Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 59(1)---Powers of Inspecting Additional Commissioner-- Self-assessment---Assessments were framed under Self-Assessment Scheme---Tax was computed on Form IT-30 and only demand notice was issued without written assessment order---Cancellation of such assessment under S.66-A of the Income Tax Ordinance, 1979 by the Inspecting Assistant Commissioner---Validity---Section 59(1) of Income Tax Ordinance, 1979 provides that to make a valid assessment order the Deputy Commissioner shall have to assess the total income of the assessee on the basis of return filed, whereafter concerned Assessing Officer was, under an obligation to pass an order in writing in pursuance of the assessment done by the Assessing Officer and then in consequence thereof the tax payable will be determined---When an order under S.59(1) of the Income Tax Ordinance, 1979 was passed, none of these steps were taken by the Assessing Officer-Neither the Assessing officer made any assessment nor was there an order in writing---No determination of any tax payable was made as postulated by S.59(1) of the Income Tax Ordinance, 1979---Tax computed on Form IT-30 and demand notice without there being any written assessment order, was not legally sustainable---Order under S.59(1) of the Income Tax Ordinance, 1979 could not be considered a formal order which could be subjected to the revisional jurisdiction of Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979---Appellate Tribunal vacated the order passed by the Inspecting Additional Commissioner under section 66-A of the Income Tax Ordinance, 1979 and restored assessments made under S.59(1) by the Assessing Officer for all the years under consideration---Since appeals were decided on legal issue, Appellate Tribunal did not adjudicate on the other issues raised by the assessee in the grounds of appeal.

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

Naveed Ahmed Andrabi for Appellant.

Mrs. Talat Altaf Khan and Ikram Tahir, D.Rs. for Respondent.

Date of hearing: 22nd January, 2003.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---The captioned three appeals at the instance of the assessee pertaining to the assessment- years 1999-2000, 2000-2001 and 2001-2002 have been directed against the combined impugned order, dated 29-6-2002 passed by the learned IAC Range III, Zone B, Lahore. The common grounds agitated for all the three assessment years an that the learned IAC was not justified to invoke section 66A of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance), whereby he cancelled the assessment framed by the Assessing Officer and directed to frame the assessments afresh.

2. Briefly stated the facts of the case are that the assessment for the assessment years under appeal were framed at net income of Rs.75,000, Rs.119,187 and Rs.135,791 respectively. The learned IAC while invoking his revisional jurisdiction conferred upon trim under section 66-A of the Ordinance examined the record of the assessee and declared the same to be erroneous and prejudicial to the interest of Revenue. It is pertinent to mention here that returns in all the three years under appeal were-filed under section 59(1) of the Ordinance, and assessments were framed for all the years under appeal as per self assessment scheme. Requisite show-cause notices were issued to the assessee. However, the learned IAC was not satisfied with the reply submitted in response to the above mentioned show-cause notices which lead cancellation of all the assessments for the reason that the same were erroneous insofar as prejudicial to the interest of Revenue. Hence the instant appeals.

3. The learned AR vehemently argued the case and assailed the impugned order raising manifold objections with regard to the invocation of section 66-A. of the Ordinance. However, right at the outset, his main thrust of arguments was that .the assessments were framed under section 59(1) of the Ordinance and there being no formal assessment order holding the field, the learned IAC erred in law while invoking section 66-A in the instant- case. In this regard he relied upon a judgment of the Tribunal reported as 2002 PTD (Trib.) 1949 Besides the learned, AR also sought strength from few other judgments of the High Court as well as the Tribunal reported as 1987 PTD 249. 1999 PTD (Trib.) 2884 and 1987 PTD (Trib.) 129.

4. Conversely the learned DR has apposed the arguments addressed at the bar and pleaded for upholding of the impugned order passed by the learned IAC.

