Income Tax Ordinance (XXXI of 1979)---

----Ss.. 66-A & 59---Power of I.A.C. to revise I.T.O.'s order ---Self- Assessment Scheme, 1988-89, para. 4 (ii) ---Assessee got factory on lease-- Assessee's case was selected for total audit under para. 4 (ii) of Self -Assessment Scheme, 1988-89---I.A.C. considering the assessment a. erroneous and lease arrangement being fictitious, cancelled the assessment under the provisions of S.66-A of the Ordinance---Validity---Held, leave was made in the assessment year 1988-89 and the arrangement stood accepted by the department in the earlier two years---No reason was recorded to declare said order under S.66-A to be a legal order---Order of Assessing Officer was ordered to be restored while the order under S.66-A stood cancelled in circumstances.

I.T.A. No.8001/LB of 1991-92 and I.T.A. No.2125/LB of 1992-93 ref.

Ch. Bashir Ahmad for Appellant.

Ch. Safdar Hussain, D.R. for Respondent.

Date of hearing: 29th April, 1997.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---The appeal in this case has been filed by the assessee contesting cancellation of the order under section 66-A.

2. The brief facts of the case are that the assessee obtained factory named M/s. Al-Imran Textile and Processing Mills (Pvt.) Ltd., Jhumra Road, Faisalabad on lease during the assessment year 1988-89 and his income therefrom continued to be assessed by the department. The return declared by the assessee during the year was selected under para. 4(ii) of the Self-Assessment Scheme for total audit. and the income therefrom was assessed at Rs.2,50,000 as against declared by the assessee as Rs.58,799. The I.A.C. considered this assessment to be erroneous and cancelled the same under provisions of section 66-A by observing that the lease arrangement was fictitious. Without going into the legal aspects of the matter as to whether lease arrangement having once been accepted can be termed as erroneous and prejudicial to the interest of revenue, the A.R., brought our attention to the acceptance of the department of this lease arrangement in the earlier years on direction of Income Tax Appellate Tribunal vide I.T.A. No.8001/LB/91-92 and ITA No.2125/LB/92-93 for the assessment years 1988-89 and 1989-90. He also informed that for the assessment year 1990-91 the department has accepted lease income in the case of the lessor. He argued that the department having accepted the income in the hands of the lessor was estopped under law from rejecting the lease arrangement in the hands of the lessee.

The D.R., however, supported the order of the learned IAC with the arguments that the arrangement was fictitious and the cancellation under section 66-A is fully justified. We are unable to agree with the learned D.R. The lease was made in the assessment year 1988-89 and the arrangement now stands accepted by the department in the earlier two years. Besides, the same has been accepted in the case of the lessee. We, therefore, do not find any reason to declare the order under section 66-A as a legal order and thereby cancel the same. The effect of this order is that the order of the ITO stands restored while the order under section 66-A stands cancelled.

C.M.S./425/Trib. Order Accordingly.