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

----S. 59 (4) &c (55)----Self-assessment---Limitation--Assessment after limitation---Assessment was framed on 30-6-1997 pertaining to the assessment year 1993-94 while the assessment with regard to the assessment year 1994-95 was completed on 25-6-2000---Validity-- Admittedly returns were filed under the Self-Assessment Scheme-- Assessments were supposed to be completed on or before 30-6-1994 and 30-6-1996 Assessing Officer did not follow the procedure envisaged by the law and proceeded to, complete assessments under normal law much later than the stipulated time---Section 59 (4) of the Income Tax Ordinance 1979 was clear or, the issue that order under S.59(1) of the Income Tax Ordinance, 1979 shall be deemed to have been passed on- such date---If no formal order was passed assessment would be considered to be completed by operation of law on such date i.e. by the thirtieth date of June of the financial, year next following the income year in respect of which a return of total income had been furnished---Assessments framed by the Assessing Officer were time barred and the same were directed to be cancelled---Returns filed by the assessee under Self Assessment Scheme were therefore, restored by the Appellate Tribunal.

1993 PTD 332 and 1993 PTD (Trib.) 1421 rel.

Ch. Bashir Ahmed for Appellant.

Ashraf Ahmed Ali, D.R. for Respondent.

Date of hearing: 9th April, 2003

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---The appeals bearing I.T.A. Nos. 44/LB of 2000 and 1783/LB of 2001 for the assessment years 1993-94 and 1994-95 have been directed against two separate impugned orders passed by the learned CIT(A), Faisalabad. The common ground which has been agitated is that both the assessments framed were time-barred. The additional ground with regard to the business income, agricultural income and property income as being excessive has also been taken.

2. The assessee in the instant case is an individual deriving income from finishing and dyeing of cloth beside earning income from property and agriculture. The assessee filed returns under self-assessment scheme. The learned Assessing Officer excluded the return from the purview of self-assessment scheme for the reason that the assessee failed to disclose property income as well as agricultural income in the current assessment years. Requisite statutory notices were issued and assessment was framed on 30-6-1997 pertaining to the assessment year, 1993-94 while the assessment with regard to the assessment year 1994-95 was completed on 25-6-2000. The assessee failed at the first appellate level, hence further appeals before this Tribunal.

3. The learned AR has vehemently contested the impugned findings recorded by the' learned first Appellate Authority. He submitted that since the assessee's returns were filed under section 59(1) of the Ordinance and were duly qualified under self assessment scheme, the assessments were deemed to be completed on 30-6-1994 for the assessment year 1993-94 and on 30-6-1996 for the assessment year 1994-95. He further submitted that since all the statutory notices were issued subsequent to the above mentioned dates and assessments were completed thereafter and these having been completed after the due dates i.e. 30-6-1994 and, 30-6-1996 have become time barred by operation of law: In this respect he referred to subsection 4 of section 59 wherein it has been stated that no order under subsection (1) shall be made in any case after the thirtieth day of June of the financial year next following the income year in respect of which a return of total income has been furnished under section 55. In support of his Contention the learned AR relied upon a Judgment of the Honourable Lahore High Court and of learned I.T.A.T. reported as 1993 PTD 332 and 1993 PTD Trib. 1421 respectively. In the case decided by the Honourable High Court on somewhat similar issue, it was held that:--

"However, the third contention of the learned counsel for the petitioner is equally well merited. It is obvious from the bare reading of section 59(4) of the Income 'Tax Ordinance, 1979 that the Income Tax Officer is required to pass any order on the return submitted by the assessee before 30-6-1998. whereafter no order in terms of section 59(1) of the Ordinance can be passed. Subsection (4) of section 59 of the Ordinance is couched in negative language and is, therefore, according to the well accepted principles of interpretation to be construed as mandatory .I am not persuaded to agree with the learned counsel for the respondents and the only effect of an order not having been passed on the return of the assessment could not be made under the self-assessment scheme but the respondents were free to proceed under the normal law. To accept such a contention would amount to allowing premium to the respondents for their neglect and inaction to the prejudice of the assessee. It is axiomatic that no one can be allowed to benefit from its own wrongs and defaults. It will be incongruous to hold that on account of failure of respondents to comply with the provisions of section 59(4) by Income Tax Authorities, the petitioner has been deprived of the benefit conferred upon it by the law of being assessed under the Self Assessment Scheme and immunity from total audit under the normal law. On no reasonable basis, can such an interpretation be accepted. The consequence of the failure to pass order in terms of section 59(4) of the Ordinance would be that the respondents cannot pass any order

