I.T.A. No. 436/LB of 2002, decided on 29th June, 2002. VS I.T.A. No. 436/LB of 2002, decided on 29th June, 2002., 2002 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 3123 (2002)

Income Tax Ordinance (XXXI of 1979)‑‑‑‑

‑‑‑‑Ss. 66‑A, 85 & 59(1)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ‑‑‑‑Self assessment‑‑‑Assumption of jurisdiction by the Inspecting Additional Commissioner in terms of S.66‑A of the Income Tax Ordinance, 1979 on the basis of IT‑30 Form having no formal order in the field ‑‑‑Validity‑‑ Expression "and if he considers that any order passed therein by the Deputy Commissioner is erroneous insofar as it is prejudicial to the interest of Revenue" used in S.66‑A of the Income Tax Ordinance, 1979 clearly spelled out that there should be an order in writing upon which the Inspecting Additional Commissioner shall apply his mind to hold that the order passed by the Assessing Officer was erroneous insofar as that was prejudicial to the interest of Revenue‑‑‑Mere issuance of IT‑30 Form in absence of the order was not sufficient to satisfy the requirements of law‑‑‑In fact IT‑30 Form was always prepared consequent upon passing of an order under or in pursuance of the Income Tax Ordinance, 1979‑‑ Condition precedent for validity of notice of demand under S.85 of the Income Tax Ordinance, 1979 or the IT‑30 Form was dependent upon existence of an order to be passed under the Income Tax Ordinance, 1979‑‑‑Appellate Tribunal held that since provisions of S.66‑A of the Income Tax Ordinance, 1979 had been initiated on the basis of an IT‑30 Form which was not a substitute of an order and was also violative of the Income Tax Ordinance, 1979 therefore, the invocation of S.66‑A of the Income Tax Ordinance, 1979 was without lawful jurisdiction and the same was annulled.

2002 PTD (Trib.) 1949; 1993 PTD 766 = 1993 SCMR 1232; 1987 PTD 249; 1999 PTD (Trib.) 2884 and 1987 PTD (Trib.) 129 rel.

Shahid Abbas for Appellant.

Nemo for Respondent.

Date of hearing: 6th April, 2002.

ORDER

JAVED TAHIR BUTT (ACCOUNTANT MEMBER).‑‑-This appeal has been filed by the assessee against the order, dated 23‑1‑2002 passed by IAC Range IV Zone‑A, Lahore hereby he has invoked section 66‑A.by holding that the assessment framed under section 59(1) had not only been found erroneous but was also prejudicial to the interest of Revenue.

2. Mr. Shahid Abbas, Advocate, present for the assessee/appellant while none present for the Revenue/respondent. The appeal is therefore, decided ex parte on merits under Rule 20(2) of the I.T.A.T Rules, 1981.

3. In this regard it has been contended by the learned counsel for the assessee that the learned IAC had acted in flagrant violation of law in invoking section 66‑A in the present case as there was no order in the field which was considered erroneous insofar as prejudicial to the interest of Revenue. Rather only an IT‑30 Form was prepared and issued by the Assessing Officer. According to the learned counsel for the assessee, unless there is an order in the field which is mandatory requirement of law, assumption of jurisdiction of section 66‑A cannot be exercised. It was further argued by the learned counsel for the assessee that all the queries raised by the learned IAC in his show‑cause notice issued under section 66‑A of the Income Tax Ordinance, 1979, were duly replied which were brushed aside without assigning any cogent reasons. Thus invocation of section 66‑A in such circumstances was not sustainable.

4. On the other hand none prosecuted on behalf of the department to defend the order passed by the IAC in the present case. We feel convinced that the department is not serious to defend the orders passed by its officer. .

5. Brief facts of the case are that the net income declared for the year under appeal of Rs.268,000 had been accepted by the department under section 59(1) of the Income Tax Ordinance, 1979. Subsequently upon having perused the assessment record, certain discrepancies were noted therein by the IAC and were confronted to the assessee by issuing a letter, dated 20‑11‑2001. Those discrepancies are being reproduced hereunder:

(1)"The return for the assessment year 2000‑2001 was filed to declare income at Rs.268,000. The return was accepted under section 59(1).

(2)Perusal of the records has revealed that you have disclosed your closing stocks at Rs.800,000 whereas in the wealth statement the break‑up has been provided as follows:

Provided as follows:

Capital750,000

F&f50,000

800,000

As it is apparent there is a discrepancy in the closing stock and capital.

(3)As per wealth statement you have declared receipt of advance from tenants to the tune of Rs.400,000 but the computation chart does not include any such income under section 12(18).

(4)As per wealth tax return the ALV of the house (2‑B/II Township, Lahore) has been shown at Rs.117,530 whereas for the purpose of income‑tax the ALV has been given as Rs.108,000.

(5)In the reconciliation statement for the assets as on 30‑6‑2001, profit on sale of shop has been shown at Rs. 12,39,862 but no such asset was disclosed in the wealth statement as on 30‑6‑2000.

(6)As per wealth tax return for 1999‑2000 business capital as on 30‑6‑1999 has been shown at Rs.400,000 whereas opening stock as on 1‑7‑1999 has been shown at Rs.750,000:

In response thereto it was contended by the assessee as under:

" 1 . ......................................................

(2)That discrepancy in closing stock and capital in the instant year it is stated that there is no discrepancy in it. Copy of statement of affairs is attached being no account case.

(3)It is further stated that application of section 12(18.) on amount of Rs.400,000 received from the tenants. It is stated that this amount has been received from the tenants as security being refundable. So the same .does not hit by section 12(16), which deals only to advance, gift and loans whereas my matter is not covered is this situation.

