I.T.A. NO. 1391/LB OF 1999, DECIDED ON 22ND MAY, 1999. VS I.T.A. NO. 1391/LB OF 1999, DECIDED ON 22ND MAY, 1999.
1999 P T D (Trib.) 2853
[Income-tax Appellate Tribunal Pakistan]
Before Inam Ellahi Sheikh, Accountant Member and Syed Nadeem Saqlain, Judicial Member
I.T.A. No. 1391/LB of 1999, decided on /01/.
nd
May, 1999. Income Tax Ordinance (XXXI of 1979)---
----Ss.66-A, 59-D & 62---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Assessee obtained C.V.T. Certificate for purchase of plot on 28-12-1994 and failed to declare said plot in the wealth tax return for the assessment year 1995-96---Show-cause notice to reopen assessment completed under S.62, Income Tax Ordinance, 1979 by the Assessing Officer for the assessment year 1995-96 on account of said plot was not considered in the assessment order---Declaration of said plot was filed by assessee, in the meanwhile under S.59-D, Income Tax Ordinance, 1979, and accepted in the consolidated order passed under. S.62 for the assessment years 1996-97. & 1997-98---Assessment for the, assessment year 1995-96 was cancelled by Inspecting Additional Commissioner on the ground that neither wealth statement was called for by the Assessing Officer nor, the plot was declared in the wealth tax return for the said assessment year---Validity; --Prejudice or the error in the order passed under S.62, Income Tax Ordinance, 1979 was removed when the assessee filed the declaration under S.59-D of the Income Tax Ordinance, 1979---Show-cause notice was issued before commencement of the proceedings under S.65 but .no proceedings were actually conducted under S.65, Income Tax Ordinance, 1979. Information about purchase of plot was already available with the department at the tune of making assessment---Error in the assessment was secured by declaration under 5.59-D of the Income .Tax Ordinance, 1979--Order of the Inspecting Additional. Commissioner was vacated in circumstances.
Muhammad Ajmal Khan for Appellant.
Khalid Aziz Banth, DR. for Respondent.
Date of hearing: 30th April, 1999.
ORDER
INAM ELLAHI SHEIKH (ACCOUNTANT. MEMBER).---An individual assessee deriving income from hardware business has filed this appeal against an order, dated 10-3-1999 recorded by the Inspecting Additional Commissioner of` Income-tax/Wealth Tax, Range-II, Zone-A, Lahore whereby the' assessment framed under section 62 of the Income Tax Ordinance (hereinafter called the, Ordinance) has been cancelled. The facts of the case have been summarised by the I.A.C. in her show-cause notice as reproduced in the impugned order in the following manner:---
"Examination of the assessment record in your case has revealed that assessment for the year 1995-96 was completed on 27-3-1996 determining income as under:---
| Sales estimatedRs. 9,25,000 G.P.10 15%Rs. 1,38,750 Less G. P. declaredRs. 79,200 Balance for additionRs. 59,550 Add income declared.Rs. 42,000 Total Income:--Rs. 1,01,550 |
Record further reveals that -the A.C.LT'-: while completing the assessment had not called for wealth statement. However, Wealth tax record has revealed that you had filed wealth tax return for the year 1995-96 on 16-4-1996. Record further reveals that you had obtained C.V.T. certificate for the purchase of a Plot No. 718, Block-It, phase-III, LCCHS, Lahore Cantt. on 28-12-1994 showing value of Rs.400,000. But the said plot was not declared in the Wealth Tax return for the year 1995-96.
The A.C.I.T. who framed the income tax assessment for the year 1995-96 on 27-3-1996, later on issued a show-cause notice requiring you to explain .as to why your assessment for the year 1995-96 should not be reopened under section 65 on account of unexplained/under statement of investment in the purchase of the said plot. The show-cause notice for action under section 65 was issued on 10-9-1996 which was duly served upon you on the same date. You did not submit any reply and, therefore, a reminder notice was accordingly issued on 16-11-1996 for compliance on 21-11-1996. This reminder notice was also served on 19-11-1996. This time again you did not submit any reply.
