I.T.AS. NOS. 111/KB AND 112/KB OF 1998-99, DECIDED ON 2ND NOVEMBER, 1998. VS I.T.AS. NOS. 111/KB AND 112/KB OF 1998-99, DECIDED ON 2ND NOVEMBER, 1998.
1999 P T D (Trib.) 816
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Mujibullah Siddiqui, Chairman and Muhammad Mahboob Alam, Accountant Member
I.T.As. Nos. 111/KB and 112/KB of 1998-99, decided on 02/11/1998.
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.66-A & 65---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Basic distinction between the two jurisdictions ---I.A.C. revised the assessment order on the point of non-taxing of interest transferred to suspense account of assessee---Assessee assailed the Authority of I.A.C. to invoke revisional jurisdiction under S.66-A, Income Tax Ordinance, 1979 on the ground that department could exercise jurisdiction under S.65 of the Income Tax Ordinance, 1979 and could not resort to exercise of jurisdiction under S.66-A of the Ordinance ---Validity-- Basic difference in exercise of jurisdiction under Ss.65 & 66-A of the Ordinance was that the Assessing Officer could not exercise jurisdiction under S.65 on the basis of material already available on record and which had already been consciously considered by the Assessing Officer, while an I.A.C. could exercise revisional jurisdiction under S.66-A on examination of the record of any proceedings under the Ordinance and could exercise revisional jurisdiction, if on examination of material available on record, he considered the order passed as erroneous and prejudicial to the interest of revenue---Appellate Tribunal, in view of the basic difference in the jurisdictions vested in Assessing Officer under S.65 and conferred on I.A.C. as revisional Authority under S.66-A observed that no resort could be made, in the facts and circumstances of the present case, by Assessing Officer to S.65 of the Income Tax Ordinance, and the issue could be considered by the I.A.C. only under S.66-A of the Income Tax Ordinance.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.66-A & 138---Power of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Power of review ---I.A.C. revised the assessment order on different points/issues---Subsequently, same order was revised on another point/issue which was not discussed in previous revised order ---Assessee assailed the Authority of the I.A.C. for invoking revisional jurisdiction on the ground that order under S.66-A amounted to review of earlier order under S.66-A, which Authority was not vested in Inspecting Additional Commissioner---Validity---If I.A.C. exercised revisional jurisdiction under S.66-A, Income Tax Ordinance, 1979 on certain points at one stage and subsequently, within the period of limitation again exercised jurisdiction under S.66-A of the Ordinance in respect of some other issues or points, he removed error from the order of Assessing Officer on both the occasions and no question of review arose---Objection raised by the assessee, in circumstances was repelled by the Appellate Tribunal.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss.66-A & 138---Power of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Revision---Doctrine of merger---Assessment order was revised by the I. A. C. ---Revision was filed by the assessee before C.I.T. under S.138 of the Income Tax Ordinance, 1979---Subsequently, I.A.C. again exercised jurisdiction under S.66-A in respect of another issue i.e. interest transferred to suspense account---Interest transferred to suspense account was not the subject-matter of revision under S.66-A or revision under S.138 by the C. I. T.---Assessee assailed the Authority of the I. A. C. for invoking revisional jurisdiction under S.66-A on the ground that the assessment order revised by the I.A.C. was merged in the earlier order of I.A.C. under S.66-A and ultimately in the order under S.138 of the C.I.T., and therefore, under the doctrine of merger the I.A.C. could not exercise jurisdiction under S.66-A---Validity---Issue relating to interest transferred to suspense account was not the subject-matter of any appeal or revision in the earlier proceedings and there was no decision in any appellate or revisional order prior to the impugned order of the I. A. C. ---Question of any merger of the order of Deputy Commissioner of Income-tax with any appellate or revisional order would not arise in circumstances---Objection raised was rejected by the. Appellate Tribunal and held that the impugned order of the I.A.C. did not suffer from any factual, legal or jurisdictional error or infirmity.
1992 PTD 932 ref.
Sirajul Haque Memon for Appellant. Mrs. Shaista Abbas, D.R. for Respondent.
Date of hearing: 31st October, 1998.
