ITAS. NOS. 954/LB TO 959/LB OF 1989-90, DECIDED ON 1ST FEBRUARY, 1992. VS ITAS. NOS. 954/LB TO 959/LB OF 1989-90, DECIDED ON 1ST FEBRUARY, 1992., 1992 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1610 (1992)

(a) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Objections raised by I.A.C. had completely been ignored by the I.T.O. in his order---Such order of the I.T.O., held, was erroneous and also prejudicial to the interest of revenue.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Where the Inspecting Assistant Commissioner had approved the assessment order the re-opening of such order under S.66-A would amount to change to opinion---When the I.A.C. was all along associated with the re assessment, subsequently he was estopped to change the view and to hold that the Assessing Officer had passed an erroneous order prejudicial to the interest of revenue.

ITA No. 1563/LB of 1984-85 ref.

(c) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Original assessment order and not the re-assessment order which could be said to be erroneous.

(d) Income Tax Ordinance (XXXI of 1979)---

---S.66-A---Inspecting Assistant Commissioner could not say that the assessment order was erroneous without giving any finding there for.

Ahmed Shuja Khan and Sh. Aamir Abbas Dilawary, ITP for Appellant.

Qaiser Yahya, D.R. for Respondent.

ORDER

ABRAR HUSSAIN NAQVI (JUDICIAL MEMBER-I): --These are six appeals filed by an individual deriving income as custom clearing agent and relate to the assessment years 1980-81 to 1985-86. The assessee is aggrieved against the order of the learned IAC dated 6th January, 1990 under which he cancelled the assessments completed under section 62/132 for the assessment years under consideration and directed the ITO to frame fresh assessments.

2. Brief facts of the case under which these appeals have arisen are that the assessee filed returns under SAS which were accepted under section 59(1) of the Income-tax Ordinance and the income originally estimated for various years was as under:---

Subsequently, the assessee's case was reopened for all these years under section 65 of the Income Tax Ordinance on the ground that the assessee had not disclosed the bank accounts maintained by him as well as the joint account with his wife and in the name of his son Mr. Sohail Akhtar Hafeez. On re assessment the additional assessments were made under section 65 of the Ordinance at an income as under:--

3. The assessee went up in appeal before the learned CIT(A) who set aside the assessments vide his order dated 21st March, 1988 and directed the ITO to make fresh assessments and to make inquiries as to whether the assessee was a clearing agent or an importer and further as to whether the deposits in the bank were those of the assessee's own or these deposits belonged to his clients. The assessing officer consequently passed fresh assessment order under section 62/132 of the Income Tax Ordinance and the assessee's declared income as originally assessed under section 59(1) of the Ordinance was accepted. The learned IAC issued notice to the assessee under section 66-A of the Ordinance on the ground that the assessing officer while making the re-assessments completely ignored the following facts:---

(i) The additions earlier made under section 13(1)(c) of the Ordinance;

(ii) That the assessee had earlier made categorical statement that no bank account was maintained by him but it was subsequently discovered - that the assessee was maintaining the following bank accounts:---

(1) A/c No.00818257 with H.B.L. The Mall, Lahore.

(2) A/c. No.1917-5 joint account with wife. Mst. Balqees Begum.

(3) A/c. No. 1924-6 in the name of assessee's son Mr. Sohail Akhtar Hafeez, who was student at the time of opening of the account.

(iii) That the assessee had purchased Vespa Scooter No. LEK 624 and Toyota Corona Car No. LEY 6093 on 17th July, 1979 and 18th February, 1980 respectively and in the additional assessment made under section 65 the value was estimated at RsA6,000 and Rs.60,000 respectively of the two vehicles and an addition of Rs.41,000 had been made under section 13 of the Ordinance.

(iv) The assessee had purchased 1 Kanal plot at Nawan Kot, Multan Road, Lahore on 18th February, 1984 and declared value of this plot as at Rs.6,000. The ITO did not consider this aspect of the case.

4. Before the learned IAC the assessee's case in substance was that the Bank deposits belonged to the assessee's clients and not to the assessee. In regard to the Vespa Scooter and Car the assessee's case before the IAC was that the addition of Rs.41,000 on account of purchase of vehicles had been discussed by the learned CIT(A) in his appellate order. However, this contention of the assessee was found to be incorrect by the IAC as according to him the appellate order was silent on this point. Moreover, the learned IAC was of the view that there was no explanation available on record as claimed by the assessee. In regard to the plot of land the assessee's contention was that it belonged to his son Sohail Akhtar Hafeez and that it was for him to explain in regard to this plot.

