furnished inaccurate particulars thereof or omitted or failed to disclose all material facts necessary for the assessment" occurring in section 34(1‑A) of the Act do not find place III section 166(c)(4) of the Ordinance. Therefore, any escaped assessment, which is made for these reasons would not fall within the mischief of section 65 of the Ordinance, nor have these been saved under section 166(c)(ii) of the Ordinance. This is obviously not a correct view. All income that have escaped assessments on account of concealment would fall within tile purview of section 65 and sec tion 166(2)(c)(ii) of the Ordinance. The subsection (1‑A) of section 341 of the Act, was introduced tri 1960 and prior to that concealed ineomes1 which escaped assessments were found to be covered and assessed under section 34(1) of the Act which corresponds to section 65 and section 166(2)(c)(ii) of the Ordinance. This view finds approval in the following rulings.

34. (i) It was held in the case of C. k T. v. Narsee Nagsee & Co. ((1960) 4 1 T R 307). Supreme Court of India that the Herds "escaping assessment" apply equally to cases where a notice was received by the assessee but resulted in no assessment at all and to cases where due to any reason no notice was issued to the assessee and, there is no assessment.

(ii) In the case of Chatturam Harilram. C. I. T. ((1955) 27 1 T R 709), Supreme Court of India held that where earlier assessment proceedings had in fact been taken but failed to result in a valid assessment because of some lacuna other then that attributable to assessing authorities, then not withstanding the chargeability of income to tax, it would be a case of chargeable income escaping assessment and not a case of mere non‑assess ment of Income‑tax.

(iii) In another case reported as Bhimraj Pannalal v. C.

1. T. ((1957) 39 1 T R 289), it was held that where income is held to have "escaped assessment" there must have been either fresh fact, brought to tile notice of the I. T. O.; or some changes in the law which were in existence during chargeable accounting period but which were not brought to the notice of Income‑tax authorities inadvertently. A mere change of opinion on the same facts and law is not covered by section 34."

(iv) Still in another case reported its Bhawani Prasad Girdhari Lal Hatia v. I. T. O. ((1960) 40 1 T R 407), it was held that the expression "income, profits or gains for escaped assessment" covered the cases where the income, profits or gains had totally escaped assessment or also include cases where part of profit and income, profits or gains had been assessed and another part has escaped assessment.

(v) In the case (1961) 3 Tax (I11‑52) it was held that where income declared by the assessee in the return of income was not considered by the I. T. O. the Appellate Tribunal held that it was a case of escapement of income from assessment for any reason.

35. The above rulings clearly point out that to the circumstances of the case Messrs I. P. F---------under consideration before the Tribunal the income had escaped assessment in so far as it was believed by the I.‑T. O. that the income of the appellant for the three years had been derived from poultry farming whereas the Income‑tax authorities later found that no poultry farm had been set tip and as such the income was not exempt therefore, it had escaped and notice under section 65 of the Ordinance could tightly be issued in the circumstances of the case. Therefore the plea that cases, where income has been concealed or incorrect particulars of income has been furnished or where the assessee has failed to disclose all material facts necessary for tile assessment, have not been saved in section 166 of the Income tax Ordinance cannot hold good. Therefore, the argument that notice under section 65 of the Ordinance could not be issued or that assessments could not be finalised within the period of 10 years allowed under section 65 of the Ordinance to this case is not tenable. Cases where incomes have escaped assessment in respect of any previous year ending before 1‑7‑1979 or in respect of assessment years commencing on or after 1‑7‑1979, can be finalized within ten years from the end of tile assessment year in which such income was first assessable. All that is necessary is that, the Income‑tax Officer finds that the income has escaped assessment, he can issue a valid notice, under section 65 of the Ordinance and frame tile assessments subject's to the other provisions of the Income‑tax Ordinance which permit escaped assessment to be made within the period of 10 years. It has earlier been noted in the light of tile observations of various ruling, of the Courts that income in this case had escaped assessment and therefore, it is not necessary to invoke tile provisions of section 34(1‑A) of the Act! to have issued the notices or to have framed tile assessments.