ORDER
MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN). ---The above appeals are directed against the order, dated 20-6-1998 by the learned I.A.C. of Income-tax, Range-I, Cos. I,-Karachi under section 66-A of the Income Tax Ordinance, 1979. ,
2. Heard Mr. Sirajul Haque Memon, learned counsel for the appellant and Mrs. Shaista Abbas, learned representative for the department.
3. The admitted facts are that the learned I.A.C. has revised the assessment orders for the two assessment years under appeal holding the same to be erroneous and prejudicial to the interest of revenue on the point of non-taxing of interest transferred to suspense account on the basis of this Tribunal's judgment in the case of appellant itself, reported as (1998) 77 Tax 231 (Trib). Thus, so far the merits of case on the point of law relating to taxability of interest transferred to suspense account by the appellant bank is concerned, it already stands decided against the-appellant in their own case, .by this Tribunal. Mr. Sirajul Haque has, therefore, mainly assailed the authority of learned I.A.C. for invoking revisional jurisdiction under section 66-A. He has summarized his objections as follows:--
"(1) The department could exercise jurisdiction under section 65 of the Income Tax Ordinance, 1979 and could not resort to exercise of jurisdiction under section 66-A.
(2) The impugned order, dated 20-6+1998 under section 66-A amount to review of earlier order under section 66-A, which authority is not vested in I.A.C.
(3) The assessment orders revised by the learned I.A.C. were merged in the earlier order of I.A.C. under section 66-A and ultimately in the order under section 138 of the Commissioner of Income-tax and therefore, under the law of merger the I.A.C. could not exercise jurisdiction under section 66-A.
4. Elaborating the above contentions Mr. Sirajul Haque has submitted that the learned I.A.C. has stated in show-cause notice, which has been incorporate in the order under section 66-A as follows:---
"However, neither you had declared the above interest as income on accrual basis, nor the assessing officer took cognizance of the above facts and failed to add, the above amount to your income, and thus, failed to charge tax thereon."
5. He has submitted, that in view of above admitted facts the position which emerges is that income representing interest transferred to suspense account was neither offered for tax nor it was so assessed and, therefore, the income had escaped assessment. According to Mr. Sirajul Haque Memon if any income chargeable to tax under the ordinance has escaped assessment the assessing officer can reopen the assessment in accordance with the law as contained in section 65 of the Income Tax Ordinance, 1979.
6. We have carefully considered the contention but we are unable to subscribe to the above view. We have asked Mr. Sirajul Haque whether at the time of original assessment the assessee had produced all the books of account and had placed entire material before the assessing officer containing the entries showing transfer of interest to the suspense account and non offering of the same to tax. Mr. Sirajul Haque has frankly conceded that the entire material was produced before the assessing officer at the time of original assessment and nothing was concealed. Mr. Sirajul Haque was next asked if he was aware of the large number of cases decided by the Honourable Supreme Court of Pakistan and the High Courts, as well as the Tribunal that once entire evidence and material is placed by an assessee before the assessing officer in the course of assessment proceedings and the assessing officer has consciously applied his mind to the facts of the case then subsequently the assessing officer would not be allowed to reopen the assessment under section 65 of the Income Tax Ordinance, 1979 on the basis of information already available on his record, because it would amount to the change of opinion. Mr. Sirajul Haque a very senior and learned Advocate has frankly conceded that he is fully aware of the ruling on the above points.