In the meanwhile you filed declaration of undisclosed income/assets under section 59-D of the Income Tax Ordinance, 1979. The original declaration was filed on 30-9-1997 which was subsequently revised on 15-10-1997. In the original declaration the value of Plot No.718, phase-II, L.C.C.H.S., Lahore Cantt. was declared at Rs.9,00,000 and in the revised return at Rs.12,00,000.
The said declaration has been accepted by the A.C.I.T., as per office note appended below in the consolidated assessment order under section 62 for the years 1996-97, and 1997-98 the extract from the said foot note is reproduced below:---
"Accretion for assessment year 1997-98 is due to declaration of one Kanai plot at L.C.C.H.S., Lahore at value of Rs.12,00,000 under amnesty scheme under section 59-D and is admissible under the rules. Learned A.R. through his reply dated 22-6-1998 stated that the case was never reopened by the department in the past and no definite information was available with the department in this regard and the assessee cannot be debarred from protection of law. This plea is accommodated being in line with the provisions of section 59-D."
The declaration of undisclosed assets/income does not appear to have been accepted in accordance with the scheme as circulated vide Board's Circular No.7 of 1997. The first para. of the said scheme is reproduced below for ready reference.
'SCOPE OF THE SCHEME
The scheme shall apply to all new as well as existing tax payers except the following:-
(i) Companies; and
(ii) Persons in whose cases assets or income has been discovered as a result of or in respect of which proceedings have been initiated by way of Government investigation/inquiry.
The proceedings in fact had already been initiated against you for re-opening of assessment under section 65 of the Ordinance, 1979 on account of prima facie unexplained/under statement of investment in purchase of said plot vide show-cause notice as mentioned above.
Keeping in view the facts stated above, assessment completed for the year 1995-96 was erroneous in, so far as it was prejudicial to the interests of revenue. The assessment is liable for cancellation to be made afresh under the law. "
After rejecting the assessee's contention, the assessment framed under section 62 of the Ordinance was cancelled under the provision of section 66A of the Ordinance.
2. The learned counsel of the assessee has taken the following grounds in appeal before us and addressed arguments thereon:---
(a) That the rejection of declaration made under section 59D by the I.A.C. is ultra vires and illegal as she does not vest in the powers to reject the same.
(b) That the I.A.C. was wrong in declaring that the asset has been discovered by way of Government investigation/inquiry.
(c) That the order passed by the A.C.I.T. is neither erroneous nor prejudicial to the interest of revenue. Therefore, the invocation of reversional jurisdiction under section 66A is ab initio, null and void.
(d) That the I.A.C. was unjustified in invoking the revisional jurisdiction under section 66A on the basis of material which was not available with the A.C.I.T. at the time of assessment.
3. The learned Counsel of the assessee has referred to the provision of paragraph 11 of section 59D to submit that the department having accepted the declaration made under section 59D of the Ordinance, no further proceedings could be initiated. It was further submitted by the learned Counsel that there was no inquiry pending with the revenue against the assessee and thus he has disputed the action under section 66A of the Ordinance. It was also submitted that the Revenue has not discovered any concealed asset to justify any action. It was also argued by the learned Counsel that the I.A.C. had failed to point out any error in the assessment order made under section 62 of the Ordinance. It was also submitted that the Assessing Officer did not have any material to justify the reopening or revision of the order at the time of making original assessment. The learned Counsel of the assessee has also filed copies of the show-cause notice issued under section 65 of the Ordinance. The learned D.R. on the other hand strongly argued that the order under section 62 had rightly been cancelled as under statement of the plot had not been considered.
