1. ' SALEEM AKHTAR, J.--The petitioner is a partnership firm engaged in exhibition of films in cinema house known as Nishat Talkies. The petitioner realized a sum of Rs,386,345 by way of Entertainment Duty in the assessm ent year 1975-76. In the return of total income this amount was mentioned as 'income claimed to be exempt'. The respondent No,1 considered the said amount liable to tax. An appeal filed before Appellate Assistant Commissioner of Income Tax was dismissed and finally the petitioner preferred a second appeal. The respondent No,3 while deciding the appeal did not deal with the question of taxability of the Entertainment Duty which had been included in the income of the petitioner. The petitioner therefore filed Misc. Application before the respondent No,3 under section 35 of the Income Tax Act in which it was submitted that during hearing the addition of Entertainment Duty in the income was assailed but no decision has been given on that point. The Tribunal found'the submission to be correct and proceeded to hear the case on this limited point.
2. By an order dated 30-3-1980 the appeal was allowed on this issue and tax was not levied on the said amount. In the year 1976-77 the petitioner claimed exemption in respect of Rs,4,34,381 realised by it as Entertainment Duty. Following its earlier decision the respondent No,3 did not treat the amount of Extertainment Duty as trading receipt. The Department accepted both the decisions of the Tribunal as it did not file any application for reference to the High Court. In the year 1977-78 the petitioner realised Rs,327,574 as Entertainment Duty. By now the Entertainment Duty for three years had swelled to Rs,1,148,309. As it was treated as trading receipt on appeal filed by the petitioner the same question came up for consideration before the respondent No,3 who took a contrary view and held that sum of Rs,327,574 received in the year 1977-78 was taxable. The petitioner has challenged this order of the Tribunal in Income Tax Reference No,131/87 which has been decided by this Court in its favour. In 1986 when the respondent No,1 was considering the enforcement of the order in respect of the year 1977-78 he issued a notice dated 20-9-1986 to show cause why in view of the order of the Tribunal the Entertainment Duty realised and retained by the petitioners during the years 1975-76 and 1976-77 should not be treated as trading receipts. He further threatened that if no reply was sent action shall be taken under section 65 of the Income Tax Ordinance. The petitioner replied the notice challenging the jurisdiction of respondent No,1 who then issued notices under section 65 of the Income Tax Act in respect of the aforcstated years. The petitioner filed Misc.
3. Application before the respondent No,3 seeking protection as in respect of the same subject matter it had given its finding which was final and could not be reopened by the Income Tax Officer the respondent No,1. This application was dismissed holding that the respondent No,1 has jurisdiction to initiate action under section'
65. The petitioner then challenged the action of the respondent No,1 in this petition. After it was admitted, on application filed by the respondent No,1, he was allowed to proceed with the matter and pass assessment order as the same would have been time-barred on 30-6-1988. The respondent No,1 completed the assessment. The petitioner has challenged all the orders which were passed on the basis of the impugned notices.
4. ' In the counter-affidavit it has been stated that for assessment year 197778 the petitioner in his return disclosed an income of Rs,1,148,309 as Entertainment Duty payable to the Provincial Government. The respondent No,1 treated this amount as trading receipts of the petitioners and added to their profit. In appeal before the Tribunal this treatment was maintained but the amount in respect of previous years was not included. However it was observed that the circumstances in the year 1975-76 and 1976-77 were different inasmuch as the petitioners had not distributed the amount retained by them amongst the partners of the petitioners. It seems that during assessm ent year 1977-78 the-petitioner had distributed the entire amount of Entertainment Duty amongst its partners. This fact seems to have impressed the respondent Na.3 to maintain the assessm ent order passed by the respondent No,1. It has been pleaded that in the earlier assessm ent years the amount received as Entertainment Duty was not distributed amongst the partners but in the assessm ent year 1977-78 it was distributed amongst them and utilized for their own benefit. The earlier Bench had no occasion to consider all the relevant facts and circumstances under which the aforesaid receipts were allegedly realized by the petitioner. It was further maintained that action taken by the respondent No,1 is proper and valid.
5. ' Mr. Sirajul Haque, the learned counsel for the petitioner has contended that once an order becomes final under section 135 of the Income Tax Ordinance the Income Tax Officer has no jurisdiction to issue a notice under section 65 of the Ordinance. It has further been contended that notices were issued without jurisdiction and were barred by time. In support of his contention the learned counsel has relied on Dr. Shroff v. Income Tax Officer and 2 others 1988 PTD 147, Income Tax Officer, Central Circle II, Karachi and another v. Cement Agencies Limited 1969 PTD 611, Commissioner of Income Tax, Delhi and Rajasthan v. Rao Thakur Narayan Singh (1965) 56 I.T.R.
