This petition under Article 9 of the Provisional Constitution Order, 1981, calls in question the notices dated 25-5-1983, issued by the respondent under section 65 of the Income-tax Ordinance (XXXI of 1979) (hereinafter referred to as the Ordinance), for the years 1980-81, 1981-82 and 1982-83, as without lawful authority and of no legal effect.
2. The petitioner is an assessee of Central Circle-I of the Income-tax Department, Government of Pakistan, Lahore. He filed his Income-tax Return for the year 1981-82, under Self-Assessment Scheme, and declared his income at Rs. 5.87,690 which was accepted. As per Column No. 6 of the Income-tax Return, sources from which the income was earned by him, reads thus.
Rs.
"(l) Salary received from Pakwest Industries Ltd.1,200
(2) Dividend from Rafhan Maize Products Company Ltd.41,265
(3) Share in estate of late father5,13,505
(4) Interest on F. D. R. & S. T. D.31,917 Total5,87,690 The petitioner also stated in the Return that the share of dividend from "estate of late father Mian Muhammad Shafi Monnoo related to the years 1972 to 1980."
3. On 25-5-1983, the respondent issued notices under section 65 of the Ordinance to the petitioner, stating that he had reason to believe that the income assessable for the years 1980-81, 1981-82 and 1982-83, had been under assessed and required the assessee to file Return of dividend income.
4. This petition was admitted to examine the vires of the impugned notices on a number of points raised in the petition. During pendency of the petition, with consent of the parties and without prejudice to their respec--tive stands, the Income-tax Officer re-examined the propriety of the impugned proceedings, after hearing the learned counsel for the petitioner and submitted his report, dated 5-10-1983, the relevant portion of which reads thus:- "Information received from I. A. C. (Faisalabad) revealed that the assessee's share in the accumulated dividends of his late father was 16 J. The total accumulated dividends of his deceased father with Messrs Rafhan Maize Products Ltd. Was Rs. 1,46,80,122 16 of share of the assessee from the total accumulated dividends comes to Rs. 23,48,819 while the assessee had declared dividends amounting to Rs. 17,92,080 relating to the period 1972 to 1980, it wad clear that the assessee had concealed dividend income of Rs. 5,56,697 from the said source.
Secondly, the assessee had claimed the following expenses against the dividend income :- Rs.
(1) ... 4,39,835 (2)... 8,38,740 Total12,78,575 Both these expenses are inadmissible under section 31 of Income-tax Ordinance. Thus the assessee had not only suppressed dividend receipts amounting to Rs. 5,56,697 but bad also claimed inadmissible expenses amounting to Rs. 12,78,575 in the year. Thus, the assessee had concealed income of Rs. 18,35,272. Consequently, notice under section 65 of the Ordinance for the assessm ent year 1981-82, was issued in order to reassess that income.
Further, as-certified by the company during the income years relevant to assessment years 1980- 81 to 1982-83, the assessee received dividends from Rafhan Maize Products Company Ltd. Shown at column-I below but he declared the receipts at amounts shown at column-II.
Asstt. YearDividends received Dividends declared Rs. Rs.
1980-814,30,110 1,06,110 1981-82 1,67,265(other than of inherited shares)41,265 1982-83 8,60,160 4,28,160 Thus the assessee had suppressed his receipts from dividends for the assessment years 1980-81 and 1982-83 as well for this reason notices under section 65 were issued for these two years also.
The Income-tax Officer has expressed the view that "the income sought to be reassessed is liable to tax under law and that the notices under section 65 have been validly issued."
5. Learned counsel for the petitioner submitted that the petitioner had neither made any suppression from the declared income nor there was any valid ground for reopening the assessm ent in the garb of under assessment. The precise submission was that in the assessment for 1981-82, the petitioner bad himself offered a sum of Rs. 5,78,734 for assessment while the gross dividend declared by Messrs Rafhan Maize Products Limited, during the period from 1-7-1980 to 30- 6-1981, was Rs. 83,630 with the result that the petitioner had been over assessed to the extent of Rs.
