I.T.A. NO. 38/KB OF 1998-99, DECIDED ON 1ST DECEMBER, 1998. VS I.T.A. NO. 38/KB OF 1998-99, DECIDED ON 1ST DECEMBER, 1998.
1999 P T D (Trib.) 3901
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman and Muhammad Mahboob Alam, Accountant Member
I.T.A. No. 38/KB of 1998-99, decided on 01/12/1998.
(a) Income Tax Ordinance (XXXI of I979)---
--Ss.65, 62, 50(4), 80C & 8pD---CRR. Circular No.12 of 1991, dated 30-6-1991---C.B.R. Circular No.7 of 1992, dated 18-3-1992---Assessment Year 1991-92---Assessment which was completed under normal law was reopened by Assessing Officer on perusal of wealth tax assessment on the ground that receipts were suppressed as the receipts declared in wealth tax record were different from the receipts declared for purpose of income-tax-- Assessee was further confronted with the fact that receipts on which tax was deducted under S.50(4), Income Tax Ordinance, 1979 fell under S.80C, Income Tax Ordinance, 1979---However, it was found that information on the basis whereof assessment was reopened ways not correct and was the result of confusion on account of incorrect method adopted by Wealth Tax Officer-- -Assessment was revised on the point of income covered under S.80C. Income Tax Ordinance, 1979---Validity---Material available on record could not be used for reopening of assessment as same would amount to change of opinion, which was, not permitted---If there was any mistake Assessing Officer could resort to "rectification of mistake under S.156, Income Tax Ordinance, 1979, or if order was erroneous and prejudicial to interest of revenue, Assessing Officer could pass the information to Inspecting Assistant Commissioner who could revise assessment under S.66-A, Income Tax Ordinance, 1979---In the garb of reopening of assessment the jurisdiction to revise assessment vested in Inspecting Assessment Commissioner under S.66-A of the Ordinance could not be conceded to Assessing Officer---Assessing Officer after conceding to the fact that the reopening, assessment was not justified due to non-availability of definite information could not proceed with the reassessment proceedings-- Once assessment was completed and attained finality, Assessing Officer could not exercise jurisdiction to revise assessment in the' garb of reopening of assessment under .S. 65, Income Tax Ordinance, 1979.
Central Insurance Company v. C.B.R. 1993 PTD 766 = 1993 SCMR 1232 rel,,
Salman Pasha for Appellant. Mrs. Shaista Abbas, D.R. for Respondent.
Date of hearing: Ist December, 1998.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeal is directed against the order dated 14-4-1988 by the learned Commissioner of Income-tax (Appeals) in Income-tax Appeal No. 624 relating to the assessment year 1991-97.
2. Heard Mf. Salman Pasha, learned counsel for the appellant and Mrs. Shaista Abbas, learned representative for the department.
3. The relevant facts giving rise to this appeal are that the appellant/assessee is a private, limited company engaged in the business of construction. The assessment for the assessment year 1991-92 was completed under section 62 at a loss, of Rs.5,53,768 against declared loss of Rs.10,02,291/. The original assessment was completed on 29-4-1994. An appeal was preferred on the point of certain disallowances in the Profit and Loss account. The first appeal was decided on 31-5-1994 and the issues relating 'to disallowances were set aside. The re-assessment under section 132/62 was completed on 21-5-1995. Subsequently on 12-2-1996 a show-cause notice under section 65 of the Income Tax Ordinance, 1979 was issued stating therein that the receipts from the two projects namely ..C .and G H were declared at Rs.1,18,54,910 and Rs.67,60,478 respectively totalling at Rs.1,86,15,388. It was further stated in the show-cause notice that the wealth tax record shows that the assessee declared receipts from Y... C.... only to the tune of Rs.1,90,13,398 whereas for income tax purposes the receipts were declared at Rs.1,18,54,910, Thus receipts to the tune of Rs.71,58,478 were suppressed. The appellant was called upon to show cause as to why the assessment should not be reopened under section 65: The assessment was subsequently reopened. Fresh notice under section 62 was issued and the assessee was further confronted on the point that as per balance sheet for. the period ending 30-6-1-991 and amount of Rs.1,20.48,333 was, shown as balance to allottees and there was a difference of an amount of Rs.23,17,333. The assessee was called upon to show as to, why the addition should not be made at Rs.23,17,333 under section 13(I)(aa). The assessee was further confronted on the point that receipts on which tax was already deducted under section 50(4) fall under section 80-C, 'therefore, these receipts should not be reflected in the balance sheet as liability as well as cost of work done, as it related to receipts pertaining to section 80-C. The appellant/assessee furnished a detailed explanation which has been reproduced by the Assessing Officer in the assessment order.. After going through the detailed explanation the Assessing Officer observed that regarding first issue of suppression of receipts, the A.R. of assessee has explained the position satisfactorily. In fact, confusion was created by the wealth sax assessment where an gross receipts were added and then after receipt of G .... H.... at Rs.67,50,478 were allowed as liability. Thus, the net resultant wealth was assessed correctly but in a round about manner. The Assessing Officer further observed that the show-cause notice for reopening the case was based on wealth tax record. Since the queries raised on this issue are settled and. are explained satisfactorily, therefore, proceedings initiated under section 65 on this issue are dropped.
