I.T.AS. NOS. 1380/KB, 1381/KB AND 1382/KB OF 1999-2000 VS I.T.AS. NOS. 1380/KB, 1381/KB AND 1382/KB OF 1999-2000
2001 P T D (Trib.) 2896
[Income-tax Appellate Tribunal Pakistan]
Before Inam Ellahi Sheikh, Chairman and
Javed Masood Tahir Bhatti, Judicial Member
I.T.As. Nos. 1380/KB, 1381/KB and 1382/KB of 1999-2000, decided on 22/05/2001.
(a) Income Tax Ordinance (XXXI of 1979)---
---Ss.59-D, 65, 13(1)(d)(aa) & 62---C.B.R. Circular No. 7 of 1997, dated 21-7-1997--- Assessment finalized under S.62 of the Income Tax Ordinance, 1979 was re-opened under S.65 of the Income Tax Ordinance, 1979 and assessee's Maim of having filed the declaration under Amnesty Scheme was rejected and addition was made under Ss.13(l)(d) & '3(1)(aa) of the Income Tax Ordinance, 1979---First Appellate Authority cancelled the assessment on the ground that notice under S.65 was issued after the assessee had already filed the declaration under S.59-D of the Income Tax Ordinance, 1979--- Validity--- Declaration was filed on 30-9-1997 whereas .the notice under S.65 of the Income Tax Ordinance, was issued on 2-6- 1998---,Assesscc had already opted to avail the Amnesty before the issuance of notice under S.65 of the Income Tax Ordinance, 1979 and no evidence had been produced before the Tribunal to show that there was a discovery of any valuation prior to filing of declaration under S.59-D of the Income Tax Ordinance, 1979---Department had no case for interference except for modification to the extent that order under S.65 was annulled and departmental appeal was dismissed by the Tribunal.
(b) Income Tax Ordinance (XXXI of 1979)---
----Ss.59-D, 66-A, 62 & 13(1)(d)(aa)---C.B.R. Circular No. 7 of-1997, dated 21-7-1997---Tax on undisclosed income ---Assessee filed declaration under S.59-D of the Income Tax Ordinance, 1979 after initiation of proceedings under S.66-A/62 by the Assessing Officer---Assessing Officer rejected the claim of assessee with regard to Amnesty with the observation that the assessee's case was excluded from the Amnesty Scheme because the proceedings had already been initiated---First Appellate Authority cancelled the Assessment with the observation that case was fully covered under the Amnesty Scheme---Validity---Declaration was never rejected by the Assessing Officer prior to the proceedings initiated under S.62/66-A of the Income Tax Ordinance, 1979 and neither formal intimation was issued to the assessee nor the tax paid by him was refunded---Order did not show any adjustment for the payment of tax under S.59-D of the Income Tax Ordinance, 1979 which would amount to double taxation of the same undisclosed income or assets which was not the intention of the law--- Assessee was entitled to the benefit of doubt because of the lapses m the Scheme and on the part of Department--- Scheme did not provide for the rejection of such a declaration nor was there any provision for refund or adjustment of tax paid with such declaration---Order of First Appellate Authority was modified so as to annul the assessment instead of cancellation of the same---Department's appeal was dismissed subject to modification by the Tribunal.
I.T.A. No. 685/KB of 1998-99 rel.
Agha Hidayatullah, D.R' for Appellant:
Najam Irshad for Respondent.
Date of hearing: 17th May, 2001.
ORDER
These three departmental appeals are directed against in order, dated 4-11-1999 recorded by the learned CIT(A), Zone-VI, Karachi in the case of an individual assessee deriving income from export of' yarn as well as real estate business.
2. The relevant facts in brief are that the original assessments were framed under section 62 of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance). The assessments for the assessment years 1992-93 anal 1993-94 were cancelled by the. learned. IAC with the directions to the Assessing Officer to make fresh assessments by making a valuation of the properties acquired by the assessee during the relevant periods at the Collector's rates as the declared value was considered to be ridiculously low. Hence the Assessing Officer proceeded to make fresh assessments under section 66-A/62 of the Ordinance. Notice under section 61 of the Ordinance was issued on 28-2-1997 for 3-10-1997 in the meantime the assessee filed a declaration under section 59-D of the Ordinance read with section 3A of the Wealth Tax Act. 1963 on 30-9-1991 under Amnesty Scheme announces in the Finance Act 1997. The Assessing Officer however, rejected the claim of the assessee with regard to the amnesty with the observation that the assessee's case was excluded from the Amnesty Scheme because the proceedings had already been initiated. The assessments were made by the Assessing Officer by making additions under sections 13(l)(d) and 13(1)(aa) of the Ordinance to the income originally assessed. In the assessment year 1994-95 the income originally assessed under section 62 of the Ordinance was reopened under section 65 of the Ordinance and again the assessee's claim of having filed the declaration under Amnesty Scheme was rejected. Again the income was assessed by malting additions under sections 13(1)(d) and 13(l)(aa) of the Ordinance to the income originally assessed. The learned CIT(A) however, accepted the assessee's appeals and cancelled the assessments for the assessment years 1992-93 and 1993-94 with the observation that the case was fully covered under the Amnesty Scheme. In the assessment year 1994-95 it was held that there was no definite information in the possession of the Assessing Officer. And for that reason the assessment for the assessment year 1994-95 was also cancelled. The learned D.R. has strongly agitated the order of the learned CIT(A) with the submission that the first appellate authority had no jurisdiction to cancel an assessment. Reference was made to clause (i) of subsection (1) of section 132 of the Ordinance which empowers an IAC to set aside, confirm, reduce, enhance or annul the assessment where the subject-matter is an order of assessment and the learned D.R. emphasises that there was no provision for the cancellation of assessment. Thus according to the learned D.R. the order of the learned CIT(A) could not be maintained. Another argument of the learned -D.R. is that the assessee could nor seek the protection of the Amnesty Scheme since he was excluded from the scope of such Scheme as the revenue was already seized of the matter of under statement of assets. According to' the learned D.R. the learned IAC had already cancelled the assessments of this assessee for the assessment years 1992-93 and 1993-94 as asset; were found to have been grossly understated and also it was emphasised by the learned D.R. that the assessee had already withdrawn his appeal filed before the Tribunal in these two years.
