1. ' SALEEM AKHTAR, J.--The applicant submitted his return for the charge year 1965-66 (ending on 31- 12-1946) declaring a loss of Rs,36,702. The assessment was completed by the Income Tax Officer under section 23 (2) of the Income Tax Act and his total income was determined at Nil. Later the Income Tax Officer issued a notice under section 34 of the Act on 28-6-1974 stating that he has reasons to believe that the income for the assessment year ending 31-21964 has been "under assessed or assessed at too low a rate". On receipt of this notice the applicant filed his return of income and also submitted a letter of his Advocate dated 1-8-1984 praying that the re-assessment proceedings may be dropped. In the revised return applicant declared a loss of Rs,18,351 as against Rs,36,701 declared originally. The Income Tax Officer noted that an old existing debit entry of Rs,2,84,764.64 in the name of M/s. Maysum Trading Investment was during the previous year relevant to the assessm ent year under consideration which was converted into a capital of his investment. The applicant was called upon to explain it but being dissatisfied with his explanation he reframed assessm ent on 28-6-1975 at a total income of Rs,2,64,784. The applicant filed an appeal which was dismissed. He pursued the matter in second appeal before the Tribunal where there was a difference of opinion between the President of the Tribunal and the Accountant Member, and consequently the matter was referred to a third member of the Tribunal who by his order agreed with the Accountant Member and dismissed the appeal filed by the applicant. The applicant filed application under section 66 (1) of the Income Tax Act and the Tribunal has referred the Tollowing two questions:-
(1) Whether on the facts and in the circumstances of the case the Tribunal was right in holding that enunciation of proceedings under section 34 of the Income Tax Act was valid in law?
(2) If the answer to question No,1 (1) is in the affirmative whether on the facts and in the circumstances of the case the Tribunal was right in law and had material to hold that the sum of Rs,2,64,782 was unpaid investment liable to be charged to tax as the income of the assessee?
2. ' The first question relates to validity of notice under section 34 of the Act. The main ground of attack was that all the facts relating to the assessment and the entire record were placed before the Income Tax Officer at the time of original assessment and merely because the Income Tax Officer has changed his opinion this cannot be a ground for invoking section 34 of the Act. The entire dispute relates to the entry of Rs,2,64,782. When the applicant was required to explain this entry he submitted certain documents. The Tribunal has found that before the Income Tax Officer when first assessm ent was made the applicant had not submitted any explanation with regard to this credit entry. It was during the inquiry with regard to the admitted investment of Rs,1,50,000 in the construction of immovable property by the applicant that the Income Tax Officer observed that the applicant had omitted to declare material facts relating to the trading liability of Maysum Trading Investment at Rs,2,64,782/ having taken as an asset and credited in his personal account in 1965-66. Therefore, at the time when the first assessment was framed no inquiry was made nor any explanation for this credit entry was offered. It was accepted in a routine manner. While furnishing explanation in compliance with notice under section 34, in the letter dated 6-6-1968 reference was made to a letter dated 29-5-1968 where it was stated that the amount outstanding in the name of Maysum Trading Co. And Piece Goods Co. Is not new but it has been carried forward from the previous year and explanation for the first time had been furnished earlier. In letter dated 29-5-1968 it was explained that he came to Pakistan in 1948. The Company was formed in 1957 and about Rs,57,000 was invested. Maysum deposit was for the value of machinery which has been invested in Pakistan Cotton Yarn and Piece Goods Export Promotion Co., through the applicant's company. The Tribunal found that it was the duty of the assessee to have disclosed all the material facts pertaining to the said credit of Rs,2,74,782. These facts were primarily material and necessary for the purposes of proper assessm ent and their non-disclosure had material bearing on question of under assessm ent or escapement from assessment. It is to be noted that the applicant produced several documents before the Appellate Authority which had contradicted each other.
3. The applicant was alleging that machinery was imported and installed by Cotton Yarn and Piece Goods Export and Promotion Co., valued at Rs, 2,640 782 but no proof or the names of the consignors or consignees or the mode of payment for this machinery was produced. The Tribunal observed that the assessee had taken conflicting stand with regard to payment of price of imported machinery from Hong Kong. First he stated that it was paid by his cousin. Again alleged to have paid out of his own personal funds and lastly from his family funds. These different statements were not reconciled by the applicant nor supported by any cogent and valid evidence.
4. The Tribunal has, therefore, found that at no stage during the original assessment the facts relating to Rs,2,64,782 were explained and therefore, there arose no question of any difference of opinion.
5. From the finding of the Tribunal, it is clear that the department had reasonable ground for issuing notice under section 34 of the Act. It is pertinent to note that in the question as framed the finding of fact on this plea has not been challenged. Therefore, on the basis of unchallenged finding of fact by the Tribunal, the Income Tax Officer was justified in issuing notice under section 34 of the Act.
6. ' Mr. Sohail, the learned counsel for the respondent has invited our attention to section 63 (3) of the Income Tax Act which reads as follows:- "(3) The validity of any notice issued under sub-section (2) of section 22 or section 34 or the validity of service of any such notice shall not be called in question after the return in response to such notice has been filed."
7. This provision clearly provides that if an assessee complies with the notice under section 34, submits his revised return without any objection or without prejudice to his rights available to him to challenge the notice then he is debarred from challenging the notice at any subsequent stage. If any assessee wants to challenge the validity of a notice under section 34 then he has to do it immediately before filing the return. Once he has filed return without any objection or reserving his right to challenge the validity of the notice, he will be estopped from challenging it at any later stage. In the present case there is nothing on record to show that when notice under section 34 was issued the applicant had challenged its validity or legality before or at the time of filing the return. Therefore, at a later stage he is not entitled to challenge the validity of the notice under section 34. Our answer to question No,1 is in the affirmative.
8. ' Question No,2. As the answer to question No,1 is in the affirmative we now revert to question No,2.
9. This question has two parts. At the first instance it has been challenged whether there was any material to hold that sum of Rs,2,64,782 was an unexplained investment and the second part is whether this amount was liable to charge to tax as income of the applicant. So far the first part is concerned the facts relating to it has sufficiently been dealt while discussing question No,1. The applicant had offered several explanations to justify the credit entry in his account book which were found unsatisfactory and unbelievable. The applicant had failed to produce any cogent and valid evidence to show that the credit entry represented the capital investment made by him through his own funds from abroad. From the facts on record the credit entry has remained unexplained. In the circumstances the provision of section 4 (2-A) are attracted which reads as follows- (2-A) Where any sum is found credited in the books of an assessee maintained for any previous year and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year.
10. The law clearly provides that all the entries found in the assessee's account books for the previous year unless clearly explained and their nature and source are disclosed satisfactorily, the same will be treated as income and will be charged to tax. In this regard reference can be made to Mrs. Samina Shaukat Ayub Khan v. C I T Rawlpindi PLD 1981 SC 85 and Miss Asia v. Income Tax Appellate Tribunal PLD 1979 SC 949. In the present case as the source and nature of entries in the books of account have not been satisfactorily explained our answer to question No,2 is in the affirmative.