1. Z. C. VALIANI, J.-Applicants above-named, being aggrieved by order---dated 6-6-1972 of Appellate Tribunal passed in Appeal No. AC-KO 08-1-B--70-71, in respect of assessment year 1967- 68, by which applicant's said appeal was dismissed, has filed the above reference under section 66(1) of the Income-tax Act 1922, in respect of following legal questions, which arise out of said impugned order, namely:-
(1) Whether in the facts and circumstances of the case the Tribunal is right in holding that sufficient opportunity was given to the assessed to explain the credit entries in the names of (1) Mrs. Amina Bai and (2) Mrs. Khatoon Bai and their lending capacity?
(2) Whether in the facts and circumstances of the-case the Tribunal is right in holding that signing of the order-sheet, dated 9-2-1971 by Accountant Habib amounted to furnishing opportunity to the assessed to explain the nature and source of the credit entries in the names of Mrs. Amina Bai and Mrs. Khatoon Bai?
(3) Whether in the facts and circumstances of the case the Tribunal is right in confirming the action of the Income-tax Officer in treating the credit entries in the names of Mrs. Amina Bai and Mrs. Kbatoon Bai as income under section 4 (2-A) of the Income-tax Act without serving specified notice under section 23(3) of the Income-tax Act on the principal officer of the assessed- company?
2. The learned counsel appearing for the applicants in support of the above reference submitted as under :- Admittedly no notice as required under section 23(3) of Income-tax Act, 1922 was given to the applicants and/or their authorised represen--tative, as provided by sections 61 and 63 of the Income-tax Act, 1922 and as such no opportunity was given to applicants to explain credit entries in the names of Mrs. Amina Bai and Mrs. Khatoon and their lending capacity, as mere obtaining of signatures of Accountant Habib, by I: T. O. On order-sheet, dated 9-2- 1 971 did not amount to notice as required by section 23(3) of Income-tax Act, 1922 specially as said Accountant was not authorised representative of applicants, as required by section 61 of the Income-tax Act, 1922. In support of this contention the learned counsel relied upon case reported in PLD 1959 SC 202 and submitted that credit entries could not ha a been treated as Income of the applicant under section 4(2-A) of the Income--tax Act, 1922.
3. The learned Advocate appearing for the respondent on the other hand submitted, that applicants' accountant Habib appeared in response to notice under section 23(1) of the income-tax Act, 1922 and as such taking of his signature on order-sheet, dated 9-2-1971 amounted to notice under sec- -tion 23(3) of the Income-tax Act, 1922. In addition to this, the learned counsel submitted, that I.-T.
4. O. Also sent notice, dated 12-5-1971, as follow up of order-sheet dated 9-2-1971, on the Principal Officer of the applicants, but the said notice was not at all replied by applicants nor facts mentioned in the said notice were denied by applicants, even at the time of filing of above reference and consequently impugned order of the Appellate Tribunal is legal and borne out by facts on record of assessee's case.
5. We have carefully considered the above submissions made by learned Advocates before us and have gone through the impugned order as well as order of I. T. O. And other papers and documents produced in the above reference. We have also carefully gone through the case cited by the learned Advocate for applicants.
6. In order to appreciate the legal questions raised in the above reference, it is necessary to consider the provisions of section 23 of Income-tax Act, 1922 which reads as under:- "23.--(1) If the Income-tax Officer (is satisfied without requiring the presence of the assessee or the production by him of any evidence) that a return made under section 22 is correct and complete he shall assess the total income of the assessed, and shall determine the sum payable by him on the basis of such return.
(2) If the Income-tax Officer (is not satisfied without requiring the presence of the person who made the return or the production of evidence that a return made under section 22 is correct and complete, he shall serve on such person) a notice requiring him, on a date to be therein specified, either to attend at the Income-tax Officer's office or to produce, or to cause to be there produced, any evidence on which such person may rely to support of the return.
(3) On the day specified in the notice issued under subsection (2), or as soon afterwards as may be, the Income-tax Officer, after hearing such evidence as such person may produce and such other evidence as the Income-tax Officer may require, on specified points, shall by an order in writing, assess the total income of the assessee and determine the sum payable by him on the basis of such assessm ent.