4,95,104 for 1981-82. It is further submitted that income offered for the said year was based upon net accretion to the petitioner upon devolution of inheritance from the estate of his father which had been reduced by the amount of interest payable and the estate duty leviable. The return was offered upon erroneous view of the statutory liability to pay tax. The declaration was far in excess of the income from the dividend which was legally liable to tax. Reference was also made to the provisions of section 16(2) of the Income-tax Act, 1922, to show that prior to 30-6-1979, the dividend were taxable on receipt and could not be taxed in band of the share-holder unless it was paid to him by the Company. When the Ordinance was promulgated, the basis of assessment was changed to year of "declaration" or "distribution" whichever is earlier. However, by virtue of Finance Ordinance, 1981, the basis was changed to year, of "declaration" alone.
6. Learned counsel for the petitioner next contended that the Impugned notices under section 65 of the Ordinance, were not valid, in that, it did not particularise the basis on which the respondent had formed the opinion that the petitioner was under assessed. Furthermore, proceedings can be initiated for additional assessm ent only if any income chargeable to tax under the Ordinance has escaped assessm ent whereas in the case in hand, the petitioner had been over assessed. It is further submitted that in the instant case, the Inspecting Assistant Commissioner accorded no prior approval for the initiation of impugned proceedings as required under subsection (2) of section 65 of the Ordinance, in that, as per Letter No. CCI/11, dated 4-7-1983 of the Income-tax Officer, the impugned proceedings were initiated as per order sheet entry dated 26-5-1983, whereas, the impugned notices were issued on 25-5-1983. It is also alleged that the respondent refused inspection of the order sheet on the basis of which the impugned proceedings -were initiated. The approval purported to be accorded by the Inspecting Assistant Commissioner is an afterthought.
7. The next submission is that the petitioner had gifted 3600 shares to his wife and children and the dividends received in respect thereof had already been assessed in hands of his wife and children from year to year. This being so, any additional assessment in pursuance of the impugned proceedings would tantamount to double taxation or over assessment.
8. It was finally contented that the respondent has already pre-judged the whole issue by expressing his firm view to report dated 5-10-1983, that income sought to be reassessed was liable to tax under law, and, therefore, any proceedings in pursuance of the impugned notices would be an idle ceremony. Learned counsel strongly relied upon Nagina Silk Mill, Lyallpur v. The Income-tax Officer, A-Ward, Lyallpur PLD 1975 SC 322, Salahuddin v. Frontier Sugar Mills and Distillery Ltd., Takht Bhai PLD 1975 SC 244, Messrs Sutlej Cotton Mills Ltd. v. The Commissioner of Income-tax, North Zone, West Pakistan, Lahore PLD 1965 SC 443, Muhammad Tufail v. Abdul Ghafoor PLD 1958 SC (Pak.) 201 and Sind Employees' Social Security Institution v. Dr. Mumtaz Ali Taj PLD 1975 SC 450 to contend that in case of absence or excess of jurisdiction or where the impugned order suffers from illegality on the face of the record, the appropriate writ may be granted without recourse to the alternate remedy.
9. Learned counsel for the respondent submitted that the impugned notices did not suffer from any legal infirmity, in that, the Income-tax Officer received definite information that the petitioner was under assessed but by way of abundant caution, prior approval of the Inspecting Assistant Commis--sioner had been obtained on 25-5-1983, while the impugned notices were served on the petitioner on 28-5-1983. It is next submitted at the view expressed in report dated 5-10-1983 of Mr. Mazhar Farooq Shirazi, Income--tax Officer was tentative in that, it is specifically stated in paragraph 7 thereof that "the law provides that the objections are raised, heard and decided during the proceedings which follow the filing of the return". Additionally, Mr. Munir Sheikb, who succeeded Mr. Mazhar Farooq Shirazi has given an undertaking in the Court that subsequent to the filing of return by the petitioner in pursuance of the impugned notices, he will hear and decide all objections of the petitioner afresh in accordance with law and facts on record and without prejudice to the tentative view expressed by his predecessor. Mr. Muhammad Ilyas Khan, learned counsel for the respondent made a statement at the Bar that the report submitted by Mr. Mazhar Farooq Shirazi, on the merits of the case be treated as "scrap" and that the respondent shall independently decide the matter on merits. Syed Niaz Ali Shah, learned Federal Counsel, also supported the learned counsel for the respondent on question of validity of the impugned notices.