4. Therefore, the Assessing Officer observed that regarding next issue of balance to the allottees, observed during the course of proceedings, the contention of A.R. of the assessee is correct to the extent that the balance sheet prepared by the assessee and as per regular books of accounts represents net financial position giving summary of trading activities carried out throughout the year, which includes the actual profit earned during the year whereas the treatment accorded by the department cannot be introduced in the books of accounts, moreover, the A.R. of the assessee has also furnished a chart of receipts and cost of construction from assessment years' 1988-89 to 1991-92 from where it is evident that balance to allottees arrived oil 30-6-1991 amounted to Rs.1,20,48,333. Proceedings, therefore, initiated on this issue stand settled and accordingly dropped.
5. The Assessing Officer further proceeded to observe that. however, the contention of the assessee on the issue of 80-C is riot correct. During the year under consideration, receipts of Rs.66,60,478 earned from G ..H on which tax under section'50(4) had been deducted from P... S... M... fall under section 80C, therefore, assessment as passed under section 62 cannot be maintained. In view of C.B.R. Circular No. 12 of 1991, Circular No.7,of 1992 assessment is being completed on prorata basis and G.P. on project expenses is being assessed separately. The Assessing Officer, thereafter, revised the assessment and assessed the loss at Rs.3.63,623. The Assessing Officer ultimately charged tax under section $0-D at 0.5% ,of the turnover which was not covered under section 80-C.
6. Being aggrieved with the above treatment the appellant preferred first appeal assailing the reopening of the assessment and various disallowances in the P & L Account. The objection was raised to the taxing of certain receipts under section 80C. The learned Commissioner of Income Tax (Appeals) held that the Assessing Officer was justified in reopening the assessment under section 65 because the receipts on which tax was already deducted under section 50(4) were not subjected to tax under section 80C and' this was not the subject matter of appeal preferred by the assessee assailing various disallowances. The learned CIT (A) further held that the receipts to .the extent of Rs.b7,60,478 were rightly subjected to tax under section 80-C as tax on the receipts was deducted under section 50(4) of the Income Tax Ordinance, 1979. So far as the disallowance in the P&L Account aggregating at Rs.4.48,524 is concerned, the learned Commissioner of Income Tax (Appeals) set aside the issue with the direction to the Assessing Officer to read judicata the matter in the light of direction of learned CIT (A) vide appellate order dated 21-5-1995.
Being still dissatisfied the appellant has preferred this second appeal before LIS. assailing the confirmation of reopening of assessment under section 65, confirmation of taxing of receipts at Rs:67,60,478 under section 80C, and merely setting aside of the disallowance of expenses at Rs.4,48,524 instead of deleting the same.
8. Mr. Salman Pasha, learned counsel for the appellant has submitted that the condition precedent for reopening of assessment is availability of definite information and in this case the Assessing Officer has himself conceded that the information on the basis whereof assessment was reopened was not correct and was a result of confusion due to incorrect method adopted by the W.T.O. Mr. Pasha has further submitted that the assessment was reopened on the information derived by the Assessing Officer on perusal of wealth tai assessment. No other information formed basis of reopening of the assessment. He has therefore submitted that the reopening of the assessment itself was not valid, thus the entire reassessment proceedings ought to have been dropped instead of dropping the two issues and proceeding with the third issue which even otherwise couldnot form basis for reopening of assessment.
9. Mr. Pasha, has next, contended that the Assessing Officer has, observed that "net income for the year is, therefore, revised and assessed as under". Thus, the Assessing Officer has himself stated that on the point of income covered under section 80C. the assessment order was revised. bun in doing so the Assessing Officer has failed to realise that the power of revision lies with the I.A.C. and not with the Assessing Officer. He has further submitted that the learned CIT(A) has also failed to consider that the assessment once completed rightly or wrongly cannot be revised by the Assessing Officer. The Assessing Officer can correct the mistakes apparent on record by resort to the provisions contained in section 156 of the Income Tax Ordinance or can reopen the assessment under section 65 on receipt of new information which should be definite. The assessment order can be revised by I.A.C. under section 66A, if it is erroneous and prejudicial to the interest of revenue. The Assessing Officer cannot revise the assessment order himself. Mr. Salman Pasha has further contended that the learned Commissioner of Income Tax (Appeals) has misdirected in observing that the Assessing Officer was unjustified in reopening assessment under section 65 because the receipt on which tax was already deducted under section 50(4) was not subjected to tax under section 80-C . According to Mr. Pasha, this observation is factually incorrect and is the result of misreading of facts obtaining on record. He has taken us through the show-cause notice issued by the Assessing Officer on 12-2-1996, and the assessment order which shows that the assessment was reopened for the sole reason that according to the Assessing Officer, receipts were suppressed which information was subsequently held to be incorrect. So far the issue relating to chargeability of tax under section 80-C is concerned, it was confronted through notice under section 62, dated 22-10-1996 only which is evident from the averment on page 2 of the assessment order.
