This appeal has been tiled at the instance of an individual who is a professional Handwriting Expert.
The appeal is directed against the order dated 1-1-1987 passed by the learned A.A.C., E-Range, Lahore in respect of the assessm ent year 1982-83.
2. The discussion with the two Representatives shows that return of income, filed on 11-1-1982 under Self-Assessm ent Scheme, was accepted under section 59(1) of the Ordinance at Rs. 22,400.
Subsequently, the assessing officer came to have the information, through a verification note dated 27-5-1985 that the Appellant had purchased some property on 8-7-1982. He, therefore, initiated proceedings under section 65 for the year 1983-84. These were finally dropped when it was discovered that the property was in fact purchased on 27-6-1982 and fell in the assessment year 1982-83. Fresh notice under section 65 was then issued on 11-5-1986 in response to which return was filed declaring income "as before". Notice under section 67 was then impugned on 9-4- 1987 calling upon the Appellant to explain as to why a sum of Rs. 50,000 should not be deemed as income due to unexplained expenditure incurred in relation to the purchase of property for Rs.
500,000. The Appellant then explained (on 13-5-1987) that the overhead expenses on purchase was made the responsibility of the seller. This position the assessing officer did not accept because the normal practice, as prevailing throughout the country, is that such expenditure is borne by the purchaser who is always keen to have proper documentation for the property purchased by him.
The assessing officer not only made an addition of Rs. 50,000 as deemed income under section 13(1)(e) of the Ordinance but also re-computed the professional income to which a sum of Rs.
10,500 was added to aggregate it at Rs. 32,900 against the declared at Rs. 22,400. This resulted the total income at Rs. 82,900. On appeal, the learned A.A.C. Confirmed this treatment.
3. The learned counsel for the Appellant Mr. A.I Bin Abdul Kadir, confined his arguments to Grounds Nos. 7, 8 and 10 taken in the Appeal Memo. These read as under:-- That the addition under section 13(1)(d) is that of a deemed income. This deemed income did not come into existence before the formalities of sections 13(1) and 13(2) were complied with. As such this income did not exist at the time of the original assessment and there was, therefore, no escapement or taxable income in the original assessment for which the proceedings under section 65 could have possibly been made.
(8) That the I.T.O. Has re-opened the whole assessment, which he could not have done under the law. Tic was bound to confine himself to-only that income which had allegedly escaped tax or which had been under assessed. The re-appraisal of the previously assessed income is against law and not sustainable.
(10) That the two statutory approvals under sections 13(1) and 13(2) have not been separately obtained for which reason the addition is fit to be deleted."
4. Taking up Ground No. 7, first the learned counsel Mr. A.I Bin Abdul Kadir explained that the deeming provisions in the Ordinance could not be stretched so as to include even fictional income under the scope of escapement while it is not in dispute that these do not represent real or tangible income. The learned counsel attempted to draw strength for this argument from the first proviso to section 31 of the Ordinance. Conceding that this piece of legislation was suspended for operation vide clause (7) of Part IV of the Second Schedule the learned counsel emphasized that the very fact of the legislature having thought to bring it on the statute book (and despite pressure did not delete it but simply suspended for some time) clearly betrays that without such special legislation it is not possible to include deemed income (if any) as escaped income. The learned counsel carried his argument further to stress that no completed assessment could be re-opened with a view to include the amount which is to be deemed as income by fiction of law created by any provision of the Income-tax Ordinance. This argument besides being novel looked attractive at first but could not stand the test of closer scrutiny. It is to be remembered that there was a change in law inasmuch as section 65 of the Ordinance compared to section 34 of the repealed Act, has a marked departure from the earlier position. It may be of advantage to reproduce for facility of quick reference the provisions of section 65 of the Ordinance as under:-- "if in any income year, for any reason--
(a) any income chargeable to tax under this Ordinance has escaped assessment; or
(b) the total income of an assessee ha:; been under assessed, or assessed at too low rate, or has been the subject of excessive relief or refund under this Ordinance ....:"
It may be seen that in clause (a) words employed are "any income" whereas in I clause (h) words "the total income" express a different intendment. Obviously clause (a) does not contemplate a situation where "total income" could have escaped assessment but relates to a situation where "any income" (being only a part of the total income which should have been assessed) has escaped assessm ent. Under the repealed Act position was different which is ascertainable by comparison with the relevant portion of subsection (1) of section 34 which stood as follows:-- "If for any reason income, profits or gains chargeable to Income-tax have escaped assessment in any years, or have been under assessed, or have been assessed at too low a rate, or have been the: subject of excessive relief or refund under this Act---------"
This means that under the repealed Act the concept of "escaped assessment" included total escapement as well a position which has been consciously modified in view of section 56 because of which income can never be said to have completely escaped assessment under the Order.
