' MUHAMMAD FARRUKH IRFAN KHAN, J.---In this Tax ,Reference under section -133(1) of the Income Tax Ordinance, 2001 against the order dated 22-11-2007 passed by Income Tax Appellate Tribunal, Lahore (hereinafter referred to as "ITAT"), the following questions have arisen for adjudication by this Court:--
(1) "Whether on the facts and in the circumstances of the case the learned ITAT was justified to dismiss departmental appeal on the basis of non-ticking of clause of notice under section 65 of the repealed Income Tax Ordinance, 1979 whereas the honourable Supreme Court vide judgment C.P. No,702-L of 2003 held that non-mentioning of sub-clause does not vitiate the whole proceedings?"
"Whether on the facts and in the circumstances of the case the learned ITAT was justified to uphold the order of CIT(A) whereby deleting the addition made under section 13(1)(c) of the Repealed Ordinance, 1979 for not ticking the sub-clause of section 65 of the Repealed Ordinance, 1979, whereas the Apex Court has held in the number of cases that a technical error of flaw should not vitiate the proceedings if the substantial compliance is made as held by the Apex Court in its recent judgments reported in C.As. Nos.991 and 992 of 2002 CIT v. Mr. Abdul Ghani and C.P. No,702 of 2003 Collector of Sales Tax and CE v. Messrs Zamindara Paper and Board Mills?"
2. Brief background of this Reference is that the assessee an individual derives income by running a bicycle shop. Original assessm ent was finalized under section 59 of the Repealed Income Tax Ordinance, 1979 (hereinafter called as "Repealed Ordinance") whereby the return filed under Self- Assessm ent Scheme (SAS) was deemed to be the final assessment. At a later stage it was found by the Assessing Officer that there was some discrepancy in the return filed by the assessee whereby proceedings under section 65 of the Repealed Ordinance were initiated. The Assessing Officer after obtaining the prior approval from the Assistant Commissioner (Audit) and having fulfilled the mandatory statutory requirements re-opened the finalized assessment and an additional demand was raised in connection therewith where after amended assessment was issued. On an appeal, the learned Commissioner of Income Tax (Appeals), Multan, disallowed the further assessm ent done under section 65 of the Repealed Ordinance on the ground that the Assessing Officer did not tick the relevant clause of notice under section 65 of the Repealed Ordinance. The department preferred an appeal against this order before the ITAT who, after ' ocean with no communication to the mainland. In the absence of such disclosure by the Assessing Officer it would not be possible for the assessee to provide his response and provide the relevant information. The proceedings under section 65 of the repealed Income Tax Ordinance, 1979 being of a substantive character and penal in nature therefore there is an inherent requirement to serve the notice issued in pursuance thereof strictly in accordance with the letter and spirit of the law and the specific legal position be placed before him. The case-law relied upon by the learned counsel for the respondent is directly applicable to the present case wherein it has been held that the relevant clause being not ticked is not sustainable in the eye of law.
8. The case-law relied upon by the learned counsel for the appellant is not attracted to the present case as from the paragraph of the honorable Apex Court's judgment, referred to at page 2 of the Reference, it is apparent that the case in C.P. No,702-L of 2003 was reported as 2007 PTD 1804 wherein it was observed by their lordships on page 1806 that:- "In our considered opinion the substantial compliance has been made by making reference of the rules to identify the period of time during which tax has been allegedly evaded. Therefore, merely for the reason that sub-rules (2) and (3) of Rule 10 of the Central Excise Rules, 1944 have not been mentioned, it would have not been proper to declare the notice illegal. In this view of the matter, the judgment of the High Court is not sustainable. It is to be noted that instead of taking into consideration technicalities, the Court looks into the matter with different angels namely as to whether substantial compliance has been made or if any of the sub-rule has been omitted then what prejudice is likely to cause to the party to whom the show-cause notice is given. But in the instant case, we are of the opinion that no prejudice shall be caused to the respondents because the substantial compliance of the relevant rules has been made. Therefore, under the circumstances, the judgment which has been relied upon by the learned counsel is of no help to him."
' As such, it was a case where in the opinion of the honourable Judges of the Apex Court substantial compliance was made by virtue of making a reference to the rules to identify the period of time during which tax was alleged to have been evaded and mere omission of mentioning of the relevant rule in the body of the notice was considered to be of non-substantial character and thus a mere technicality. Besides, the said observation an instruction is also contained for the Courts in the dictum laid down in the case supra, i,e, to look into each matter through "different angles", in particular, as to whether "substantial compliance" has been made and as to quantum of "prejudice" likely to be caused to the party. Taking Instructions from the said guideline in the case before us, in our humble opinion, the provisions of section 65 ibid are substantial in nature and being penal provisions which will have a direct pecuniary affect on the parties, as such, in the absence of any one specific reason for re-opening of the case for assessment, notice under C section 65 of Repealed Ordinance would cause a serious prejudice to the assessee and be an exercise in futility and a nullity in the eye of law.
9. We have also considered the requirements laid down in subsection (2) of section 65 ibid which require that no proceedings under subsection (1) are to be initiated without definite information coming into the possession of the Deputy Commissioner and without having previous approval of the Inspecting Additional Commissioner of Income Tax in writing to do so. It is, therefore, essential that the proceedings in subsection (1) are to be initiated on some definite information with prior approval of the Additional Commissioner. This does not appear to be the case, otherwise, the notice would have been properly issued with specific allegation against the respondent, as such non-ticking of the relevant clause also gives the inference of non-compliance of the requirements of subsection (2) of section 65 ibid.
10. In view of the above discussion, this Tax Reference is disposed of by answering question No,1 in the affirmative. So far as the question No,2 is concerned the same is not arising out of the order passed by the learned ITAT, hence the same is left unanswered.