M. ISLAM QURESHI, PROPRIETOR MESSRS QURESHI CLOTH HOUSE, LAHORE VS SECRETARY, REVENUE DIVISION, ISLAMABAD, 2003 PTD-FEDERAL-TAX-OMBUDSMAN-PAKISTAN 203 (2002)

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.66(1), 66(2)(i), 65 & 13(1)(aa)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Limitation for assessment in certain cases‑‑‑Addition made being relevant to 'earlier assessment year was directed to be deleted by the First Appellate Authority and Appellate Tribunal also agreed with the contention of the assessee that "if any addition has to be made, it should be made first in the earlier assessment year "and confirmed the findings of the First Appellate Authority which had resulted in the deletion of addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979‑‑‑Department issued notice under S.65 of the Income Tax Ordinance, 1979 by invoking S.66(2)(i) of the Income Tax Ordinance, 1979‑‑‑Complaint against issuance of such notice was contrary to law‑‑‑Validity‑‑‑Section 66 of the income Tax Ordinance, 1979 provides that whereas a consequence of or to give effect ‑to any finding or direction contained in any order made by the authorities mentioned therein including the Tribunal an assessment was to be made on any firm, partner, assessee or any other person such assessments could be made within two years from the end of the financial year in which such order was received by the Assessing Officer Section 66 of the Income Tax Ordinance, 1979 contemplates three independent situations in which it could be applied; one of them being that if in consequence of an order assessment was to be made the limitation provided by subsection (1) of S.66 of the Income Tax Ordinance, 1979 will apply‑‑‑Such was an independent and separate from finding or direction which could be made basis of assessment‑‑In consequence of the order of Tribunal the Assessing Officer was justified in initiating proceedings for making the assessment‑‑‑ No maladministration having been established the case was closed by the Federal Tax Ombudsman.

Muhammad Shahid Abbas for the Complainant.

S.M. Ali, D.C.I.T. for Respondent.

DECISION/FINDINGS

The Complainant an individual, is a vendor of Sofa‑cloth. He alleges that the Special Officer, Income Tax, Circle‑26, Zone‑A, Lahore has illegally initiated proceedings under section 65 of the Income Tax Ordinance, 1979 for the assessment year 1988‑89.

2. Briefly the facts, are that the assessment for the assessment year 1989‑90 was completed under section 59‑B at income of Rs.32,500. However, subsequently the case was reopened under section 65 with the prior approval of the IAC Range‑I, Zone‑A, Lahore vide his Letter No.2213 dated 27‑6‑1995, as the assessee purchased ground floor at

Haidri Market, Barkat Ali Road, Lahore. The value of investment in the shop was assessed at Rs.2,50,000 and added under section 13(1)(aa) for alleged unexplained source of investment. On appeal the addition was deleted by the learned CIT(A) but it was challenged by the department through further appeal before the Tribunal. Photo copies of the Registered sale‑deed submitted before the Tribunal supported the contention of the A.R of the respondent/assessee that the shop was purchased before 30-6‑1988 and hence his contention; "if any addition has to be made, it should be made first in the assessment year 1988‑89 and not for the assessment year 1989‑90" .

3. The Department initiated proceeding under section 65 of the Income Tax Ordinance which has been challenged as illegal.

4. The Respondent has submitted that the assessment order has been already passed under sections 62/65 on 7‑5‑2002 while making an addition under section 13(1)(aa) read with section 13(2) to ‑the tune of Rs.250,000. It has been averred that the issues raised in the complain; purely relate to assessment for which legal remedies are available under the provisions of Income tax Ordinance 1979 therefore the complaint is without jurisdiction.