9. It is not necessary to examine all the points urged by the learned counsel for the petitioner as the petition can be disposed of on a short legal ground. The real controversy which requires consideration is whether the impugned notices are ultra vires of the provisions of section 65 of the Ordi--nance which reads thus:- Additional assessm ent.-(1) If, in. Any year, for any reason,- (a)any income chargeable tounder this Ordinance has escaped assess. Ment; or
(b) the total income of an assessee has been under assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund under this Ordinance; or
(c) the total income of an assessee or the tax payable by him has been assessed or determined under subsection (1) of section 59 and no order of assessment has subsequently been made under this section or any other provision of this Ordinance, The Income-tax Officer may, at any time, subject to the provisions of subsections (2), (3) and (4), issue a notice to the assessee containing all or any of the requirements of a notice under section 56, and may proceed to assess or determine, by an order in writing, the total income of the assessee or the tax payable by him, as the case may be, and all the provisions of this Ordinance shall, so far as may be apply accordingly: Provided that the tax shall be charged at the rate or rates applicable to the assessment year for which the assessm ent is made.
(2) No proceedings under subsection (1) shall be initiated unless definite information has come into else possession of the Income-tax Officer or be has obtained the previous approval of the Inspecting Assistant Commissioner of Income-tax in writing to do so.
(3) Notice under subsection (1.) in respect of sexy income year, may be issued within ten years from the end of the assessm ent year in which the total income of the said income year was first assessable.
(3-A) Where a notice under subsection (1) has been issued, no order under the said subsection shall be made after the expiration of one year from the end of the financial year in which such notice was served.
(4) Nothing contained in subsection (2) shall apply to any such case or class of' cusses to which clause (c) of subsection (1) applies as may be specified by the Central Board of Revenue.
10. A bare perusal of section 65 of the Ordinance would show that definite information in possession of the Income-tax Officer or previous approval of the Inspecting Assistant Commissioner in writing is a condition precedent for vesting jurisdiction in the Income-tax Officer to initiate proceedings for additional assessment if in any year for any reason, any income chargeable to tax under this Ordinance has escaped assessment; or the total income of a assessee ha- been under assessed, or assessed at too low a rate, or has bee the subject an excessive relief or refund under this Ordinance; or the total income of an assessee or the tax payable by him has been assessed of determined under subsection (1) of section 59 and no order or assessm ent has subsequently been made under this section or any other provision of this Ordinance. It as not the legal requirement that notice should itself specify that all the conditions specified under section 65 for initiating the proceedings, have been fulfilled. The requirements are fully met if the notice indicate that the I. T. O. Has reason to believe that the assessee's assessable income is hit by any of the conditions laid down in clause (a), (b) or (c) of subsection (1) of section
65. Record of the Income-tax Officer, however, must show that definite information has come into his possession or he leas obtained previous approval of the Inspecting Assisitant Commissioner of Income-tax in writing before initiating the proceeding under this section. This section does not deal with proof. It merely deals with definiteness of information or prior approval of the Inspecting Assistant Commissioner.
