W.T.As. Nos. 1414/LB and 1415/LB of 2000, decided on 26th February, 2002. VS W.T.As. Nos. 1414/LB and 1415/LB of 2000, decided on 26th February, 2002., 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2695 (2002)

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.35 & Second Sched., Cl.12(2)‑‑‑S.R.O. 595(I)/96, dated 7‑9‑1996‑ Rectification of mistakes‑‑‑Exemption‑‑‑Factory/ manufacturing unit as well as sale point‑‑‑Exemption allowed while passing order under S.16(3) of the Wealth Tax Act; 1963 was disallowed by rectification of the said order under S.35 of the Wealth Tax Act, 1963, on the report of Audit and Inspection Authority‑‑‑Validity‑‑‑Cursory perusal of the contents of show‑cause notice issued showed that the Assessing Officer did not apply his mind but only relied upon the discrepancies pointed out by the audit party‑‑‑Only issue' which was highlighted by the audit party was with regard to exemption allowed by the Assessing Officer and no other defects were pointed by the Assessing Officer which meant that the proceedings under S.35 of the Wealth Tax Act, 1963 were solely initiated on the . behest of recommendations of the audit party‑‑ Admittedly, the Assessing Officer did not apply his own mind but rather blindly relied upon the report of the Audit and Inspection Authority which was disapproved by the Tribunal‑‑‑Assessing Officer relied upon the report of the Audit and Inspection Authority while invoking S.35 of the Wealth Tax Act, 1963, in order to initiate rectification proceedings, which was not warranted under S.35 of the Wealth 'fax Act, 1963‑‑‑Appeal of the department was rejected by the Tribunal.

1992 PTD 570 = 1992 SCMR 687 rel.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.16(3)‑‑‑Assessment‑‑‑Assessment prior to fixed date‑‑‑Effect Cancellation of assessment by the First Appellate Authority passed on a date prior to the date for which the case was adjourned and without giving an opportunity of being heard was upheld by the Tribunal being illegal.

2001 PTD (Trib.) 3810 and I.T.As. Nos.4662 and 4663/LB of 1991‑92 rel.

Mehboob Alam, D.R. for Appellant.

Tahir Mehmood for Respondent.

Date of hearing: 9th February, 2002.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).‑‑‑The revenue has come up in. appeal assailing the impugned order dated 15‑5‑2000, passed by the learned IAC, Appeal. Cancellation of the order passed under section 35 of the Wealth Tax Act, 1963 (hereinafter called as Act) by the learned First Appellate Authority has been contested by the Department.

2. The facts of the case leading to filing of these appeals are that the assessment in die present case for the assessment year 1996‑97 was finalized at net wealth of Rs. 20,75,383 on 1‑8‑1997 vide an order passed under section 16(3) of the Act and for the assessment year 1997‑98 assessment was finalized at net wealth of Rs. 21,46,315 vide an order dated 8‑6‑1998 of the Act in Which exemption was allowed to a business premises treating it a shop, thereafter, the learned ACIT, seized of the matter, after issuing a requisite show‑cause notice rectified the original assessment order passed under section 16 (3) of the Act whereby the exemption allowed to the assessee with regard to the business premises/shop was disallowed.

3. The assessment succeeded at the first appellate level, and the rectification order passed under section 35 of the Act was cancelled by the learned First Appellate Authority, hence the instant appeals by the revenue.

4. The learned D.R. has vehemently argued the case and contended that the learned First Appellate Authority erred in law while cancelling the rectification order passed under section 35 of the Act by the Assessing Officer. He submitted that the business premises which was considered to be a shop and for the purposes of allowing exemption was not as a matter of fact a shop but manufacturing process was being carried on at the said premises, hence it could not be considered to be a shop as enunciated by the Tribunal in its various judgments.

5. On the contrary the learned A.R. of the assessee strongly repelled the arguments advanced by the learned D.R. and tried to argue the case on factual as well as on legal basis. He asserted that the assessee was involved in. the business of manufacturing of chappal and premises was not being used for manufacturing but it was also, a sale out let for the manufactured items. Therefore, the business premises was well covered within the definition of shop. On legal plane, the learned A.R. submitted that the case was reopened/rectified by the Assessing. Officer on the objections raised by the Audit and Inspection Authorities which is not warranted in the eye of law. He further argued that rectification order was not passed on a date fixed for hearing. Rather the assessee was surprised to receive the rectification order dated 20‑9‑1999 while he was asked to make its compliance for 27‑9‑1999. He emphasised that order passed earlier to the date for which the case has been fixed has also been held to be null and void being in violation of legal norms. He further stressed that even provisions of section 35 are not attracted in this case for the reason that the action taken by the Assessing Officer does not amount to rectification which turned down apparent from the face of the record.

