Citation(s): 1995 SLD 157 = 1995 PTD 1159
Income Tax Appellate Tribunal
heard on: 24th October, 1994.
AUTHOR(S): SARFRAZ AHMAD, ACCOUNTANT MEMBER AND SARDAR MUHAMMAD
ANWAR AHMAD KHAN, JUDICIAL MEMBER
Asmar A. Sheikh for Appellant.
Ahmad Kamal, D.R. for Respondent.
Law: Income Tax Ordinance, 1979
Section: 63
The Income Tax Ordinance (XXXI of 1979), specifically Section 63, governs the procedure
for ex parte assessments in income tax matters. The key point in this case involves the ex
parte assessment being finalized on a date subsequent to the hearing date, for which the
assessee had no notice.
Legal Principle:
• Ex parte assessments are invalid if they are made on a date that was not the one fixed for
hearing and for which the taxpayer (assessee) had not received notice. In this case, the
notice was issued for the hearing on 21-1-1987, but the assessment was finalized on 24-1-
1987, a date that the taxpayer was not notified about. This rendered the assessment
untenable.
This case follows the principle laid down in 1981 PTD 210, which reinforces that ex parte
assessments must be conducted on the date notified to the taxpayer and should not be
finalized on an unnotified date.
ORDER
SARDAR MUHAMMAD ANWAR AHMAD KHAN (JUDICIAL MEMBER).---These four appeals for
the assessment years 1983-84 to 1986-87 assail two separate ORDER:s of learned AA.C.
Range-F, Lahore, dated 2-5-1987.
2. Brief facts giving rise to these appeals are that the assessee is a Private Limited
Company deriving income from supply of scientific instruments to different institutions,
colleges and hospitals. For the assessment year 1983-84 return was filed to declare the
sales at Rs.6,59,802 with G.P. rate of 28.35%. In view of defects detailed in the body of the
assessment ORDER: the I.T.O. rejected the declared version and estimated the sales at
Rs.7,50,000 and subjected them to a G.P. rate of 35%. Not satisfied with the treatment
meted out the appellant went in appeal. The A.A.C. set aside the ORDER: for de novas
decision on estimation of sales. In re-assessment for non-compliance of statutory notices ex
parte assessment was made and same income as before was repeated. For the assessment
year 1984-85 the assessee had declared a loss at Rs.64,783. However, for the assessment
years 1985-86 and 1986-87 no return was filed in spite of service of notices under section
56 and under section 61 of the Ordinance. The case was fixed a number of times but as the
assessee did not bother to attend the proceedings, the J.T.O. completed the ex parte
assessment under section 63 of the Ordinance and adopted the net income at Rs.1,00,000,
Rs.1,50,000, Rs.2,00,000 respectively for the years 1984-85, 1985-86 and 198687.
1
3. It was contended by the learned counsel for the assessee that the ex parte assessment
made for the assessment year 1983-84 is not legally sustainable in the eyes of law. It was
contended that according to the I.T.O. this case was fixed for hearing on 21-1-1987 on
which date no one on behalf of the assessee attended and ex pane proceedings were taken.
But surprisingly the I.T.O. has passed the ex parte ORDER: on 24-1-1987 for which date no
notice was given to the assessee. To support his contention learned counsel for the
assessee cited a decision of the Lahore High Court reported as 1981 PTD 210. For the
assessment years 1984-85 to 1986-87 it was contended that the I.T.O. had adopted the net
income without evolving any formula which is not legally correct. It was also argued that no
notice was properly served upon the assessee and the ex parte assessments were illegal.
The learned D.R. on the other hand, supported the ORDER:s of the officers below and
contended that ex parte assessments were rightly made.
4. We have considered the contentions and find force in the submissions made for the
assessee. For the assessment year 1983-84 notice of hearing was given for 21-1-1987
while the ex parte assessment was framed on 24-1-1987 which is not legally sustainable. In
the case reported as 1981 PTD 210 the question before the High Court was as under:---
"Whether on the facts and circumstances of the case the Appellate Tribunal was justified in
holding that the Income Tax Officer could resort to section 23(4) of the Income Tax Act only
on 2-12-1971 and not on any subsequent date on which no notice had been given to the
respondent?"
The Honourable High Court came to the conclusion that the ex parte action of the I.T.O. was
not justified as no notice was given to the assessee for subsequent date on which the
ORDER: was passed. The High Court held as under:---
."As stated above, in the present case, the conditions required under the law are not
satisfied. The Income Tax Officer has acted illegally in making ex parte assessment on a
date which was not fixed for hearing without furnishing the assessee with requisite notices.
We, therefore, are of the view that - the ex parte assessment made by him under section
23(4) of the Act on 15-12-1971 was bad in law as he could do so on 2-12-1971:'
5. The facts and circumstances of the present case before us are exactly similar. The date of
hearing was fixed for 21-1-1987 while the ex parte assessment was passed on 24-1-1987.
In these circumstances we set aside the assessment for the assessment year 1983-84 and
remand the case back to the I.T.O. with direction that the assessee should be provided a
reasonable opportunity of being heard before framing the assessment. Since we have set
aside the assessment for the assessment year 1983-84, the assessment for subsequent
years 1984-85 to 1986-87 are also set aside for de novo consideration, by the I.T.O. after
ascertaining the correct position.
6. As a result all the appeals are accepted to the extent indicated above.
Order accordingly.
