1995 P T D 882
[Lahore High Court]
Before Ahmad Saeed Awan, J
Sh. ABDUL SATTAR
Versus
COMMISSIONER OF INCOME-TAX, ZONE `C' and 2 others
Writ Petition No.152 of 1995, decided on 02/02/1995.
Income Tax Ordinance (XXXI of 1979)----
----Ss. 66-A [as amended by Finance Act (XII of 1991) and Finance Act (VII of 1992)] & 129, 134 & 137---C.B.R. Circular No.8 of 1991, dated 30-6-1991-- Appeal---Revision---Reference---Provisions of S.66-A, Income Tax Ordinance, 1979 being mandatory in nature, shall apply even if an appeal has been filed under Ss.129, 134 & 137 or a reference has been made under S.136 of the Income Tax Ordinance, 1979---Where an appeal or reference has been decided, the revision of erroneous order of I.T.O. will still be possible in respect of a point or issue which was not the subject-matter of such appeal or reference.
An assessee has a right either to file an appeal or revision against the assessment order made by the Income Tax Officer/Deputy Commissioner of Income Tax; but no remedy was available prior to the amendment in section 66-A, to check manoeuvred and erroneous order prejudicial to the interests of revenue. Under old section 34-A of the repealed Act or even under section 66-A of the Ordinance the frivolous appeals were filed to protect manoeuvred and erroneous orders prejudicial to the interest of revenue made by the Income Tax Officer in favour of assessee, only to exclude the jurisdiction of Inspecting Assistant Commissioner under section 66-A of the Ordinance.
To safeguard the interest of revenue and to fulfil the lacuna, the legislators thought it advisable to amend section 66-A by inserting subsection (1-A) to it by Finance Act, 1991, and by adding "explanation" to the section by Finance Act, 1992 to cover jurisdiction of I.A.C. under section 66-A of the Ordinance.
Now, as amended, the provisions of section 66-A of the Ordinance are applicable even if any appeal has been filed or a reference has been made if the order is prejudicial to the interest of revenue. However, the consideration to reopen the matter must be judicious and based on reasonable material under sub-clause (a) of subsection (1-A) of section 66-A. Further, even where an appeal or reference has been decided, the revision or erroneous order of Income Tax Officer/Deputy Commissioner of Income Tax will be still possible in respect of a point or issue which was not the subject-matter of such appeal or reference under sub-clause (b)(1-A) of section 66-A.
Though an order passed by the I.A.C. under section 66-A of the Ordinance, 1979 was not appealable under section 134; section 134 has now been amended by Finance Act, 1994 in a manner that all the orders passed by an I.A.C./Additional Commissioner of Income-tax under section 66-A have become appealable.
In the present case, the assessee twice filed revision against the order of I.A.C. before the Commissioner of Income-tax but each time revision had been rejected by the Commissioner of Income-tax on merits:
Held, the provisions of section 66-A, being mandatory in its nature shall apply even if an appeal has been filed under sections 129, 134 and 137 or a reference has been made under section 136. Further, where an appeal or reference has been decided, the revision of erroneous order of I.T.O. will still be possible in respect of a point or issue which was not the subject-matter of such appeal or reference.
Naveed Amjad Andrabi for Petitioner.
Liaquat Nasir on behalf of Zahid Pervez for Respondents.
ORDER
The brief facts of the writ petition under Article 199 of the Constitution are that the petitioner's assessment for the year 1991-92 was made under section 62 by the respondent No.3 Income Tax Officer at Rs.2,47,254 against the declared income of Rs.58,000. The petitioner preferred an appeal against the said order of respondent No.3 before respondent No.l which was decided on 12th July, 1993 and the order was set aside.
