I.T.As Nos. 65/IB and 66/IB of 2001-2002, decided on 3rd September, 2002. VS I.T.As Nos. 65/IB and 66/IB of 2001-2002, decided on 3rd September, 2002.
2003 P T D (Trib.) 605
[Income‑tax Appellate Tribunal Pakistan]
Before Karamat Hussain Niazi, Judicial Member and Saeed Ahmed Zaida, Accountant Member
I.T.As Nos. 65/IB and 66/IB of 2001‑2002, decided on 03/09/2002.
Income Tax Ordinance (XXXI of` 1979)‑‑‑
‑‑‑‑S. 66‑A(2), 62 & 62/132‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ‑‑‑Limitation‑‑ Whether limitation runs from the date of order passed under S.62 of the Income Tax Ordinance, 1979 or from the date of revised order passed under Ss.62/132 of the Income Tax Ordinance, 1979‑‑‑When the issue raised by the Inspecting Additional Commissioner in his order under S.66‑A of the Income Tax Ordinance, 1979 was not the subject‑matter of appeal, the limitation would start from the date of the assessment order made under S.62 of the Income Tax Ordinance, 1979 and not from the revised order made under Ss.62/132 of the Income Tax Ordinance, 1979.
Pak River Steamers Ltd.'s case 1971 PTD 204 distinguished.
Abdul Sattar v. Commissioner of Income‑tax 1995 PTD 882 and 1999 PTD (Trib.) 2294 rel.
Anjum A. Sheikh, F.C.A. and Imtiaz Ahmad, C.M.A. for Appellants.
Malik Muhammad Nawaz, L.A. and Shahid Zaman, D.R. for Respondent.
Date of hearing: 17th August, 2002.
ORDER
KARAMAT HUSSAIN NIAZI (JUDICIAL MEMBER).‑‑‑The above appeals, the at the instance of the assessee trust, are directed against the order, dated 28‑5‑2001 of the learned IAC made under section 66A of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance).
2. The assessee has assailed the impugned order on merits as well as on legal plane. At the time of hearing of the appeals, the learned A.R. requested to be heard on the ground of limitation. It was contended that the order made under section 66A was barred by time under the provision of subsection (2) of section 66A of the Ordinance and, therefore, the order is liable to be annulled. On the issue of limitation, we heard at length both the learned representatives of the parties.
3. The relevant facts in brief are that the original assessment in the case of Messrs Army Welfare Trust for both the years under appeal were finalized under section 62 of the Ordinance on 22‑6‑1996. Feeling aggrieved with the assessment made, the assessee preferred appeals before the learned CIT(A) who vide order, dated 3‑4‑1997 set aside the assessment on the issue of credit for tax deduction at source, and the treatment of receipts from travel agency for the purpose of levy of income‑tax under section 80D. In reassessment proceedings, the Assessing Officer allowed the credit of tax deducted at source and also included in the gross turnover for the purposes of levy of turnover tax under section 80D of the Ordinance, the amounts received as commission by the assessee from travel agency. This assessment was completed on 29‑5‑1997 under section 62/132. While examining the assessment record, the learned IAC found that the assessment framed under sections 62/132 was erroneous as well as prejudicial to the interest of Revenue on the ground that inadmissible expenses of "sales tax liability" and provision for "doubtful debts in administrative expenses" as well as "another expenses" were wrongly allowed. The learned IAC showed his intention to revise the assessment, on the above grounds, through a show‑cause notice issued under section 66A. The assessee, in its reply, contested the proposed action of the learned IAC by contending that the assessment could not be revised under section 66A being barred by limitation as envisaged by the provision of subsection (2) of section 66A of the Ordinance. It was explained that the alleged inadmissible expenses were allowed in the original assessment finalized on 22‑6‑1996, therefore, action could not be taken under section 66A, after lapse of four years. The learned IAC was of the view that the period of four years as provided under section 66A(2) of the Ordinance would start from the date of order of assessment made under sections 62/132 and not from the date of order of original assessment, therefore, the proceedings under section 66A are within time. In coming to this conclusion, the learned IAC relied upon the case of Pak River Steamers decided by the Honourable Dhaka High Court reported as 1971 PTD 204. The inadmissible expenses as stated hereinabove were included in the income of the assessee and the assessment was modified by the learned IAC under section 66A of the Ordinance. Hence, these appeals by the assessee.
4. We have heard Mr. Anjum A. Sheikh, FCA and Imtiaz Ahmed, C.M.A. for the assessee and Malik Muhammad Nawaz, Legal Adviser, assisted by Mr. Shahid Zaman, DR for the department and have perused the relevant orders.
5. The learned A.R. has submitted that original assessment was made for both the years under appeal on 22‑6‑1996. The assessee preferred appeals and the learned CIT(A) set aside the assessment in respect of claim of "tax credit deducted at source" and the inclusion of amount of commission received from travel agency and not the gross receipts from sale of air tickets, in the turnover for the purpose of levy of turnover tax under section 80D. It is further stated that the Assessing Officer, in compliance with the direction of the learned first appellate forum, made the assessment under sections 62/132 on 29‑5‑1997. The learned A.R. has added that the issue of admissibility/inadmissibility of expenses was never the subject‑matter of appeal, therefore, the period of limitation would run from the date of making of the original assessment as envisaged under subsection (2) of section 66A of the Ordinance. It is argued that the words "order sought to be revised" in subsection (2) of section 66A are very material and are used in reference to that portion of the order in which the issue first arose and was decided. Continuing his arguments, he states that the order made under sections 62/132 did not involve the issue of admissibility of expenses, therefore, the order which was sought to be revised, was the order of assessment made on 22‑6 1990 and, therefore, the period of four years will be computed from 22‑6‑1996.