5. Arguments heard and the relevant judgments cited at the bar perused.

6. We have heard the learned counsel for both the sides and have given our anxious consideration to the case-lays relied upon by the learned A.R. to substantiate his contentions. At this jucture, a would not be out of place to go through the judgment which had been made basis by the learned AR to elaborate his arguments. In the first case cited (supra) reported as 2002 PTD (Trib) 1949. the issue was somewhat similar to the one which is subject-matter of present appear. In the said case the return for the assessment- year 1999-2000 was filed and assessment was computed under section 59(1) of the Ordinance under the Universal Self-Assessment Scheme. Subsequently the learned IAC cancelled the assessment considering the same to be erroneous and prejudicial to the interest of Revenue for the reason that income declared by the assessee was less than the income last assessed. Following the ratio settled by, the august Supreme Court of Pakistan in a case 1993 PTD 766 = 1993 SCMR 1232, it was held:----

"the nutshell of the case is that the order passed by the learned IAC under section 66-A was without any legal basis since there was no formal order holding the field, invocation of section 66-A was without jurisdiction and nullity in the eye of law and void ab initio in law. Therefore, the impugned order passed in pursuance thereof is hereby annulled."

In the second case which has been relied upon by the learned A.R. reported as (1987) 55 Tax 48 (Trib.) wherein the ITO computed tax on form IT-30 and issued demand notice the question which came up for adjudication before the Bench was whether notice of demand can create liability without there being any written assessment order, the emphatic answer of the Bench was `No'. Similarly the Honourable Karachi High Court while deciding the issue is question observed that where passing of any formal order was condition precedent to the validity of notice of demand it was held by the Honourable Court that without passing any such order, no notice of demand could be issued to the assessee for levying of tax. This was a case under the Income Tax Act, 1922 wherein it was observed:--

"the Court categorically concluded that under section 29 of the late Act a notice of demand can only be served provided tax, penalty or interest' is due in consequence of an order-gassed under the Act Therefore, the condition precedent to the validity of the notice of demand under section 29 must be an order passed under, the Act, and the notice is merely consequential upon that order. Therefore, if there is no order under the Act, no notice can be served under section 29. In our view in the absence of such an order there is no liability of an assessee to comply with a notice under section 29."

This issue also cropped up before the Karachi Bench of the Tribunal. The learned Bench was also of the view consistently held by the Tribunal as well as higher Courts of Pakistan that where Assessing Officer passed an order under section 59(1) of the Ordinance and issued oily a demand notice and IT-30 form, the invocation of section 66-A by the learned IAC canceling the assessment framed under section 59(1) being erroneous as well as prejudicial to the interest of Revenue was held to be void ab initio for want of valid jurisdiction. At this stage reference to section 59(1) of the Ordinance is also worth mentioning and for the sake of convenience the same is being reproduced which is as under:--

"Where the return of total income for any income year furnished by the assessee, (not being) a company engaged in the business of banking, leasing and modaraba, under section 55 qualifies for acceptance in accordance with the provisions of a scheme of self-assessment made by the Central Board of Revenue for that year or under any instructions or orders issued thereunder, the (Deputy Commissioner), shall assess, bit an order in writing, the total income of the assessee on the basis of such return and determine the tax payable on the basis of such assessment."

If we go through the case-law in conjunction with section 59(1) of the Ordinance we are constrained to observe that arguments advanced by the earned AR carry weight. Mere glance of section 59(1) of the Ordinance would indicate that to make a valid assessment order the Deputy commissioner shall have to assess the total income of the assessee on the basis of return filed, 'having done so, then the concerned Assessing officer is under an obligation to pass an order in writing in pursuance of he assessment done by the Assessing Officer and then in consequence hereof the tax payable will be determined. Obviously, when an order under section 59(1) of the Ordinance is passed, none of these steps as envisaged under section 59(1) of the Ordinance are taken by the assessing Officer. To sum up, neither he makes any assessment, nor is here an order in writing and hence no determination of any tax payable is postulated by section 59(1) of the Ordinance. Our view also stands substantiated by the different judgments pronounced at different times and this is the reason that in a number of judgments it has been held that ax computed on form IT-30 and demand notice without there being any written assessment order, has not been held to be legally sustainable. In the light of case-law cited and submissions made by the learned AR, we lave no hesitation in holding that an order under section 59(1) of the ordinance cannot be considered a formal order which could be subjected to the revisional jurisdiction of learned IAC under section 66-A of the Ordinance. We, therefore, vacate the impugned order passed by the learned IAC under section 66-A of the Ordinance and restore the assessments made under section 59(1) by the Assessing Officer for all the years under consideration. Since we decided the appeals on legal issue there is no need to adjudicate on the other issues raised by the assessee in the grounds of appeal.

C.M.A./820/Tax (Trib.) Appeals accepted.