(4) (If any person fails to make the return required by any notice given under subsection (2) of section 22 and has not made a return or a revised return under subsection (3) of the same section), or fails to comply with all the terms of a notice issued under subsection (4) (or subsection 4-A) of the same section or, having made a return fails to comply with all the terms of notice issued under subsection (2) of this -section), the Income-tax Officer shall make the assessment to the best judgment (and determine the sum payable by the assessee on the basis of such assessm ent) (and) (in the case of a firm, may refuse or may cancel its registration if it is already registered). (Provided that the registration of a firm shall not be cancelled until fourteen days have elapsed from the issue of a notice by the Income-tax ;Officer to the firm intimating his intention to cancel (its registration).
(5) Notwithstanding anything contained in the foregoing subsections, when the assessee as a firm and the total income of the firm has been assessed under subsection (1), subsection (3) or subsection (4) as the case may be, -
(a) in the case of a registered firm (super tax but not income-tax) pay--able by the firm itself shall be determined and the total income of each partner of the firm, including therein his share of its income, profits and gains of the previous year shall be assessed and the sum payable by him on the basis of such assessm ent shall (also) be determined Provided that if such share of any partner is a loss it shall be set off against his other income or carried forward and set off in accordance with the provisions of section 24 ; Provided further that when any of such partners is a person not resident in (Pakistan) his share of the income, profits and, gains of the firm shall be assessed on the firm at the rates which would be applicable if it were assessed on him personally, and the sum so determined as payable shall be paid by firm ; b) In the case of an unregistered firm, the Income-to m Officer--- proceed in the manner laid down in clause (a) as applicable to a registered firm, if, in has opinion, the aggregate amount of the tax, including super tax, if any, payable . . . Under such procedure would be greater than the aggregate amount which would be payable by the firm and the partners individually if the firm were assessed as an unregistered firm.)
(6) Whenever the Income-tax Officer makes a determination in accor--dance with the provisions of subsection (5) he shall notify to the firm by an order in writing (the amount of super tax payable by it, if any, and) the amount of the total income on which the determination has been based and the apportionment thereof between the several partners.)
7. It may be noted from section 23(2), that notice in writing is specially mentioned in the said section, whereas in section 23(3) there is no such specific mention of notice in writing to be given and consequently information required to be furnished, as mentioned in order-sheet dated 9-2-1971 would be sufficient compliance of the provisions of section 23(3), in our opinion. The contention of the learned Advocate for the applicants, that Mr. Habib the accountant of the applicants, who signed order-sheet dated 9-2-1971, was not duly authorised, representative in writing of applicants, required by section 61 of the Income-tax Act, 1922, in our opinion, has no force at all, in view of the facts, that in follow up reminder dated 15-5-1971 which was issued to Principal Officer of the applicants, it has been clearly mentioned, that authorised representative of the applicants (l. e. Mr. Habib) was duly called upon to furnish certain detains in respect of the assessment year in question, but he has failed to do so and as such said letter was issued A as follow up of order-sheet dated 9-2-1971. Receipt of this letter is not denied by applicants. It is admitted position, that no reply was sent to this letter at all. Further, in the facts of the case, as given by applicants, in above reference, nowhere it is specifically denied, that Mr. Habib was not duly authorised representative of applicants as contemplated by section 61 of Income-tax Act, 1922. In the face of such facts on record, we find no force at all in the contention of the learned Advocate for applicants, that Mr. Habib was not duly authorised representative of applicant and as such signing of order-shat dated 9-2-1971 was not binding on the applicants and did no amount to notice for furnishing explanation sought for. In any case, dated 15-5-1971, which was issued as follow up of order-sheet dated 9-2-1971, to the Principal Officer of the applicants, would be sufficient notice under section 23(3) of income-tax Act, 1922, even if such notice was required, argued by the learned counsel for applicant, as I.-T. O. Did not prod to assess ex pane till 27-5-1971.
8. The case relied upon by learned counsel for applicants reported PLD 1959 SC 202, is not at all applicable to the facts of the present case as the said case deals with non-service of notice under section 23(2) of Income tax Act, which is specifically provided by said section and does not deal with the provisions of section 23(3) of Income-tax Act 1922, which in our opinion, tides not contemplate specific notice in writing like one under section 23(2) of the Income-tax Act, 1922.
9. In view of above conclusions, we answer all the three questions in affirmative.