3. The learned counsel of the assessee on the other hand opposed the 5ubrnission of the learned D.R. with the submission that the information regarding valuation of plot was already available on the assessment record Hence nothing has been discovered by the Government Agency which could disqualify the assessee from seeking the amnesty. The learned-counsel of the assessee has also filed a decision of the Tribunal, dated 17-2-1999 recorder in I.T.A. No. 685/KB of 1998-99 and submits that this issue has already been decided against the revenue in similar circumstances. The learner counsel of the assessee further submitted that the information regarding the under valuation was already on the record as the value declared by the assessee was part of the assessment record. In respect to the assessment years 1994-95 it was submitted by the learned counsel of the assessee that the notice under section 65 of the Ordinance has been issued after 'the assess has already filed the declaration under section 59D of the Ordinance which could not be sustained. The learned D.R. however, opposed such argument of the learned counsel of the assessee and also distinguished the decision of the Tribunal, dated 17-2-1999 (supra) from the fact of the case under consideration. The learned D.R. pointed that in the case, dated 17-2-1999, on which learned A.R. has relied, it was recorded that the Tribunal had earlier dismissed the assessee's appeal bearing ITA No. 426/KB of 1996-97 ?on 8-5-1997 with the direction to complete the fresh assessment by 15-1-1997 whereas the assessment was actually completed on 27-5-1998. It was further elaborated that the assessee in the meantime had taken advantage of the delay and filed a declaration under the Amnesty Scheme which came to the rescue of the assessee before the Tribunal in the second round on 17-2-1999. Hence, according to the learned D.R. the facts and circumstances are quite distinguishable as the assessee in the present case had voluntarily withdrawn the appeals for the assessment years 1992-93 and 1993-94 against the order under section 66-A of the Ordinance. The learned D.R. also emphasied that the order of the Tribunal, dated 17-2-1999 had been passed in the absence of the D.R. and also without discussing the relevant provision of the scheme made under section 59D of the Ordinance in the order. With regard to the existence of the information regarding under valuation on the record, it was submitted by the learned D.R. that such difference was pointed out by the learned IAC while proceedings under section 66-A of the Ordinance much earlier than the filing of the declaration.
4. The submissions of both the parties as summarised above have been considered by us. The fact that the assessee withdrew the appeal under section 66-A of the Ordinance for the assessment years 1992-93 and 1993-94 and subsequent filing of the declaration under Amnesty Scheme clearly established the under statement of the relevant properties. However, the question to be resolved is whether after filing the amnesty declaration under section 59D of the Ordinance, the assessee could still be penalised by way of additions under section 13 of the Ordinance. First we would like to deal with the assessment year 1994-95. In that year the original assessment was completed on 30-6-1997 and the declaration under section 59D of the Ordinance is filed on 30-9-1997 whereas the notice under section 65 of the Ordinance was issued on 2-6-1998. Thus it could be said that the assessee had already opted to avail the amnesty before the issuance of the notice under section 65 of the Ordinance on 2-6-1998 and no evidence has been produced before us to show that there was a discovery of under valuation in this year prior to the filing of the declaration under section 59D of the Ordinance. Thus prima facie in the assessment year 1994-95 the department has no case for interference. Hence no interference is required in the order of the learned CIT(A) in this year except for modification to the extent that the order under section 65 is annulled and departmental appeal for the assessment year 1994-95 is dismissed.
