I.-T.A. NO. 492 TO 496/IS OF 1984-85, DECIDED ON 2ND APRIL, 1986. Versus I.-T.A. NO. 492 TO 496/IS OF 1984-85, DECIDED ON 2ND APRIL, 1986.
ORDER
AMJAD ALI (MEMBER).‑‑ .These five appeals brought by the assessee assail the order of the Inspecting Assistant Commissioner of Income‑tax, Range‑2., Rawalpindi, dated the 3rd February, 1985, whereby in exercise of the powers under section 66A of the Income‑tax Ordinance, 1979, he had directed the Income‑tax Officer for making fresh assessments of the assessee's‑ income pertaining to the charge years 1969‑70 to 1973‑74.
2. The brief facts leading to the appeals are that the assessee appellant, an association of persons (AOP) consisting of four members, derives income from a hotel and restaurant known as Messrs Lords Hotel and Restaurant, Rawalpindi, and also from property. The appellant did not file the returns of its income in compliance with the notices issued to it under sections 22(2) (4), 34 and 38 of the repealed Income‑tax Act, 1922, nor produced the requisite books of accounts. Hence, for the charge years 1969‑70 to 1973‑74 the Income‑tax Officer by his order, dated the 26th June, 1974, made the assessments on the best of his judgment by estimating the income from hotel and restaurant. The rent received by the appellant by letting out its property was also charged to tax. These assessments were objected to by the appellant before the Appellate Assistant Commissioner who, by his order, dated the 13th July, 1981, concluded that the ex parte assessments made by the Assessing Officer were without any legal authority. He was also of the view that, since the property income was duly ascertainable, it should have been separately assessed in the hands of the members of the AOP. Hence, tae set aside the assessments for all the years under consideration with, the following observations:‑
"In the light of the facts stated above, I come to the conclusion that the ex parte order passed by the I.‑T.O. is without any legal authority and so it cannot be sustained. Accordingly, I set aside the assessment order with the direction that proper assessments for these years should be made on proper lines alter strictly ad hearing to the statutory requirements for passing a valid and proper order. As the assessments have been set aside, I refrain from giving any finding on the income estimated by the I.‑T.O. from hotel and restaurant business. It is for the I.‑T.O. to justify the estimate of income under these heads while' completing re‑assessments for these years.
As regards the income from property, the I.‑T.O. should also give due consideration to the appellant's claim that this income was to be separately assessed in the hands of the members of the AOP under section 9 (3) of the Income‑tax Act as their shares in the property were definite and determinable."
In compliance with the said order, the Income‑tax Officer issued the necessary notices but since the appellant could not be contacted, he by his order, dated the 30th June, 1983 filed the proceedings. For facility of reference, the said order of the Income‑tax Officer is reproduced below:
"30‑6‑1983
Notice server report is placed on file. Assessee is likely to be time‑barred. The proceedings are filed subject to action under section 65/156."
3. When this order came to, the notice of the learned Inspecting Assistant Commissioner of Income‑tax, he invoked the provisions of section 66‑A of the Income‑tax Ordinance, 1979, and consequently, by his combined order which is now impugned before us, vacated the order, dated the 30th June, 1983, passed by the Income‑tax Officer and directed him for making fresh assessments. The appellant is aggrieved of the said order and has accordingly filed the present appeals claiming the impugned order to be without any legal authority. Since all the appeals give rise to common questions, we have deemed it expedient to dispose of all the appeals jointly by this single order:
4. Supporting the appeals, Mr. G.A. Chatha, Advocate, the learned counsel for the appellant contended that, since the order, dated the 30th June, 1983, was passed in pursuance of the order of the Appellant Assistant Commissioner, the same could not be vacated under the provisions of section 66‑A of the Income‑tax Ordinance, 1979, as the order of the assessing Officer had merged into the appellate order. In this respect, he drew our attention to a decision. of the Appellate Tribunal reported at (1971) 23 tax (Trib. ) 27 He also filed an unattested copy of an unreported decision of their 'Lordships of the. Lahore High Court passed in T. R. No. 17 of 1971 .on the 29th May, 1975, wherein it was held that on an appeal, against the order of the Income tax Officer the same ceases to exist and merges itself into the appellate order passed by the Appellate Assistant Commissioner or the Tribunal as the case may be and these the Inspecting Assistant Commissioner has no jurisdiction under section 34‑A of the repealed Act to revise the order after it has already ceased to exist.
5. We are, however, humbly of the view that the facts of TR of 1971 are distinguishable. In the said case the assessment for the charge year 1965‑66, relating, to the accounting periods from 1‑4‑1964 to 30‑6‑1964 and from 1‑7‑1964 to 31‑3‑1965 was completed by two separate orders. On appeal, these orders were partly modified by the Appellate Assistant Commissioner on 2‑4‑1969. Later on, it come to the notice of the Inspecting Assistant Commissioner that the expenses allowed to the assessee out of profit and loss account under the head sales‑tax were excessive. Hence, by his order, dated 6‑6‑1979, passed order under section 34‑A ‑of the repealed Income‑tax Act, 1922, he directed the Income tax Officer to make addition or certain amount claimed as refundable sale tax. `the assessee appealed against the said order of the Inspecting Assistant Commissioner before the Appellate Tribunal which held the same to be infructuous for the reasons that the relevant record of assessments had already been examined and adjudicated upon by the Appellate . Assistant Commissioner and it tent amounted to be the orders made‑by him. On reference, the High Court field that Appellate Assistant Commissioner may sit in revision against the original order passed by the Income‑tax Officer but on appeal against the said order, it merges into the appellate order' and, therefore, the same could not be revised by him under the provision of section 34‑A ibid. Almost similar facts were involved in the case reported at (1971) 23 Tax (Trib.) 27.
