SUHAIL ABBAS KHAN VS PUNJAB PROVINCE
1996 P T D (Trib.) 1078
[Income-tax Settlement Commission]
Before Muhammad Mushtaq and Mrs. Safia Ch., Members
No.9442/Application/ITSC/lhr, decided on 09/06/1996.
(a) Income Tax Ordinance (XXXI of 1979)---
----S. 138D(i)---Application for settlement---Maintainability---Condition precedent application for settlement in cases where there is no undisclosed income lies with the Income Tax Settlement Commission before completion of assessment.
(b) Income Tax Ordinance (XXXI of 1979)---
-----Preamble & S. 138B(i)---Income-tax Settlement Commission---History and object of creation---Income-tax Settlement Commission cannot interfere in the assessment proceedings which have not given rise to any dispute between the assessee and the Income-tax Department so far.
Originally the Income Tax Settlement Commission was created to process the application in cases where assessee intended to declare income to the Income Tax Department which had not been declared by him previously. However, subsequently the functions of the Income Tax Settlement Commission were expanded and subsection (2-A) of section 138 was incorporated in the income Tax Ordinance, 1979.
Commission cannot interfere in the assessment proceedings, which have not given rise to any dispute between the assessee and the Income Tax Department so far. No appeal or revision lies against an intended action. Similarly no application lies with the Income Tax Settlement Commission against an intended action.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 138B(i)---Definition of 'case' as used in S.138B(i), Income Tax Ordinance, 1979 is in relation to provisions of S. 138B(i) of the said Ordinance.
(d) Income Tax Ordinance (XXXI of 1979)---
----Ss. 138B(i) & 138C(5)---Both the provisions of Ss. 138B(i) & 138C(5) of the Ordinance are not to be read in isolation.
1993 PTD 637 (Trib.) ref.
(e) Interpretation of statutes---
---- Statute is to be read as a whole and a provision is not to be read in isolation until and unless provided to be otherwise---Provision of a statute has to be construed keeping in view the other relevant provisions.
1993 PTD 637 (Trib.) ref.
(f) Interpretation of statutes-
---- Any interpretation which results in absurdity is not correct interpretation.
1993 PTD 637 (Trib.) ref.
(g) Income Tax Ordinance (XXXI of 1979)---
----S.138C(5)---Income Tax Settlement Commission ---Jurisdiction---Scope--?Provisions of S.138C(5), Income Tax Ordinance, 1979 have not ousted the jurisdiction of the Assessing Officer---Where an application is made to the Income Tax Settlement Commission before completion of assessment, the jurisdiction of Assessing Officer will not cease.
Although the Income Tax Settlement Commission has all the powers of an Income-tax Authority by virtue of section 138C(5) but these provisions have not ousted the jurisdiction of the assessing officer. No where in the Income Tax Ordinance it has been indicated that when application is made to the Settlement Commission before completion of assessment, the jurisdiction of Assessing Officer will cease.
(h) Income Tax Ordinance (XXXI of 1979)---
----S.138C(2-A)(b) & 138D(i)---Income Tax Settlement Commission Procedure Rules, 1994, Rr.8(1) & 8(2)---Application of assessee who has not declared any undisclosed income---Powers and functions of Income Tax Settlement Commission---Scope.
In cases where applications are made in' which assessee has not declared any undisclosed income, the powers of Commission have been specified. In such cases applications can be made only regarding disputes arising out of assessment order or an order made by the Appellate Additional Commissioner. There is no other contingency in which an application can be made in such cases. It is also pertinent to mention the provisions of Rules 8(1) and 8(2) of the Income Tax Settlement Commission Procedure Rules, 1994. Rule 8(1) required that application shall be made in prescribed form given in Schedule 1. The prescribed form of application clearly requires the assessee to indicate the tax demand under section 85 of the Income Tax Ordinance or after appeal order. Obviously this can be indicated only after assessment had been completed. Similarly the application form also requires the assessee to clearly indicate additions and disallowances made by the Assessing Officer, which are in dispute. The assessee is required to make application in prescribed form. If, the application of the assessee is not in prescribed form or incomplete then obviously the Income Tax Settlement Commission is not bound to process such an application.?
(i) Income Tax Ordinance (XXXI of 1979)---
----S. 138D(lA) ---Income Tax Settlement Commission Procedure Rules, 1994, R.8(2)---Application to Income Tax Settlement Commission can only be made if income-tax demanded on the basis of application is more than Rs.25,000.
(j) Income Tax Ordinance (XXXI of 1979)---
----S. 138D----Application to Income Tax Settlement Commission---Commission declined to give opinion on application of assessee where question raised had become of mere academic value for an Appellate Authority or Authority adjudicating disputes between the department and the assessee was not supposed to give its opinion on such questions.