36. Relying on some of tile rulings, my learned brother has concluded that the notices issued under section 65 of the Ordinance, and the assessment made, being barred by limitation, are invalid and has, therefore annulled the assessments. As to whether any right has accrued to the assessee he, has cited the following cases:

(i) Saeed Ahmed v. Tire Slats reported as P L D 1964 S. C 266.

The Supreme Court observed in the case as follows:

"At the same time there is no difference in principle between repeal and amendment if in a cast; of a total repeal proceedings can be continued tie if there was no repeal why should the proceed ings not be continued in tile case of an amended provision?"

But it must be pointed out that elsewhere in the judgment, their Lordships have observed as follows:

So far as substantive rights of parties to a litigation are concerned, a law which comes into force either during the pendency of the proceeding in a Court or even before the institution of such proceedings, but after the coming into existence of the events, the legal effect of which is to be determined, can have no effect whatsoever on the proceedings except to the extent of the retros pective effect which it may possess expressly or by necessary implication

Elsewhere it was observed as follows:

"There is no difference at all between a case where the Legislature says that a particular section will stand amended to a particular way and a case where it says that the section stands repealed and its place will be taken by a new section, if the new section is the same as the amended section."

It is thus clear that where an Ac: has been repealed and another Act or Ordinance takes its place then to the extent of the retrospective effect which it possesses expressly or by implication it will have effect, notwith standing the rights that may have accrued to an assessee, under the Income‑tax Act. 1922. Moreso, when the new provisions are not the same as the amended section. It. is, therefore, clear that this case does stand in the way of department to have issued the notices under section 65 and to have completed the assessments within a period of 10 years from 30th June, 1978, when the assessment could first be completed in view of the period allowed under section 65 of the Income‑tax Ordinance, 1979.

(ii) In the next case of C. I. T. v. Eastern Federal Union Insurance Company (P L D 1982 S C 247) (Supreme Court Pakistan) a similar view was taken that right could not be taken away by giving retrospective operation to amended statutory provision extending the period for assessment. It must be pointed out there that this case is distinguishable from the case under consideration before the Tribunal. It is not a case of amendment, but it is the case of replacement of the Income‑tax Act, 1922 by the Income -tax Ordinance, 1979, which clearly permits the revenue to reopen and frame the assessments in respect of incomes which escape assessments within a period of 10 years from the card of the year in which it was first assessable. In the present case the assessments could be completed upto 30th June, 1978 and since the assessments were completed on 24‑2‑1983 they are within the limitation. Approval of this view is available in the judgment of Supreme Court of Pakistan in the case of Mr. Saeed Ahmad v. The Sate referred to above.

(iii) In the third case cited in this connection viz. that of Koh‑i‑Noor Textile Limited v. C. I. T. (P L D1974 S C 284) (Supreme Court) it was held that the assess ment made after the expiry of the period allowed before amendment were barred by limitation. This case is on all fours with that reported its P L D 1932 S C 247 and therefore, would also be distinguishable.

37. In regard to the principle of natural justice in so far as no one should be condemned unheard the following cases have been cited by my learned brother:‑

(1) P L D 1959 Supreme Court page 45.

(2) P L D 1964 Supreme Court page 410.

(3) (1978) 37 Taxation 155.

(4) 1979 P T D 58, and (5) 1951‑20 1 T R 287.

In these cases it has been held that every affected person has not only to be confronted with such evidence but an opportunity has to be afforded for rebuttal. No one should be dealt with to iris disadvantage without having been given an opportunity of being heard and making his defence Every affected person has a right to inspect the records and an opportunity must be afforded to the assessee to rebut the information on which the I. T. O. is relying. It was also held in the case reported as 1979 P T D 58 that before charging any person with financial liability he should be informed of the material on which the charge is going to be imposed and given the opportunity to rebut the same.