10. The learned D.R. has supported the orders of the learned two officers below. However, she is not able to rebut the fact that the assessment was reopened under section 65 on the alleged information of suppressing of receipts only.
11. We have carefully considered the contentions raised by the learned representatives for the parties and the material available on record. On perusal of the assessment order we are pursuaded to agree with the submission of Mr. Salman Pasha that the assessment was reopened on the basis of alleged information of suppression of receipts which was subsequently held to be incorrect. The show-cause notice dated 12-2-1996 also confirms this fact. The reason that the receipts from G .Hproject which suffered deduction of tax under section 50(4) fell within the ambit section 80C was now here mentioned as one of the reasons for reopening of the assessment. We are further of the considered option that it cannot form basis for reopening of assessment, as this information was already available with the Assessing Officer at the time of framing of original assessment. The material which was already available on record could not be used for reopening of assessment as it would amount to the change of opinion, which is not permitted. Thus, if there was any mistakes, the Assessing Officer could resort to the rectification of mistake under section 156 of the Income Tax Ordinance or if the order was erroneous and prejudicial to the interest of revenue the Assessing Officer could pass on the information to I.A.C. who could after the examination of record and after satisfying himself that the assessment was erroneous so far as prejudicial to the interest of revenue, could revise the assessment under section 66A. On perusal of the assessment order, we are of the considered opinion that, in fact, the Assessing Officer has himself revised the assessment order in respect of taxability of receipt from G .... H... Originally it was assessed under the normal law and in the reassessment proceedings it has been assessed under the presumptive tax regime. The expenses have been curtailed on prorata basis and, therefore, the original loss assessed at Rs.553,768 has been assessed at Rs.363,623. We are of the firm view that the learned CIT(A) failed to advert to the question for jurisdiction and, therefore, misdirected in holding that the Assessing Officer was justified in reopening assessment under section 65 and tax the receipts at Rs.67,60,478 under section 80C. The method of assessment may by correct but it has been overlooked by the learned CIT(A) that an order without jurisdiction is nullity in law, howsoever, sacrosanct project arid otherwise correct it may be. Whenever there is any objection, to the proceeding, meaning thereby, there is objection to the exercise of the very jurisdiction and the objection is found valid, then any finding though it may be correct on merits, loses its legality and validity. Even a legally correct finding is rendered void if a finding is given by an authority which has no jurisdiction to give the finding. If any authority is required on this point it is available in Central Insurance Company v. C.B.R. 1993 PTD 766 = 1993 SCMR 1232. In this case the Hon'ble Supreme Court of Pakistan has held that construction placed by the C, B.R. on the relevant provisions of the Ordinance seems to be correct, but that fact alone will not change its character as to qualify it as a definite information to justify a reopening of assessment. This judgment by the apex Court is the conclusive authority on the point that even if a correct view of the relevant provision of law is taken by an authority which is not clothed with the jurisdiction it shall have no legal validity.
12. Applying the above principle of law it is held that in the garb of reopening of assessment the jurisdiction to revise assessment vested in I.A.C. under section 66-A cannot be conceded to the Assessing Officer. It is cardinal principle of law that the thing should be done as they are required to be done or riot at all. It is, therefore, held that the Assessing Officer after conceding to the fact that the reopening of assessment was not justified due to non-availability of definite information rather the information forming basis of reopening was incorrect, lie could not proceed with the reassessment proceedings and ought to have dropped the entire re-assessment proceedings. It is further held that in the garb of reopening of assessment the Assessing Officer cannot exercise jurisdiction to revise the assessment, once it is completed and attained finality as in this case. The orders of the learned two Officers below are, therefore, held to be not sustainable in law and are hereby vacated. The entire reassessment proceedings and the assessment order in consequence thereof under section 62/65 are held to be nullity in law,. in its entirety. The result is that the factual and legal position as obtaining on 12-2-1996 when show-cause notice for reopening of assessment was issued stands restored. The appeal for the assessment year 1991-92 is allowed as above.
C.M.A./M.A.K.81/Tax(Trib.)Appeal allowed.