I.T.AS. NOS. 537 AND 713/LB OF 1990-91, DECIDED ON 25TH MARCH, 1991. VS I.T.AS. NOS. 537 AND 713/LB OF 1990-91, DECIDED ON 25TH MARCH, 1991.
1991 P T D (Trib.) 1068
[Income-tax Appellate Tribunal Pakistan]
Before A.A. Zuberi, Accountant Member and Mian Abdul Khaliq, Judicial Member
I.T.As. Nos. 537 and 713/LB of 1990-91, decided on 25/03/1991.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 5 (1) (c) & (cc)---Jurisdiction of Income-tax Officer---To take out a cap; (etc.) out of the jurisdiction of an Income-tax Officer and for its assignment to the Income-tax Panel, it is mandatory for the Commissioner to pass a "general or special order in writing"---Unless such an assignment is made to an Income Tax Panel by the Commissioner, the Assessing Officer would continue to have unfettered jurisdiction "in respect of such persons or classes of persons" as fall in jurisdiction of his circle under S. 5 (1) (c)---Assessee, having filed a return of income with an Income-tax Officer on the basis of jurisdiction specified in S.5(1)(c), is not entitled to call in question the same unless he is able to show that subsequent to the filing of return a "general or special order in writing" has been passed about him by the Commissioner under S.5 (1) (cc) assigning his case to an Income-tax Panel.
Pakistan Tobacco Company Ltd.'s case 1991 PTD 345 and J.L. Wei's case 1989 PTD 271 ref.
(b) Income-tax---
----Assessment---Where a notice was not challenged promptly and the assessee waited till such time as an assessment was passed with his full participation, it could not be challenged unless a defect or irregularity existed which completely vitiated the assessment order.
Pakistan Tobacco Company Ltd.'s case 1991 PTD 345; J.L. Wei's case 1989 PTD 271 ref.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 5(1) (c)---Jurisdiction of Income-tax Officer---Operation of S.5 would not give jurisdiction to an Income-tax Officer unless he had the same under S.5(1)(c).
M. Akbar, CA for Appellant (in ITA No. 537/LB of 1990-91) Qudrat Ullah, D.R. for Appellant (in ITA No. 713/LB of 1990-91). Oudrat Ullah, D.R. for Respondent (in ITA No. 537/1,13 of 1990-91). M. Akbar, CA for Respondent (in I TA No.713/LB of 1990-91).
Date of hearing: 7th March, 1991.
ORDER
A.A. ZUBERI, ACCOUNTANT MEMBER.---Of these two appeals, one is by the Assessee and other by the Department. These assail order dated 21-10-1990 passed by the learned Commissioner of Appeals, Gujranwala in respect of the assessment year 198090.
The facts in brief: Return of income was filed on 15-10-1989 with Cricle-17, Daska hereafter statutory notices issued by the same officer were complied with and proceedings attended resulting in assessment on 28-6-1990 whereby total income was determined at Rs. 1,866,563 against the declared Rs.640,951. At no stage of the proceedings before the assessing officer his jurisdiction was challenged. The assessing officer assigned the status of `company' while the, relevant column in the return had been left blank. For this the assessing officer passed a short order under clause (bb) of subsection (16) of section 2 of the Income Tax Ordinance.
The learned DR pointed out that the Assessee were inconsistent in declaring their status, although the amendment to treat the Trust as a 'company stood inserted in subsection (16) of section 2 since the Finance Ordinance, 1983. For the assessment years 1986-87 and 1957-it was mentioned 'individual' but the assessing officer treated as "Trust" which was not challenged. In the year 1988-89 no status was declared but the assessing officer again declared them a `Trust'. It seems to have been contested in appeal for the assessment year 1988-89, which the learned Commissioner decided on 20-2-1990 and assigned status as `company'. Perhaps taking a cue from the appellate order for the assessment year 1988-89, the assessee challenged the assessment for the year 1989-90, also before the learned Commissioner where it was pleaded that CBR Circular No. 2 of 1989 dated 12-1-1989 read with section 5 rendered the assessment illegal because per clause (cc) of subsection (1) of section 5, their assessment should have been made by a Panel and not by the assessing officer alone. The lair Commissioner annulled the assessment on the point of jurisdiction hence he did not go into the other ground taken in the appeal. In the opinion of the learn; d Commissioner the ITO had no jurisdiction which he could have under clause 'c of suhsec6on (1) of section 5 and that the operation of subsection (5) alone could not give him jurisdiction. Because in the present case the jurisdiction assessment was to he exercised by the Panel under clause (cc) of subsection (1) section 5, the assessment was invalid for want of jurisdiction.