38. In the case, before us the I. T. O. after making preliminary enquiries issued a notice under section 62 of the Income‑tax Ordinance informing the assessee that he had made all possible enquiries and there was no evidence to show that a poultry farm had been set up and called upon the assessee to lead evidence against that view. Then again on 31‑1‑1983 the I. T. O. confronted the assessee with all the material he had collected and recorded the statement of F-----------M-----------in the presence of the A. R. K-----------M-----------H----------- and the A. R. Mr. M----------- C-----------In the statement on oath dated 31‑1‑1983 he admitted that the affidavit dated 15‑8‑1981 was given by him willingly wherein he had denied having given his land on rent fur a poultry farm. Likewise he afforded full opportunity to the assessee to inspect the files, which were, in fact, inspected by Mr. Chattha the A. R. of the assessee. Earlier also, the Income‑tax, Officer had provided a clear opportunity to Messrs M-----------I-----------M-----------S----------- who appeared on 7‑12‑1982 along with their father, to ascertain whether they know anything about the poultry business, but the two members of the A. O. P. slipped out of office. The 1. T. O. has recorded in some details this incidence at page 3 of his order dated 24‑2‑1983. Proper opportunity has, therefore, been afforded and it cannot be said that parties had been saddled with financial liability without giving them aft opportunity of rebutting the same.

39. I am accordingly of the view that both under the Income‑tax Act, 1922 as well as under the Income‑tax Ordinance, 1979 the assess ments made by the I. T. O. anti confirmed by the C. I. T. (A) were not barred by limitation and that these assessments were validly made. The decision of the C. I. T. (A) is upheld on both the points. As to the other grounds of appeal, it may be stated that section 13 of the Income‑tax Ordinance, 1979 is not relevant in this case as what the assessee has concealed was not any particular investment in Messrs I-----------P-----------F-----------or found owner of any money or valuable article in regard to this concern, which required to be explained but had claimed exemption of the entire income showing it from poultry Farming and approval of I. A. C. to this regard was not called for Further the order was passed by the I.‑T. O. independently and the advice given or sought from his senior officers in no way vitiates the assessments.

40. In the result the appeals of the assessee are dismissed for all the three years and the assessments‑are upheld.

(Sd.)

(ZAFAR HUSSAIN),

Member Accountant.

Questions of difference of opinion

(1) Whether in the facts and circumstances of this case re‑assess ments made by the I.‑T. O. for the years under review were time barred ?

(2) Whether filing of proceedings by the I. T. O. on 8‑3‑1978 amounted to assessment.

(3) In the absence of any element of concealment, period of limita tion prescribed under section 34 (1) or 34 OA) of the Repealed Income‑tax Ordinance, 1979 is applicable?

(4) What is the effect of repealing provisions of section 166 of the Income‑tax Ordinance, 1979, for the purposes of limitation in the instant case ?

(5) Whether statements made behind the assessee's back have any evidential value as against‑the statement made in the presence of the assesses?

(6) Whether evidence available 'on record establishes existence of the assessee's poultry farm business in the years under review

As per Mr. Abrar Hussain Naqvi, J. M. (II).

41. This is a case in which a difference of opinion has arisen between the two Members of the Tribunal and the following questions have been referred to me for decision: ‑

(1) Whether in the facts and circumstances of this case re‑assessments made by the I. T. O. for the years under review were time‑barred ?

(2) Whether filing of proceedings by the I. T. O. on 8‑3‑1978 amounted to assessment ?

(3) In the absence of any element of concealment, period of limitation prescribed under section 3‑I (1) or 34 (IA) of the Repealed Income- tax Ordinance, 1979, is applicable?

(4) What is the affect of repealing provisions of section 166 of the Income‑tax Ordinance, 1979, for purposes of limitation in the instant case?

(5) Whether statements trade behind the assessee's back have any evidential value as against the statement made in the presence of the assessee?