234. From all these judgments the rule which emerges is that where a Tribunal has given a decision and it has not been challenged by way of reference to the High Court as provided under law, the judgment so given by the Tribunal becomes final and binding on the parties.
6. ' Mr. Shaikh Haider, the learned counsel for the respondents has contended that the moment the amount was distributed amongst the partners it became taxable. In these proceedings we are not called upon to give our decision on the question of validity of the order passed by the respondent No,3 while deciding the appeal of the petitioner in respect of assessment year 1977-78 as it is subject-matter of Civil Reference No,31 of 1987. The short point involved is whether after the order of the Tribunal treating the Excise Duty collected during 1977-78 as trading receipt notice under section 65 of the Income Tax Ordinance could be issued to the petitioner. According to Mr. Shaikh Haider, the Income Tax Officer received information from the order of the Tribunal and as such he was justified in re-opening the case under section 65 of the Income-Tax Ordinance. Section 65 of the Income Tax Ordinance reads as follow:-- ' Section 65. Additional assessm ent.--(1) If, in any year, for any reason,-
(a) any income chargeable to tax under this Ordinance has escaped assessment; 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 sub-section (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 the possession of the Income Tax Officer or he 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 any 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.
7. (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 cases to which clause (c) of subsection (1) applies as may be specified by the Central Board of Revenue.
8. The Income-Tax Officer is authorised to reassess an assessee if the income has escaped assessm ent or assessed at too low a rate or excessive relief or refund has been granted or the total income or tax payable by an assessee has been determined under section 59 (v) and no assessm ent order has been passed. However the precondition to the exercise of this power is that such proceeding shall be initiated only when the Income Tax Officer has definite information that any one of the conditions mentioned in section 65 (1) dues exist or the written approval of the Inspecting Assistant Commissioner of Income Tax has been obtained prior to taking such action.
9. Another restriction is that notice under section 65 (1) should be issued before the expiry of ten yeah from the end of the assessm ent when the total income of the said income year was first assessable. In the present case the stand of the respondents is that definite information came into the possession of the Income Tax Officer from the order of the Tribunal.
10. ' We have noted a series of judgments of the High Courts .n India where it was held that the change of law or the order of the Tribunal expressing a different view from its earlier order cannot constitute information foi re-opening the assessment. Some of those judgments are as follows:
(1) R.D. Dahmia v. Income Tax Officer New Delhi (1964) 52 I.T.R. (2) 416 Sadu v. Income Tax Officer 1964 PTD 59
(3) Lala Panna Lal v. Income Tax Commissioner (1948) 33 I.T.R. 145 (4)Shobh Karan Co. v.
11. Commissioner of Income Tax (1953) 24 I.T.R 388
(5) Shobhkaran Seksaria v. Commissioner of Income Tax 1950 (18) I.T.R. 773
(6) K.P.S.V. Rajirathina Nadar & Sons v. Commissioner of Income Tax Excise Profit Tax (1956) 59 I.T.R.
12. 34.
13. ' In the aforestated judgments or the High Court the view has been expressed that due to change of law or judgment no information can be gained for initiating action under section 34. However tlfis view has not found favour with the Supreme Court of India. In this regard Mr. Shaikh Haider has relied on (1976) 104 I.T.R.
295. We have also noted that in Maharaj Kumar.Kamal Singh v. Commissioner of Income Tax, Bihar and Orissa (1959) 35 I.T.R. 1 it was observed as follows: ' It is not disputed that, according to its strict literal meaning, the word 'information' may include knowledge even about a state of the law or a decision on a point of law. The argument, however, is that the context requires that the word 'information' should receive a narrower construction limiting it to facts or factual material as distinguished from information as to the true state of the law ' It is then contended that sections 33B and 35 confer ample powers on the specified authorities to revise the Income Tax Officer's orders and to rectify mistakes respectively and so it would be legitimate to construe the word 'information' in section 34 (1) (b) strictly and to confine it to information in regard to facts or particulars. This argument also is not valid. If the word 'information' in its plain grammatical meaning includes information as to facts as well as information as to the state of the law, it would be unreasonable to limit it to information as to the facts on the extraneous consideration that some cases of assessment which need to be revised or rectified on the ground of mistake oflaw may conceivably be covered by sections 33B and 35. Besides, the application of these two sections is subject to the limitations prescribed by them; and so the fact that the said sections confer powers for revision or rectification would not be relevant and material in construing section 34 (1) (b)
14. ' On the other hand, one of the cases specifically mentioned in section 34 (1) (b) necessarily postulates that the word 'information' must have reference to information as to law. Where, in consequence of information in his possession, the Income-tax Officer has reason to believe that income has been assessed at too low a rate, he is empowered to revise the assessment; and there can be no doubt that the belief of the Income-tax Officer that any given income has been assessed at too low a rate may in many cases be due to information about the true legal position in the matter of the relevant rates. If the word 'information' in reference to this class of cases must necessarily include information as to law, it is impossible to accept the argument that, in regard to the other cases falling under the same provision, the same word should have a narrower and a more limited meaning. We would accordingly hold that the word 'information' in section 34 (1) (b) includes information as to the true and correct state of the law and so would cover information as to relevant judicial decisions. If that be the true position, the argument that the Income-tax Officer was not justified in treating the Privy Council decision in question as information within section 34
(1) (b) cannot be accepted."