5‑A. In support of his contention he relied upon various judgments of the Tribunal as well as superior Courts of Pakistan. The first judgment relied upon by the learned A.R. for the assessee reported as 2001 PTD (Trib.) 3810. This was also a case wherein section 66‑A of the Income Tax Ordinance, 1979, was invoked by the learned I.A.C. on initiation of Additional Director and Audit Report who had specifically mentioned this fact in his report which was confronted to the assessee by the learned I.A.C in the show‑cause notice. It was held by the Tribunal that "when the statute confers a certain duty on an officer it is that officer who has to make up his mind and pass the order in accordance with law and exercise his discretion uninfluenced by any opinion of any other authority". It was further observed in the supra authority that "As the statute has delegated authority to the I.A.C. to call for and examine the record and to form his independent opinion, he should not be influenced by any direction or opinion or note received from any quarter. In this case the learned IAC has not applied his mind at all, therefore, the conclusion drawn by the learned. IAC from the Audit and Inspection Report was absolutely in excess of the authority conferred on him by the statute and has the effect of vitiating the impugned order". We are of the considered view that supra judgment produced by the learned A.R. in support of his contention applies on all fours to the case before us. In the present case, the show‑cause notice which is subject‑matter of the appeal; reads as under:

The audit party has made audit in your case and pointed out certain discrepancies. You are, therefore, showcase to explain your position as to the discrepancies being pointed out below 18‑9‑1999.

Why your assessment for the assessment years 1996‑97 and 1997‑98 may not be rectified by disallowing the exemption for the factory measuring 40 Marlas (covered area 6750 sq. ft. at Qutab Shah Road, Lahore). On account of the fact that the exemption allowed by the Department is not admissible under S.R.O. 595(1)/96, dated 7‑9‑1996 as under:

6. Even the cursory perusal of the contents of show‑cause notice issued would show that the Assessing Offices did not apply his mind but only relied upon the discrepancies pointed out by the audit party. This is interesting to note that the only issue which is highlighted by the audit party is with regard to exemption allowed by the Assessing Officer and no other detects were pointed by the Assessing Officer which means that the instant proceedings under section 35 of the Act were solely initiated, on the behest of recommendations of the audit party. In the supra judgment the issue that whether the judgment passed earlier to the date on which it was fixed for hearing could be sustained in the eye of law was also taken up by the Tribunal relying upon another judgment passed by the Tribunal in I.T.As. Nos. 4662 and 4663/LB/1991‑92, dated 20‑5‑1996 observed that such order could not be upheld. The relevant paragraph of the judgment is also being reproduced for the sake of convenience.

It has once again been challenged before us that the assessment is illegal having been completed a day for which there was no notice. The learned D.R. could not satisfy us as to the legality of the assessment which has been finalized on 25‑8‑1990 on day before the case was fixed for hearing. The assessment being illegal, should have been cancelled by CIT (A) instead of setting aside, and, we therefore, cancel the same.

7. He further‑ relied upon the judgment of the Supreme Court of Pakistan reported as 1992 PTD 570 = 1992 SCMR 687 wherein the guide‑lines with regard to rectification were provided by the apex Court. It is not out of place to reproduce the relevant paragraph of the supra judgment which is as follows:

35 of the repealed Income Tax Act, 1922 hereinafter referred to as The Act confers a power to rectify any mistake in the order which is apparent from the record. Such power can be exercised suo motu or if it is brought to the notice by an assessee. Therefore, essential condition for exercise of such power is that the mistake should be apparent on the face of record; mistake which may be seen floating on the surface and does not require investigation or further evidence. The mistake should be so obvious that on mere reading the order it may immediately strike on the face of it. Where an officer exercising power under section 35 enters into the controversy, investigates into the matter, reassess the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to `rectification' of the order. Any mistake which is not patent and obvious on the record, cannot be termed to be an order which can be corrected by exercising power under section 35."

8. In the light of arguments addressed and judgments cited at the bar, we have no hesitation in upholding the impugned order passed by the learned First Appellate Authority. Admittedly, in the instant case the Assessing Officer did not apply his own mind but rather blindly relied upon the report of the Audit and Inspection Authority which has been disapprove(l by the Tribunal in its reported judgment cited as 2001 PTD (Trib.) 3810. Second argument of the learned A.R. of the assessee also carries weight that the assessee furnished an application for adjournment of the case which was allowed till 8‑11‑1999 but the relevant order was passed can 20‑10‑1999 prior to the date for which the case was adjourned and without giving an opportunity of being heard to the assessee. In the supra judgment cited as (2001) PTD (Trib.) 3810, it has been held that assessment order passed one day prior to the date for which the case was fixed for hearing was held to be illegal by the learned CIT (A) concerned and w as set aside, however, the Tribunal cancelled the assessment being illegal.. Similarly, the ratio settled by the apex Court through a judgment reported as 1992 PTD 570 = 1992 SCMR 687 also provided that the Assessing Officer while exercising powers under section 35 in order to rectify any assessment order passed by him could not rely upon or take into consideration additional evidence and then form an opinion different from, the order, then it will not amount to rectification of the order. It is worth‑nothing that in the present case the Assessing Officer relied upon the report of the Audit and Inspection Authority while invoking 1 section 35, Wealth Tax Act, 1963, in order to initiate rectification proceedings which was not warranted under the law provided under section 315 of the Act.

9. For the foregoing reasons the order of the learned CIT (A) is maintained and appeals of the department being devoid of any merit stand rejected.

C.M.A./M.A.K./380/Tax(Trib.)

Appeals rejected.