Income Tax Ordinance (XXXI of 1979)---

----Ss. 156, 86, 88, 59(1), 50(7C), 80-D, 52 & 52A---Rectification of mistake---Self-Assessment Scheme---Additional tax---Deduction of tax at source---Liability of persons failing to deduct or pay tax ---Assessee's return was accepted under Self-Assessment Scheme---Assessment was rectified under S.156 of, the Income Tax Ordinance, 1979 and tax was levied under S.50(7C) of the Ordinance at the rate of 7.5 % on the amount earned by winning prize bond with additional tax under S.88, Income Tax Ordinance, 1979---Assessee contended that tax was deductible by the Authority from the payment and such payment/income was covered under presumptive tax regime under S.80-D of the Income Tax Ordinance, 1979 which had nothing to do with the Return filed under Self-Assessment Scheme that Assessing Officer could initiate proceedings under Ss.52 & 52A as well as under S.86 of the Income Tax Ordinance, 1979 and that the price won by assessee was not liable to deduction to tax under S.50(7C) of the Income Tax Ordinance, 1979 because no prize individually was in excess of Rs.25,000---Validity-- Assessing Officer had incorrectly invoked jurisdiction under S.156 of the Income Tax Ordinance, 1979 and he had to take recourse to the provisions contained in Ss.52 & 52A of the Income Tax Ordinance, 1979---Both orders under Ss.56 & 88 were without jurisdiction which were annulled by Appellate Tribunal with the observation that Assessing Officer might initiate proceedings under Ss.52 & 52A of the Ordinance if so advised and warranted in law.

A.S. Jafry for Appellant.

Zaki Ahmad, D.R. for Respondent.

Date of hearing: 1st March, 2000.

ORDER

MUHAMMAD MUJIBULLAH SIDDIQUI (CHAIRMAN).---The above appeals are directed against the order dated 1-2-2000 by the learned CIT(A), Hyderabad in I.T. As. Nos.124 and 125 relating to the assessment year 1995-96. The first appeal arises out of order under section 156 and the second appeal out of order under section 88 which is consequential in nature.

2. Heard Mr. A. S. Jafry, learned counsel for the appellant and Mr. Zaki Ahmad, learned representative for the department. Mr. A. S. Jafry has contended that the entire proceedings under section 156 and consequential proceedings under section 88 are without jurisdiction. The brief facts giving rise to these appeals are that the appellant is an individual deriving income as goldsmith. The appellant filed return of income under self-assessment scheme which was accepted under section 59(1). Subsequently the Assessing Officer issued a show-cause notice intimating the appellant that he earned Rs.14,00,000 by winning prize bonds during the period from 11-1-1995 to 29-3-1995 but no tax was paid under section 50(7C) of the Income-tax Ordinance, 1979. It was contended on behalf of assessee that no tax Was payable under section 50(7C) as no winning was more than Rs.25,000. The Assessing Officer did not accept the contention and rectified the order by invoking provisions contained in section 156 and levied tax on the amount of Rs.14,00,000.under section 50(7C) of the Income Tax Ordinance at the rate of 7.5 % . Additional tax was also levied under section 88 from the date of filing of return i.e. 30-9-1995 to 25-3-1999.

3. The appellant preferred first appeal assailing the jurisdiction of Assessing Officer under section 156 but the learned CIT(A) did not accept the contention and dismissed the appeal.

4. Mr. A. S. Jafry, learned counsel for the appellant has submitted that subsection (7C) of section 50 enjoins upon the deducting authority to deduct the tax from the payment made to the recipient and the income is covered under the presumptive tax regime under section 80-D of the Income Tax Ordinance. He has submitted that the presumptive tax regime had its own mechanism and has nothing to do with the return filed under self-assessment scheme. He has further submitted that if a deducting authority has failed to deduct the tax under section 50(7C) .of the Income-tax Ordinance, the Assessing Officer can initiate proceedings against him under section 52 as well as under section 86 of the Income-tax Ordinance and now by virtue of insertion of section 52A in the Income-tax Ordinance by Finance Act, 1999, the tax can be recovered from recipient also. He has further reiterated his contention that the prize won by the appellant was not liable to deduction of tax under section 50(7C) because no prize was individually in excess of Rs.25,000.

5. The learned D.R. has though supported the orders of the learned two officers below but he is not able to rebut the contention that if any deducting authority has failed to deduct the tax under section 50 and the amount liable to deduction is covered under the presumptive tax regime it shall not have the effect of conferring jurisdiction on Assessing Officer for rectification of an assessment order which pertains to the normal tax regime. He is further unable to rebut the contention that there was no mistake in the assessment order under section 59(1) and, therefore, question of rectification never arose and that the ligitimate tax can be recovered by recourse to the provisions contained in sections 52 and 52A.

6. We have carefully considered the contentions raised by the learned representatives for the parties and have perused the material available on record. We are persuaded to agree with the submission of learned counsel for the appellant that the Assessing Officer has incorrectly invoked jurisdiction under section 156. The correct course open to the Assessing Officer is to have recourse to the provisions contained in sections 52 A and 52A of the Income-tax Ordinance, 1979. Consequent to this finding it is held that the order under section 156 and order under section 88 both are without jurisdiction and consequently both the orders are hereby annulled. The Assessing Officer may initiate proceedings under sections 52 and 52A if so advised and warranted in law. The appeals are allowed as above.

7. Since the main appeals have been disposed of, therefore, the stay applications submitted on behalf of appellant have been rendered in fructuous and stand disposed of accordingly.

C.M.A./M.A.K./23/Tax(Trib.) Appeal allowed.