Income Tax Ordinance (XXXI of 1979)---

---Ss.66-A, 80-D, 50(7-E), 59(1) & 54---Powers of Inspecting Additional Commissioner to revise, Deputy Commissioner's order---Minimum tax on income of certain persons---Deduction at source---Assessment under Self Assessment Scheme---Cancellation of assessment---Minimum tax, payable under S.80-D, deducted under S.50(7-E) of Income Tax Ordinance, 1979 was shown by the assessee in the balance sheet and credit of such amount of tax was also claimed which was allowed by the Assessing Officer while completing assessment under S.59(I), Income Tax Ordinance, 1979-- Inspecting Additional Commissioner cancelled the assessment on the ground that claim of minimum tax was inadmissible as such assessment order was erroneous and acceptance of claim caused prejudice to the interest of revenue---Contention of the assessee was that assessment being merely erroneous, could be no ground for cancellation of assessment unless same was prejudicial to the interest of revenue, while the tax paid under S.80-D, Income Tax Ordinance, 1979 was much more than the amount the Department wanted to calculate by addition of tax-deducted at source in the income---Department contended that deduction of tax under S.50(7-E), Income Tax Ordinance, 1979 was erroneously allowed and the same had caused damage to the interest of revenue---Validity---By allowing an inadmissible expenditure an error had been committed which had not caused any prejudice to the interest of revenue---If addition of such inadmissible expense was made in the total income, the tax payable thereon remained below the amount of tax-paid under S.80-D, Income Tax Ordinance, 1979, which was mandatory payment for finalization of an assessment under S.59(() of .the Income Tax Ordinance, 1979---No prejudice having been caused to the interest of revenue,. order of the Inspecting Additional Commissioner was declared to be without legal justification which was cancelled.

PLD 1992 SC 549 = 1992 PTD 932 rel.

Mujahid Arshi for Appellant.

Noor ul Amin Hotyana, D.R. for Respondent..

Date of hearing: 12th January, 1999.

ORDER

KHAWAJA FAROOQ SAEED (JUDICIAL MEMBER).---Cancellation of order under section 6.6-A is challenged by the assessee. The error found by the department that caused prejudice to the interest of revenue in the opinion of learned I.A.C. is as follows:---

"The amount of tax deducted under section 50(7-E) were duly reflected in the balance sheet available on record, Credit for the above deduction was also claimed and erroneously allowed by the. Assessing Officer while finalising the above orders. The claim under reference being an inadmissible claim, allowance of the same resulted the order both erroneous and prejudicial to the interest of revenue."

The I. A. C., therefore, issued a notice under section 66-A to the assessee to show-cause as to why the provisions of said section not be' invoked. The assessee responded to the notice and relying upon PLD 1992 SC 549 = 1992 PTD 932. said that merely being erroneous is no reason for cancellation of an earlier order as the other facts of its being prejudicial to the interest of revenue should also simultaneously be there. It has further been argued that the assessee has in fact paid tax under section 80-D which. is much more than the amount which the department wants to calculate by addition of tax deducted at source in the income of the assessee. The explanation of the assessee was found unsatisfactory and the case was cancelled for reassessment. In appeal before us the learned A.R. has repeated the facts of the case as mentioned above. He has added that charge of tax under section 80-D is a part of section 54 and tax paid by him under said provision for the 3 impugned years respectively was Rs.9,445, Rs.11,335 and Rs.13,041. Since the same he said was much more than the liability. as per First Schedule there was no prejudice caused to the interest of revenue. He further added that the income declared for all the 3 years was as under:---

The amount of tax claimed by the assessee by omission was Rs.570, Rs.560, and Rs.690 respectively for the year which even if added in total income would result in much less tax than already paid by the assessee under the provisions of section 80-D.

The learned D.R.. however, argued that the deduction of tax under section 50(7-E) has been erroneously allowed by the Assessing Officer and the same has caused damage to the interest of revenue, hence, cancellation is fully justified.

We have given-our earnest consideration to the rival arguments. It needs do further discussion that the provision of section 66-A can only be invoked where the two basic ingredients of order being erroneous as well as prejudicial to the interest of revenue are simultaneously found. In the impugned case one thing is obvious that by allowance of an admissible expenditure, an error has been done, whether the same has caused any prejudice to the interest of revenue is the moot point. In the impugned case if we add the inadmissible expenses allowed in the total income of the each year, the tax payable. thereon shall remain still below the amount of tax paid by the assessed under section 80-D which is a mandatory payment for finalization of an assessment under section.59(1). The assessment would not, have been finalized under the provision 59(1) if the liability under section 54 of the Income Tax Ordinance was not paid. The relevant provision of law is reproduced as follows:---

"54. Payment of tax with return of income.---Every person who is required, under this Ordinance to furnish a return of total income shall pay the tax payable, on the basis of such return, on or before the date on which he is so required to furnish such return.

Explanation. ---For the removal of any doubt, it is declared that the expression 'tax-payable' as used in this section includes the tax under section 80-D." `

One of the important conditions for assessment under Self Assessment Scheme as already discussed and is clear from section 54 is the payment under section:80-D, meaning thereby the tax payable thereon is to be considered for all intents and purposes while making an assessment under section 59 or subsequent reopening under, section 65 or 66-A as the case may be. In the impugned case even after addition in the declared income the amount of inadmissible claim, of taxes paid the income shall remain less than the limit where tax would exceed the amount of tax paid under section 80-D.

We, therefore, have no hesitation in holding that it was not a case causing, prejudiced to the interest of revenue. While giving our findings we also have in our mind the provisions of section 54(3) under which the Income Tax Department was entitled to make addition of inadmissible add backs while making an assessment under S.A.S., though the result of the same would have been what we have already adjudicated upon above. As a result thereof, the order of the I.A.C. cancelling the assessment is considered without any legal justification in all the 3 years and the same is, therefore, cancelled.

C.M.A./103/Tax(Trib.)Appeal allowed