Income-tax Act (XI of 1922)----

----S.48---Martial Law Regulation No.32 of 1969--Income Tax Appellate Tribunal Rules, 1981, Rr.11 & 12---Additional tax---Time-barred appeal-- Limitation---Certified copy of order---As per Martial Law Regulation No.32 of 1969 people who had returned their incomes under Income-tax Act, 1922 for the assessment years 1960-61 to 1968-69 or returned incorrect incomes were asked to submit revised true returns ---Assessee returned income accordingly---After usual proceedings Revenue and assessee reached an agreement and assessment was framed accordingly---Special Circle Officer burdened the assessee with additional tax basing his order or M.L.R. 32 of 1969 read with S.48 of late Income-tax Act, 1922---Order further indicated that sums due for the assessment years 1963-64, 1964-65, 1967-68 and 1968 69 were paid after considerable delay---Period of default in respect of those sums were calculated at 5809 days each to impose penalty ---Assessee pleaded that proceedings had already become time-barred and, thus, action was unjustified and illegal ---C.I.T.(A) accepted the assessee's appeal and cancelled the imposition of additional tax---Revenue, feeling aggrieved, went into appeal before the Tribunal---Held, initiation of proceedings after lapse of 14 years appeared improper---Though no time limit was prescribed in the late Income-tax Act, 1922, yet the proceedings should have been initiated within reasonable time---Revenue had failed to comply with the requirements of Rr.11 & 12 of I. T. A. T. Rules, 1981 as the certified copy of the impugned order was not submitted---Revenue was held to have failed to rebut that funds were due to assessee in the years in which additional tax was imposed- Revenue had also filed to explain a delay of 14 years---Departmental appeals were dismissed in circumstances.

Muhammad Attique v. I.T.O., Khanpur 1994 PTD 132 ref.

Shahid Zaheer, D.R. for Appellant.

Muhammad Shafique (Chief Executive) for Respondent.

Date of hearing: 27th February, 1997.

ORDER

NASIM SIKANDAR (JUDICIAL MEMBER). ---On April 18, 1969 the then Chief Martial Law Administrator issued and enforced Income Tax (Correction of Return and False Declaration) Regulation. It was titled as Regulation No.32 of 1969. According to clause (2) of this Regulation any person who had filed a return for his income under the late Income-tax Act of 1922 for the assessment year 1960-61 till the year 1968-69 and who has reason to believe that the return so filed was not correct may file a revised return of this true income by-16th June, 1969. Immunity from prosecution or other penalties was promised if the assessee came up with a true declaration of his "excess" income.

2. The assessee before us, a private limited company deriving income from manufacture and sale of cloth at the relevant time came forth and filed returns for the years 1960-61 to 1968-69 declaring consolidated excess income at Rs.1,00,000. After usual proceedings the Revenue and the assessee reached an agreement on 9-6-1972. As per the assessment framed on agreement basis net income was assessed at Rs.5,50,000 to be devided equally on five assessment years viz. 1963-64., 1964-65, 1965-66, 1967-68 and 1968-69. The year 1966-67 was left out of the agreement for the reason that a reference between the parties was pending before the Honourable Lahore High Court.

3. The Special Officer, Circle Faisalabad through an order recorded on 28-6-1988 under MLR 32 read with section 48 of the late Income-tax Act of 1922 burdened the assessee with additional tax at a sum, of Rs.70,595. According to para. 2 of this order an exercise was carried out in the office of the concerned officer to verify the position of demands created under MLR 32 and the payments made by the assessees. As a result of this exercise, according to the assessment order, it transpired that as against total demand at Rs.3,08,000 created on 12-6-1972 for the aforesaid five years the assessee had paid a sum of Rs.2,67,742 till 28-3-1974. Therefore, a sum of Rs.40,258 was still outstanding against it. It was noted that per para. 4 of the aforesaid MLR No.32 d-ed 15-4-1969 the assessee was obliged to make payment of the tax due on the excess income within the prescribed time and was liable to pay additional tax at a rate of 8 % per annum on so much of outstanding demand which had not been cleared. The assessment order further indicates that the sum of Rs.500, Rs.1,450, Rs.16,773 and Rs.21,535 respectively due in respect of the assessment years 1963-64, 1964-65, 1967-68 and 1968-69 were paid after considerable delay. The period of default in respect of these sums was calculated at 5809 days each to impose penalties at the aforesaid rate amounting in all as aforesaid to Rs.70,595. The assessee duly replied to the show-cause notice dated 14-6-1988. It was pleaded that proceedings had already become time-barred and no action in this regard was justified. It was further stated that at best the assessing officer could rectify its order under the provisions of subsection (4) of section 156 of the Income Tax Ordinance within a period of four years. Since it had already long gone, the proceedings were described as totally illegal. However the Special Officer disregarded the defence and proceeded to calculate additional tax keeping in view the aforesaid amounts having remained unpaid for a number of days calculated in respect of each alleged default. It appears that on 28-11-1988 the Income Tax Officer Circle Unit No. l Faisalabad rectified its earlier order under the provisions contained in section 35 of the late Act of 1922. According to this order the assessee represented against calculation of additional tax and after inquiry a mistake apparent from record was found to have crept in the same. Therefore, fresh calculation of additional tax was made by reducing the amount of additional tax to Rs.21,989.