5. The learned counsel for the assessee has contended before us that there was no basis for proceedings under section 66-A of the Ordinance inasmuch as the order of the ITO was neither erroneous nor prejudicial to the interest of revenue. It has further been contended by the learned counsel for the assessee that it was a change of opinion and the learned IAC had no jurisdiction to form a different view than what had been formed by the assessing officer. It was submitted that the assessing officer was satisfied with the explanation of the assessee and therefore he accepted the original assessments made under section 59(1) of the Ordinance. It was further submitted that the assessee had satisfied the ITO that the deposits in the bank accounts of the assessee did not belong to him and in fact belonged to the assessee's clients. It was therefore concluded by the learned counsel that since the assessing officer was satisfied with the explanation of the assessee the learned IAC had no jurisdiction to reopen the assessee's case on the changed view. He has relied upon various case-law which need not be quoted here for the reasons to follow.

6. The learned IAC has reopened the assessee's case under section 66-A and not on account of change of opinion as the learned IAC's view is that no opinion had been expressed at all inasmuch as the assessing officer while passing the assessment order under section 132 of the Ordinance has ignored the various facts mentioned above. Factually it is evident from the order of the ITO that he has not dealt with the issues raised by the learned IAC in his order passed under section 66-A of the Ordinance. In the assessment order the ITO has laid stress on the question as to whether the assessee was a clearing agent or an importer and he has given finding that the payments were made through cheques and that most of the amounts received by the assessee were through cheques.

The ITO observed as under:---

"He (assessee) has filed sufficient evidence to prove that the assessee is not an importer but a Custom Clearing Agent. Enquiries made in this respect have also revealed that the assessee is a Custom Clearing Agent since long and not indulging in imports on his own behalf. All the peak deposits made from time to time represent cash or cross cheques received from other parties on whose behalf goods were got released."

The ITO further observed in his order as under:---

"In view of such circumstances I am satisfied that the assessee is a Custom Clearing Agent and his assessments for the charge years 1980-81 to 1985-86 were reopened on the verification Note received from Survey and Vigilance Wing through some misunderstanding as at the time of finalisation of these assessments the assessee hesitated to cooperate with the Department. Now after all these assessment orders have been set aside by the learned CIT(A) the assessee has cooperated with the department and furnished all sorts of evidence to prove that he is acting as a Custom Clearing Agent and not as an Importer. Owing to such circumstances issuance of notice under section 65 was not necessary for all the abovementioned years. Owing to such circumstances income declared by the assessee for all the assessment years is, therefore, accepted."

7. From the above quotations of the order of the ITO it is evident that the objections raised by the learned IAC are correct as the various points mentioned by the learned IAC in his order have been completely ignored. This obviously makes the order of the ITO as erroneous and also prejudicial to the interest of revenue. However, one thing is to be noted that the fads noted above in regard to the additions made under section 13 on account of purchase of scooter and car were, though admittedly ignored by the assessing officer, but these are relatable to the assessment year 1980-81 only. Therefore, these factors could justify the reopening of the case by the learned IAC for the assessment years 1980-81 only. These factors alone could not be a basis for reopening of the assessee's case for rest of the assessment years as no addition under section 13 of the Ordinance had been made even in the original assessment order. In the other assessment years namely from 1981-82 to 1985-86, the moot point was only the deposits in the bank account. It may not be out of place to quote the operating order of the learned CIT(A) who had set aside the assessment which is reproduced below:---

"It appears that in the light of abovementioned submission made on behalf of the appellant this case needs further scrutiny and resultantly the impugned assessment orders are set aside for de novo proceeding as warranted by the facts of the case."

It may further he stated that before the learned CIT(A) the assessee's contention was two-fold. One was against the bank deposits and the other was against the additions under section 13 of the Ordinance. As stated above, the additions under section 13 were relatable to the assessment year 1980-81 while the deposits were relatable to all these assessment years. We have already quoted the portion of the ITO's order wherein the assessing officer had given a clear cut finding that the assessee was a Clearing Agent and that "all the peak deposits made from time to time represent cash or cheques received from other parties on whose behalf goods were got released". Not only that, the learned IAC was associated with the reassessment proceedings when the assessing officer came to the conclusion that the peak deposits belonged to the assessee's clients and not to the assessee. The learned counsel for the assessee has filed a certified copy of the order-sheet which proves the assessee's contention. In one of such entries it has been so mentioned that:--

"Facts of the case discussed with the A.R. of the assessee at length across the table in presence of the worthy IAC, Range-111, Zone-A, Lahore. Enquiries have also conducted by me through certain quarters to know whether the assessee is indulging in import on his own accord or not. It is proved-beyond any shadow of doubt that the assessee is acting as a Custom Clearing Agent since long and has nothing to do with the imposts made by other parties. He receives the money from parties either through cheques/drafts or cash and deposits them in his own bank a/c for the clearance of the goods imported by others, as and when the occasion arises. It is because of this fact that the assessment has been finalised by accepting the declared income of the assessee under section 62/132 of the Income Tax Ordinance, 1979 after consulting the IAC on each and every point. Income for each year is assessed."