15. ' Again in Mooljee Sicka and Co. v. Second Additional Income Tax Officer V (1) and others (1960) 40 I.T.R. 163 for the assessm ent year 1953-54 exemption was granted in respect of 50% of the income derived from collection and sale of Tendu Leaves. The exemption was allowed in view of a judgment of High Court in Mooljee Sicka's case (1939) 7 I.T.R.
493. No appeal was filed against this assessment. In another case Commissioner of Income-tax v.
16. Raja Bend Kumar Sahas Roy (1957) 3 I.T.R. 466 the Supreme Court of India held that income derived from trees of spontaneous growth could be treated as agricultural income without any basic operation being performed. The Income Tax Officer started proceeding under section 34. The petitioner challenged it as without jurisdiction and it was held: "In other words, where an exemption had been granted by the income-tax authorities on the ground that the law was to be applied in a particular manner, and if it was subsequently held by an authoritative decision that the law applicable was different, then that was sufficient information which would warrant a re-opening of the assessment."
17. ' In India this seems to be the settled view. Mr. Sirajul Haq has referred to Income Tax Officer Central Circle Karachi v. Cement Agencies Ltd. PLD 1969 S.C. 322 where a contrary view has been taken in respect of cases which have attained finality in law. For proper appreciation we reproduce the following observation of the Honourable Supreme Court: 'The Appellate Assistant Commissioner and the Income-tax Appellate Tribunal took the view that since the Managing Agent and the Managed Company were both residents outside Pakistan, the commission earned by the Managing Agent in regard to the two Cement Factories of the Managed Company in Pakistan was not taxable in Pakistan. This Court in the case of Octavius Steel & Company Ltd. v. The Commissioner of Income-tax, Dacca, however, took a different view. After the decision of this Court in the above case the second set of notices were issued to the respondent.
18. The question that arises is whether this was permissible. In my view such a course is not sanctioned by law. I do not see how on the basis of the judgment of this Court in Octavius Steel & Company Ltd.'s case past and closed transactions could be, reopened. The proceedings in respect of the disputed years were finally disposed of in favour of the respondent and until they are set aside in accordance with law, no fresh proceedings could be initiated in respect of these years.'
19. In the present case the assessm ent in respect of assessment years 1975-76 and 1976-77 were finally disposed of by the orders of the Income Tax Appellate Tribunal and the Department did not file any application under section 136 of the Ordinance for reference to the High Court. Therefore in terms of section 135 (9) of the Ordinance the order passed by the Appellate Tribunal became final.
20. Such order can not be reopened by the Income Tax Officer. Reference is made to Dr. Shroff v.
21. Income Tax Officer and 2 others 1988 PTD 147 and Commissioner of Income-Tax Delhi and Rajasthan v. Rao Thakur Narayan Singh (1965) 56 I.T.R.
22. 234.
23. In view of the observations of the Honourable Supreme Court which is binding on us the Income Tax Officer (Respondent No,1) on the basis of the order of the Tribunal in a completely independent case, though against the same assessee, where it had expressed a view contrary to what had been expressed earlier, had no jurisdiction to start reassessment proceeding under section 65 of the Ordinance. Upsetting the order of Tribunal which has attained finality.
24. ' We therefore declare that the notice under Section 65 of the Income Tax Ordinance were issued by the Income Tax Officer without lawful authority and are of no legal effect. Since proceedings initiated were without jurisdiction all subsequent actions taken, order made and assessment framed are also without lawful authority, of no legal effect and are quashed.