(6) Whether evidence available on record establishes existence of the assessee's poultry farm business in the years under review

42. The facts and circumstances of the case have been given in detail by the learned members who have discussed the above issues. However, briefly the facts may be reiterated for purposes of convenience. The assessee is an A. O. P. who tiled returns for the assessment years 1975‑76, 1976‑77 and 1977‑78 on 15‑9‑1975, 15‑10‑1976 and 29‑9‑19,77 respectively declaring net income at Rs. 60,000, Rs. 2,63,195 and Rs. 1,64,868. The source of income was shown as from poultry farm and thus claimed exemp tion. The I.‑T. O. issued various notices under sections 22 (4) and 23 (2) of the Replealed Income‑tax Act and in compliance with the notices the assesses filed certain documents to prove that the assessee was deriving income from poultry farm. One of such evidence was a lease agreement dated 20‑6‑1976 with the landlord. Allegedly the business was closed by the assessee on 31‑5‑1977 and the I. T. O. was duly informed. The assessing officer filed the proceedings on 8‑3‑1978 in which it was mentioned that wealth‑statements, computation chart and lease agreement were placed on file and that the income being exempt, no action was called for.

43. Subsequently on the basis of certain information the I. T. O. re‑opened the case of the assessee tinder section 65 of the Income‑tax Ordinance, 1979, which came into force on 1‑7‑1979. Notices for re opening of the case of the assessee were issued on 30‑12‑1981 tinder section 65 of the Income‑tax Ordinance. It may be noted that notices were, issued on the grounds:

(1) That the income has escaped assessment;

(2) it was under‑assessed ;

(3) it was assessed at too low a rate, and'

(4) excessive relief has been granted.

It may further be noted that corresponding provision in the Repealed Income‑tax Act was section 34. The Income‑tax Act, 1922 was repeated and re‑enhancement was made by promulgating the Income‑tax Ordinance, 1979. Subsection (2) of section 166 of the Income‑tax Ordinance saved certain provisions of the Repealed Income‑tax Act. Clause (c)(i), provides that if a notice under section 34 of the Repealed Act had been issued before commencement of the Ordinance the proceedings in pursuance of such notice could be continued and disposed of under that Act. Clauses (ii) provides that if` an income had escaped assessment or under assessed notice and no proceedings had been started under section 34 of the Act; a notice under section 65 could be issued acid in that case alt the provisions of the Income‑tax Ordinance would be applicable.

44 It is in the state of these facts and law that the questions as reproduced above have arisen which are dealt with as under: ‑‑

Question No. 1

"Whether in the facts and circumstances of this case re‑assessment made by the I. T. O. for the ears under review were time‑barred?

The learned J. M. had held: that all the three assessments were finalize:" on 8‑3‑1978 and thus became closed and past transaction before the promulgation of the Income-tax Ordinance on 1st of July, 1979 and that the re‑assessment could be made by 30‑6‑1980, at the latest, Consequently the annulled all the three assessments. The learned Accountant Member, however, on the other hand has held that the limitation for re‑opening of the cases of the assessee was 10 years under section 65 of the Income‑tax Ordinance, which is the relevant provision of law applicable in his case.

45. The first question, therefore, which falls for determination is as to whether section 65 of the Income‑tax Ordinance applies to the cases which are already time‑barred under the Repealed Income‑tax Act and could slot be re‑opened had the time not been extended under the new law. Under subsection (2) of section 34 the period of limitation for reopening the case of the assesses under section 34 was two years from the end of the year in which the income, profits and gains were first assessable. This limitation period however eras not applicable in the following cases: ‑

(1) the assesses has not filed any return under subsection (1) or (2) of section 22;

(2) the assessee had concealed the particulars of his income or deliberately furnished incorrect particular of such income ;

(3) omitted and failed to disclose material facts necessary for assessment for that year.

46. It may further be noted, as has been stated above, that the assessee's case was re‑opened not on the basis of the concealment or state ment of incorrect particular of income but on the basis of escapement of income under assessment or on the basis of excessive relief. Thus, the assessees case did not fall under any of the exceptions given in the sub‑sections. Therefore, had the Income‑tax Ordinance not come into force under the old law the assessee's case could not be re‑opened after 30‑6‑1980, The promulgation of the new law cannot extend the period of limitation under the old law as section 65 of the Income‑tax Ordinance has not been given a retrospective operation This view was taken in Prashar and another v Vasantsen Dwarkadas and others (1963 491 T R 1) in Supreme Court of India.

