Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 62---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ---Assessee was a partner of an "Association of Persons "---Assessment completed under S.62, Income Tax Ordinance, 1979 was cancelled by Inspecting Additional Commissioner under S.66-A, Income Tax Ordinance, 197.9 on the grounds that declared rental income was lower than the value declared- on wealth tax side; that rent deed, property tax receipts and accounts of association of persons was not -submitted; that decrease in capital, increase in share investment was not proved and information from Bank regarding imports made by the "Association of Persons" was riot obtained by Assessing Officer and rent was not verified from the tenants ---Assessee contended that objections raised were of administrative nature, therefore, there was no reason to cancel the assessment finalized under S.62, Income Tax Ordinance, 1979 after probing the case in depths; that property income proposed to be assessed was also lower than the one already assessed that an objection regarding accounts of Association of Persons, investment, import of an Association of Persons could be raised in case of assessment of "Association of Persons" and not in case of partner and that revising Authority had not pointed out any loss of revenue ---Validity-- Objections raised by the revising Authority had been successfully refuted by the assessee---Objections , raised by the Authority were of administrative nature and directly related to the quality of assessment order passed by the Assessing Officer---Revising Authority having failed to point out any prejudice to the interest of Revenue, the impugned action was unjustified which was set at naught---Order of the Inspecting Additional Commissioner was vacated and original assessment order framed under S.62 of the Income Tax Ordinance, 1979 was restored, by the Appellate Tribunal.

1997 PTD (Trib.) 902 and 1999 PTD (Trib.) 700 rel.

Sohail Mutee Babri, ITP and Nadeem Saeed, ITP for Appellant.

Shahid Zaheer, DR for Respondent.

Date of hearing: 11th February, 2000.

ORDER

MUHAMMAD TAUQIR AFZAL MALIK (JUDICIAL MEMBER).---This appeal has been preferred against the order of leaned Inspecting Additional. Commissioner of Income Tax Range-III; Zone-A, Lahore whereby he cancelled the original assessment framed under section 62 of the Ordinance considering the same to be erroneous and prejudicial to the interest of Revenue.

2. The facts in brief are, that the original assessment in this case was completed under section a2 of the Ordinance at an income of Rs.9,02,956 as against declared at Rs.7,27,704. The bifurcation of the assessed income as under:---

On examination of the record, the learned I.A.C found that the assessment framed by the Assessing Officer was erroneous and prejudicial to the interest of Revenue for the following reasons:

(i) Rental income should have been adopted for the year under consideration at Rs.91,050.

(ii) I/4 share in property No.S-14-II-S-R, Royal Park, Lahore has been declared as rented out and the assessee's share was shown at Rs.912 per month whereas on wealth tax side this property has been assessed at Rs.7,40,000.

(iii) The Assessing Officer failed to collect the rent deeds.

(iv) Copy of the account of AOP has not been obtained.

(v) The Assessing Officer has failed to the decrease in capital, increase in share investment and has not obtained any information from bank regarding imports made by an AOP (Sabri Store).

(vi) Property tax receipts have not been obtained

(vii) The Assessing Officer has failed to verify the rent from tenants.

3. Consequently, a show-cause notice was issued to the assessee that as to why his, assessment should not be cancelled being erroneous and prejudicial. The assessee in its reply submitted that all the points raised by the revising authority are of administrative nature. Therefore, there was no reason to cancel the assessment as it was being finalized under section 62 after probing the case in depth. The learned PAC did not agree with the assessee and fie cancelled the assessment under section 66A and directed the Assessing Officer to frame additional assessment in accordance with law after detailed scrutiny. Hence this appeal

4. The learned A.R. for the- assessee contended that since the, IAC himself came to the conclusion that property income should have been assessed at Rs.91,050 as against assessed originally at Rs.1,40,000, there was no error, attracting the provision of section 66A. He explained that since the income already assessed was higher than the proposed by the IAC, no revenue has been loosed. As regards the objection of the IAC that the value of property at Royal Park, Lahore has not been properly assessed, the learned A.R. submitted that the assessee has also filed appeal against the value assessed on Wealth Tax side: He contended that even if the higher value of this property has been determined on Wealth Tax side and for income-tax assessment the property has been shown at monthly rent of Rs.912 even then there is no prejudice to the interest of Revenue.