6. In the instant case, after the original assessments were set aside by virtue of the order of the learned Appellate Assistant Commissioner, no adverse order or assessment existed against the appellant. In fact, the appellate order had brought back the position to the date when no assessment of appellant's income had been merit, in that respect, the learned Inspecting Assistant Commissioner had not touched the original assessments nor he had interfered in the appellate order, but had only exercised his discretion in respect of the order the Income‑tax Officer was required to make in pursuance of the order of the learned Appellate Assistant Commissioner but had failed to do so. Therefore, it cannot be said that the Inspecting Assistant Commissioner had purported to revise the original assessment order which had merged into the order of the learned Appellate Assistant Commissioner. Apparently, he had only taken cognizance of the fresh order made by the Income‑tax. Officer which was also subject to appeal under the relevant provisions of law. In the respect, we also draw support from Jeewanlal Limited v. C.I.T., Calcutta (1977) 106 ITR 33 wherein the Calcutta High Court had field that where the Appellate Assistant Commissioner on appeal had directed the Income tax Officer to verify the question of rebate on export sales and allow such relief and rebate as might be admissible in law, the order passed in pursuance thereof was not part of the order of the Appellate Assistant Commissioner, but was an independent order passed by the Income‑tax Officer and was subject to revision under section 263 of the Indian Income‑tax. Act,' 1961(which is on the lines of section. 66‑A of the Income‑tax Ordinance, (1979)
7. Under the provisions of section 66‑A of the Income‑tax Ordinance, 1979, which are identical .to section 34‑A of the repealed Income‑tax Act, 1922, the Inspecting Assistant Commissioner may call for and examine the record of any proceedings if he considers that any order passed therein by the Income‑tax Officer is erroneous in so far as it is prejudicial to the interest of revenue'. The word "any" is very exhaustive in its implication and covers all orders passed by the Income‑tax Officer. In I. T. As. Nos. 2616 and 2617 of 1977‑78, reported at 1980 P T D (Trib:) 19, the Appellate Tribunal had also held that as far as the powers of the Inspecting Assistant Commissioner to call for records of any case under section 34‑A were concerned these. were not confined only to cases where the order had been passed which was prejudicial to the interest of revenue alone. The powers of We Inspecting Assistant Commissioner under that section include the power to call for the records of any proceedings under the Act.
8. The learned counsel for the appellant next contended that in the present case the provisions of section 66‑A ibid could riot be invoked as under section 66(1) (c) of the Ordinance, the Income tax Officer was required to complete the assessment proceedings within a period of one year from the end of the financial year in which the order passed by the learned Inspecting Assistant Commissioner was received by the Income tax officer it may, however, be seen that the proceedings in the instant case have been initiated under the repealed Income‑tax Act, 1922, and accordingly tire original assessments which were made prior to coming in force of the Income‑tax Ordinance, 1979, were completed under the‑ relevant provisions of the repealed Act. Therefore, by virtue of section 166 in Income tax Ordinance, 1979, the re‑assessments proceedings were also to be completed ire accordance with the provisions of the repealed Act where under, by virtue of section 34(1‑A) in thereof tier, the assessment proceedings could be completed within a period of six years. Even otherwise the question regarding limitation does not arise the present case as admittedly the order, dated the 30th June, 1983, filing the proceedings was passed within the period of limitation.
9. As regards the merits of the order, dated the 30th June, 1983; are concerned, there could be no dispute that the same is riot only erroneous but also prejudicial to‑the interest of revenue. In pursuance or of the directions of the learned Appellate Assistant Commissioner, the Income‑tax officer was required to complete the re‑assessment proceedings after affording reasonable opportunity to the appellant to explain its point of view and assess the property income in the hands of the members of the A.O.P. separately. Evidently, the Assessing Officer did not adhere to these directions and hurriedly filed the proceedings lest these may become time‑barred. This findings was obviously neither a speaking order nor he had given his findings on the facts available with him In the circumstances, the learned Inspecting Assistant Commissioner was fully justified in invoking the provisions of section 66‑A of the Ordinance so that tax liability, if any may not be evaded.
10. It may also not out of place to point out that if such orders as were passed by the Income‑tax Officer in the instant case are not taken notice by the relevant superior income tax authorities, the Department will be left with no remedy to correct similar erroneous findings. In this Respect we also draw support from Messrs Amir Muhammad Khan v. Controller of Estate Duty. P L D 1961 SC 119 wherein the Supreme Court had laid down that:‑
"The provisions relating to imposition of tax are to be strictly construed in favour of the subject so that if there be any substantial doubt it has to be resolved in his favour. But the machinery sections are to be liberally construed. If the incidence of tax be clear the machinery sections should be so construed as to make the realization of the proper tax possible. They should not be so construed as to defeat the intention of the Legislature and to prevent the realization of the tax that is in fact due." '
11. In view of the above, we consider that the action taken by the learned Inspecting Assistant Commissioner was fully justified and is accordingly upheld.
12 In the result all the five appeals are hereby dismissed.
M. Y .H. Appeals dismissed.