BEFORE MAHMOOD AHMED MALIK, ACCOUNTANT MEMBER AND MUHAMMAD TAUQIR AFZAL MALIK, JUDICIAL MEMBER VS BEFORE MAHMOOD AHMED MALIK, ACCOUNTANT MEMBER AND MUHAMMAD TAUQIR AFZAL MALIK, JUDICIAL MEMBER
2002 P T D (Trib.) 278
[Income-tax Appellate Tribunal Pakistan]
Before Mahmood Ahmed Malik, Accountant Member and Muhammad Tauqir Afzal Malik, Judicial Member
I. T. As. Nos. 3902/LB and 3903/LB of 1999, decided on /01/.
th
September, 1999. Income Tax Ordinance (XXXI of 1979)---
----S. 66-A, Explanation ---C.B.R. Circular No. 14 of 1992, dated 1-7-1992---C.B.R. Circular C.No. 2(1) DTA-2 of 1994, dated 19-2-1994---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Where order passed by the Assessing Officer was without jurisdiction and was cancelled by the Inspecting Assistant Commissioner being erroneous and prejudicial to the interest of Revenue, such order of I.A.C. was maintained by the Appellate Tribunal with the observation that the order passed by Assessing Officer was rather made in haste and without proper appraisal of the facts of the case.
San Paulo (Brazilian) Railway Company Limited v. Carter (Surveyor of Taxes) Tax Cases Vol. III, p.407; I.T.A.T. No. 448/LB of 1998; I.T.H. No. 449/LB of 1998 and I.T.A. No. 450/LB of 1998 distinguished.
Anwar Shaukat and Muhammad Azhar Siddique for Appellant.
Shahbaz Butt and Muhammad Asif, D.R. for Respondent.
Date of hearing: 28th August, 1999.
ORDER
MAHMOOD AHMED MALIK (ACCOUNTANT MEMBER).-- These two appeals have been filed by the assessee against an order of the IAC passed under section 66-A of the Income Tax Ordinance. 1979 for the assessment years 1997-98 and 1998-99 on 19-6-1999.
2. The brief facts of the case are that the assessments for the years under appeal were finalized under section 62 at an income of Rs. 1,47,600 and Rs. 3,18,800 respectively. The learned IAC held that the assessments were erroneous and prejudicial to the interest of the Revenue for the reasons which were confronted to the assessee as under.
1. As per dealership certificate bearing No. FC/MRT/2810, dated 5-3-1997 issued by the FECTO Cement Ltd. your business address has been given as Messrs Sohail Traders Prop: Syed M. Sohail Tahir Khiali Bye Pass. Sheikhupura Road Gujranwala.
Even on copy of security deposit receipt issued by FECTO Cement Ltd. vide No. FCL/MKT/2698, dated 5-3-1998 your address has been written as Messrs Sohail Traders, Prop. Syed M. Sohail Tahir Khiali Bye Pass, Sheikhupura Road, Gujranwala. It was also added that as per Para-4 of above mentioned dealership agreement the a of operation was to be Gujranwala.
2. The Assessing Officer has completed the assessments in your case without lawful jurisdiction as the enquiry report of ITAT on which he has relied on is unsigned. The undersigned has also got conducted enquiries regarding the place of business in Dhoomi Chand Street Old Anarkali Lahore through the Income Tax Inspector of Circle and this office. Both have categorically stated in their reports and affidavits, dated 2-6-1999 that no such business is being conducted or had been conducted in the said street at given address since last 50, years.In view of explanation to para. 28 of C.B.R. Circular C. No. 2(1) DTA-2 of 1994, dated 19-6-1999 the expression place of business shall mean the principal place where such manufacturing, processing or business is carried out. In your case your business is being carried out at Khiali Bye Pass Sheikhupura Road, Gujranwala. In view of explanation to section 66-A(2) the order passed without lawful jurisdiction is prejudicial to the interest of Revenue.