5. The objection of the learned I.A.C. for non-obtaining of rent deeds has been refuted by the learned A.R- by, inviting our attention to the portion of the assessment order whereby the Assessing Officer observed as under:---

"Notices under section 61 were issued and served, in response to which Mr. Nadeem Saeed, the A.R. of the assessee attended the office and submitted necessary documents/details. He also explained that PT-I Forms and rent deeds have already been filed which are available in Income Tax as well as Wealth Tax Record."

As regards the objection of the learned IAC that copy of accounts of AOP has not been obtained and the decrease in capital and increase in investment has not been probed while making the assessment, the learned A.R. pointed out that these objections can be raised in case of the assessment of A.O.P. and not in the case of a partner the learned A.R. submitted that these objections are relevant to the assessment of AOP and not in the case of a partner. The learned A.R. submitted that these objections are relevant to the. assessment of AOP in which the assessee is a partner and if these objections are found correct the department can make resort to section 65 or can make rectification. The learned A.R. for the assessee also contended that a reconciliation of wealth statement has also been filed and properly placed on record and the learned I.A.C. was not correct to raise objection that the assessee has failed to furnish any re-conciliation. He conciliationthat the objection of .the IAC, that the Assessing Officer has not conducted any inquiry through his , Circle .Inspector to verify the property income is frivolous in -view of the finding that the property income of the assessee should have been assessed at Rs.91,050.

6. The learned A.R. submitted that there are two essentional conditions for application of the provisions of section 66-A. He submitted that the IAC, having failed to point out any loss of revenue, his order merits cancellation. The learned A.R. submitted, that even if it is assumed that the order of assessment is of poor quality even then it could not be cancelled as held by the Tribunal in a reported case 1997 PTD (Trib.) 902. The relevant portion reads under:

"We are in respectful agreement with the observation of Azad Jammu and Kashmir High Court that mere disagreement between Officers on result of assessment could not be genuine reason to resort to the provision contain in section 66-A of the Income Tax Ordinance, 1979 which contains similar provision as in section 34-A of the (Repealed) Income Tax Act, 1922. It is further held that if an assessment order is not found up to mark in quality by an I.A.C. It is not sufficient ground for invoking section 66-A as a condition precedent is to arrive at an objective conclusion to the effect that the assessment order is erroneous and at the same time prejudicial to the interest of Revenue. Until and unless these two conditions are satisfied mere poor quality of an assessment would not provide justification for invocation of jurisdiction under section 66-A. We further agree with the contention of learned counsel for the appellant that under section 66-A of the Income Tax Ordinance, 1979 and I.A.C. has no authority to substitute his own discretion and his own way 'of appreciating the facts ' for arriving at preconceived desired result. "

The learned A.R. submitted that keeping in view this authoritative judgment of the tribunal the objections raised by the I.A.C have no legal effect at all therefore, his action needs to be set at naught.

7. The learned A.R. for the assessee also relied upon another case of the Tribunal reported as 1999 PTD (Trib.) 700 whereby this Tribunal has held that revisional jurisdiction cannot be used without the existence of two conditions of erroneousness and prejudice which in this case are not available.

8. The learned D.R. on the other hand supported the order of learned I.A.C. and contended that no interference is called for in the facts and circumstances of the case.

9.We have heard the parties and perused the relevant orders. The objections raised by the learned I.A.C. have been successfully refuted by the learned A.R. As these are of-administrative nature and directly relate to the quality of assessment order passed by the Assessing Officer, the ratio settled by the aforesaid judgment cited as 1997 PTD (Trib.) 902' is fully attracted. The learned I.A.C. having failed to point out any prejudice to the interest of Revenue, respectfully following the ratio settled by the aforesaid decisions we hold that the action of the revisional authority is -unjustified. Consequently, the action of the revising authority is set at naught.

10. As a result, the order of the I.A.C. is vacated and that of the original assessment order framed under section 62 of the Ordinance is restored. The appeal is accepted.

C.M.A./M.A.K./20/Tax(Trib.) Appeal accepted.