2. During the pendency of appeal before respondent. No.1, the respondent No.2 issued a show-cause notice on 16-6-1992 stating there in that "the assessment is erroneous in so far as it is prejudicial to the interest of revenue. This observation is based on the following facts ... " and called for explanation on the facts mentioned in the notice as to why the assessment may not be cancelled under section 66-A of Income Tax Ordinance, 1979. The petitioner submitted the requisite explanation called for on 28-6-1992; resultantly, the respondent No.2 cancelled the assessment made by the Income Tax Officer respondent No. 1, dated 27-5-1992 vide order passed under section 66-A, dated 30-6-1992 and issued direction for fresh assessment on the facts and merits of the case.
3. The petitioner aggrieved by the said order, preferred a revision petition before the respondent No.l assailing the order under section 66-A on various grounds which was set aside by the respondent No.l vide his order, dated 11-11-1992 with the following observation:--
"It is evident from the above that the explanation of the petitioner had not been properly considered. It would, therefore, be in the interest of justice to set aside the I.A.C.'s order under section 66-A with the directions that the I.A.C. should consider the explanation for the discrepancies submitted by the petitioner and drop the proceedings under section 66-A, if all the discrepancies are satisfactorily explained for the discrepancies not reconciled, adverse inference may be drawn so as to modify the original order to the extent found prejudicial to the interest of revenue. The cancellation of the order without elucidating the erroneousness of the order and the injury of the revenue is set aside in circumstances."
4. The respondent No.2 in pursuance of the order passed by respondent No.1 issued a show-cause notice, dated 21-1-1993 in which the previous facts were repeated; in response to which a detailed explanation point-to-point elaborately was submitted on 28-1-1993 by the petitioner and it was urged that the proposed action under section 66-A was not justified and it tantamount a change of opinion which the law does not permit. The respondent No.2 issued another notice under section 66-A on 28-2-1993 wherein almost the same points were again raised; to which reply, was submitted by the petitioner on 6-3-1993.
5. The respondent No.2 passed order under section 66-A and the assessed income was enhanced/modified at Rs.8,60,768 against Rs.2,47,000 already assessed by the respondent No.3; aggrieved by the said order, the petitioner again filed a revision petition before respondent No.l, which was disposed of by respondent No.l by justifying the order under section 66-A passed by the respondent No.2; hence this petition.
6. The question arising out of the writ petition is "whether the respondent No.2 i.e. I.A.C. is competent under section 66-A to reopen an already concluded transaction by the Income-tax Officer on the basis of change and difference of opinion under section 66-A of the Ordinance 1979".
7. It is worth mentioning that the repealed Income Tax Act, 1922 was amended in 1959 and section'34-A was inserted by Finance Act, 1959 being parallel to section 66-A of the Ordinance, 1979. The application of provisions of section 34-A were explained in Circular No.9 of 1959, dated 15th April, 1959 as under:--
"The powers so given to Inspecting Assistant Commissioner are very wide and in a way this new section vests in them all the powers of an Appellate Assistant Commissioner with the significant difference that an Appellate Assistant Commissioner .can reduce or enhance an assessment or penalty only when appeal has been filed before him while an Inspecting Assistant Commissioner can pass an order under the new section of his own accord, but restrictions were imposed upon the Inspecting Assistant Commissioner by the C.B.R. to avoid conflict of opinion between Appellate, Assistant Commissioner and Inspecting Assistant Commissioner should not take up any case of enhancement of the income where an appeal was pending before the Appellate Assistant Commissioner or the Tribunal; in such cases where Inspecting Assistant Commissioner thought that there was a case of enhancement of the income, he was bound to bring into the notice of the Appellate Assistant Commissioner or Tribunal through Income Tax Officer; the Inspecting Assistant Commissioner was only competent to take action under section 34-A only in cases where no appeal was pending."
8. The section 34-A of the Income-tax Act, 1922, was deleted when the Income Tax Ordinance, 1979, was promulgated; perhaps the author of the Ordinance thought that it was not required as the Inspecting Assistant Commissioner and Income Tax Officer both had started making assessments; hence the Inspecting Assistant Commissioner under the Income Tax Ordinance, 1979 had no power to revise the order of Income Tax Officer as it was enjoyed by the I.A.C. under section 34-A of the repealed Act till section 66-A was inserted by Finance Act, 1980: which is reproduced here:--
"66-A. Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order.--(1) The Inspecting Additional Commissioner may call for and examine the record of any proceedings under this Ordinance and if he considers that any order passed therein by the Deputy Commissioner is erroneous in so far as it is prejudicial to the interests of revenue he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment to be made."
