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

‑‑‑‑S. 66‑A‑‑‑C.B.R. Letter C. No.7 (2) DT‑14/92, dated 13‑8‑1992‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Agreement between Association of the Recruiting Agents and the Central Board of Revenue‑‑‑Non‑applicability of‑‑‑Rationale and reasons.

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

‑‑‑‑Ss. 66‑A & 59(1)‑‑‑C.B.R. Letter C. No.7(2) DT‑14/92, dated 13‑8‑1992‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Assessments finalised under Self Assessment Scheme were cancelled by the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979 on the ground that the same were not in accordance with the agreement executed between Association of the Recruiting Agents and the Central Board of Revenue‑‑‑Validity‑‑‑Appellate Tribunal held that action taken by the Inspecting Additional Commissioner was contrary to law which could not be approved and to meet the ends of justice order passed by the Inspecting Additional Commissioner was cancelled by the Appellate Tribunal.

1998 PTD (Trib.) 3191; 1990 PTD 903 and 1990 PTD 383 rel.

Dr. Ilyas Zafar, Advocate.

Muhammad Zulifiqar Ali, D.R.

Date of hearing: 7th January, 2003.

ORDER

These two appeals have been filed at the instance of an assessee who has earned income in the status of registered firm from business of recruiting agent to challenge order passed by Range IAC under section 66‑A for the years 1992‑93 and 1993‑94. Following grounds of appeal have been raised which are identical and mutatis mutandis apply to, both the years:‑‑

"(1) That, the learned IAC is not justified to invoke section 66‑A of the Income Tax Ordinance, 1979, as the order passed earlier by the Income Tax Officer under section 59 was not erroneous is so far as prejudicial to the interest of Revenue, and he is not empowered to take cognizance of the case unless both ingredients are satisfied.

(2)That the learned IAC is not justified to exercise his discretionary power to cancel the assessment passed under SAS as the return was immune from assessment under, normal law and no inherent defect in the order has been pointed out.

(3)That the learned IAC was not justified to take away the vested right of the assessee of being assessed under SAS as guaranteed by the Note appended in para 4 of Circular 22 of 1991, dated 21st July, 1991.

(4)That, the learned IAC is not justified to resort to section 66‑A on the basis of an agreement, dated 12‑8‑1992 between C.B.R. and all Pakistan Overseas Employment Association. This agreement is in clear violation of SAS, when the assessee had filed the return under SAS on 1‑8‑1998 claiming immunity.

(5)That the IAC was not justified to cancel the assessment on account of an agreement in which the assessee is not a party and the Chairman of the Association was also not authorised to make such agreement. The Association is formed with the object of welfare to the member and not for the purpose to create undue and illegal tax liability:

2. Authorised representative of both the parties have been heard and available records have been perused.

3. Brief facts of the case are that the assessee, as mentioned supra, is a registered firm which derives income from business of recruiting agency. It filed its return of income for the years 1992‑93 and 1993‑94 on due dates under self‑assessment scheme which were accepted as such under section 59(1). The record was later on examined by the Range IAC who found that the assessment made in the case of the appellant was not in accordance with‑the agreement which had been executed between Association of the Recruiting Agents and the Central Board of Revenue and which was conveyed to the Regional Commissioner through C.B.R. letter No.C. No.7(2) DT‑14/92, dated 13th August, 1992. The explanations furnished by the assessee in response to show‑cause notice under section 66‑A did not find favour with the learned IAC who rejected the same and proceeded to cancel the assessments directing the Assessing Officer to finalize the same afresh in accordance with the agreement referred to above. It is this action of the IAC which has brought the assessee firm in appeal before us.

4. In support of the contentions raised in the ground of appeal the AR of the assessee has made the following arguments at the bar.

(i)Return of income for the year 1992‑93 was filed on 1‑8‑1992 under self‑assessment schemes whereas agreement between the C.B.R. and All Pakistan Overseas Employment Association was made on 12‑8‑1992 and, therefore, the said agreement cannot be retrospectively applied to assessee's case.

(ii)Assessee filed returns of income for the years 1992‑93 and 1993‑94 under SAS. Since assessment for the year 1991‑92 had been made under section 62 under total audit, therefore, assessee's case cannot be selected for total audit in the subsequent two years i.e. in the year 1992‑93 and 1993‑94 according to the commitment made by C.B.R. in its Circular, dated, 31‑7‑1991 issued under self‑assessment scheme. It means that the return filed by the assessee for the years 1992‑93 and 1993‑94 not only qualify under SAS. but also qualify for immunity. In this situation argument made between C.B.R. and All Pakistan Overseas Employment Promotion, Association cannot be applied to assessee's case as this agreement does not overrule self‑assessment scheme.

