SALEEM AKHTAR, J.-1. The petitioner was assessed under the self-assessment scheme in respect of assessm ent years 1982-83, 1983-84 and 1984-85 on 18th December, 1982, 10th December, 1983 and 25th September, 1984 respectively. On 18th April, 1987 respondent No. 1 issued a show-cause notice in respect of the aforestated assessme nt years giving details of facts and figures showing that the petitioner has been under-assessed and reply was required to be filed within 10 days. However, it is alleged that without waiting for the reply notices under section 65 were issued on 23rd April, 1987 alleging that the income has been under-assessed and requiring the petitioner to submit the return "not later than 30th April, 1987. The Income Tax Officer sent a notice under section 62, dated 13th June, 1987 stating that both the notices issued earlier on 18th April, 1987 and 30th April, 1987 had remained uncompiled with, and therefore, he intended to proceed with the assessment under section 65(5) of the Income Tax Ordinance in respect of the aforestated three years. Three separate notices were issued for each assessment year and the facts and the amounts which were questioned an
2. Mr. Muhammad Nasim the learned counsel for the petitioner contended that the show-cause notice under section 65 is based on change of opinion, and therefore, the same should be struck down. 1h this regard the learned counsel has referred to PLD 1990 SC 399, PLD 1990 SC 338, 1988 PTD 1014, 1989 PTD 114 and 1990 PTD 873. It is well-settled that on the basis of change of opinion action under section 65 cannot be initiated. However, in cases where assessment order has been passed without investigation into the correctness of the return filed by the assessee without applying mind and the assessm ent order is not a conscious order passed by him, the question of change of opinion will not arise. The change of opinion arises only when there exists an opinion expressed by the assessing officer in regard to the controversy or matter under consideration. If no opinion has been expressed earlier, the question of change of opinion will not arise. According to Mr. Shaikh Haider the first assessm ent was made without applying mind to the correctness of the return. The copies of the assessm ent orders for the relevant three years have been filed which clearly show that it was a case under the self- assessment scheme and the assessments were made in a mechanical manner without applying any mind. The declared income was accepted without any investigation and taxes were determined accordingly. Therefore, it is clear that during these three assessm ent years the assessing officer did not apply his mind and did not pass any conscious assessm ent order after investigation or scrutiny of the return. In these circumstances the plea of change of opinion cannot sustain.
3. Mr. Muhammad Nasim has referred to 1990 PTD 873 where the assessm ent was made under the self-assessm ent scheme still notice under section 65 was declared to be invalid. In this case although the case was under the self-assessment scheme, the assessment was made, as is obvious from the observation, after scrutiny of the documents which had been supplied to the Income Tax Officer. Therefore, this case will be distinguishable as the assessment had been made under self- assessm ent scheme after due scrutiny. The learned counsel also referred to the judgment in Constitutional Petition No. 447/88 Bhambore Ceramic Industries vs. Income Tax Officer but in this judgment it has been clearly observed that the assessing officer had framed a conscious assessm ent after scrutiny of the records, documents and account books. The observation in this judgment will not apply to the facts of the case.
4. The learned counsel then contended that the proceedings are mala fide with intention to defeat the petitioner's claim for refund. In this regard he has referred to various letters sent by the petitioner's Advocate claiming refund fr6m the respondents. However, except one or two letters all were issued after notice under section 65 had been served. In these circumstances merely by showing that a claim for refund was pending it cannot be presumed that the action is mala fide.
5. The learned counsel then contended that under the garb of section 65 the petitioner cannot make fishing inquiries. The question of fishing inquiries does not arise as in the notice under section 65 specific instances have been quoted and queries have been made relating to those points.