The assessee was confronted with the above the assessee attended who inspected the file and filed written reply. After perusal of the assessee's reply, its enclosures and assessment record it was considered by the learned IAC that the orders passed by the Special Officer, Circle-2, Zone-B. Lahore for the years 1996-97 to 1998-99 were erroneous as well as prejudicial to the interest of Revenue. It was stated by the learned I.A.C. that in para. 2 of adjournment application, dated 9-6-1999 the assessee had stated that he had discontinued the business in March, 1999, and closed his office after that. He had also added that he received no notice at his office address. Whereas perusal of assessment record revealed that notice under section 61, dated 10-4-1999 for 18-4-1999 and demand notice under section 85, dated 24-4-1999 were sent to the assessee on the address i.e. Messrs Sohail Traders, Dhooni Chand. Street, Old Anarkali, Lahore. As per record the demand notice was served upon the assessee on 6-5-1999. The IAC observed that, this situation clearly established that the address given by the assessee was non-specific and no such business existed there and that the initiation of proceedings, compliance of statutory notices and finalization , of proceedings are collusive arrangement between the assessee and the Assessing Officer. The IAC concluded that the not worth declared by the assessee as on 30-61,1997 at Rs. 2,650,000 including capital of Rs. 2,100,000 and notes and coins/prize bonds at Rs.550,000 had been accepted without its probe and that the assessments were completed in compliance of un-served notices under sections 61 arid 62 and on the basis of unsigned alleged enquiry project of the ITI. It was stated by the learned IAC that the Assessing Officer had not issued notice under section 116 for not furnishing of Income Tax Return within due time despite the fact that said default occurred and that he had estimated the sales without obtaining ledger copy/certificate from the principal and had also applied G.P. @ 1.5% instead of 6.25 % upheld by the appellate authorities in a number of cases. On the face of income tax returns for the assessment years 1997-98 and 1998-99 the assessee had written the following business addresses:
(1) Head Office:Dbooni Chand Street, Old Anarkali, Lahore.
(2) Agency: Khiali Bye Pass Sheikhupura Road, Gujranwala.
It has also been stated in the order of learned IAC that in the reply to notice under section 66-A and its enclosure, the assessee had tried to provide through affidavits of different persons that he was doing business of Cement under the name and style of Messrs 'Sohail Traders, in bhooni Chand Street, Old Anarkali Lahore. The IAC observed that all' these documents had been prepared in a single sitting and some one else other than deponents has put the date i.e. 19-6-1999 on the said documents. The assessee's mere emphasis is that he was having Head Office at Dhooni Chand Street, Old Anarkali, Lahore. Whereas in view of explanation to para 28 of C.B.R. Circular C. No. 2(1) DTA-2 of 1994, dated 192-1994 the expression, place of business (except public limited company) means the principle place where said manufacturing, processing or business is carried out. In this case agency was allotted for Gujranwala as per para 4 of dealership certificates, dated 5-6-1999 and the area of operation of business was Gujranwala. Considering the above facts the learned JAC held the assessments finalized by the assessing to be erroneous and prejudicial to the interest of the revenue and, therefore, the IAC cancelled the same.
