I.T.AS. NOS.509/LB TO 511/LB OF 1989-90, DECIDED ON 26TH FEBRUARY 1991. VS I.T.AS. NOS.509/LB TO 511/LB OF 1989-90, DECIDED ON 26TH FEBRUARY 1991.
1991 P T D (Trib.) 847
[Income-tax Appellate Tribunal Pakistan]
Before Mian Abdul Khaliq, Judicial Member and A.A. Zuberi, Accountant Member
I.T.As. Nos.509/LB to 511/LB of 1989-90, decided on 26/02/1991.
(a) Income Tax Ordinance (XXXI of 1979)-----
----Ss. 65 (4) & 59(1)---C.B.R. Circular No.15 of 1980, dated 26th June, 1980-- Provision of S. 65(4) deals with those cases (or class of cases) which are specified by the Central Board of Revenue despite assessments having already been framed under S. 59(1) and dispenses with two conditions prescribed under S. 65(2) for initiation of additional assessment proceedings.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65(1), (2) & 59(1)---To initiate additional assessment proceedings in situations as are contemplated in S. 65(1) the Assessing Officer has to adhere to the requirements of S. 65(2)---In those cases or class of cases which are specified by Central Board of Revenue out of those where returns have already been accepted under S. 59(1) there would be no need to adhere to the requirements of S. 65(2).
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss. 65(2), 63 & 59(1)---Self-Assessment Scheme (1985-86), para. 6(7)-- Immunity from selection for detailed scrutiny---Self-assessment Scheme stipulates that cases where the returned income was accepted under immunity provisions would be re-opened only with the prior permission of the Central Board of Revenue---Where the C.B.R. permission was not obtained although the return of income was originally accepted under "immunity" the assumption of jurisdiction for re-opening the case was beset with a fatal illegality warranting annulment of the assessment under S. 63 read with S. 65 of the Ordinance determining total income of the assessee.
Rashid A. Sheikh for Appellant.
S. Roomi Shah, D.R. for Respondent.
Date of hearing: 25th February, 1991.
ORDER
A.A. ZUBERI (ACCOUNTANT MEMBER): --These three appeals have been filed at the instance of a Registered Firm, who acts as Commission Agents. These impugn consolidated order dated 3-8-1989 passed by the learned Commissioner of Income Tax (Appeals), Gujranwala in respect of the assessment years 1984-85, 1985-86 and 1986-87. The learned counsel explained that assessments for all the three years were completed under section 59(1) at Rs.21,301, Rs.26,500 and Rs.30,992 for 1984-85, 1985-86 and 1986-87 respectively. All these were under immunity clause of SAS. Subsequently, the Department came to have some information on the basis of which show-cause notice was issued followed by reminders and finally notice under section 65 dated 5-10-1987 all of which were ignored by the Appellant nor Returns filed. The Assessing Officer then issued statutory notices for non-compliance of which he framed assessments ex parte under section 63 read with section 65 of the Income Tax Ordinance. These resulted in determination of total income for 1984-85 at Rs.1,08,506 for 1985-86 at Rs.89,350 and for 1986-87 at Rs.1,51,550. All these assessments were set aside in appeal by the learned Commissioner of Income Tax for the reason: 'no proper opportunity has been provided to the Appellant to explain his position before drawing any conclusion". Furthermore, the learned Commissioner observed that explanation regarding the alleged cash credits had not been obtained nor any basis indicated for estimating sales and for applying the G.P. rate. The learned Commissioner gave directions for de novo decision after confronting the Appellant and providing sufficient opportunity for explaining their position with regard to the securities with the Principals. The learned counsel submitted that there was no quarrel for cause with the decision by the learned Commissioner had not there been - a subtle legal issue involving interpretation of section 65 and its affect on assessment completed under immunity on the basis of which, according to the learned counsel, the assessments should have been annulled. Mr. Rashid A. Sheikh the learned counsel submitted that normally for proceedings aimed at additional assessment under section 65 the conditions prescribed at subsection (2) thereof are to be satisfied i.e. possession of definite information by the assessing officer and the prior approval of the IA.C. in writing. However, his jurisdiction to initiate such proceedings was ousted in those cases where assessments were framed under subsection (1) of section 59 by the substituted subsection (4) vide Finance Ordinance, 1980 which reads as under:--
"65(4). Nothing contained in subsection (2) shall apply to any such case or class of cases to which clause (e) of subsection (1) applies as may be specified by the C.B.R."
