Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.66-A & 59‑A‑-‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Assessment on the basis of return‑‑Self‑Assessment Scheme‑‑‑Non‑filing of wealth statement‑‑ Effect‑‑‑Assessment by operation of law‑‑‑Cancellation of assessment under S.66‑A of the Income Tax Ordinance, 1979 for de novo assessment as condition precedent of filing of wealth statement had not been fulfilled‑‑‑Return filed should have been processed under normal: law‑‑‑Action under S.59‑A by the Assessing Officer was thus erroneous insofar as it was prejudicial to the interest of Revenue ‑‑‑Validity‑‑‑Non observance of the terms and conditions of. the Self‑Assessment Scheme under S.66‑A, Income Tax Ordinance, 1979 was not sustainable for the reasons that limitation for any action under S. 59‑A had expired on 30‑6‑1992; obligation on the part of Assessing Officer in terms of para. 3, Circular No.22 of 1991‑92 was not discharged and Assessing Officer on his own dislodged the requirement of wealth statement by accepting return under S.59‑A of the Income Tax Ordinance, 1979‑‑ Order under S.66‑A of the Income Tax Ordinance, 1979 was declared without jurisdiction by the Tribunal in circumstances.

1986 PTD (Trib.) 790; 1988 PTD 16; 1986 PTD 843 and 1988 PTD (Trib.) 987 rel.

Mian Muhammad Azeem for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 1st September, 2001.

ORDER

IMTIAZ ANJUM (ACCOUNTANT MEMBER).‑‑‑This appeal by appellant/assessee an individual has been filed contesting order under section 66A being against law and facts of the case. The impugned order has further been assailed on the ground that submissions made in response to show‑cause notice have not been properly appreciated by the I.A.C. The impugned order in any case has been objected on the plea that, order under section 59A has not been proved to be prejudicial/ erroneous inasmuch as to be against the interest of Revenue.

2. The facts briefly are that appellant individual filed return as‑ a new assessee on 31‑8‑1991 under SAS which as far as Assessing Authority is concerned was accepted under section 59A on 5‑6‑1994 almost after 3 years. Later on, I.A.C. noticed that return filed under S.A.S. did not qualify for acceptance as the condition preceded of filing of wealth statement had not been fulfilled. Non‑filing of wealth statement according to the I.A.C. rendered the return filed invalid in terms of Scheme of Self‑Assessment. A notice under section 66A was, therefore, issued to the assessee which as recorded in the impugned order is reproduced below:‑‑‑

Your assessment was accepted under section 59(1) relevant to the assessment year 1991‑92 whereas you had not filed your wealth statement for which a notice under section 58(1) was issued. The case should accordingly have been dealt with under normal law which was not done.

Show‑cause as to why your case should not be reopened under section 66A as .order of Assessing Officer are erroneous and prejudicial to the interest of Revenue. Your answer must reach this office by 29‑6‑1995, failing which it will be inferred that you have nothing to offer and your case will be processed under normal law.

The appellant made reply which has also been reproduced on page 2 of the assessment order as under:‑‑‑

"The return for the assessment year 1991‑92 was submitted under Self‑Assessment Scheme. The return was complete in all respects. No proceedings whatsoever were taken in hand in the above case by the 30‑6‑1992. Accordingly the return stood accepted by operation of law on the 30tb of June, 1992 in accordance with section 59(4) of the Income Tax Ordinance, 1979. Thereafter, a notice under section 61, dated 19‑4‑1993 alongwith a notice under section 58(1) was issued by the officer for 28‑4‑1993. On the date of hearing the Income Tax Officer was told of the fact that by operation of law the return of income stands accepted. As such he was requested to file proceedings, Accordingly, the Assessing Officer had dropped the proceedings and has treated the return to have been accepted utter section 59(4).

There is no question of non‑compliance of notices under sections 61 and 58(1). Accordingly there is no assessment order what to say of an order which could be termed as erroneous available on record. How for and in what way the order is erroneous is not clear from your notice. You have not made it clear as in what way the order is prejudicial to interest of Revenue. Until the preposition is not made clear regarding erroneous nature of the order and its character of being prejudicial to interest of Revenue, the detailed explanation on the subject cannot be submitted.

It is, therefore, requested that the assessee may please be intimated as to how the order had become erroneous and in what way had has become prejudicial to interest of Revenue so that proper compliance of the notice may be made."