7. In the above circumstances we are of the opinion that the assessing officer could not reopen the assessment under section 65 and, therefore, the contention is repelled. Before parting with our findings on this issue we would like to make a brief observation that for the purpose of reopening of assessment under section 65, the preconditions are that an income chargeable to tax under the ordinance must have escaped assessment, or the total income of an assessee must have been under assessed, or assessed at too low a rate, or had been subject of excessive relief or refund under the ordinance or the total income of an assessee or the tax payable by him has been assessed or determined under subsection (1) of section 59 or section 59-A or deemed to have been so assessed or determined under subsection (1) of section 59 or section 59-A and definite information has come into the possession of assessing officer which was not available before hint at the time of making original assessment and no conscious application of mind was made to the facts which constitute definite information forming basis of reopening of assessment and the previous approval of I.A.C. is obtained in writing. All these conditions have to be satisfied together and if any of the condition is lacking there would be no valid exercise of jurisdiction under section 65 and reopening of assessment shall not be sustained. On the other hand the I.A.C. by virtue of authority vested in him under section 66-A may call for and examine record of any proceedings under the Income-tax Ordinance and if he considers that any order passed therein by the D.C.I.T. is erroneous in so far as it is prejudicial to the interest of revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify. Thus, one of the basic difference in exercise of jurisdiction under sections 65 and 66-A, is that the assessing officer cannot exercise jurisdiction under section 65 on the basis of material already available on record and which has already been consciously considered by him while an I.A.C. can exercise revisional jurisdiction under section 66-A on examination of the record of any proceedings under the ordinance and can exercise revisional jurisdiction if on examination of material available on record, he considers the order passed as erroneous and prejudicial to the interest of revenue. This basic difference is for the reason that the jurisdiction vested in assessing officer under section 65 is original jurisdiction and once assessing officer completes the assessment order he becomes functus officio, loosing all and every seisin over the matter and to this extent the concept of finality of assessment comes into play. The assessing officer thereafter, can reopen the assessment if fresh information is received which was previously withheld or concealed by the assessee. On the other hand the appellate and revisional jurisdiction always confers authority to examine the material available on record and to decide on the basis of material available on record if the issues have been correctly and legally decided by the Court of original jurisdiction. The appellate and revisional jurisdiction is primarily a corrective jurisdiction and for that purpose the appellate and revisional authority can always examine the facts and evidence available on record and on the appreciation of material available on record and examination of legal provisions decided the factual as well as legal issues arising out of the original proceedings. Thus, in view of the basic difference in the jurisdiction vested in Assessing Officer under section 65 and conferred on I.A.C. as revisional authority under section 66-A, no resort can be made in the facts and circumstances of the present case by assessing officer under section 65 of the Income-tax Ordinance and the issue could be considered by the I.A.C. only under section 66-A of the Income-tax Ordinance. We would further like to observe that the legislature in its wisdom has enacted section 66-A of the Income-tax Ordinance in order to protect the state revenue by conferring suo motu jurisdiction on I.A.C. because if any assessee is aggrieved with an order of assessing officer he may prefer appeal before the A.A.C. under section 129 of the Income Tax Ordinance, 1979 but the department has no right of appeal before the A.A.C
8. Coming to the second contention Mr. Sirajul Haque has given his history of proceedings which have taken place in this case. According to him the assessment order under section 62 for the assessment year 1992-93 was made on 1-8-1994. The appellant preferred first appeal which was decided by the learned C.I.T.(A) on 18-6-1995. The learned I.A.C. made an-order under section 66-A on 30-11-1995 and modified the order on the point of bad debts, capital loss, excess perquisites and tax on dividend income. The appellant preferred a revision under section 138 before the C.I.T. against the order under section 66-A which was decided on 13-4-1996. The issue relating to bad debts was set aside and the findings on the other issues were upheld. Mr. Sirajul Haque has, thus, submitted that the assessing officer had already exercised revisional jurisdiction under section 66-A on 30-111995 and, therefore, he could not exercise the same jurisdiction again as it would amount to review of the earlier order. According to Mr. Memon if an order under section 66-A is passed by an I.A.C. at any stage on any issue, no second order can be made under section 66-A, as according to him it would amount to review of the earlier order under section 66--A and the authority to review the order is not vested in I.A.C. He has submitted that an authority to review an order is to be conferred under the law by the legislature.