11. There is no cavil with the proposition that where the question of jurisdiction of the authority passing the impugned order is raised, the remedy of appeal is not an adequate remedy and in such cases the constitution jurisdiction can be invoked. The exercise of jurisdiction is, however, confine only to consideration whether the authority had acted with or without jurisdiction. The precedents cited at the Bar by the learned counsel for the petitioner, on closer examination, have been found to be not applicable to the facts of the present case. The scope of interference in this case, under Article 9 of the Provisional Constitution Order is, therefore, limited. To the inquiry, whether the Income-tax Officer had definite information on the basis of material on record or he had already obtained previous approval of the Inspecting Assistant Commissioner. If the answer is in the affirmative, this Court will stay its hand and will not substitute its belief for that of the Income- tax Officer. If the answer is the negative, an appropriate writ may be granted. This view finds support from Messrs Paramount Electric Company, Lahore v. The Commissioner of Income-tax Lahore Zone PLD 1976 Lah. 1147. In the precedent case, the learned Judges of the Division Bench, after exhaustive examination of the case-law on the subject dealt with the scope of section 34, which is corresponding to the provisions of section 65 of the Ordinance. The relevant observations read thus:- ---We are of the considered opinion that it is not at all necessary that the notice issued under section 34 of the Act must indicate on the face of it either that it was issued on the basis of definite information that had come into the possession of the Income-tax Officer or that prior approval of the Inspecting Assistant Commissioner of Income-tax had been obtained in writing, or for the matter of that the precise reasons which led the Income-tax Officer in impelling him to issue the notice. Indeed, in terms of subsection (1) of section 34 it is sufficient if the notice addressed to the assessee merely indicates that the Income-tax Officer hag reason to believe" that his assessable income (a) has escaped assessm ent, (b) been under-assessed, (c) been assessed at too low a rate, (d) been subject to excessive relief. This belief in the Income-two Officer may be due to the reason that he has definite information to that effect. But in case this belief in the Income-tax Officer is not based on an information which is not definite then he cannot initiate the proceedings under the section against the assessee without the prior approval of the Inspecting Assistant Commissioner obtained in writing. In law it is not necessary that the notice should itself specify that all these requirements initiating the proceedings under this section have been fulfilled. But at the same time it is a condition precedent and of the essence of jurisdiction that from the record of the Income-tax Officer it must appear either that he had definite information in his possession or that he had already obtained the prior approval of the Inspecting Assistant Commissioner before initiating the proceedings under this section. In case one or the other requirement is not to be found in the record of the Income-tax Officer, he has no jurisdiction whatever to even initiate these proceedings."
Same view is reflected in Begum Nusrat Bhutto v. Income-tax Officer. Circle V, Rawalpindi PLD 1980 Lah. 449. Also refer Escorts Limited v. Income-tax Officer, Lahore PLD 1975 Lah. 443, wherein it was held that, "the Income-tax Officer is not required to disclose information in the notice and the factum that he has obtained any approval from superiors. All official acts are presumed to have been done in accordance with law unless the contrary is proved. Section 114 of the Evidence Act is referred".
12. In the instant case, the Income-tax Officer was in possession of a definite information on the basis of material on record that the assessee had not only suppressed receipts but also claimed inadmissible expenses. This information may ultimately be proved or not proved but it does not suffer from want of definiteness. The income-tax Officer also obtained approval of the Inspecting Assistant Commissioner on 25-5-1983 before serving the impugned notices. This was a sufficient compliance of the mandatory provisions of section 65 of the Ordinance.
13. The record shows that the impugned proceedings were initiated by the Income-tax Officer on 25-5-1983. Due to clerical error the date was shown as 26-5-1983 but later it was corrected. The mere fact that the date was not corrected on the copy supplied to the petitioner would not affect validity of the impugned proceedings. The allegation that prior approval obtained by the Income- tax Officer from the Inspecting Assistant Commis--sioner was an after thought, is not established on record. It is not even alleged that the Inspecting Assistant Commissioner or the Income-tax Officer bore any personal grudge against the petitioner. It well settled that there is to start with, a presumption of regularity with regard to all official acts and until that presumption is rebutted, the action cannot be challenged upon mere vague allegations of mala fide. Refer: Federation of Pakistan v. Saeed Ahmed Khan PLD 1974 SC 151. The petitioner has failed to rebut the presumption of regularity attached to the impugned proceedings.
14. It is not appropriate to express any opinion on other questions as that would tantamount to making an encroachment upon the powers exclu--sively reserved for the Income-tax Officer under section 65 of the Ordinance. The petitioner can raise all these objections before the Income-tax officer, after filing his Return. I have no doubt in my mind that he will indepen--dently deal with this matter, just, fairly, without prejudice to the observations made by his predecessor and in accordance with law.
For the foregoing reasons, the writ petition is dismissed, but there shall be no order as to costs.