It was canvassed that the overriding condition now was that those cases where assessments were framed under section 59(1) the approval for initiation of additional assessment proceedings should come from the C.B.R. For this assertion Mr. Rashid A. Sheikh attempted to draw strength from this Tribunal's decision reported as 1988 P T D 681. The D.R. on his turn opposed the proposition and submitted that S.A.S. contained a policy of stick and carret inasmuch as whatever assessments were completed under section 59(1) stood all the time exposed to the hazard of action for additional assessment even without the conditions prescribed in subsection (2) of section 65 subject, of course, to the safeguards promised in the SA.S. for the relevant year.
The arguments advanced by Mr. Rashid A. Sheikh the learned counsel for the Appellant appeared attractive at first glance but could not meet the test of closer scrutiny. Our interpretation of subsection (4) is that: it deals with those cases (or class of cases) which are specified by the Board despite assessments having already been framed under section 59(1) and dispenses with the two conditions prescribed under subsection (2) of section 65 for initiation of additional assessment proceedings. The same position emerges on examination of C.B.R. Circular No.15 of 1980 dated 26-6-1980, which is reproduced below:
"Two important amendments have been made in this section:
(a) The Self-Assessment Scheme envisages that out of the cases accepted under the Scheme, a certain number of cases may be selected by the C.B.R. for detailed scrutiny. The amendment dispenses with the condition of definite information or approval of I.A.C in such cases."
There is thus no room for doubt that (as a rule) to initiate additional assessment proceedings in such situations as are contemplated by subsection (1) of section 65 theassessing officer has to adhere to the requirement of subsection (2) of the same section. However, those cases (or class of case) which are specified by the C.B.R. out of these where Returns have already been accepted under section 59(1) there would be no need to adhere to the requirements of subsection (2) of section 65. On this view of the matter, we see no merit in the appeal for the assessment years 1984-85 and 1986-87 and DISMISS these with the result that the directions by the learned Commissioner of de novo assessment STAND GOOD.
As about the assessment for 1985-86 in addition to the above arguments alleging illegality in the assumption of jurisdiction for additional assessment, the learned counsel pointed out that as per para. 11 of Circular No.7 of 1985 dated 22-7-1985 the cases completed under immunity provisions of Self-Assessment Scheme could not be reopened except with the prior permission of the C.B.R, Mr. Rashid A. Sheikh canvassed that the Return having been accepted under immunity, proceedings were invalid as permission by the C.B.R. was admittedly not secured. We find validity in this argument for the reason that the S.A.S. is not a part of the Income Tax Ordinance and that the Scheme for the year 1985-86 prescribed "immunity" from selection for Detailed Scrutiny in Paragraph 6. Note 7 of paragraph 6, clearly stipulates "cases where the returned income is accepted under immunity provisions would be reopened only with the prior permission of the C.B.R. Admittedly the C.B.R. permission was not obtained although the C Return was originally accepted under "immunity", declaring income at Rs.26,500. Therefore, the assumption of jurisdiction for this year is beset with a fatal illegality warranting ANNULLMENT of the ASSESSMENT framed on 5-4-1988 under section 63 of the Income Tax Ordinance read with section 65 thereof, determining total income at Rs.89,350. Ordered accordingly.
CONCLUSION
For the reasons recorded hereinabove the appeal for the assessment year 1985-86 SUCCEEDS but those for the assessment years 1984-85 and 1986-87 FAIL.
M.B.A./1192/TOrder accordingly.