9. We have carefully considered the contentions raised by Mr. Sirajul Haque. We are persuaded to agree with him, to the extent that an authority to review an order is to be specifically conferred under the statute and no such authority has been conferred on the I.A.C., therefore, the I.A.C. cannot exercise the jurisdiction to review his own order. However, we are not persuaded to agree with the contention of Mr. Sirajul Haque that an I.A.C. can exercise jurisdiction under section 66-A once only and if an I.A.C. has exercised jurisdiction under section 66-A, at any stage on any issue then at any subsequent stage he cannot exercise jurisdiction under section 66-A on any other point or issue. We are not persuaded to agree with the submission for the reason that no such restriction has been imposed on the authority of I.A.C. by the legislature. The contention of Mr. Sirajul Haque Memon that the making of second order under section 66-A amounts to review of the earlier order may be valid if I.A.C. has exercised jurisdiction under B section 66-A on certain issues/points and subsequently the second order is made in respect of the same issues thereby modifying earlier order. However, where I.A.C. has exercised jurisdiction under section 66-A at one stage on certain issues and subsequently he finds within the period of limitation provided in section 66-A, that the order is erroneous and prejudicial to the interest of revenue on some issues other than that examined by him earlier there would be no occasion for review of the order. The reason being that the review of an order is made by the same Court/authority which makes the earlier order and, therefore, existence of an order by the same authority is condition precedent for review. When there is no order on any point the question of review on that point does not arise. If an I.A.C. exercises revisional jurisdiction under section 66-A on certain points at one stage and subsequently within the period of limitation again exercises jurisdiction under section 66-A in respect of some other issues or points, he removes error from the order of assessing officer on both the occasions and no question of review arises. Since in the present case the I.A.C. exercised revisional jurisdiction under section 66-A on 30-11-1995 in respect of issues relating to bad debts, capital loss, excess perquisites and tax on dividend income and vide impugned order, dated 20-6-1998 the I.A.C. has exercised revisional jurisdiction on the point of order being erroneous due to non taxing of interest transferred to suspense account, therefore, it is not a case of review at all. The objection is, therefore, repelled.
10. This brings us to the third objection which relates to the merger of order. According to Mr. Sirajul Haque Memon when the assessment order for the assessment year 1992-93 was revised by the learned I.A.C. for the first time on 30-11-1995 under section 66-A and thereafter, further revision was preferred by the appellant before C.I.T., under section 138 and the revision petition was decided on 13-4-1996 whereby issue relating to bad debts was set aside while findings of I.A.C. on other issues were maintained the law of merger come into play. It is, however, admitted position that the issue relating to interest transferred to suspense account was not the subject matter of revision under section 66-A or revision under section 138 by C.I.T. Mr. Sirajul Haque has submitted that notwithstanding the fact that the issue relating to interest transferred to suspense account was not the subject matter of revisional order under section 66-A, dated 30-11-1995 by I.A.C., and order under section 138, dated 13-4-1996 by C.I.T., the entire assessment order merged in the order of C.I.T., and, therefore, the I.A.C. could not exercise revisional jurisdiction in respect of such order. According to Mr. Sirajul Haque Memon, under the law of merger, the order in field was the order passed by C.I.T. and not the order passed by D.C.I.T. The I.A.C. is empowered to revise any order passed by D.C.I.T. and not the order passed by C.I.T. We have asked Mr. Sirajul Haque Memon if the law of merger is an statutory law or law of precedent and prudence. Mr. Sirajul Haque has very rightly stated that the law of merger is not a statutory law but it has developed through the law of precedent and the law of prudence. He has further submitted that the law of merger originally developed with reference to appeal and the same principles were made applicable to the revisional proceedings. Mr. Sirajul Haque has, however, produced judgments from Indian Jurisdiction wherein it has been held that in the case of appeals, even if appeal is dismissed the merger takes place while in case of revision, no merger takes place if the revision is dismissed. He has submitted that in the present case the revision petition preferred before the C.I.T. under section 138 was not dismissed in totality. On one point it was allowed and the issue relating to bad debts was set aside and, therefore, the entire order of D.C.I.T. and I.A.C. shall be deemed to be merged in the order of Cff. The attention or Mr. Sirajul Haque was drawn to the insertion of subsection (1-A) in section 66-A of the income Tax Ordinance by Finance Act, 1991 whereby it has been provided that the