1998 P T D (Trib.) 2896

[Income-tax Appellate Tribunal Pakistan]

Before Nasim Sikandar, Judicial Member and Shariq Mamood, Accountant Member

M. As. Nos. 50/LB to 59/LB of 1995, decided on 23/10/1995.

(a) Income-tax---

----Principles of res judicata---Application---Principle of res judicata is not applicable in the income-tax proceedings because it is a settled proposition of law that every assessment year is an independent accounting period and a person/assessee claiming exemption will have to establish its claim for every assessment year---An expense allowed or an exemption given in one year cannot be claimed as a matter of right in all subsequent years and the Revenue will be well within its right to require the assessee to establish the claim for exemption whenever it is claimed---Income Tax Ordinance (XXXI of 1979), S.14.

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

----S.156---Rectification of mistakes---Principles.

1993PTD 110 rel.

Siraj Khalid for Applicant.

Qaiser M. Yahya, D.R. for Respondent.

ORDER

1.These miscellaneous applications have been moved at the instance of a Cooperative Society praying that since there were mistakes of facts and law in the consolidated order passed in I.T.A. Nos. 189 to 198/LB of 1988-89 dated 23-2-1995 these may be recalled and rectified in accordance with law.

2.The applicant is a cooperative housing society and is engaged in the business of acquiring land, developing it and selling it to its members in small plots. In response to notices issued by the Assessing Officer returns were filed for the assessment years 1976-77 to 1985-86 at various incomes. However, exemption from levy of income-tax was claimed per provisions of clause (103) of Second Schedule to the Income Tax Ordinance. In respect of interest income as well it was stated that income from this source also stood exempted inasmuch as the society was being operated at no profit no loss basis as per clause (49) of Bye-Laws of the Society. The Assessing Officer rejected the claims and framed consolidated assessments in respect of these years on 23-6-1986. The first appeals taken to C.I.T.(A) Zone III, Lahore succeeded on 23-10-1986. Learned First Appellate Authority allowed the claimed exemption under clause (103) of the Second Schedule to the Ordinance with respect to the income derived from dealing with the members. Income from admission fee demarcation fee, maintenance etc., was also excluded from the assessment on the doctrine of mutuality and was found to be covered by the benefits allowed under the aforesaid clause of the Second Schedule to the Income Tax Ordinance. In case of interest on deposits with banks it was directed that the Assessing Officer should have assessed such income only after deducting overheads as may be attributable to the earning, management, control, supervision and dispensation of income under this head. It was further directed that reasonable expenses as being allowed in the case of other societies should be allowed and the assessment made accordingly. The Department did not feel, satisfied and agitated the matter before this Tribunal through I.T.As. Nos. 3411 to 3420, decided on 23-5-1988. A Division Bench of this Tribunal found that the First Appellate Authority was justified in observing that in similar other cases income from dealing with members was found to be exempt. An example of the Lahore Cantt. Cooperative Housing Society was quoted in this respect. Therefore, no interference was made in the first appellate order dated 23-10-1986. On remand the Assessing Officer again framed a consolidated assessment order on 31-1-1988 for the assessment years 1976-77 to 1985-86 under section 132/62 of the Income Tax Ordinance. The directions of the First Appellate Authority were implemented and the income earned by the Society from dealings with the members was allowed exemption under the said provisions of the Second Schedule to the Ordinance. However, income from interest was found chargeable to tax and the A.R. of the assessee was asked to explain whether the expenses claimed were expended wholly and exclusively for the purpose of earning interest income. On its admission that claimed expenses were not spent wholly and exclusively for the purpose of earning of interest income these were held not allowable. It was further noted that the income earning from members being exempt as per clause (103) of the Second Schedule to the Ordinance there was no reason to allow the expenses which were incurred to earn income not liable to tax. In the second round of appeals decided on 18-4-1988 by C.I.T.(A), Zone-II, Lahore the claim for exemption with regard to interest income was accepted with the following observations:---

"It was claimed that the Income Tax Officer should have allowed proper expenditure under, the law while determining the income from this source. In the case of Lahore Cantonment Cooperative Housing Society Limited, Lahore 10% of overhead expenses were allowed by the CIT (Appeals) against such income on the plea that unless funds were mobilized after meeting certain overhead expenses no surplus fund could be available and interest income could be earned and this treatment accorded by the CIT(A) was upheld by the learned Tribunal vide I.T.A. Nos.3381 to 3391 of 1984-85 dated 31-3-1986 keeping that in view the I.T.O. is directed to allow 10% of the overhead expenses claimed in all the years under appeal when computing income from this source."

The department assailed the first appellate order and the above observations before this Tribunal through I.T.A. Nos.189 to 198/LB of 1988-89 (assessment years 1976-77 to 1985-86). These appeals were disposed of through a consolidated order made on 23-2-1995. This Tribunal found that an expense must have been laid out or expended strictly with the object of earning of the income against which it is being claimed. Also that in case, of the kind before us while considering an expense against interest income the claimant as well as the Revenue Officer allowing the expense must make out a case that the interest income could not have been achieved, or at least facilitated wholly or partly if the claimed expenses had not been incurred. Finding that no such- claim was ever made by the assessee Society in any of the years under review the appeals were allowed and the order of the Assessing Officer was restored.