Similarly the Division Bench of the Tribunal white commenting upon the which is subject-matter of the present appeals observed as follows:-

"In the grounds of appeal it is stressed that the limitation prescribed under the law having already lapsed the framing of assessment by resort to section 62 was not justified. And, that the Assessing Officer having lost the jurisdiction to frame the assessment could not have avoided the rigors of the limitation prescribed under section 59(4) of the Ordinance, by simply mentioning section 62 of the Ordinance which was not applicable in the circumstances of the case. The contentions raised in the grounds of appeal bear weight. The Assessing Officer has expressly accepted that the return filed by the present applicant qualified for acceptance under Self-Assessment Scheme and that in fact it was never selected for detailed scrutiny. Since he was conscious of the fact that the time prescribed for framing assessment under section 59(4) of the Ordinance had long lapsed when he was framing the assessment on 30-5-1985, he simply mentioned section 62 in column 9 of the prescribed assessment form to wriggle out of the mischief of the limitation. This was clearly improper, and a fraud upon the statute. The Assessing Officer attempted to cover his belated action of framing assessment by resorting to another section of the Ordinance which allowed him more time to frame an assessment. The confirmation of this action by the learned Appellate Authority by reference to section 155 is even more fallacious. Framing of assessment within the time prescribed under section 59(4) of the Ordinance being within time prescribed under section 59(4) of the Ordinance being necessarily of jurisdictional aspect, the same could not be condoned by making a reference to the provisions contained in section 155 of the Ordinance. The blanket protection provided under section 155 cannot cure a jurisdictional defect which apparently occurred in this case after the time prescribed under subsection (4) of section 59 had long gone on 30-5-1995 when the assessment in question was framed. The learned DR has not been able to convince us of the vires of the action of Assessing Officer as also to the interpretation assigned to section 155 of the Ordinance by the learned Appellate Authority. As observed earlier, the Assessing Officer tried to camouflage his mistake of not having framed assessment within time by resorting to section 62 of the Ordinance and saying that the return was left to be assessed inadvertently."

The learned DR, on the other hand,' has supported the orders of the authorities below for the reasons stated therein.

4. We have heard the learned counsel for both the parties and have gone through the relevant orders alongwith case-law cited at the Bar. We are of the considered opinion that the arguments addressed by the learned AR carry weight. There is no denying of the fact, that the returns were filed under, the Self-Assessment Scheme. It is also admitted that the assessments were supposed to be completed on or before 30-6-1994 and 30-6-1996 but the learned Assessing Officer digressed from the procedure envisaged by the law and proceeded to complete assessments under normal law much later than the stipulated time. Section 59(4) is crystal clear on this issue and Superior Courts as well as the Tribunal have already interpreted it that order under subsection (1) shall deemed to have been passed on such date. We would like to add that even if no formal order is passed assessment would be considered to be completed by operation of law on such date i.e. by the thirtieth date of June of the financial year next following the Income year in respect of which return of total income had been furnished. In this view of the matter we have no hesitation in holding that the assessments framed by the learned Assessing Officer were time-barred and hence directed to be cancelled. Returns filed by the assessee under self-assessment scheme are therefore, restored in 1993-94 and 1994-95.

5. Since we have accepted the appeal filed by the assessee for the assessment year 1993-94 the penalty imposed by the Assessing Officer for this year has no legs to stand. Consequently the penalty imposed for the year 1993-94 stands deleted.

6. All the three appeals filed by the assessee are allowed accordingly.

C.M.A./822/Tax (Trib.)Appeal accepted.