3. Parties have been heard. The learned counsel for the assessee has submitted that on the face of the Income Tax Returns for the years 1997-98 and 1998-99 the assessee had written the address of Head Office as Dhooni Chand Street Old Anarkali, Lahore and address of the agency as Khiali, Bye Pass Sheikhupura Road, Gujranwala. It was further submitted the assessments were completed by the Assessing Officer under section 62 of the Income Tax Ordinance and the learned counsel for the assessee duly participated in the proceedings which is evident from the assessment order. Therefore, the learned I.A.C. is not right in saying that the assessments were completed incompliance of un-served notices under sections 61 and 62. It was further submitted by the learned counsel that the Assessing Officer duly conducted the inquiry which revealed that the assessee obtained Cement Agency from Messrs.Fecto Cement Co. w.e.f. 4-3-1997. The Head Office of the assessee was at Dhooni Chand Street. Old Anarkali, Lahore and sub-office at Khiali Bye Pass Sheikhupura Road, Gujranwala. The learned A.R. contended that the IAC had hastily passed the order on 19-6-1999 without giving proper opportunity of hearing to the assessee. He cited the judgment in case of San Paulo (Brazilian) Railway Company Limited v. Carter (Surveyor of Taxes) reported in tax cases Volume-III Page 407 to state that the assessment is to be framed at the place where the head and brain of the business exists. It was contended that though business activities were carried out at Gujranwala control vested with the Head Office at Lahore, and therefore, assessment was rightly framed by the S. O. Cir-O2, Zone-B who held jurisdiction over the case. The learned counsel has LA also showed to us the order sheet which had been written in pencil and the entries recorded therein did not bear the signatures of the Assessing Officer. It was thus argued that the impugned assessment was in fact a collusive arrangement as had also been stated in the order, under section 66-A and it had no validity in the eyes of law. The learned D.R. referred to the Explanation to section 66-A which states that an order prejudicial to the interests of Revenue shall include an order passed without lawful jurisdiction. The learned D.R. also referred to C.B.R's. Circular No. 14 of 1992, dated 1-7-1992. This circular explained the provisions of section 66-A and an extract as under was produced to show that the explanation was added to safeguard the interest of Revenue against the collusive arrangements or otherwise:
"This provision has been brought to safeguard the interest of Revenue where, through collusive arrangement or otherwise, an assessment is made without there being lawful jurisdiction over the case."
The L.A. also replied to the objection of the learned A.R that since the IAC held that the S.O. had no jurisdiction over the case the IAC too had no jurisdiction of the case. A copy of the order of a D.B. of the I.T.A.T. in I.T.A. No. 448/LB of 1998. I.T.A. No. 449/LB of 1998 and I.T.A. No. 450/LB of 1998, dated 24-8-1998, was filed. The order is written by Mr. Nasim Sikandar the learned Judicial Member. In this case, it was held that under section 66-A, the IAC could exercise his revisional jurisdiction only after calling for and examining the record of any proceedings. It was also held that the IAC was not justified in laying hands upon the assessment framed in some other range of another district, unless it was so directed by the Commissioner, it was stated that there was an implied inference in the arguments put forth on behalf of the appellant that any other IAC held jurisdiction to cancel the order under section 62. It was argued that it was held in the Tribunal's unreported case referred to above that in case an Assessing Officer passes an order without lawful jurisdiction, it is the IAC to whom the Assessing Officer is subordinate who would pass order under section 66-A.
5. We have considered the arguments of both the sides and have also gone through the orders passed by the authorities below. The assessee entered into an agreement with the principal company to conduct business in Gujranwala. The A.R was specifically asked by us to furnish any copy of bank account etc. to show that business had been controlled or managed from Lahore. He showed his inability to produce any such evidence. The IAC got conducted enquiries which showed that no business had been conducted in Dhooni Chand Street, Old Anarkali. The affidavits of different persons produced before the IAC were not accepted for valid reasons. These were not supported by any independent or corroborative evidence like copies of bank account etc. The case law placed at the bar is not relevant, because in the case of the assessee no satisfactory evidence has been produced to show that the "head and brain" of the business existed at Lahore. On the other hand, the learned IAC had shown from the agreement with the principal company that the assessee's business operations were confined to Gujranwala. As for the argument that the IAC had not applied his mind and had acted upon the advice of CIT, Gujrawala, we do not find much substance therein. The CIT is charged with the responsibility to collect revenues. If he finds that taxes pertaining to his Zone are being wrongly charged and paid outside his jurisdiction; he is supposed to act and take remedial measure. There is no evidence available to show that the IAC did not act independently and apply his own judgment. Further a perusal of the assessment order and examination of assessment record shows that the impugned assessment orders were also erroneous and prejudicial to revenue as proper enquiries were not conducted and a lower G.P. rate was applied. The orders were rather made in haste and without proper appraisal of the facts of the case. The order passed by the learned IAC is- fair and reasonable which is, therefore, maintained.
7. As a result the appeals filed by the assessee are dismissed being devoid of merits.
C.M.A./M.A.K./135/Tax (Trib.) Appeals dismissed.