1993 PTD 1482; 200 ITR 534; 1993 PTD 325 and 198 ITR 465 ref.
Muhammad Younas for Applicant.
Date of hearing; 15th May, 1996.
ORDER
1. In this case application has been made by the above named assessee for settlement of the disputed issues for the Assessment year 1994-95. The application made by the assessee received in this office on 27-3-1996. This application has been made by the assessee before completion of assessment in this case.
2. The contentions of the assessee are reproduced as under:--
"(1) That the applicant seeks legal redress from this Hon'ble Settlement Commission mainly for the reason that it has, this year, been subjected to unnecessary frightful harassment and extraordinary oppressive introspection is sought in an abnormally discriminate manner. This situation has created a reasonable justification for the applicant to move this Hon'ble Settlement Commission to ensure fair justice in the finalization of the assessment at a reasonable declared figure of income.
(2) That the applicant had filed its return of income on 31-7-1994 declaring a total income of Rs.2,32,348. Income tax assessment proceedings have, therefore, been initiated and the applicant is entitled to seek legal remedy towards fair and final assessment at a figure of total income computed in the manner laid down in the Income Tax Ordinance.
(3) That the petitioner company is a tax payer-of sizeable revenue and has been in the field with respectability. It has, this year, been subjected to unnecessary vexatious behavior from the Assessing Officer. From starting of the proceedings jurisdiction changed hands to about four officers. In addition the harassing situation further expanded when four different notices under section 62 of the Income Tax Ordinance, 1979 were given. This extraordinary treatment has created a justifiable reason in the mind of the Management of the applicant company that the assessing officer had utterly failed in culminating the assessment proceedings to a fair, reasonable and justifiable consequences.
(4) That the returned version is disbelieved because that mind of the present assessing officer is clearly settled and reason cannot move him to a fair treatment.
(5) That during the present proceedings against which the applicant seeks intervention of this Hon'ble Settlement Commission, the respondent conducted a raid and the premises of the petitioner company situated at Liberty Market were practically ransacked and all the stocks were physically checked and verified. 1n spite of their microscopic examination of the merchandise they miserably failed to find any discrepancy whatsoever either in the affairs of the business or maintenance of the books of accounts. Instead of appreciating the normal flow of business the respondent proposed an order of assessment contrary to the settled history of the case upto ITAT stage.
Four notices at a stretch at different intervals have been issued under section 62 of the Income Tax Ordinance which is clear reflector on the arbitrary, biased and prejudiced mind of the assessing officer because he is again exercising a practice contrary to the settled history. The proposal is still being made for acceptance of higher G.P. rate regarding both the locally purchased indigenous and foreign merchandise. It has been repeatedly explained that the company does not import any merchandise from abroad any every item of sale is being procured from the local market. The assessing officers engaged in thrusting his own imaginative arbitrary " decision of taxing the petitioner company at a higher figure of G.P. rate though the ITAT has accepted this intention for earlier years.,
In the light of the above situation it is requested that jurisdiction in this case may very graciously be assumed so that a fair and reasonable order ?of assessment could come into existence which should be made binding on the assessing officer."
3. Subsequently also the assessee forwarded his contention vide his A.R's. letter No. Nil dated 15-5-1996. The contentions of the assessee in this letter are also reproduced as under:
"That the application cited above was submitted by the assessee company with the intention to seek interpretation on the point of jurisdiction of this Hon'ble Court where the assessment proceedings have been initiated but the assessment has not yet been finalized and the assessee is aggrieved with the negative attitude of the Department in spite of involving the following law points as well as facts of the case:--
(i) Where the assessee has a settled history of G.P. rate -upto the ITAT.
(ii) Estimation of sales.
The Income tax Department was duly intimated about the submission of the Settlement Application before your honour but they did not bother and finalized the ex parte assessment before the date fixed for hearing before this Court. The assessment for the year under consideration remained pending for the last year, but as soon as the Department got intimation in regard of filing the settlement application before this Hon'ble Court, they instead of waiting finalized the ex parte assessment.
It is further submitted that in our opinion the subsection (i) of section 138B of the Income Tax Ordinance, 1979 gives jurisdiction to this Hon'ble Court to proceed on the settlement application submitted during the pending assessment proceedings and in accordance with the provisions of law the department should have waited for the verdict of your honour, but the department with mala fide intention finalized the ex pane assessment which deserves to be cancelled.
It is, therefore, prayed that keeping in view the law and facts of the case, the ex parte assessment may kindly be made undo and the proceedings on settlement application be initiated as if no ex parte assessment has been finalized. "
4. As indicated above, the assessee has made application in this case before completion of assessment. The attention of Mr. Muhammad Younas, Advocate, who attended on behalf of the assessee was brought to the fact that no application for settlement in cases where there is no undisclosed income lies with the Income Tax Settlement Commission before completion of assessment. How ever, the learned counsel of the assessee insisted that the application in this case was competent and the Income Tax Settlement Commission had jurisdiction to process the application made by the assessee in his case.
