I.T.A. No. 4547/LB of 2001, decided on 18th March, 2003. VS I.T.A. No. 4547/LB of 2001, decided on 18th March, 2003., 2003 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2749 (2003)

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A & 59(1)‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner s order‑‑‑Assessment finalized under Self Assessment Scheme without issuance of any formal order was cancelled by the Inspecting Additional Commissioner on the ground that declared income was leis than the income assessed in the preceding assessment year‑‑‑Validity‑‑‑Assessment was framed under S.59(1) of the Income Tax Ordinance, 1979 by the Assessing Officer using a cycle styled pro forma and that too was not properly filled in and was left absolutely blank‑‑‑Provisions of S.59(1) of the Income Tax Ordinance, 1979 had provided that there must be an assessment which could not be made without conscious application of mind‑‑‑Older must be in writing in sequel to the assessment order, the tax due, if any, must also be determined‑‑‑In absence of such finding no order could be treated a proper/legal order‑‑‑Inspecting Additional Commissioner having wrongly invoked S.66‑A of the Income Tax Ordinance, 1979 his order was vacated and that passed under S.59(1) of the Income Tax Ordinance, 1979 was restored by the Appellate Tribunal.

2002 PTD (Trib.) 1949; 1975 PTD (Trib.) 27; (1967) 16 Tax 119 and 1987 PTD (Trib.) 129 rep.

Zulifqar Khan and Miss Uzma Butt for the Appellant.

Mahboob Alam, D.R. for Respondent.

Date of hearing: 28th January, 2003.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).‑‑‑Titled appeal at the behest of the assessee for the assessment year 2000‑2001 has been filed against the impugned order, dated 8‑9‑2001 passed by the learned IAC, Range‑1, Lahore. The sole ground of the assessee is that the learned IAC was not justified to invoke section 66A of the Income Tax Ordinance, 1979 (hereinafter called the Repealed Ordinance).

2. Briefly stated the facts of the case are that the assessee is an individual derives income from retail sales of ready‑made garments. Assessee filed return declaring income of Rs. 1,95,300 which was accepted under section 59(1) of the Repealed Ordinance. Subsequently, on examination of assessment record, the learned IAC observed that the case of the assessee was erroneously accepted under the Self‑Assessment Scheme since declared income is less than the income assessed in the preceding assessment year. The learned IAC holding the action of the Assessing Officer to be erroneous so far as it was prejudicial to the interest of Revenue cancelled the assessment order while using his powers under section 66A of the Repealed Ordinance. Hence the instant appeal by the assessee.

3. Both the parties have been heard and relevant orders perused. The learned counsel appearing on behalf pf the assessee contended that the learned IAC acted in flagrant violation of law while invoking section 66A of the Ordinance. She emphatically pleaded that no formal order was holding the field, hence the action of the learned IAC is void ab initio and nullity in the eye of law. The learned AR drew our attention towards the assessment order passed under section 59(1) of the Ordinance and submitted that even the columns relating to the net income as well declared income were not filled in and left absolutely blank. She also referred to the section 59(1) of the Ordinance which is the relevant provision which governs filing of return under Self‑Assessment Scheme. For the sake of convenience the same is reproduced as under:

Section 59(1). "Whether 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 by 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."

4. While commenting upon the above referred to provision of law, she emphasized that it has been made obligatory upon the Assessing Officer that he shall assess by an order in writing and then determine the tax payable on the basis of such assessment (underlining is ours(sic)). The learned A.R. averred that perusal of the assessment order clearly shows that since section 59(1) was complied with and it could not be considered to be a valid order. She submitted that order which is the subject‑matter of the appeal, the Assessing Officer even did not bother to fill in the columns, hence there was no assessment and no determination of tax payable on the basis of such assessment either. It was further stated that section 59(1) envisages an assessment through an order in writing which was also not adhered to because the Assessing Officer used a cyclostyled pro forma. Further contended that the demand of notice follows the assessment order because demand is always created in sequel to passing of assessment order. Similarly the learned A.R. argued that IT‑30 also cannot take place of an assessment order. It was explained that IT‑30 is a creation of rule while the assessment order is creation of law under the Ordinance. Moreover, the rules are always subservient to the main statute. In support of his contention the learned A.R. also relied upon the judgments reported as 2002 PTD (Trib.) 1949, 1975 PTD (Trib.) 27, (1967), 16 Tax 119 and 1987 PTD (Trib.) 129. The learned D.R. on the other band opposed the arguments advanced by the learned A.R.

5. Before we embark upon the discussion in the light of contention raised by the rival parties, it would be appropriate to go through the judgments relied upon by the learned A.R. in support of his contention. In the first supra judgment reported as 2002 PTD (Trib.) 1949, the issue was somewhat similar to the one which the subject‑matter of present appeal where the learned IAC while exercising his revisional jurisdiction cancelled the assessment framed under section 59(1) of the Ordinance and directed the Assessing Officer to make fresh assessment under the normal law. It was held by the Tribunal that the learned IAC cannot exercise his revisional powers finder section 66A because there was no formal order holding the field, hence invocation of section 66A was without jurisdiction and nullity in the eye of law. In the judgment reported as 2002 PTD (Trib.) 1949 it has been held by the Tribunal that the demand of tax, penalty and interest is created only in pursuance of an order and in the absence of formal order notice tax demand with regard to tax could not be held to be legal notice. The 3rd case relied upon by the learned A.R. is reported as 1987 PTD (Trib.) 129 in which the question whether notice of demand and IT‑30 Forms containing the tax calculations could legally substitute an assessment order came up for adjudication in which the Tribunal held that notice of demand under section 85 is issued only in consequence of an, assessment or other order under this Ordinance. In the same judgment it was also observed that IT‑30 is a creation of rules while an assessment order is passed under the Ordinance. Moreover, the rules are always subservient to the main statute and assessment could not be framed properly unless an order is passed in this respect. In the judgment reported as 1975 PTD (Trib.) 27 it has been held that making of an order by filing in a few blanks in the printed form was not an order in the eye of law, hence not sustainable.

6. We have given our anxious consideration to the arguments addressed by the learned A.R. at the bar and have also gone through the law cited in support of their respective contentions. We are of the considered view that judgments cited by learned A.R. are on all fours. There is no denying the fact that assessment in the present case framed under section 59(1) of the Ordinance. The Assessing Officer used a cyclostyled pro forma and that too was not properly filled in and was left absolutely blank. We are constrained to observe that as postulated by section 59(1), there must be an assessment and obviously assessment could not be made without conscious application of mind. The order must be in writing in sequel to the assessment order, the tax due, if any, must also be determined. In the absence of such finding no order can be treated a proper/legal order.

7. For the foregoing reasons and the case‑law cited at the bar, we have no hesitation to hold that the learned IAC has wrongly invoked section 66A of the Ordinance. Hence impugned order is vacated and the order passed under section 59(1) stands restored.

8. Appeal of the assessee succeeds accordingly.

C.M.A./881/Tax (Trib.)Appeal succeeds.