8. It appears that the learned CIT asked the assessing officer to make a report in this case and the assessing officer had submitted his report to him on 9th April, 1989 a copy of which has been placed on our record by the learned counsel for the assessee. After narrating all the facts the assessing officer observed:---

"All these facts were discussed with the then IAC, Range-III, Zone-A, Lahore under whose directions the declared income of the assessee for all the years was accepted:"

It will not be out of place to mention here that in the complaint some of the allegations levelled were against the son of the assessee Mr. Sohail Akhtar Hafeez an existing assessee of this Circle at NT No.05-05-1135628 assessment in whose case has been finalized and the allegations levelled against him have been dealt with."

The learned counsel for the assessee has also filed a copy of the office note of the ITO which is reproduced below:---

"Facts regarding the Bank deposits declared by the assessee as a Custom Clearing Agent were discussed in detail with the worthy JAC under whose directions details with regard to cross cheques and cash received from other parties by the assessee were obtained to prove the peak deposits in the bank by the assessee. It is because of this fact that the assessee has successfully proved that he is a Custom Clearing Agent and all the cheques of cash payment represented amounts received from other parties on whose behalf goods imported by them were got cleared from the Custom Authorities. Owing to such circumstances issuance of notices under section 65 has become ab initio null and void. After full discussions with the worthy IAC above exercise was made under his directions. The income as declared by the assessee for all the abovementioned years has been accepted owing to the circumstances as narrated above ITO."

9. From the above facts it is evident that so far as the assessment years 1981-82 to 1985-86 are concerned the moot point before the ITO was peak deposits in the bank. The assessing officer after thorough inquiries was satisfied that the deposits did not belong to the assessee but belonged to the clients of the assessee. In regard to this issue the learned IAC was also involved and from the office note it also appears that as a matter of fact the assessing officer made the assessment or, the direction of the IAC. This fact supports the contention of the assessee that this is a change of opinion of the IAC at least so far as the question of peak deposits is concerned. The learned counsel has relied upon the Tribunal's decision bearing TTA No.1563/LB/1984-85 dated 19th May, 1990 wherein under the similar circumstances the Tribunal held that where the IAC had approved the assessment order the reopening under section 66-A would amount to change of opinion and that in such circumstances the learned IAC should have checked the order at the time of the approval of the assessment order as to whether the order of the ITO was erroneous or prejudicial to the interest of revenue. We are clear in our mind that so far as the issue of peak deposits relating to the assessment years 1981- 82 to 1985-86 is concerned this was clearly a change of opinion by the learned IAC as the IAC had all along associated with the re-assessment and subsequently he is estopped to change the view and to hold that the assessing officer had passed an erroneous order prejudicial to the interest of revenue.

10. As stated above the question in the assessment year 1980-81 is entirely different inasmuch as in the earlier assessment the ITO had made additions under section 13 of the Income Tax Ordinance on account of purchase of Car and Scooter which has completely been ignored by the assessing officer. The contention of the learned counsel for the assessee that there had been a change of opinion is not available so far as the assessment year 1980-81 is concerned inasmuch as no opinion was expressed by the ITO in regard to the additions under section 13 of the Ordinance. Similarly the argument of the learned counsel for the assessee that the IAC had associated himself with the re assessment is also not available because of the fact that the additions under section 13 had not been brought to the notice of the learned IAC and therefore, there is no opinion whatsoever either by the ITO or by the IAC and therefore question of change of opinion does not arise. Another factor which has been taken note of by the learned IAC while dealing the case under section 66-A of the Ordinance was the purchase of land in the name of son of the assessee. This argument of the learned IAC is also without any basis for two reasons. Firstly, in the original assessment as well no addition on account of purchase of land had been made by the assessing officer. Therefore, if at all, it was the original assessment order which could be said to be erroneous and not the re-assessment order because the original order merged in the CIT(A)'s order and the re-assessment order had been passed by the ITO under the directions of the CIT(A) under section 132 of the Ordinance. Secondly, the ITO stated in the report made to the Commissioner that because the land was purchased by the son of the assessee who was also an existing assessee therefore this question has been dealt with in his case. The learned IAC has not said a word in regard to this fact as to whether this observation was correct or not. Without giving such finding the learned IAC could not say that the assessment order was erroneous.

11. For the foregoing reasons we maintain the order of the learned IAC in regard to the assessment year 1980-81 and dismiss the assessee's appeal. However, in regard to the assessment years 1981-82 to 1985-86 we find that the learned IAC's order is without any basis and he has wrongly held the order of the ITO as erroneous and prejudicial to the interest of revenue. The assessee's appeals for the assessment years 1981-82 to 1985-86 are accepted.

M.BA./1714/TOrder accordingly.