In that case it was observed at page 13 of the report: ‑

"It is a firmly established principle of income‑tax law that once a final assessment is arrived at and the assessment is complete, it cannot be reopened except in the circumstances detailed in sec tions 34 and 35 of the Act and within the time limited by those sections."

It was further observed: ‑

"The legislation cannot revive a remedy which was already lost to the Income‑tax Officer."

It was further observed in the same judgment: ‑

"It seems to me that the proposition of law is settled beyond any doubt that although limitation is a procedural law and although it is open to the legislature to extend the period of limitation, an important right accrues to a party when the remedy against him is barred by the existing law of limitation and a vested right cannot be affected except by express terms used by the statute or the clearest implication flowing therefrom".

It was further observed: ‑

"The Income‑tax Officer could avail the remedy of re‑opening of the case within the period of limitation proved by section 4 and if the remedy is lost, the right is also lust and if the right is lost, much more so is the remedy."

A similar view was taken by another Judge in the same case dealing with this question. The learned Judge of the Supreme Court observed: ‑

"The first argument above brings us to the general principles of that law of limitation whether a change in the period of limitation takes away the existing finality of the immunity against actions which bad already been barred by the lapse of the period of limitation. "

At page 33 of the report, referring to the Privy Council's decision, it was observed: ‑

"In all these cases the Privy Council proceeded on the principle that if the fight of action had become barred according to the law of limitation in force, subsequent enlargement of the period of time does not revive the remedy, to enforce the rights already barred."

47. This case was then followed by the Supreme Court of India in another case titled C.

1. T. v. Sardar Lakhmir Singh (49 I T R 70), In that case it was argued before the Supreme Court that although the limitation had expired but when the I. T. O. had completed the assessment after the proviso to section 34 (3) had come into operation under which the I. T. O. could make the assessment or re‑assessment even after the lapse of period of limitation. In the present case as well the same argument has been advanced as under section 65 of the new Ordinance the period of limita tion has increases from two years to 10 years and this extended period was available to the I. T. O. when he made the assessment order. Dealing with this question the Supreme Court made the following observations: ‑

"-----as at the time when the I.‑T. O. completed the assessment the proviso to section 34 (3) had come into operation, the I. T. O. could, in spite of the lapse of the period, re‑assess the respondent and re‑assessment was therefore valid. The argument raised was really the same as that raised in S. C. Prashar, Income‑tax Officer v. Vasantsen Dwarkadas. In the present case the period applicable was four years. In regard to the assessments for the year s 1946‑47 and 1947‑48 the period of four years ended before April 1, 1952. For reasons given in S. C. Prashar's case the assessment will btw barred and in our opinion the High Court rightly held it so,"

A similar situation arose in India when the Income‑tax Act. 1922 was repealed by the Indian income‑tax Act, 1961 and was re‑enacted. The, repealing act was applicable with effect from 1‑4‑1962. A question arose as to whether the new Act was applicable even to cases where assessment lead already become barred by time before it came into force. Dealing with this question in the case J. P. Jani, Income‑lax Officer v. Indurprasad Devsanker Bhatt (7 2 I T R 595) the Supreme Court observed as follows: ‑

"In our opinion, the argument put forward by Mr. Narasaraju is not warranted. It is submitted in this case that the right of the Income-tax Officer to reopen the assessment for the year 1947‑48 was barred under the old Act before the new Act came into force. In our opinion it is not permissible to construe section 297 (2) (d) (ii) of the new Act as reviving the right of the Income tax Officer to reopen the assessment, which was already barred under the old Act. The reason is that such a construction of section 297 (2) (d) (it) would be tantamount to giving of retrospective operation to that section which is not warranted either by the express language of the section or by necessary implication. The principle is based on the well‑known rule of interpretation that, unless the terms of the statute expressly so provide or unless there is a necessary implication, retrospective operation should not be given to the` statute so as to effect, alter or destroy any right already acquired or to revive any remedy lost by efflux of time."