6. The learned counsel then contended that notice under section 65 is incompetent as under Form IT 191 in which it has been issued prescribes a period of 30 days for submitting the reply but respondent No. 1 had given only 5/6 days, and therefore, the entire proceedings is illegal. In this regard the learned counsel has referred to several judgments under section 24 of the Sales Tax Act where notices in Form ST-15 were issued which provided a period of 35 days for submitting the reply but as it was not complied with, the assessment was struck down. Reference has been made to (1983) 48 Taxation 44 (sic), 1990 PTD 288 (sic), 1988 PTD 145 (sic). In all these cases question of notice under Form S.T. 15 of Sales Tax Act was under consideration. Such form of notice was prescribed by the Central Board of Revenue under its Rule-making powers. The learned counsel has not been able to show any Rule under which Form 191 was prescribed by the C.B.R, fixing a period of 30 days, for submitting reply to the notice under section 65. This Form-191 may have been adopted by the Department but both the learned counsel have not been able to show any authentic or legal backing from the statute or the Rules framed by the C.B.R. Therefore, breach of such form is not sufficient to strike down the proceedings.
7. The learned counsel then contended that the proceedings initiated and continued by respondent No. 1 is a command performance on the. Direction of the Commissioner and is, therefore, illegal and void. In this regard the petitioner has alleged in the petition that after the scrutiny of records produced pursuant to notice under section 65 the Income Tax Officer was satisfied and was of the view that proceedings under section 65 should be dropped. He, therefore, addressed a letter dated 11th November, 1987 to the Inspecting Assistant Commissioner respondent No. 2 the concluding part of which reads as follows:-- "In view of the above discussion this office may be permitted to drop the proceedings under section 65 in respect of the assessme nt years 1982-83,1983-84,1984-85."
According to the petitioner, the Inspecting Assistant Commissioner disagreed with this view and directed to proceed with the assessment. In the counter-affidavit the respondents have not denied this fact but have alleged that the petitioner is making reference to confidential inter- departmental documents and the same were not filed claiming that they are confidential.
Therefore, the petitioner's averment has not been denied and only refuge has been taken on the plea that they are confidential documents. The learned counsel for the respondents has produced before us the photo-copy of these letters with a request that being confidential documents they should not be disclosed to the petitioner. First letter dated 14th November, 1989 was addressed by the Income Tax Officer to the Inspecting Assistant Commissioner Of Income Tax in which the queries raised in pursuance of section 65 and the reply submitted by the petitioner were mentioned. It also contains the opinion of the Income Tax Officer on the basis of which he had sought permission to drop the proceeding. This letter was replied on 5th December, 1987 in which the Inspecting Assistant Commissioner of Income Tax has given his comments in respect of each assessm ent year and the I.T.O, was directed to assess accordingly.
8. First we will dispose of the contention of Mr. Shaikh Haider that the documents are confidential and privileged and, therefore, they should not be taken into consideration. The letter addressed by the Income Ta* Officer or the Inspecting Assistant Commissioner of Income Tax have not mentioned it to be 'confidential' otherwise the same would have appeared in the photo-copy produced before us. The Income Tax Officer has written a letter in the proceedings which were pending before him. The letter do clearly affect the rights and liabilities of the assessee and, therefore, it is entitled to have the knowledge of such facts which affect it adversely. Thus, it was incumbent on the Income Tax Officer to have disclosed the contents of the letter of the Inspecting Assistant Commissioner so that the petitioner may be able to defend itself against such points which were raised by him. Furthermore, only such documents should be treated confidential disclosure of which is likely to prejudice the interest of the State. The question involved is purely a matter of assessm ent and does not involve any secret or sensitive inquiry relating to security of the State or any State secret. Under Article 6 of the Qanun-e-Shahadat Order, 1984 (section 123, Evidence Act) any evidence derived from unpublished official record relating to any affair of the State cannot be given except with the permission of the head of the department. Under Article 7 (section 124 of Evidence Act) no public officer can be compelled to disclose official communication made to him in confidence if he considers such disclosure prejudicial to public interest. Both these provisions are based to protect public interest. However, the unpublished record should relate to affairs of the State. Therefore, those documents "whose disclosure would endanger public interest" and "documents pertaining to public security, defence and foreign relations" fall in this category.
