' MIAN MASOOD AHMAD (ACCOUNTANT MEMBER).---The titled appeals arise out of a combined appellate order dated 25-8-2010 whereby appellant's first appeals against assessment orders, and consequential penalty, orders, for the assessment years 1993-1994 to 1997-1998 were refused. The appellant is mainly aggrieved of initiation of proceedings by the taxation officer without lawful jurisdiction. It is reflected in the following grounds of appeal which are common for all the years.
2. The grounds pertaining to assessm ent year 1993-1994 are reproduced below for convenience of reference:- .
(1) _ That the orders passed by the lower authorities are bad in law and are also contrary to the facts and circumstances of the case.
(2) That the proceedings under sections 59/65 of the Repealed Income Tax Ordinance have been initiated without any lawful jurisdiction in absence of any definite information. Thus, the order passed under sections 59/65 of the Income Tax Ordinance is liable to be struck down.
(3) That issuance of notice under sections 59/65 of the Ordinance for want of any legal authority is not sustainable as the law does not authorize to reopen the case on conjectures, surmises and on vague and fanciful assumptions as well as in order to hold fishing inquiry.
(4) That the learned CIR(A) was not at all justified to maintain the proceedings initiated under sections 59/65 of the Repealed Income Tax Ordinance, 1979 being ab initio void, illegal on account of whims ical inference drawn from the statement of the appellant.
(5) That the learned Assessing Officer has acted in flagrant violation of law in reopening the already completed assessm ent and confirmation thereof by the learned CIR(A) was unwarranted as the Assessing Officer has categorically concluded in the body of the order passed under sections 59/65 of the Repealed Ordinance. "Hence, no adverse inference is drawn as far as the source of deposit is concern and no action being taken under section 13 of the Income Tax Ordinance, 1979."
(6) That as the notice under sections 59/65 of the ordinance has been properly ticked, thus, the proceedings initiated .Hereunder are not lawful.
(7) That not an iota of evidence whatsoever has been brought on record by the Assessing Officer which could justify that the appellant was engaged in the business of selling golden ornaments and estimation of concealed sales on this account was uncalled for.
(8) That estimation of concealed sales was without any rhyme and reason because the appellant is only Zargar and earns repair receipts.
(9) That the appellant craves permission to add/alter/modify any grounds of appeal at the time of final hearing of appeal.
3. Facts of the case, as summarized in the impugned order, are:-- ' Original assessm ent for assessm ent year 1993-1994 was made under section 62 of repealed Income Tax Ordinance, 1979 and for assessment years 1994-1995 to 1997-1998 under section 59(1) at the following income:- 1993-94 Rs.40,000 1993-95 Rs.42,500 1993-96 Rs.56,000 1993-97 Rs.58,900 1993-98 Rs.65,000 ' Nature of business for all the years was declared as "repair receipts from Zargar:-- ' During the course of wealth tax proceedings it transpired that assessee was maintaining a bank account No, PLS 3152 at Habib Bank Limited, Nowshera Virkan. Bank Statement was obtained as scrutinized which reflected huge deposits and withdrawals. Quantum of these transactions did not match with the declared receipts/income assessed for assessment years 1993-94 to 1997-98. The case reopened under section 65 of the repealed ordinance with the approval of IAC Range-I Guiranwala. When confronted the assessee replied that he was known as honest Zargar in the area and he enjoyed a good reputation. People of the area gave him advance amount for preparing gold ornaments which was deposited by him in the bank. The assessing produced two such persons whose statements were recorded on oath by the Assessing Officer under section 148 of the repealed Ordinance. They confirmed the assessee's contention that they advanced the amount from purchase of ornaments. This reflected that assessee was also engaged in the business of sale of gold ornaments and income under this head had been concealed and not offered for taxation.
The bank deposits were treated as sale of the assessee and assessments were completed under sections 62/65.
4. It is the second round of proceedings. Earlier rejection of appellant's appeals by the learned first appellate authority was not approved by a Division Bench of this Tribunal vide order dated 22-10- 2009 in I.T.As. Nos.5011 to 5015/LB/2005 and I.T.As. Nos.5847 to 5851/LB of 2005. The Division Bench remanded the case to the learned first appellate authority to look into appellant's contentions and to pass a comprehensive order.