The reply of the appellant quoted above was rejected because being a new assessee wealth statement which formed part of the return cinder SAS had not been filed. The return filed for lack of fulfillment of legal requirement was considered invalid and such was not acceptable under section 59(1). On the basis of above conclusion the IAC formed the opinion that the return filed should have been processed under normal law. Action under section 59A by the Assessing Officer (IAC has mentioned 59(1) in the show cause) was thus erroneous insofar as it was prejudicial to the interest of Revenue. As far as the objections of the appellant that no proceedings were taken by 30‑6‑1991 and the return stood accepted by operation of law on 30‑6‑1992 in accordance with the provisions of section 59 subsection (4) was turned down ‑ on the plea that it does not hold the ground as the action of the Assessing Officer was erroneous and was prejudicial to the interest of Revenue. On the basis of above conclusions the assessment under section 59A was cancelled with the direction for de novo assessment.

3. Mian Muhammad Azeem, Advocate, learned A.R,. of the appellant has argued that return was filed under SAS as a new tax payers. Appellant/assessee was within its legal right presume that return has been accepted under SAS as appellant was not pointed out and required to file documents in terms of clause (b) of para. 3 of the Circular No.22 of 1991‑92. The learned A .R. has argued that the such impression was further strengthened by the fact that appellant had not received any communication till the date of 30th Ju‑,,, 1992. The A.R. has 'further emphasized that whether order under section 59(1) was passed or not was the burden of the Assessing Authority. As far as the action under section 59A, dated 5‑6‑1994 is concerned appellant was not aware of unless pointed out by the I.A.C. through a show‑cause notice stating inter alia that appellant has been assessed under section 59(1) which was erroneous as wealth statement had not been filed and was thus prejudicial to the interest of Revenue. The AR has emphatically urged that since appellant has not been served with any assessment order. IT 30 and DN served does not constitute an order. On the basis of objections the learned A‑.R. has pleaded that action under section 66‑A of the Assessing Officer is illegal as:‑‑

(i) there is no assessment order which has been found erroneous insofar as it is prejudicial to the interest of Revenue.

(ii) appellant/assessee was never served a notice for non‑submission of wealth statement as required in the terms of Self‑Assessment Scheme (after the preliminary examination of the return.) '

(iii) since no adverse action contrary to the Scheme of Self- Assessment was communicated up to 30‑6‑1992 the acknowledgement receipt issued by the Department ,constituted an order as well as DN as far as assessee was concerned.

4. In view of the above objections the learned A.R. has contended that action under section 66‑A could not be initiated. The A.R. has further emphasized that submissions made in response to show‑cause notice reproduced in the impugned order have been arbitrarily brushed aside, particularly the objection raised that since no order under section 59(1) was passed before 30‑6‑1992, return stood accepted in terms of provisions of subsection (4) of section 59. The A.R. has strongly objected that the observations of the Assessing Authority that return .did not qualify under SAS are based on conjectures as purported legal or otherwise action had not been taken by the Assessing Officer which amounted to be erroneous insofar as it was prejudicial to the interest of Revenue. .

5. We have carefully perused the order under section 66‑A and the facts of return. We have noticed that no action whatsoever had been taken after the return had been filed under SAS as a new tax‑payer till order under section 59A on 5‑6‑1994. We are also constrained to note that IAC has mentioned in the show‑cause notice that return was" accepted 59(1) without referring to any order, its date of IT 30 and DN. We have further noted with disapproval the way appraisal of the submissions by the appellant‑assessee has been made in spite of having been reproduced on page 2 of‑the impugned order under section 66‑A. Needless to say that there is a host of case law whereby the interest of tax‑payers in context of Scheme of Self‑Assessment have been protected on facts and factors of greater degree of error than discovered by the IAC in case of the appellant. In this context reference may be made to cases reported (1985) 51 Tax 10=1986 PTD 790 (Trib.) and 1988 PTD 16. Another relevant case to be mentioned is 1986 PTD 843. It is pertinent to refer to a judgment reported 1988 PTD (Trib.) 987. That in the interest of sanctity of Scheme of Self Assessment criteria' applied in the exercise of powers by C.B.R. to select case for detailed scrutiny (criteria applied) has been held to be not to be arbitrary, unreasonable or unfair.

6. Keeping in view the facts and factors enumerated above particularly deficiencies of action under section 59(1), arbitrary rejection of the submissions made by the appellant in response to show‑cause notice for proposed action under section 66‑A, non‑observance of the terms and conditions of the Scheme of Self‑Assessment for the impugned year of 1991‑92 order under section 66‑A is not sustainable for the following:‑‑‑

(a) Limitation for any action under section 59(4) expired on 30‑6‑1992.

(b) Obligation on the part of Assessing Officer in terms of para. 3 Circular No.22,,1991‑92 was not discharged.

(c) Assessing Officer on his own dislodged the requirement of wealth statement by accepting return under section 59‑A.

On the basis of our observations above, the action under section 66‑A in the instant case is held to be without jurisdiction. We order accordingly.

C.M.A./M.A.K./182/Tax (Trib.)Order accordingly.