The documents relating to commerce, trade or contractual activities of State generally do not relate to affairs of the State. Monir in Law of Evidence relying on 32 Mad. 62-1 I.C. 705 observed that 'statement made before the Income Tax Collector, and orders made under section 14 or section 26 of the Income Tax Act, determining the amount of income tax do not relate to affairs of the State and are not, therefore, privileged under this section" (section 123). Article 7 prevents disclosure which is detrimental to public interest. Monir while commenting on section 124 observed that the question whether the documents is a communication made to a public officer in official confidence is for the Court to decide". Unless the documents relate the affairs of the State, the Court has power to take evidence and decide whether it was a communication made to the public officer in official confidence. (ILR 32 Mad. 62.) No provision of the Income Tax Ordinance has been referred in support of the claim of privilege. Therefore, in our view respondents cannot claim privilege and with this view in the matter we have placed these letters on record.
9. Mr. Shaikh Haider has referred to section 7 of the Income Tax Ordinance which provides that in the course of any proceedings under the Ordinance, the Income Tax Officer may be assisted, guided or instructed by another Income Tax Authority to whom he is subordinate or any other person authorised in this behalf by the Central Board of Revenue. Mr. Shaikh Haider has contended that in view of this provision the Income Tax Officer was justified in seeking guidance from the Inspecting Assistant Commissioner of Income Tax. Inspecting Assistant Commissioner of Income Tax has been given power under section 66-A to call for and examine the record of any proceedings under this Ordinance and if he considers that any order passed therein by the ITO is erroneous in so far as it is prejudicial to the interest of revenue, he may after giving opportunity to the assessee of being heard and after making such inquiry as he deems fit pass such order therein as the circumstances of the case justify including an order enhancing, or modifying the assessm ent or cancelling the assessment and directing fresh assessment to be made within four years from the date of the order sought to be revised. The Income Tax Assistant Commissioner has thus vast power to call for the record and examine any proceeding. If the communication of the Income Tax Officer is to be treated as final opinion amounting to an order as contended by Mr. Nasim, then the Income Tax Appellate Commissioner was competent to call for the record and reopen the case as such order was prejudicial to the revenue. If this provision is pressed in service then the Inspecting Assistant Commissioner should have passed assessment order after notice to the assessee and no direction should have been issued to the assessee in the manner he has formulated his opinion. The point for consideration is whether under section 7, Income Tax Officer could have sought guidance or instructions as he has done in the present case. Section 7 seems to be a general provision provided to seek guidance and instructions in cases of complicated nature where the ITO is not able to understand or decide the case in proper manner. There may be cases in which the assessing officer may feel difficulty and to resolve that difficulty. Section 7 has been introduced which is a completely new section and did not find place in the Income Tax Act, 1922.
The procedure provided in section 7 has to be exercised in a conscious manner. The authority should realise that .The assessm ent proceeding is of quasi-judicial in nature and it is possible that the Income Tax Officer may seek assistance or guidance from his superior who may be revisional or appellate authority and in such circumstances the very purity and sanctity of the hierarchy which provides for original and appellate jurisdiction is completely tarnished. If the Income Tax Officer before making the assessme nt seeks direction from his superior and on their direction passes the assessm ent order then in such circumstances the appellate and revisional jurisdiction will be completely meaningless. This could never be the intention of the legislature and that .Is why section 7 has to be interpreted in a restricted manner. It is only in difficult and complicated cases that guidance may be sought before any assessment order has been passed or before the ITO has formed a definite opinion. Although he had sought approval for reopening the case there is no provision which provides for seeking approval while framing the assessment order. It is significant to note that under section 65(2) the approval of the Inspecting Assistant Commissioner is necessary but correspondingly obtaining his approval for the order proposed to be passed by the Income Tax Officer has not been provided, Therefore, it seems clear that the assessing officer having obtained the approval has to apply his mind independently free from guidance or direction from his superior officer. Therefore, in our view the assessment made in pursuance of such a direction was without lawful authority and of no legal effect. We have taken the view that notice under section 65 of the Income Tax Ordinance was legal and proper, however, the petitioner has also prayed that all proceedings thereupon be declared as without jurisdiction and of no legal effect. It seems that during the pendency of the case the assessment has been framed. The illegality which has crept into the proceedings from the date the direction was issued by the Inspecting Assistant Commissioner to frame the assessment as directed by him makes all the subsequent proceedings void. We, therefore, direct that the assessment may be reframed by another Income Tax Officer to be nominated by the Commissioner of Income Tax.