4. The parties have been heard and relevant orders perused. It was gathered from the learned Counsel that the assessee had obtained a C.N.T. certificate on 7-2-1995 for the purchase of a plot measuring one Kanal for a declared value of Rs.400,000. After completion of the assessment under section 62 of the Ordinance, two notices were issued to the assessee one dated 10-9-1996 and the other, dated 16-11-1996 asking the assessee to show cause as to why the proceeding may not be initiated under section 65 of the Ordinance. The assessee was also asked to file the explanation and documentary evidence as well as the wealth statement, which were not complied with. However, no notice under section 65 of the Ordinance appears to have been issued in this case by the Assessing Officer. Finance Act, 1997 is produced an amnesty scheme for a concessional tax on undisclosed income. Such scheme was notified by the C.B.R. vide Circular No.7 of 1997, dated 21-7-1997. Paragraph 1 of such circular provided for the scope of the scheme has already been given by the I.A.C. in her show -cause notice and reproduced above. The assessee then filed a declaration on 30-9-1997 to show the value of the same plot at Rs.900,000. Subsequently such declaration was revised on 15-10-1997 to show the value of the plot at Rs.1,200,000. Such declaration is said to have been accepted by the Assessing Officer. It may also be useful to reproduce the content of paragraph 11 of the scheme, as relied upon by the learned Counsel and which reads as follows:---
"FINALITY OF PROCEEDINGS UNDER THE SCHEME:
Where a declaration in respect of undisclosed income has been properly made and the tax due on such income has been fully paid, the Deputy Commissioner of Income-tax shall accept such declaration without any further proceedings provided that where it comes to the knowledge of the Deputy Commissioner of Income-tax by way of definite information that the undisclosed income so declared was under-stated, the declaration may be rejected with the prior approval of Commissioner of Income-tax."
5. The learned Counsel of the assessee has strongly agitated that the assessee's declaration under section 59-D of the Ordinance having been accepted by the Assessing Officer, the I.A.C. could not exercise his powers under section 66-A of the Ordinance to the extent of the order passed under section 62 of the Ordinance. It was also emphasised by the learned Counsel that the Revenue had not discovered any asset on its own enquiry nor any proceedings were pending in respect thereof. The learned Counsel has also objected that the I.A.C. has not pointed out the error allegedly made in the assessment order. It was elaborated by the learned Counsel that there was no material available with the Assessing Officer at the time of making of assessment to show any concealment or under statement. The learned Counsel further emphasised that the show-cause notices were issued under section 65 of the Ordinance but no proceedings were actually initiated because of the lack of definite information. The learned D.R. on the other hand pointed out that the I.A.C has cancelled the assessment because of the non-declare at of the plot in the wealth tax return and the under statement of the investment.
6. We have considered the submissions and also facts of the case. The main reason for invoking the powers under section 66A of the Ordinance appears to be the fact that the assessee ha! not shown the Plot No.718 in the wealth tax return although a C.V.T. had been obtained in respect thereof. In the ordinary circumstances, this would have been a fit case of invoking the proceedings of 66A of the Ordinance. However, in the present case the Government had offered a scheme in the shape of section 59D of the Ordinance in respect of concealed income or assets. The assessee availed this scheme and filed a declaration initially showing the value of the plot at Rs.900,000. Such declaration was then revised to show value of the plot at Rs.1,200,000 and such declaration was accepted by the Assessing Officer. The case of the Revenue is that the asset concealed by the assessee had been discovered as a result of or in respect of enquiry or proceedings. Hence the case of the Revenue is that the case was not protected by the provision of Para. 11 of the scheme as reproduced above. We are afraid we did not find merit in this contention. The prejudice or the error in the order under section 62 of the Ordinance was removed when the assessee filed the declaration under section 59D of the Ordinance. The asset has not been discovered as a result of any enquiry or in the proceedings. No doubt a show-cause notice was issued before commencement of the proceedings under section 65 of the Ordinance but no proceedings were actually conducted under section 65 of the Ordinance. The information about the purchase of plot was already available with the revenue at the time of making the assessment. Hence the error in the assessment under section 62 of the Ordinance was secured by declaration under section 59D of the Ordinance. So far as the valuation of Rs.1,200,000 is concerned, no comment has been made by the I.A.C. Hence we accept this appeal and the order of the learned inspecting Additional Commissioner in dispute is vacated. The appeal is allowed.
C.M.A./62/Tax(Trib.) Appeal accepted.