Grounds on which action for additional assessment under section 65 may now be taken are as follows:
(i) partial escapement of income;
(ii) under assessm ent of income;
(iii) assessm ent at too low a rate;
(iv) erroneous allowance resulting in excessive relief or refund.
Reference to income having "escaped assessment" (as appearing in section 65) covers the following situations:-
(i) When income arising from a particular whereas income from another source falling under the same head (or from a different head of income) has been assessed i.e. a source of income or a complete head of income may have escaped assessment.
(ii) When income arising from a particular source or head of income has 1 been assessed in a wrong assessm ent year, or in the hands of a wrong person.
5. Since, "income" has been defined in clause (24) of section 2 of the Ordinance to include "any sum deemed to be income------..Under any provisions of this Ordinance" and "deemed income" as per clause (e) of subsection (2) of section 30 clearly falls under the head "income from other sources" listed at clause (f) of section 15, there appears no room for doubt that the expression "any income" as used in clause (a) of subsection (1) of section 65 clearly creates al situation where it is no longer possible to say that any income, deemed by fiction, of law, cannot be charged to tax once the "income year" relevant to the "assessment year" has lapsed. I, therefore, reject the appeal on this issue.
6. Coming to the next ground relating to the inclusion in the income, besides the one alleged to have escaped assessm ent forming the basis for re-opening an assessment, I am of the view that this situation also should not be confused with the position of law obtaining in the repealed Act because the Income-tax Ordinance has consciously brought about such changes as sufficiently cover these aspects. It may be recalled that in the repealed Act, scope of re-assessment was strictly restricted to "such income" which (in terms of the notice) had escaped assessment or was under-assessed (etc.). No general power of review was available to the assessing officer. For example, if notice was in reference to income as had "escaped assessment", proceedings were essentially to confine themselves to "such income". Contrarily, if the notice referred to income having been "under assessed", proceedings were likewise to remain confined to "such income" as was actually under-assessed. This was manifest from the words employed in the repealed Act, i.e. Section 34(1)---If for any reasons income, profits or gains chargeable to Income-tax have escaped assessm ent in any year, or have been under-assessed, or have been assessed at too low a rate, or have been the subject of excessive relief (or refund) under this Act---.. The Income-tax Officer ....
May proceed to assess or re-assess such income, profits or gains and the provisions of this Act shall, so far as may be, apply accordingly."
Words now preferred in Income-tax Ordinance are:-- Section 65(1)-- "If, in any year, for any reason--
(a) any income chargeable to tax under this Ordinance has escaped assessment .... The Income- tax Officer 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."
It is easily discernible that though reasons for notice under section 65 remain unchanged, assessm ent is no longer to remain confined to the cause for which it is re-opened that is to say the assessing officer may probe into other issues as, well, if circumstances justify. 1t is so because once a case is re-opened, it is (in contradistinction to any "such income") the "total income" which has to be) re-assessed meaning thereby: assessment as a whole is the subject of probe for purposes of additional assessm ent. 1n this view of the matter this ground of appeal also FAILS.
7. Coming to the last ground of appeal, about the statutory approval having not been obtained by the assessing officer; I do not find validity in the plea that two approvals (separately envisaged by subsections (1) and (2) of section (3) were not separately obtained. The assessing officer had specifically mentioned about the approvals having been obtained on 16-3-1987 and, therefore, the presumption of truth available to conduct in the normal course of official duties, is available to the Department. 1f any authority is needed one may refer to section 114 of Evidence Act and to PLD 1982 AJ & K 54 as discussed in (1984) 49 Taxation 17 (Art). The onus to establish that no approval (oral or written) was obtained fell heavily on the Appellant but was not discharged and, it is all the more significant that this plea was not taken at the first stage of appeal, hence finds no adjudication in the impugned order, nor any affidavit has been tiled by the Appellant to rebut the observation (in this behalf) by the assessing officer. I, therefore, REJECT this ground as well.
CONCLUSION
9. For the reasons recorded hereinabove, the appeals fails and is consequently dismissed.