3. The applicant society claims that mistakes of facts as well as law has crept in the aforesaid order of this Tribunal inasmuch as this Tribunal misconceived the facts that the eligibility of the expenses against interest income was neither mooted before the Tribunal nor it was ruled upon in the earlier round of second appeal culminated into the consolidated order, dated 23-5-1988 in I.T. Nos.3411 to 3420/LB of 1986-87 (Assessment years 1976-77 to 1985-86). It is further submitted that this Tribunal failed to raise objection against allowing of 10% expenses against interest income in the earlier round, it could not agitate the matter in the appeals before this Tribunal Also that this Tribunal failed to take judicial notice that the Revenue was in fact in appeal against the first appellate order recorded in the first round. It is also claimed for the assessee that the Division Bench of this Tribunal differed with the order, dated 31-3-1986 in I.T.A. Nos.3381 to 3391 of 1984-85 a judgment passed by another Division Bench of this Tribunal without resorting to proper procedure. According to the assessee it was incumbent that the Division Bench hearing departmental appeal in the second round ought to have requested the Chairman to constitute a Larger Bench instead of differing with an earlier decision by a learned Division Bench. The application of principle of estoppel is also claimed to have been mooted at the time of arguments through allegedly underwent unnoticed in the order recorded by this Tribunal on 23-2-1995.

4.Parties have been heated. Learned counsel for the assessee has repeated his submissions that he had earlier made in the applications. A lot of stress has been placed on the principle of res judicata. Some reported decisions have been referred to state that the rules underlying the principle of res judicata do apply even in tax matters. It is also alleged that the Revenue failed to agitate the matter of allow ability of expenses against interest income before this Tribunal in the earlier round and having failed, it could not agitate the same matter again in the second round. The alleged disapproval of earlier decision of a Division Bench is also described to be improper on the ratio of reported decisions cited as 1993 PTD 110 = (1977) 110 ITR 453.

5.Learned D.R. resists the prayer on the ground that the assessee is necessarily seeking review of the order of this Tribunal which is untenable at law.

6. Having heard the parties we are inclined to agree with the submissions made for the Revenue. The alleged mistakes of facts as well as of law have already been dealt with at sufficient length in the order of this Tribunal, which is sought to be rectified. In the first instance it is incorrect to say that we recorded any difference of opinion with the judgment of the Division Bench in the earlier round of proceedings. The facts as well the principles of law involved in such situation have adequately been explained m the order of this Tribunal dated 23-2-1995. The cases referred with regard to application of principle of res judicata are also not applicable before us because it is a settled preposition of law that every assessment year is an independent accounting period and a person/assessee claiming exemption will have to establish its claim for every assessment year. An expense allowed or an exemption given in one year cannot be claimed as a matter of right in all subsequent year and the Revenue will be well within its right to require the assessee to establish the claim for exemption whenever it is claimed. The submissions made in the application qua filing of appeal by the department m the earlier round is also misconceived. In para 7'of the order dated 23-2-1995 we were referring to the appeal filed by a Co-operative Society in the parallel case are not to the departmental appeals filed against the present assessee. Further, the view point of this Tribunal has expressly been detailed in para. 7 as well as para 10 of the order recorded on 23-5-1995. The views adopted by the Division Bench have already been explained with reference to the alleged precedent or the earlier view of this Tribunal in para. 10 of the order se recorded. Therefore, it needs no reputation at all.

7. To us it appears that the assessee is seeking review of the order of this Tribunal dated 23-2-1995, by plucking imaginary loophole or Identifying supposed pit falls in the order of this Tribunal. If such-like applications are sustained, no judicial order can attain finality.

8. The scope and powers of Income Tax Authority as well as this Tribunal to rectify a mistake apparent from the record has recently been considered by the Supreme Court of Pakistan in re: 1992 PTD 570. Their Lordships held that:

"Essential condition for exercise of such power, power to rectify any mistake which is apparent from the record is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require any investigation or further evidence. A mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Where an officer exercising powers to rectify any mistake apparent from the record enters into controversy, investigates into the matter, reassesses the evidence or takes into consideration additional evidence and on the basis interprets the provision of law and forms an opinion different from the order then it will not amount to rectification of the order."

9. As observed above the applicant is seeking review of our order by putting forth fresh reason or by raising certain questions as grounds as if we are sitting in appeal against our own order. The assessee cannot be obliged either on facts or in law. The aforesaid judgment of the Supreme Court of Pakistan makes it abundantly clear that the kind of mistake the assessee in claiming to have crept in the order cannot be seen floating on the face of the order of this Tribunal.

10. Therefore, these applications fail.

M.B.A./537/Trib.Applications rejected.