provision of subsection (1) of section 66-A authorising I.A.C. to exercise revisional jurisdiction shall, in like manner, apply, where an appeal has been filed under sections 129, 134, 136 or 137 against an order passed by the D.C.I.T. and the appeal is decided in respect of any point or issue which was not the subject-matter of such appeal. Mr. Sirajul Haque stated that there was difference of opinion between the Superior Courts in Indian Jurisdiction also and, therefore, corresponding amendment has been made in the Indian law as well. However, according to Mr. Sirajul Haque the law of merger which has been brought on the statute book for the first time with the insertion of subsection (1-A) in section 66-A, relates to the appeal only and not the revision as section 138 is not referred in subsection (1-A) of section 66-A. We have given our anxious consideration to the contention raised by Mr. Sirajul Haque. As already referred, the law of merger developed with reference to the appeals and their effect, and the principles relating to merger of original orders with the appellate orders were made applicable to the revisions and consequence of the revisional orders, the same principles should apply to the law of merger with reference to revision when the legislature has restricted the scope of merger in respect of appeal. With reference to the law referred to by Mr. Sirajul Haque from Indian Jurisdiction to the effect that even if an appeal is dismissed the merger takes place but in case of revision no merger takes place if the revision is dismissed, we asked Mr. Sirajul Haque as to why the principles of merger as enunciated in subsection (1-A) of section 66-A should not be applied to the issue of merger arising out of revisional orders and particularly when the law of merger is more strict and comprehensive in respect of appeals as compared to revision. Mr. Sirajul Haque merely placed reliance on the judgment of Honourable Supreme Court of Pakistan in the case of Glaxo Laboratory v. I.A.C. reported as (1992 PTD 932). However, in the case which pertains to the assessment year 1987-88 the Hon'ble Supreme Court of Pakistan has taken notice of insertion of subsection (1-A) in section 66-A by Finance Act, 1991. The Honourable Supreme Court of Pakistan while considering the law of merger observed as follows:---
"The I.A.C. did not have the jurisdiction or power to initiate same action in respect of the orders passed by the appellate authority or the Tribunal. However, as observed above such power has now been vested in I.A.C. from the year 1991."
11. In the operative part of the order Hon'able Supreme Court held as follows:
"The result is that the order of the Income-tax Officer merged into the order of the Tribunal and, therefore, the I.A.C. did not have the jurisdiction to initiate action under section 66-A of the Income Tax Ordinance for reopening the matter. In this case principles of re-judicate will not apply as it is governed by the provisions of section 66-A which lays down the boundaries and parameters for exercise of jurisdiction under it The fact that in 1991 subsection (1-A) was added authorising I.A.C. to initiate action under section 66-A even if appellate and revisional order has been passed, supports the contention that such a power did not exist earlier.
12. A perusal )f the above observation of the Hon'ble Supreme Court of Pakistan shows that the principles contained in subsection (1-A) are applicable to appellate order as well as revisional order. It is not a case of any body before us that the law of merger with reference to revisionol order was not the subject-matter of appeal before the Hon'able Supreme Court, but even if such plea is raised for the reason that the reference of revisional order in the judgment of Honourable Supreme Court is an orbiter dicta, the contention would not be acceptable for the reason that even orbiter dicta of the Hon'ble Supreme Court is binding on all the Courts in Pakistan. Thus, after the above observation of Hon'able Supreme Court in the case of Glaxo Laboratories, no discretion is left with any Court in Pakistan to take any contrary view.
13. For the foregoing reason it is held that the issue relating to interest transferred to suspense account was not the subject-matter of any appeal or revision in the earlier proceedings and there is no decision in any appellate or revisional order prior to the impugned order of learned I.A.C., dated 20-6-1998, therefore, the question of any merger of the order of D.C.I.T. with any appellate or revisional order does arise. The objection in this behalf is hereby rejected.
14. Before parting with this order we would like to clarify that the first objection to the effect that no resort can he made to the provisions contained in section 66-A and the assessment could be reopened under section 65 was raised in both the appeals under consideration while second and third objections were raised in the appeal relating to the assessment year 1992-93 only.
15. Consequent to the above findings it is held that the impugned orders of learned I.A.C., dated 20-6-1998 do not suffer from any factual, legal or jurisdictional error or infirmity, which are hereby maintained. The appeals stand dismissed accordingly.
C. M. A./11/Trib.Appeals dismissed.
(Raja Qureshi, J)