It was further observed by the Supreme Court: ‑

"We considered that the language of the new section must be read as applicable only to those cases where the right of the Income -tax Officer to reopen the assessment was not barred under the repealed section."

48. In the light of the above decisions, the assessments for the assessment years 1975‑76 and 1976‑77 could be reopened under sec tion 34 (2) upto 30th June, 1979. In other words when the Income‑tax Ordinance, 1979 came into force the assessee had acquired an important right, which could not be taken away. The action against him, which could possibly be taken under section 34 had become time barred. As. notwith standing the extension of period of limitation provided by section 65 of the Income‑tax Ordinance, the assessment could not be reopened under section 65 of the Ordinance for the assessment years 1975‑76 and 1976-77.

However, I do not contribute to the view of the learned Judicial Member; that the period of limitation provided by section 34 also extended to the assessment year 1977‑78 as well which expired on 30‑6‑1980 i. e. after coming into, force of the Income‑tax Ordinance, 1979. When the Income ta x Ordinance came into force and a case is hit by section 166 (2) (c) (ii), a notice under section 65 could be issued even for earlier period and in that case all the provisions of the Income‑tax Ordinance would applicable. This means that ail the provisions of the Income‑tax. Ordinance including the provision of section 65 would be applicable in a case where other is escapement of income or tinder assessment, etc. relating asessment year prior to coming into force of the Income‑to Ordinance and where notice under section 34 had not been issued before 1‑7‑1979. The only limitation however is that the right to reopen the assessee's case by the Income‑tax Officer has not been barred by time before a coming into force of the Income‑tax Ordinance, Thus, for the assessment a years 1975‑76 and 1976‑77 the re‑assessments made fly the I.T.O. wet time‑barred. It may be noted that the cases being relatable tot the assess Intent years 1975‑76 to 1977‑78 they had to be governed fry section 34 of the Repealed Income‑tax Act, had the Income‑tax Ordinance not come in to force. Since this has never been the case of the department that it was a case of concealment of income and obviously so because the assessment concealed his income which was duly declared to the department by filling voluntary returns the period of limitation for the assessment years 1975‑76 and 1976‑77 expired on 30‑6‑1979. Thus, the I.‑T. O. could, trot claim the benefit of extended period of 10 years provided by section of the Income‑tax Ordinance as it has no retrospective effect as such. But for the assessment year 1977‑78 the period of limitation as prescribed by section 65 of the Ordinance would be applicable and, therefore, notice issue d by I.T.O. was not tinge‑barred. On issue No. 1, I partly agree with the learned J. M. that the re‑assessments made by the I‑T.O. for the assessment years 1975‑76 and 1976‑77 were time‑barred. However, for the assessment year 1977‑78, the re‑assessment was within time.

Question No. 2:

"Whether filing of proceedings by the I.‑T. O. on 8‑3‑1978 amounted to assessment 7"

Thu assessing officer had filed the proceedings after issuing notices under sections 22 (4) and 23 12) and accepted the return of income of the assessee exempt. Therefore, for all intent and purposes this amounts to at assessment. Even if it be assumed, as has been observed by the learned, Accountant Member, that it was a case of no assessment, iii that case the entire re‑opening of the case would fall to the ground because then the returns of the assesses for all the three years would be deemed to bed still pending for disposal. The assessee's case therefore, could not be re‑opened because in that case the assessee's returns would be deemed to be still pending for disposal and the assessment could not be made on the original returns as it had already become time‑barred. Therefore, if the ding of the assessment proceedings is regarded as assessment then the answer to the question No. 1 would be in the affirmative. If however, it is to be taken as a no‑assessment case, in that case again no action could be taken either under section 34 or 65 of the Income‑tax Ordinance and) even original assessment could not be made having become otherwise, time‑barred‑ My answer to this question is that the order of the

I.T.O. dated 8-3-1978 amounted to an order of assessment determining income.