(iii)Assessee neither a Member of the All Pakistan Overseas Employment Association nor he is signatory to the said agreement. Therefore, the said agreement cannot be applied to assessee's case.

(iv)Agreement concluded between C.B.R. and All Pakistan Overseas Employment Association does not carry any legal sanctity. Even the agreed assessments made by the Assessing Officers which the assessee have been struck down in appeal when the assessees object. In support of this contention the AR referred to the following case‑law:‑‑

1998 PTD (Trib.) 3191; 1990 PTD 903 (LHC) and 1990 PTD 383 (LHC).

(v)C.B.R. concluded an agreement of this type with Yarn Merchants Association wherein tax rate of 12% on gross receipts was fixed. This agreement did not stand the text of appeal. The ITAT in its reported judgment 1998 PTD (Trib.) 3191 held that such agreement could not result into ousting any of the provisions of the Income Tax Ordinance, 1979 or the rates notified for levy of Income Tax in the first schedule of the said Ordinance.

5. The learned DR, on behalf of Revenue, has rejected the contentions of the assessee and has strongly supported the case of the learned IAC. However, he has not added anything new to what the IAC has already in his order.

6. We have considered the view point of both the parties and have gone through the order passed by the learned IAC under section 66‑A. We agree with the AR of the assessee on the issue of non‑applicability of the agreement made between C.B.R. and All Pakistan Overseas Employment Association to the case of the assessee. The rationale and reasons of our this decision are as under:‑

(i)What to speak of a general agreement made between the C.B.R. and All Pakistan Overseas Employment Association, the superior Courts have discouraged even those agreed assessment wherein the agreement had been made by the Assessing Officers with the assessees directly in their individual cases. For example the Honourable Lahore High Court in its judgment cited as 1990 PTD 903 found that agreement did not fit into the broad contours of the Ordinance though certain exceptions can be visualised. In another judgment reported as 1990 PTD 383 the Honourable Lahore High Court concluded that agreed assessments have not been provided in the Ordinance and so the Assessing Officer had to assess the total income of the assessee on the strength of the material on records and such other evidence on specific point which was required by him. In the light of the view generally taken of the agreed assessments by the superior judiciary, the agreement made by the C.B.R. with All Pakistan Overseas Employment Association cannot be enforced in the instant case particularly when the assessee has serious objection to the same.

(ii)The agreement concluded between C.B.R. and the said Association regarding making of assessment of Recruiting Agents and Overseas Employment Promoters, which was circulated vide C. No. 7(2)/DT‑14/92, dated 13th August, 1992 is in the nature of administrative arrangement and in our opinion it does not have the sanctity of a judicial pronouncement or legislative enactment. Therefore, by no stretch of imagination it can override, overrule or supersede the self assessment scheme framed under section 59(1) of the Income Tax Ordinance, 1979. It can be enforce or made applicable only in these cases where the assessee have filed their returns of income under self assessment scheme voluntarily on the basis of this agreement of where return have been taken up for normal law assessment under section 62 and assessee agrees to be assessed on the basis of formula prescribed in the said agreement. Since the case of our present assessee qualifies for self assessment scheme as well as for immunity against selection for total audit and the assessee does not agree to be assessed on the basis of the said agreement, the assessee cannot be forced to comply with the provisions of the said agreement.

(iii)There is much force in the contention of the AR of the assessee that the conditions laid down under section 66‑A of the Income Tax Ordinance, 1979 for invoking the powers vested an IAC by this section have not been fulfilled in the instant case. The assessment order must be erroneous and it should be erroneous so far as it is prejudicial to the interest of Revenue. While interpreting the conditions laid down under section 66A it has been held by the superior judiciary of the land such as High Courts and Honourable Supreme Court that assessment order made by the Income Tax Officer should be proved to be erroneous as well as prejudicial to the interest of Revenue the IAC intends to revise the same under the said section 11, the instant case the assessment orders passed by the ITO under self assessment scheme may be prejudicial to the interest of Revenue as viewed by the learned IAC but the same are certainly not erroneous in law.

7. In view of the foregoing discussion we do not feel any hesitation to hold that the action taken by the learned IAC in the case of the assessee under section 66A for the years 1992‑93 and 1993‑94 is contrary to law which cannot be approved. Hence it would meet the ends of justice if the order passed by the IAC is cancelled. So appeals filed by the assessee succeed.

C.M.A./738/Tax (Trib.)Appeals accepted.