Law: Income Tax Ordinance, 1979

Section: 59(1)&(lA)

(a) Income Tax Ordinance.(XXXI of 1979)---S. 59(1) & (lA)---Central Board of Revenue Circular No. 22 of 1991 dated 21-7-1991, para. 4(ii)---Self-Assessment Scheme for the assessment year 1991-92---Selection of the cases for audit---Procedure to be followed---Terms "Definite information", "material evidence" and "suspected gross under¬statement" occurring in para. 4 (ii) of C.B.R. Circular No. 22 of 1991--¬Connotation and effect. The provisions of subsection (1) of section 59 of the Income Tax Ordinance indicate that the Central Board of Revenue has been authorised to make a scheme of self-assessment and the said subsection further indicates that where any return of total income for an income year furnished by an assessee under section 55 of the Ordinance qualifies for acceptance in accordance with the provisions of such scheme, the Income Tax Officer shall assess the total income of the assessee on the basis of such return and determine the tax payable on the basis of such assessment. It clearly follows from the definition of the expressions "information", "definite information" and "material evidence" that information must be substantial, which may lead to discovery. Such information, therefore, should not be based on mere guess, gossip or rumour but it should be based on material evidence against the assessee. The Income Tax Officer, therefore, should form an honest belief upon material, which should reasonably support such belief. The word "suspected" has been used in the said paragraph alongwith the words "gross under-statement of income" and "definite information based on material evidence". A plain reading of the said paragraph makes it abundantly clear that the Income-tax Officer or the Regional Commissioner of Income-tax can proceed against an assessee or grant approval as the case may be, only on the ground of definite information which must be based on material evidence. Therefore, such action cannot be based on mere suspicion. Suspicion, in contradistinction to definite information, means partial or unconfirmed belief. The use of the word "gross" in the said paragraph further indicates that it is not in case of every under-statement in regard to…

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