Question No. 3

"In the absence of any element of concealment, period of limitation prescribed under section 34 (1) or 34 (1-A) of the Repealed Income‑tax Act or as of section 65 of Income‑tax Ordinance 1979, is applicable.

The apply to this question has already given by me while dealing Question No.1. In the notice under section 65 there was allegation of concealment against the assessee. Therefore, this would be a case falling under section 34 (1) and not under section 34 (I‑A).As stated above could not be even otherwise the case of concealment because, the assessee had filed the return and the income was declared by him. Therefore, it would be at best a case of escapement of tax and not concealment .of income. However, since Income‑tax Act, 1922 was repealed and to notice under section 34 had been issued before 1‑7‑1979. Period of limitation as prescribed in section 65 of the Ordinance would be applicable except for the assessment years 1975‑76 and 1976‑77, as the time limit for re‑opening had already expired before coming into force of the Income s Tax Ordinance, 1979.

Question No. 4

Whether the effect of repeating provisions of section 166 of the Income‑tax Ordinance, 1979, for purposes of limitation in the instant case ?"

Again this question has been dealt with by discussing question No. 1. Sub s ection (2) of section 166 of the income‑tax Ordinance has saved certain provisions of the Repealed Income‑tax Act in spite of its repeal. Thus subsection (2) begins with the words "notwithstanding the repeal of the Income‑tax Act, 1922". As has been stated above, section 166 (2) (c) (ii) has empowered an Income‑tax Officer to issue notice under suction 65 of the income‑tax Ordinance in the given circumstances, and in that case ail the provisions of income‑tax Ordinance would be applicable. This means that in the given circumstances the I.‑T.O, is empowered to give a notice under section 65 provided a notice under section 34 (1) of the, Repealed income‑tax Act had not been given. This notice is to be issued for assessment years prior to promulgation of this Ordinance. Thus, the period of limitation would be as has been prescribed under section 65 i.e.10 years except in those case: where the remedy is already barred by time before coming into force of the Income‑tax Ordinance.

Question No. 5

Where statements made behind the assessee's back have any evidential value as against the statement made in the presence of the assessee?

The detailed facts have been given by both the learned Members in which a has been stated shat it is not in dispute that the land‑owner had been making contradictory statements. The statements recorded by the I.‑T.O. and the Inspector behind the back of the assesses, were against the assess ;; bile the statement in the presence of the assesses was in favour of the assessee. Obviously, these statements which were recorded on the back of the assesses cannot have the same evidential value as the one recorded in the presence of the assessee. On 'this issue there could be hardly a dispute as this is a settled law and I agree with the learned Judicial Member on this issue.

Question No. 6

"Whether evidence available on record establishes existence of the assessee's poultry farm business in the years under review?" Without going into the detail, which has been given by the two learned Members, the answer to this question is obviously in the negative. The assessee was given considerable opportunity to prove his case but he has trot been able to discharge the burden. The only evidence in favour o the assessee is the statement of the land‑owner recorded in his presence and the report of the Naib‑Tehsildar. As for the statement of the assessee it loses all its force when we see that he has been making contradictory statements. Thus it could be safely said that the assessee has not been able to establish that the poultry business existed in the years under consideration. However, this does not mean that the concealment of hi income is also established. It is possible that the assessee might running a poultry business but he has not been able to prove it by an cogent evidence. In the presence of the contradictory evidence, it cannot be said with definiteness that the assessee did or did not have the poultry business, though the assessee could not prove its existence convincingly.

As a result of the above discussion and my answer to the above 6 questions of difference of opinion, the assessee's appeals for the assess ment years 1975‑76 and 1976‑77 are accepted and the assessments are annulled as per majority judgment, The assessee's appeal for the assessment year 1977‑78 is dismissed as per majority opinion.

M. Y. H. Appeal dismissed,