5. It is further submitted that taking cognizance of the finding of the learned CIT(A), Zone‑IV, Lahore vide order dated 16‑6‑1998 in the light of provision as contained in section 66(2)(i) of the Income Tax Ordinance 1979, the case was reopened for the preceding assessment year i.e. 1988‑89. According to respondent the limitation to give effect to the findings of the learned CIT (A) was to expire on 30‑6‑2001 in terms of section 66(1)(b) of the Income Tax Ordinance 1979 and therefore, the case was reopened and notice under section 65 was issue on 12‑5‑2001. The basis of invoking provisions of section 66, according to the RCIT are the words used in the appellate order, "This addition therefore, being relevant to earlier assessment order." The contention the assessee, on the other hand, is that these words are neither direction nor findings while from the point of view of the RCIT these word are clear cut findings/directions.

6. The A .R. of the Complainant has contended that the notice issued under section 65 for 1988‑89 by invoking provision of clause of subsection (2) of section 66 of the Income Tax Ordinance is patently contrary to law. Reliance for this assertion is placed on a judgment the Appellate Tribunal reported as 1994 PTD (Trib.) 1336.

7. The proceedings under section 65 for the assessment years 1989‑90 were originally initiated by the Assessing Officer on the base: information that the complainant made investment in the purchase shop‑ The sale‑deed of the property was registered by the sub register on 5‑9‑1988. The assessment for the year 1989‑90 was completed under sections 65/63 by making addition of Rs. 2,50,000 under section 13(1)(aa) of the Income Tax Ordinance, 1979 .

8. However, on appeal by the complainant, the Commissioner of Income Tax Appeal, Zone‑IV, Lahore, agreed with the following contentions of the Authorised Representative of the appellant:

"The A.R. of the appellant stated that the transaction in this case was completed on 11‑6‑1988 when the documents after completion were submitted to the registrar by the local commission. It has further, been contended that balance time has been consumed by the registry office for office formalities which have got nothing to do with the deal which stood completed earlier. The addition if any, therefore, could be made prior to the assessment year relevant to the closing date 30‑6‑1988."

He has accordingly held,

"This addition, therefore, being relevant to the earlier assessment year is directed to be deleted."

9. In second appeal filed by the department, the learned Income Tax Appellate Tribunal also agreed with the contentions/arguments of complainant's A.R. that "if any addition has to be made, it should be made first in the assessment year 1988‑89" and confirmed the findings of the learned Commissioner of Income Tax, Appeal which had resulted in the deletion of addition made under section 13(1)(aa) of the Income Tax Ordinance.

10. The facts stated above clearly establish that both the learned appellate authorities gave due consideration to the arguments/contentions of both the sides and after careful examination of relevant documents reached the definite conclusion that the addition under section 13(1)(aa) was not called for in the earlier assessment year 1989‑90 and was relevant for 1988‑89. According relief was granted to the complainant and addition was deleted.

11. This was a clear finding of both the appellate authorities and not a casual or incidental remark or an observation out of context. The order was neither remanded for making any further investigation nor set aside for completing the same de novo on merit. The addition was deleted on the only ground that it related to the immediately preceding assessment year.

12. The complainant's reliance on the judgment of the learned Income Tax Appellate Tribunal reported as 1994 PTD (Trib.) 1336 appears to be misplaced. The following findings of the, learned Income Tax Appellate Tribunal support the case of the respondents "in order to attract the provision of section 66 for the purpose of lifting the bar of limitation there should be definite and conclusive finding of the appellate authority".

13. Both the parties have concentrated on the plea that as there is no finding or direction in the order of Tribunal section 66 will not apply, which has been discussed and resolved by the proceeding observations. It is to be noted that section 66 provides that whereas a consequence of or to give effect to any finding or direction contained in any order made by the authorities mentioned therein including the Tribunal an assessment is to be made on any firm, partner, assessee or any other person such assessments can be made within two years from the end of the financial year in which such order is received by the Deputy Commissioner. Section 66 contemplates three independent situation in which it can be applied. One of them being if in consequence of an order assessment is to be made the limitation provided by sub section (1) will apply. This is independent and separate from finding or direction which can be made basis of assessment. In the present case in consequence of the order of Tribunal the Deputy Commissioner was justified in initiating proceedings for making the assessment.

14. As no maladministration has been established the case is closed.

C.M.A./M‑471/FTOOrder accordingly