5. The situation in the assessment years 1992-93 and 1993-94 is however, not so simple. The plea of the assessee is that there was no inquiry or investigation initiated by Government Agency which could disqualify the assessee from availing the amnesty. The Scheme of Amnesty was introduced under section 59D of the Ordinance and was contained in the C.B.R. Circular No. 7 of 1997, dated 21-7-1997. First paragraph of the Scheme laid down the scope of the Scheme in the following manner:---
"1. Scope of the Scheme.---(1) The Scheme shall apply to all new as we 11 as existing taxpayers except the following:
(i) companies; and'(ii) person in whose cases assets or income has been discovered as a result of or in respect of which proceedings have been initiated by way of Government investigation/inquiry.
(2) The Scheme shall be applicable to undisclosed income of any year or years relevant to any assessment year or years ending on or before 30th day of June, 1997."
Paragraph 2 of this Scheme defines the meaning of undisclosed income and there is no dispute over such meaning between the parties. Paragraph 3 prescribed the rate of tax on such undisclosed income and the Paragraph 4 lays down the deadline for filing the such declaration as 30-9-1997 and there is no dispute that the assessee has filed such declaration by 30-9-1997. Paragraph 5 stipulates that the valuation of undisclosed assets shall be made in accordance with the rules contained in Part-IIA of Income Tax Rules 1982 and again there is no dispute over the question of valuation as declared in the Amnesty Scheme. Pagaraphs 6, 7, and 8 are procedural provisions such as the procedure for filing of declaration payment of tax and incorporation of undisclosed income of the books of account. Pargraph 9 however, provides for immunity in the following words:---
"9. IMMUNITY: Where a person has paid tax on is undisclosed income in accordance with the Scheme and the rules, he shall not be liable to any further tax, charge, levy, penalty or prosecution in respect of such income under the Income Tax Ordinance, 1979."
Paragraph 10 mentions the consequences of irregularity of filing of declaration in the following manner:---
"10. Consequences of non-filing of declaration or filing an inaccurate declaration. ---If it is discovered that the declaration made under this Scheme was inaccurate or that it contained incorrect or incomplete information, the declarant shall be liable to penalties and prosecution under the provisions of sections Ill and 119 of the Income-tax Ordinance, 1979."
Paragraph 11 deals with the finality of proceedings in the following manner:-- .
Finality of proceedings under the Scheme.---Where a declaration in respect of undisclosed income has been properly made and the tax due on such income has been fully paid, the Deputy Commissioner of Income Tax shall accept such declaration without any further proceeding provided that where it comes to the knowledge of the Deputy Commissioner of Income Tax by way of definite information that the undisclosed income so declared was understated, the declaration may be rejected with the prior approval of Commissioner of Income-tax."
6. A perusal of the above provisions shows that only in the opening paragraph of the Circular dealing with the scope of Scheme, a person in whose case undisclosed income has been discovered prior to the filing of the declaration has been excluded from the application of such Scheme. Thereafter in paragraph 9 an immunity is provided to a person who has paid tax on disclosed income in accordance with the Scheme and the rules from the liability to any further tax, charge, levy, penalty or prosecution. In paragraph 10, consequences for non-filing of declaration or filing of an inaccurate declaration have been given. In paragraph 11 the finality. of the declaration has been ensured if the declaration has been made properly. It is not disputed before us that a declaration was filed for these two years which was never rejected by the Assessing Officer prior to the proceedings initiated under sections 62/66-A of the Ordinance. Even at that time no formal intimation was issued to the assessee nor the tax paid by him was refunded. In fact the Scheme carries no provisions of the refund of tax where the declaration does not qualify for acceptance as per Scheme. A perusal of the IT-30, dated 30-6-1999 for the assessment year 1992-93 does not show any adjustment for the payment of tax under section 59D of the Ordinance. Hence, this would amount to double taxation of a same undisclosed income or assets which could not be the intention of the law and at this point we also find the decision of the Tribunal, dateda17-2-1999 (supra) coming to the help of the assessee. In that case also the under statement of property was discovered and action taken under section 66-A of the Ordinance which was upheld by the Tribunal. The fact that the Tribunal directed the Assessing Officer to complete re-assessment by 15-1-1997 is not of a great significance as this would not alter situation that the information regarding the under statement of value was already available with the department. We may also mention that the Scheme does not' provide the issuance of a formal order indicating the acceptance or rejection of a declaration under section 59D of the Ordinance. We are not aware as to why such lapses were allowed in the Circular of C.B.R. No consequence has been given in the law or in the Circular for filing a declaration where the under statement of an asset or income has already come to the knowledge of the department except showing that such persons were excluded from the. Scheme itself. Considering all these facts and circumstances we feel that the assessee is entitled to the benefit of doubt because of the lapses in the Scheme and on the part of the Department. The Scheme does not provide for the rejection of such declaration nor is there any provision for refund or adjustment of tax paid with such declaration. Hence we are not inclined to accept such appeals of the department for both the years except that the order of the learned CIT(A) is modified so as to annul such assessments instead of cancellation of the same. The appeals are dismissed subject to the above modification in the order of the learned CIT(A).
C. M . A. /M. A. K. /99/Tax(Trib. )??? ???????????????????????????????????? Order accordingly.