COMMISSIONER OF INCOME-TAX, FAISALABAD VS MUHAMMAD ASHRAF
2001 P T D 1492
[Lahore High Court]
Before Nasim Sikandar and Jawwad S. Khawaja, JJ
COMMISSIONER OF INCOME‑TAX, FAISALABAD
versus
Haji MUHAMMAD ASHRAF
C.T.R. No.28 of 1992, heard on 06/02/2001.
(a) Income‑tax‑‑‑
‑‑‑‑Assessment‑‑‑Agreed amount‑‑‑Appeal to Appellate Tribunal ‑‑‑Scope‑‑ Resorting to far‑fetched technicalities by Appellate Tribunal and entertaining plea of non‑availability of definite information and improper service of notice‑‑‑Justification‑‑‑Agreed assessment was binding both on the Revenue as well as the assessee‑‑‑Far‑fetched technicalities could not be resorted to interfere with agreed assessment‑‑‑When the assessee had agreed to be assessed at a certain sum after he was found to have concealed his income, he owed a lot of explanation to be made before his appeal could be entertained by the Tribunal ‑‑‑Assessee had to make a case that the agreement was got executed in a manner which amounted to coercion, misrepresentation or fraud on the part' of the Revenue and it was only on such three grounds or reasons that an agreed assessment could possibly be challenged before the First Appellate Authority or the Tribunal‑‑‑Income Tax Appellate Tribunal, in circumstances, was not justified in annulling the assessment orders when these were made in agreement with the assessee and the assessee himself had offered for agreed assessment‑‑‑Principles.
In the present case the A.C. in his order expressed his surprise as to how both the assessees as well as his counsel who signed the agreed assessment could possibly approach him (A.C.) complaining against the assessment order as framed. However, the Tribunal completely closed its eyes to the agreed assessment and entertained the objections with regard to lack of availability of definite information or improper service of notice in a manner which appears totally unusual to proceedings before the Appellate Tribunal. Far‑fetched technicalities were resorted to interfere with the agreed assessment. It was absolutely unjustified. The assessee agreed to be assessed at a certain sum after he was found to have concealed his income. Therefore, he owed a lot of explanations to be made before his appeal could be entertained by the Tribunal and ruled upon as such. An agreed assessment is binding both on the Revenue as well as the assessee. Although the provisions of Civil Procedure Code are not strictly applicable to the proceedings before the Tribunal, however, the general principle contained in the Code can freely be invoked to do complete justice between the parties. One of such principle is contained in subsection (3) of section 90 of the Code. It states that no appeal shall be from a decree passed by the ‑Court with the consent of the parties. That principle was rightly invoked by the First Appellate Authority the A.C. The Tribunal rather went to the extent of allowing premium to an assessee who was caught in the middle of concealment and had offered to be assessed at a particular income. Before the Tribunal it was never. their case that the agreement was got executed in a manner which amounted to coercion, misrepresentation or playing fraud on the part of the Revenue. It is only on these three grounds or reasons for which an agreed assessment can possibly be challenged before the First Appellate Authority or the Tribunal. The sanctity attached to a completed. assessment with the agreement of the parties was outraged by a forum not less than that of second appeal.
In absence of a solid proof on record and the availability of any of the elements of coercion, misrepresentation or fraud on' the part of the Revenue appeal before the Tribunal was not competent.
(b) Income‑tax‑‑‑
‑‑‑Assessment‑‑‑Agreed assessment‑‑‑Penalty proceedings ‑‑‑Justification‑‑ Agreed assessment amounts to a package deal between the Revenue and the assessee‑‑‑In the absence of an express mention of penalty proceedings .in the agreement itself, penalty proceedings could not be resorted to subsequently using the agreed amount as admission on the part of the assessee.
An agreed assessment shall be taken to be a package deal between the Revenue and the assessee and that in absence of an express provision for that purpose an Assessing Officer cannot resort to penalty proceedings. An agreed assessment covered the interest of both the Revenue as well as the assessee, and therefore, they were bound by its terms and conditions. Also in absence of an express mention of penalty proceedings in the agreement itself, these provisions cannot be resorted to subsequently using the agreed assessment as admission on the part of the assessee.
CIT v. Muhammad Hanif C.T.R. No.362 of 1991 ref.
Shafqat Mehmood Chohan for the Revenue. Nemo for Respondent.
ORDER
NASIM SIKANDAR, J.‑‑This is a case stated by the Lahore Bench of the Income Tax Appellate Tribunal. The following questions of law have been framed for our consideration and answer:‑‑‑
(i) Whether on the facts and circumstances of the case the learned ITAT was justified in annulling the re-assessment orders when these assessments were made in agreement. with the assessee and the assessee himself offered for agreed assessment?
(ii) Whether on the facts and circumstances of the case the learned ITAT was justified in holding that action under section 65 was illegal in spite of the provisions of section 154(6) of the Income Tax Ordinance, 1979.
(iii) Whether, on the facts and circumstances of the case the learned ITAT was justified in holding that Income Tax Officer discount did not have any definite information for action under section 65 in this
(iv) Whether, on the facts and circumstances of the case the learned ITAT was justified in holding that amendment made in section 65(2) by the Finance Act, 1987 was applicable retrospectively?