5. The learned counsel of the assessee contended that the provision of section 138B(i) clearly indicate that case means "any proceedings under this Ordinance for assessment, including additional assessment, appeal order, revision in connection with such proceedings of any person in respect of any year or years which may be pending before any income tax authority". According to the learned Counsel of the assessee the Assistant Commissioner of Income Tax who had initiated assessment proceedings was an income Tax Authority in the Income Tax Ordinance and that assessment proceedings were pending in this case hence Income Tax Settlement Commission was competent enough to process the application of the assessee.
6. Second argument advanced by the learned Counsel of the assessee is that a perusal of Income Tax Ordinance vide section 138C(5) indicates that the Income Tax Settlement Commission has all the powers vested in an income tax authority under this Ordinance, hence the Income Tax Settlement Commission could process the application made by the assessee.
7. We have carefully examined the contention of the assessee in this application and heard the learned Counsel of the assessee. Apart from the specific provisions ousting the jurisdiction of Income Tax Settlement Commission in such cases the application made by the assessee is not maintainable on the following grounds as well:--
(a) Income Tax Settlement Commission was brought into existence by the Government to settle the disputes. If there is no dispute then obviously there cannot be any settlement. The learned counsel of the assessee desires the Commission to interfere in the assessment proceedings which obviously have not given rise to any dispute between the assessee and the Income Tax Department so far. It is trite law that no appeal or revision lies against an intended action. Similarly no application lies with the Income Tax Settlement Commission against an intended action. The contention made by the assessee in first paragraph as outlined above is reproduced again even at the cost of repetition:--
"That the applicant seeks legal redress from this Honourable Settlement Commission mainly for the reason that it has this year been subjected to unnecessary frightful harassment and extraordinary oppressive introspection is sought in an abnormally discriminate manner. This situation has created a reasonable justification for the applicant to move this Honourable Settlement Commission to ensure fair justice in the finalization of' the assessment at the reasonable declared figure of income. "
8. From the above contention it is quite obvious that the grievance of the assessee is against the manner of completion of assessment. We are afraid this has not caused so far any dispute in which we could interfere for settlement. Further perusal of the record indicates that the assessing officer has issued notices under sections 61, 62 and section 13 of the Income Tax Ordinance before completion of assessment and has also got enquiries conducted as per contention of the assessee. We are of the view that the assessing officer is within his legal right in issuing these notices. However, if there is any grievance caused by the action of the ACIT, this requires an administrative remedy and proper forum for such a grievance is the concerned Commissioner of Income Tax or R. C. I. T.
9. The contents of the subsequent letter of the assessee dated 15-5-1996 are different than the contention made by the assessee alongwith the application. First paragraph of the assessee's A.R. letter dated 15-5-1996 is again reproduced even at the cost of repetition:--
"That the application cited above was submitted by the assessee company with the intention to seek on the point of jurisdiction of this Honourable Court where the assessment proceedings have been initiated, but the assessment has not yet been finalized and the assessee is aggrieved with the negative attitude of the department in spite of involving the following law points as well as facts of the case:--
(i) Where the assessee has a settled history of G.P. rate upto the Income Tax Appellate Tribunal.
The Income Tax Department was duly intimated about the submission of the Settlement Application before your honour but they did not bother and finalized the ex parte assessment before the date fixed for hearing before this Court. The assessment for the year under consideration remained pending for the last year but as soon as the Department got intimation in regard of filing the Settlement Application before this Honourable Court they instead of waiting finalized the experted assessment.
10. The contention of the assessee outlined above is different than the contention made by the assessee in the application. The contention of the assessee as indicated in the paragraph above is against the ex parte assessment completed by the Income Tax Department. If, so the assessee should have approached the concerned Commissioner of Income Tax.
11. The learned counsel of the assessee has relied on the provisions of sections 138D(i) and 138C(5) of the Income Tax Ordinance, 1979. These provisions are reproduced as under:--
138(B)(i) "Case means any proceedings under this Ordinance for assessment including additional assessment, appeal or revision connection with such proceedings, of any person in respect of any year or years which may be pending before an Income Tax Authority, Income Tax Appellate Tribunal or any Court on the date of making application under this subsection (i) of section 138D."
12. The above wording clearly indicates that the above definition of the case is in relation to provisions of section 138D(i) of the Income Tax Ordinance, which are reproduced as under:-- ?