5. The learned counsel, tendering appearance for the appellant, vehemently argues that a fundamental legal question germane to the jurisdiction is that the proceedings initiated by the Assessing Officer under section 65 of the Income Tax Ordinance, 1979 (the repealed Ordinance) are based on conjectures, surmises and whims. He contends that the Assessing Officer has acted in flagrant violation of law to reopen the already completed assessment. He submits, to substantiate his contention, that although the assessments wore reopened on the basis of maintenance of bank accounts, yet, at the end of the day the Assessing Officer could not draw an adverse inference regarding bank deposits, etc. He stresses that having failed to draw an adverse inference, the A Assessing Officer resorted to estimation of sales. He draws my attention to the following lines appearing in couple of assessm ent orders:-- ' Hence no adverse inference is drawn as for as the source of deposit is concerned and no action being taken under section 13 of the Income Tax Ordinance, 1979.
6. He stresses that in the absence of any adverse inference to the grounds of reopening, the Assessing Officer should have dropped the proceedings instead of continuing with the same.
7. Another contention is that the notices under section 65 of the repealed Ordinance had not been lawfully issued, since the relevant clause of the notices was not ticked which was the statutory requirement, According to the learned counsel non-observing of a statutory requirement renders the subsequent proceedings to the unlawful. Reference in this regard is made to the cases reported as 1997 PTD 47, 1997 PTD (Trib.) 1994 and 2000 PTD (Trib.) 2531.
8. Adopting another line of argument, the learned counsel argues that no notice under said section 65 could be Issued on the basis of information which was supplied by the assessee himself. He suggests that influx of new information is mandatory in terms of section 65(2) of the repealed Ordinance. A number of reported judgments are cited to support the contention.
9. The learned DR, however, supports the assessment orders as well as the impugned order for the reasons recorded therein.
10. Heaving heard the rival arguments and having perused the impugned orders, I intend to agree with the learned counsel for the appellant. I would readily agree that after being satisfied with the genuineness of deposits in accounts, the Assessing Officer had no jurisdiction to proceed further under said section 65. It is particularly important to note that no action under section 13 appears to have been taken with reference to deposits except in one year which is again on altogether different grounds. This being so, the issuance of notices and culmination of proceedings initiated thereunder is held to be void, ab initio and illegal. This being so, any and all subsequent proceedings are without jurisdiction liable to be quashment. Suffice it would be to refer in this regard to case-law cited as 2011 PTD 2435, 2002 PTD (Trib.) 1337, 2009 PTD (Trib.) 1919, 2001 SCM R 838, 2001 PTD 480 (SC), 1997 PTD 47 (H.C. Lah.), 2004 PTD (Trib.) 1052 and 2000 PTD (Trib . ) 531.
11. The learned counsel is also correct in pointing out that the Assessing Officer was bound to let the assesses know as to precise basis warranting reopening of his already completed assessment by ticking appropriate clause and striking off the remaining clauses. In the absence of any such exercise the courts have always drawn inference that the Assessing Officer was himself or herself not sure as to the basis of reopening. An irrefutable inference in such like situations is that the information being utilized by the Assessing Officer did not fulfill the conditions of being definite information. In my considered opinion this defect alone is sufficient to declare whole the proceedings as void ab initio. In support thereof reference is invited to the case-law reported as 2011 PTD 2435, 2002 PTD (Trib.) 1337 and 2009 PTD (Trib.) 1963.
12. Result of above discussion is obvious. Notice under section 65 of the repealed Ordinance is held as having been issued without lawful jurisdiction for lack of definite information. Thus all the subsequent proceedings and the whole series of the orders passed on the basis of such notice are not allowed to hold the field. Accordingly, I feel no question in vacating all the orders passed by the lower authorities for the years under consideration as having been passed without lawful authority.
12. Since I have declared the proceedings initiated under section 65 of the repealed Ordinance and passing of order there under to be without lawful authority, therefore, the imposition of penalty is to crumble down. All the ten appeals succeed.