2. According to the statement of the case the assessee an individual at the relevant time derived income from grinding and sale of chillies. Original assessments in the years 1980‑81 to 1983‑84 were framed under self assessment scheme by accepting the assessee's version of the earned income. Subsequently on the report of another wing of the Revenue his case was re opened and he was directed to make reply of a number of objections raised by the Assessing Officer to his earlier declared income in the perspective of the report received. After considering the reply, the Assessing Officer concluded that the assessee had not been able to prove his contention regarding grinding of the said commodities on behalf of other parties. It was accordingly concluded that he had been doing business on his own account and that fact had not been disclosed in the return of the income earlier filed and accepted under the Self-Assessment Scheme. At the fag end of the proceedings the assessee in the company of his Advocate agreed to be assessed at net income of Rs.75,000, Rs.80,000, Rs.85,000 and Rs.95,000 as against the earlier declared and accepted income of Rs.29,539, Rs.34,539, Rs.41,500 and Rs.42,539 respectively in the years under review. The Assessing Officer after framing the assessment on agreement basis proceeded to issue notice under section 116 of the Income Tax Ordinance and finally imposed penalties of various sums.
3. His appeal before the A.C. was rejected while the learned Tribunal found for him inter alia on the ground that initiation of proceedings under section 65 of the Ordinance were without availability of definite information and that the learned I.A.C. recorded the approval for re‑opening without exercising his discretion. The amendment in section 65 of the Income Tax Ordinance by Finance Act, 1987 w.e.f. 1‑7‑1987 was also held to be applicable to the pending cases being procedural in nature. Accordingly the assessments framed on agreement basis as well as the penalty imposed under section 111 of the Income Tax Ordinance, 1979 was found to be unjustified, and therefore, cancelled.
4. After hearing the learned counsel for the revenue we will readily agree with him that, in the first instance, appeal before the Tribunal was not competent. It will be noted that the A.C. in his order expressed his surprise as to how both the assessees as well as his learned counsel who signed the agreed assessment could possibly approach him complaining against the assessment order so framed. However, the learned Tribunal completely closed its eyes to the agreed assessment and entertained the objections with regard to lack of availability of definite information or improper service of notice in a manner which appears totally unusual to proceedings before the learned Appellate Tribunal. Far‑fetched technicalities were resorted to interfere with the agreed assessment. It was absolutely unjustified. The assessee agreed to be assessed at a certain sum after he was found to have concealed his income. Therefore, he owed a lot of explanations to be made before his appeal could be entertained by the Tribunal and ruled upon as such. An agreed assessment we have repeatedly held is binding both on the Revenue as well as the assessee. Although the provisions of Civil Procedure 4 Code are not strictly applicable to the proceedings before the Tribunal, however, the general principle contained in the Code can freely be invoked to do complete justice between the parties. One of such principle is contained in subsection (3) of section 96 of the Code. It states that no appeal shall be from a decree passed by the Court with the consent of the parties. That principle was rightly invoked by the First Appellate Authority the A.C. Faisalabad. As observed earlier, the learned Tribunal rather went to the extent of allowing premium to an assessee who was caught in the middle of concealment and had offered to be assessed at a particular income. Before the Tribunal it was never their case that the agreement was got executed in a manner which amounted to coercion, misrepresentation or playing fraud on the part of the Revenue. It is only on these three grounds or reasons for which an agreed assessment can possibly be challenged before the First Appellate Authority or the Tribunal. The sanctity attached to a completed assessment with the agreement of the parties was outraged by a forum not less than that of second appeal. We, therefore, share the surprise of the learned First Appellate Authority. Accordingly our answer to question (a) is in the negative.
7. (sic) The other three questions (b to d) do not arise at all inasmuch as we are of the view that in absence of a solid proof on record and the availability of any of the aforesaid elements of coercion, misrepresentation or fraud on the part of the Revenue appeal before the Tribunal was competent.
8. Following common question in the years 1980 to 1984 with regard to penalties imposed by the Assessing Officer has also been framed and sent to this Court for reply:
"Whether, on the facts and circumstances of the case the learned ITAT were justified in cancellation of the penalty orders?
9. After hearing the learned counsel for the Revenue we will return an affirmative answer to the question holding that the Assessing Officer was not justified in imposing penalties. .Our answer, however, is based upon different .reasons. In a number of cases, we have held that an agreement assessment shall be taken to be a package deal between the Revenue and the assessee and that in absence of an express provision for that purpose an Assessing 'Officer cannot make resort to penalty proceedings. In CTR No.362/91 re: CIT v. Muhammad Hanif answered on 20‑11‑2000 we have examined the issue in detail and concluded that an agreement assessment served the interest of both the Revenue as well, as the assessee, and therefore, they were bound by its' terms and conditions. Also in absence of an express, mention of penalty proceedings in the agreement itself, these provisions cannot be resorted to subsequently using the agreed assessment as admission on the part of the assessee.
For the various reasons recorded in the aforesaid reference we will return an affirmative answer to the cancellation of penalty orders though as observed earlier, for reasons different from the one expressed by the learned Tribunal.
Answered accordingly.
M.B.A./C‑71/L Reference answered.