And subsection (1-A) to section 66-A was inserted by Finance Act, 1991, which is as under:--
"(1-A) The provisions of subsection (1) shall in like manner, apply--
(a) Where an appeal has been filed under sections 129, 134 and 137, or a reference has been made under section 136, against an order passed by the Deputy Commissioner; and
(b) Where an appeal or reference referred to in clause (a) has been decided, in respect of any point or issue, which was not the subject matter of such appeal or reference.
(2) No order under subsection (1) shall be made after the expiry of four years from the date of the order sought to be revised.
(Explanation.--For the purpose of this section, an order prejudicial to the interests of revenue shall include an order passed without lawful jurisdiction)."
9. The very purpose of amending the abovesaid subsection (1-A) has been elaborately explained by the C.B.R. in its Circular No.8 of 1991, dated 30th June, 1991 as under:--
"Section 66-A provides that where an order passed by the Income Tax Officer is found to be erroneous in so far as it is prejudicial to the interest of revenue, the Inspecting Assistant Commissioner (IA.C.) may revise such order. However, no such order could be revised by the IA.C. against which an appeal was filed by the assessee. Resultantly, frivolous appeals were sometimes filed in order to protect the erroneous orders against any future revision by the I.A.C:"
10. An assessee has a right either to file an appeal or revision against the assessment order made by the Income Tax Officer/Deputy Commissioner of Income-tax but no remedy was available prior to the amendment in section 66-A to check manoeuvred and erroneous order prejudicial to the interest of revenue. Under old section 34-A of the repealed Act or even under section 66-A of the Ordinance as already observed the frivolous appeals were filed to protect manoeuvred and erroneous orders prejudicial to the interest of revenue made by the Income Tax Officer in favour of assessee, only to exclude the jurisdiction of Inspecting Assistant Commissioner under section 66-A of the Ordinance.
11. To safeguard the interest of revenue and to fulfil the lacuna, the legislators thought it advisable to amend section 66-A by inserting subsection (1-A) to it by Finance Act, 1991, and by adding "explanation" to the section by Finance Act, 1992 to cover jurisdiction of I.A.C. under section 66-A of the Ordinance.
12. Now, as amended, the provisions of section 66-A of the Ordinance are applicable even if any appeal has been filed or a reference has been made if the order is prejudicial to the interest of revenue. However, the consideration to reopen the matter must be judicious and based on reasonable material under sub-clause (a) of subsection (1-A) of section 66-A. Further, even where an appeal or reference has been decided, the revision or erroneous order of Income Tax Officer/Deputy Commissioner of Income Tax will be still possible in respect of a point or issue which was not the subject-matter of such appeal or reference under sub-clause (b)(1-A) of section 66-A.
13. Though an order passed by the I.A.C. under section 66-A of the Ordinance, 1979 was not appealable under section 134; section 134 has now been amended by Finance Act, 1994 in a manner that all the orders passed by an IA.C./Additional Commissioner of Income-tax under section 66-A have become appealable.
14. In case in hand; the petitioner twice filed revision against the order of I.A.C. before the Commissioner of Income-tax but each time revision had been rejected by the Commissioner of Income-tax on merits.
15. The outcome of the above discussion is that the provisions of section 66-A, being mandatory in its nature shall apply even if an appeal has been filed under sections 129, 134 and 137 or a reference has been made under section 136. Further, where an appeal or reference has been decided, the revision of erroneous order of I.T.O. will still be possible in respect of a point or issue which was not the subject-matter of such appeal or reference. The petition is without merits and is hereby dismissed without no order as to costs.
M.BA./A-795/L Petition dismissed.