The learned DR assailed the above finding and contended that return A income having been filed in Circle-17, Daska, no question could be raised to challenge jurisdiction of the ITO of that Circle more so when the provisions of subsection (5) of section 5 were so unambiguous again statutory notices for the framing of the assessment having been complied with and roceedings for assessment participated, rendered the Assessee disentitled to challenge the validity of notices issued under section 61, etc. particularly when subsection (6) of section 154 stood in the way of the Assessee. Therefore, the learned Commissioner erred in holding that the ITO, Circle-17, Daska had no jurisdiction and in annulling the assessment. On his turn the learned Counsel for the Assess, heavily relied on clause (cc) of subsection (1) of section 5 to plead that read with Circular 2 of 1989 dated 12-1-1989, the companies were tee be assessed by a Panel who were vested with jurisdiction under clause (cc) of section 5(1) of tip: Ordinance and, therefore, the treatment by the learned Commissioner unexceptionable.
We have given our consideration to the rival arguments advanced by the two sides and have carefully gone through the impugned order as also the relevant sections in the Income Tax Ordinance. It may be relevant to record that under the scheme of the Ordinance an ITO is generally assigned jurisdiction under clause `c' of section 5(1) of the Ordinance. This clause in respect of the ITO reads as under:---
"5(1) (c)--...the Income Tax Officers shall perform their functions in respect of such persons or classes of persons or such areas as the Commissioner ....may direct...."
This jurisdiction of the assessing officer is ousted by clause (cc) of section 5 (1) which reads as under:--
"5(1).--- (cc) Not withstanding anything contained in clause (c) the Commissioner may, by general or special order in writing, direct, that all or any of the powers conferred on the Income-tax Officer shall, in respect of all or any proceedings relating to specified cases or classes of cases or specified persons--or classes of persons, be exercised by the Income Tax Panel.. "
A combined reading of the two provisions of law clearly shows that to take out a case (etc.) out of the jurisdiction of an ITO and for its assignment to the Income Tax Panel, it is mandatory for the Commissioner to pass a "general or special order in writing". Unless such an assignment is made to an Income Tax Panel by the Commissioner the assessing officer would continue to have unfettered jurisdiction. "in respect of such persons or classes of persons" as fall in jurisdiction of his Circle under clause (c) of subsection (1) of section 5. Therefore, Assessee having filed a return of income with an ITO on the basis of jurisdiction specified in clause (c) of section 5 (1), is not entitled to call it in question unless he is able to show that subsequent to the filing of the Return a "general or special order in writing" had been passed about. him by the Commissioner under clause (cc) of section 5(l) assigning his case to an Income Tax Panel. The learned counsel before us was entirely helpless; in this behalf and could offer no such evidence, while the learned DR insisted that the case fell in the jurisdiction of the ITO, Circle-17, Daska and was not taken out for allocation to any Panel. Here we may with advantage refer to the observations by the learned Judges of the Karachi High Court In re: Pakistan Tobacco Company Ltd. 1991 PTD 345 to the effect that where a notice is not challenged promptly and the Assessee waits till such time as an assessment is passed (with his full participation) it cannot be challenged unless a defect or irregularity exists which completely vitiates the order. Another decision, more to the point, was pronounced In re: J.L. Wei 1989 PTD 271 the operative part whereof reads as under:--
" ....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."
In these attending circumstances we see no erroneousness with the conclusions by the learned Commissioner that the operation of section 5 would not give jurisdiction to an ITO unless he has the same under clause (c) of section 5(1) but as respects the finding that the ITO, Circle 17, Daska had no jurisdiction in the present case, there appears to be no basis or material on II record, the most fatal being absence of "general or special order in writing assigning Assessee's case to the Income Tax Panel. We, therefore, hold his order as erroneous so far as annulment is concerned. Therefore, vacating the same we remit the case back to the Commissioner for adjudication on other issues taken up (or pressed) before him. The Department's appeal, therefore, succeeds.
The Assessees in their appeal have expressed grievances with the Commissioner not having adjudicated on issues relating to additions, such as export charges and demurrage. As we have already remitted the case back to the Commissioner this appeal also succeeds as he would now look into these also.
M.B.A./1205/T Appeals allowed.