(4)As showing of lesser ALV in income‑tax return of Rs.108,000 instead of Rs.117,530 in wealth tax return. It is furnished that the assessee has shown cost value of his asset in the wealth tax return of Rs.11,75,300 inadvertently written (ALV) instead of as written in year letter Rs.117,530 whereas the assessee was receiving rent of Rs.3,000 per month from three persons. Thus the ALV comes to Rs.108,000 which is lesser than the cost value of the assets, therefore, the‑assessee has to show cost value of the asset as per Rule 8(1A) of the Wealth Tax Rules of the Wealth Tax Act 1963. Furthermore this information cannot be made basis for application of section 66A, which is independent and separate proceedings.

(5)Non‑disclosure of asset wealth statement as on 30‑6‑2000 which was subsequently sold out as per wealth statement on 30‑6‑2001, it is submitted that the assessee has purchased this property on 25‑10‑1992 and subsequently shown through Amnesty 1997 but inadvertently (photocopy of the Iqrar Nama is annexed). The assessee has sold out area measuring at 2470 sq, ft. whereas remaining area of 872.5 duly is reflecting in the wealth statement as on 30‑6‑2001 as there is no 30‑6‑2001 as there is no discrepancy in it.

(6)Capital as on 30‑6‑1999 of Rs.400,000 and opening stock of Rs.750,000 as on 1‑7‑1997 statement of affairs on this score is attached."

As the explanation tendered was found incoherent as well as confusing the IAC again confronted the assessee and in compliance thereto it was further added in the following words:‑‑

(1)"Three copies of the agreement of persons from whom the assessee obtained refundable security. That the assessee is doing business on credit basis alongwith Messrs SharifJewellers outside Suha Bazar, Lahore.

(2)Photocopies of two sale deeds are attached for your kind consideration regarding sale of property out of property No.2/B/1 situated in Township, Lahore.

(3)It is stated that in the statement of affairs relating to assessment year 2000‑2001 has inadvertently written as opening stock instead of opening capital hence the same may please be read as opening capital instead of opening stock.

(4)The reply of query of para. 5 of your letter is duly available in assessment reply, dated 29‑1‑2001.

6. The reply furnished by the assessee was not found tenable and the IAC ultimately cancelled the order allegedly passed under section 59(1) of the Income Tax Ordinance, 1979 to be erroneously made and was also prejudicial to the interest of Revenue. The Assessing Officer was accordingly directed to proceed afresh under normal law after conducting detailed enquiries in respect of the discrepancies narrated in the said show‑cause notice.

7. Perusal of reply of the assessee in compliance to the show‑cause notice reveals that the assessee has categorically challenged initiation of proceedings under section 66A to be void ab initio on account of non existence of assessment order in the field but the IAC seems to have intentionally avoided to mention this part of the reply in his order. For facility of reference para. No. 1 of the reply is being cited hereunder:

(1)Reference your show‑cause Notice No. 480/R‑IV, dated 20‑11‑2001 regarding invocation of provision under section 66A of the Income. Tax Ordinance, 1979 considering the so‑called order of the ITO i.e. only I.T‑30 (without' demand notice and order in writing which is the mandatory provision of sections 59(1) and 85 of the Income Tax Ordinance, 1979. Hence application under section 66A of the Income Tax Ordinance, 1979 is void ab initio and illegal in absence of ' these ingredients. It is, therefore, requested that the proceed ings initiated in incomplete record may kindly be filed please.

So this act of the IAC vividly shows acceptance of the assessee's plea that only I.T‑30 Form has been issued in this case. Now, the question which has been posed for our consideration is whether an order is a pre requisite for invocation of section 66‑A of the Income Tax Ordinance, 1979. If we go through section 66‑A we find that the Legislature has used the expression in this section "and if he considers that any order passed therein by the Deputy Commissioner is erroneous in so far as it is prejudicial to the interest of Revenue". This expression clearly spells out that there should be an order in writing how (sic) that may be upon which the IAC shall apply his mind to hold that the order passed by‑the Deputy Commissioner was erroneous insofar as that was prejudicial to the interest of revenue. Mere issuance of IT‑30 Form in absence of the order is not sufficient to satisfy the requirement of law. In fact IT‑30 Form is always prepared consequent upon passing of an order under or in pursuance of the Income Tax Ordinance, 1979. The condition precedent for validity of notice of demand under section 85 of the Income Tax Ordinance, 1979 or the I. T. 30 Form is dependent upon existence of an order to be passed under this Ordinance.

8. The learned D.R also conceded that no order has been passed under section 59(1) rather IT 30 Form is available on record. We. therefore, hold that since provisions of section 66‑A have been initiated on the basis of an IT‑30 Form which is not a substitute of an order and is also violative of the Income Tax Ordinance 1979, therefore, invocation of section 66‑A was without lawful jurisdiction in the present case. This view gets strength from the judicial consensus arrived at by the apex Court of Pakistan and the dictums announced by the Tribunal in re: 2002 .PTD (Trib.) 1949, 1993 PTD 766 = 1993 SCMR 1232, 1987 PTD 249, 1999 PTD (Trib.) 2884 and 1987 PTD (Trib.) 129 Consequently, the order passed by the IAC under section 66‑A of the Income Tax Ordinance, 1979, dated 23‑1‑2002 stands annulled.

9. Since assessment has been annulled on legal plane, we, therefore, need not dilate upon the merits of the

case.

10. As the result, the asssessee's appeal succeeds.

C.M.A./M.A.K./456/Tax (Trib.)Order accordingly