"An assessee may, at any stage of his case, make an application in such form and in such manner as may be prescribed, containing full and true disclosure of his income which he may not have disclosed before the assessing officer, the manner in which such income has been derived, the additional amount of income tax payable on such income and such other particulars as may be prescribed to the Commission to have to case settled any such application shall be disposed of in the manner provided hereinafter:"
13. Tracing the history of legislation of Income Tax Settlement Commission, it is pertinent to point out that originally the Income Tax Settlement was created to process the applications in cases where assessee intends to declare income to the Income Tax Department which has not been declared by him previously. However, subsequently the functions of the Income Tax Settlement Commission were expanded and subsection (2-A) of section 138 was incorporated in the Income Tax Ordinance, 1979.
14. As far as provisions of section 138C (5) are concerned, these are reproduced as under:
"In addition to powers conferred on the Commission tinder this chapter it shall have all the powers which are vested 'in Income Tax Authority under this Ordinance. "
15. The learned counsel of the assessee has contended. that the Income Tax Settlement Commission has all the powers of an income tax authority, hence it can interfere in the assessment proceedings which is not correct interpretation of these provisions of section 138C(5) or even 138B(i) because these provisions are not to be read in isolation. A statute is to be read as a whole and a provision is not be read in isolation until and unless provided to be otherwise, 1993 PTD 637 (Trib.). They have to be construed keeping in view the other provisions relevant to functioning of Income Tax Settlement Commission. It is also accepted interpretation of law that any interpretation which results in absurdity is not correct interpretation. Although the Income Tax Settlement Commission has all the powers of any income tax authority by virtue of section 138C(5) but these provisions have not ousted the jurisdiction of the assessing officer. No where in the Income Tax Ordinance it has been indicated that when application is made to the Settlement Commission before completion of assessment, the jurisdiction of assessing officer will cease. So if the interpretation of the learned counsel of the assessee is accepted to be correct it will result in absurdity and chaos.
16. It is relevant here to point out the provisions of Income Tax Ordinance which clearly debar an application other than under section 1381)(1) for settlement before completion of assessment. A reference to the provisions of section 138C(2-A) had already, been made above. These provisions are reproduced as under:--
"The functions of the Commission shall be;
(a) To process and decide applications filed by the assessee declaring income not hitherto declared,
(b) to process and decide application filed by the assessee regarding tax disputes arising out of an assessment order or an order passed by an Appellate Additional Commission,
(c) to process Department's appeals filed before that ITAT for settlement or withdrawal thereof and
(d) any other functions specifically assigned by the Federal Government to the Commission.
17. At this stage special attention is required to the provisions of section 138C(2-A)(b) as reproduced above. In cases where applications are made in which assessee has not declared any undisclosed income, the powers of Commission have been specified. In such cases applications can be made only regarding disputes arising out of assessment order or an order made by the Appellate Additional Commissioner. There is no other contingency in which an application can be made in such cases. It is also pertinent to discuss the provisions of Rules 8(l) and 8(2) of the Income Tax Settlement Commission Procedure Rules, 1994. Rule 8(l) requires that application shall be made in prescribed form given in schedule I. The prescribed form of application clearly requires the assessee to indicate the tax demand under section 85 of the Income h Tax Ordinance or after appeal order. Obviously this can be indicated only after assessment has been completed. Similarly the application form also requires the assessee to clearly indicate additions and disallowances made by the assessing officer, which are in dispute. As pointed out above, the assessee is required to make application in prescribed form. If, the application of the assessee is not m prescribed form or incomplete then obviously the Income Tax Settlement Commission is. not bound to process such an application.
18. Secondly Rule 8(2) clearly indicates that application for settlement of disputes can only be made if Income Tax demand on the basis of application is more than Rs.25,000. Since in this case there is no income tax demand, hence application does not lie with the Income Tax Settlement Commission.
19. Even if for the sake of argument it is assumed that such an application as made by the assessee is competent then what the Income Tax Settlement Commission can do is obviously is to direct the Income Tax Department to proceed according to law. The assessing officer even without such directions is supposed to act accordingly.
20. Lastly in this case assessment has been completed after the assessee has made the above application as pointed out by the learned counsel of the assessee. The learned counsel has been informed that assessee can make fresh application now and indicate all his grievances in the application to be made, but the learned counsel has insisted that the present application should be adjudicated. But with the completion of assessment in this case, the contentions made by the assessee in the present application have become of only academic nature and any Appellate authorities or any authority adjudicating disputes between the Department and the assessee are not supposed to give its opinion on the academic questions 1993 PTD 1482, 200 ITR 534 and 1993 PTD 325 Notes 198 ITR 465.
21. Because of these reasons the application made by the assessee is infructuous misconceived and is dismissed.
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Mrs. Safia Ch. Member, ITSC???????????????????????????????????? Muhammad Mushtaq,
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M.B.A./217/T????????????????????????????????????????????????????????????????????????? Appeal dismissed