4. Both the orders so made on 28-6-1988 and 28-11-1988 were challenged in first appeal. Learned first appellate authority CIT(A), Faisalabad on 23-7-1989 accepted the appeal and cancelled the imposition of additional tax both as originally calculated and then rectified under section 35 on 28-11-1988. This has grieved the Revenue.

5. Parties have been heard. The assessee is represented by its Chief Executive Muhammad Shafique. For the Revenue it is averred that the first appellate authority clearly erred in law as well as in fact by allowing the impugned relief inasmuch as the assessee had admitted late payments of the tax due. The Chief Executive of the assessee company on the other hand denies that there has ever been a delayed payment. It is also submitted that even if there had been one, the Revenue ought to have initiate proceedings within a reasonable time. He claims that the total amount of tax created as a result of the aforesaid agreed assessment was duly paid up to 30-5-1974. It is rather stated that the assessee had in fact made over payments of Rs.17,665, Rs.10,605, Rs.15,165 and Rs.9,022. These amounts as refund were duly acknowledged by the Revenue through notices issued on 31-10-1973, 5-6-1973, and 23-6-1972. For the assessee it is also contended that the initiation of proceedings or imposition of additional tax after a lapse of 14 years was totally illegal as the Martial Law Regulation under which it was imposed had also lapsed. In support of the submission that where no time limit was prescribed for doing an act it must be done within a reasonable time; reliance is placed upon 1994 PTD 132 re: Muhammad Attique, ITO, Kanpur. For the assessee objections are also directed against maintainability of these appeals. It is stated that in absence of certified copies of the order appealed against and lack of intimation of appeal to the respondent under Rule 12 of the ITAT Rules, 1981 these appeals are not entertainable.

6. Having heard the parties we find a lot of (force in the submissions made for the assessee. Learned first appellate authority has recorded a finding of fact that in the aforesaid years not only that the whole demand had been made good by the assessee but also that refunds had fallen due to it. Also that this fact was fully acknowledged by the Revenue through notices issued from time to time as detailed above. This finding of fact has not been challenged by the Revenue even in the grounds of appeal. Leaned D.R. has also not been able to controvert this portion of the impugned order. It is noted that the Acting Wafaqi Mohtasib (Rtd.) Mr. Justice Aslam Riaz Hussain on 31-1-1990 allowed the complaint of the assessee against the Revenue and finally directed that the assessee should be refunded a sum of Rs.1,52,615. From para. 3 of the order it appears that on being served with a copy of the complaint the Revenue immediately despatched a refund voucher of Rs.70,085. However, as observed above, the Wafaqi Mohtasib allowed whole of the claim of the assessee although the Revenue had admitted only part of it.

7. Be that, as it may, the fact remains that initiation of proceedings after a lapse of almost 14 years per se appear improper. Although no time limit was prescribed under the late Act of 1922 of for that matter under the replacing legislation of Income Tax Ordinance, 1979 yet the proceedings had to be initiated within a reasonable time: As observed by His Lordship of the Allahabad High Court in the aforesaid decision relied upon by the assessee: Muhammad Attique even where no time limit was prescribed for the purpose, the initiation of proceedings must take place within a reasonable time. In our view lapse of 14 years cannot by any standard be described as a reasonable time for imposition of additional tax.

8. The objections of the assessee against maintainability of these appeals also carry weight. The Revenue has failed to comply with the requirements of both rules 11 and 12 of the ITAT Rules, 1981. Neither a certified copy of the consolidated impugned order has been submitted with the memo. of appeal nor the required certificate under Rule 12 has been submitted to affirm that a copy of memorandum and grounds of appeal was served upon the respondent/assessee through registered post.

9. The upshot of the above is that the Revenue has failed to rebut as a matter of fact that refunds were due to the assessee in the years in which additional tax was imposed for failure to discharge liability within due date. On legal premises again it has not been able to explain a delay of almost 14 years in the imposition of additional tax. As noted above, these departmental appeals also do not conform to the said rules of this Tribunal.

10. These shall therefore be dismissed.

C.M.S./409/Trib.Appeals dismissed.