6. The learned Legal Adviser Malik Muhammad Nawaz contends that the period of four years will start from the date of assessment order made in pursuance to the order of the learned CIT(A). Continuing further, the learned A.R. states that the assessment made under sections 62/132 vide order, dated 29‑5‑1997 partakes the character of a fresh assessment order, which is now in the field and is the "order sought to be revised" under section 66A of the Ordinance if found to be erroneous and prejudicial to the interest of Revenue. He further submits that the words "any order passed therein" occurring in section 66A(1) of the Ordinance are very pertinent and material. It is stated that the Legislature has used the words "any order" and not the original order and, therefore, it means and includes the order passed after remand as well. In support of his contention, the learned Legal Adviser has placed reliance upon the case of Pak River Steamers Ltd. reported as 1971 PTD 204. Controverting the contention of the learned A.R. that limitation of four years will start from the date of original assessment, the learned Legal Adviser submits that there could not be two assessment orders, one is the original order of assessment and' the other is the order passed after remand of the case, which is an ambiguous situation.
7. We have seriously considered the contention raised by both the learned A.R. of the parties. The answer to the question raised in respect of limitation, depends upon the interpretation of the provision of subsection (2) of section 66A. For the sake of convenience and reference, the provision of section 66A is reproduced as under:‑‑‑
"66A. Powers of Inspecting (Additional Commissioner) to revise (Deputy Commissioner's) Order.‑‑(1) The Inspecting (Additional Commissioner) may call for and examine the record of any proceedings under this Ordinance, and if he considers that any order passed therein by the Deputy Commissioner is erroneous in so far as it is prejudicial to the interests of Revenue, he may, after giving the assessee and opportunity of being heard and after making, or causing to be made, such enquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment to be made.
(1A) The provisions of subsection (1) shall, in like manner, apply,
(a) where an appeal has been filed under sections 129, 134 and 137, or (an appeal has been filed) under section 136, against an order passed by the (Deputy Commissioner); and
(b) where an appeal referred to in clause (a) has been decided, in respect of any point or issue which was not the subject‑matter of such appeal.
(2) No order under subsection (1) shall be made after the expiry of four years from the date of the order sought to be revised."
(Emphasis provided)
8. The underlined words are very material. Their proper connotation and understanding will help in proper interpretation of the provision of subsection (2) of section 66A. The provision of sub section (1A) was inserted by Finance Act, 1991. The aim and purpose of this amendment is well‑known and need not be repeated. The Honourable Supreme Court of Pakistan has taken notice of the insertion of sub section (IA) in section 66A by Finance Act, 1991, in the case of Glaxo Laboratories reported as 1992 PTD 932. It was observed:‑‑
"The IAC did not have the power to initiate same action in respect of the order passed by the appellate authority or the Tribunal. However, as observed above such power has now been vested in IAC from the year 1991."
In the case of Abdul Sattar v. Commissioner of Income Tax reported as 1995 PTD 882, Mr. Justice Ahmed Saeed Awan held that the provision of section 66A being mandatory in its nature, shall apply even if an appeal has been filed under sections 129, 134 and 137 or a reference has been made under section 136. Further, where an appeal or reference has been decided, the revision of erroneous order of I.T.O. will still be possible in respect of a point or issue which was not the subject‑matter of such appeal. It is thus clear that where the appeal has been decided, the revision of erroneous order of I.T.O. will still be possible in, respect of a point or issue which was not the subject‑matter of such appeal or reference. In the present case, the issue of admissibility/inadmissibility of expenses was not the subject‑matter of appeal, therefore, the revisional power could be exercised under section 66A in respect of that point or issue. According to learned Legal Adviser, the original assessment order merged into the order made under sections 62/132 hence, the limitation provided under section 66A would start from the date of that order. In support of this, the case of Pak River Steamers (supra) was referred to show that "any assessment order" means an operative and final order and not original order. The facts of the referred case are distinguishable. Rather, the ratio laid down in this case, goes against the department. It was a case of rectification of mistake under section 35 of the late Income‑tax Act, 1922. The assessee, Pak River Steamers Company, was a successor company of Rivers Steamers Navigation Company Ltd. having its registered office in U.K. and has its business in the area in the then British India. It was first assessed in Pakistan for the years 1947‑48 and 1948‑49 in the status of "non resident". For the assessment year 1949‑50, assessment was made on 31‑3‑1954 treating the company as "resident". In appeal, the learned AAC accepted the claim of the company as "non‑resident". He also allowed other relief. The I.T.O. revised the assessment in the light of the appellate order on 30‑4‑1959 under section 31 of the Act. In further appeal, the Tribunal further reduced the assessment vide order, dated 15‑5‑1959. Giving appeal effect to the order of Tribunal, the Assessing Officer found that the loss and unabsorbed depreciation allowances determined in the assessment, years 1947‑48 and 1948‑49 had not been properly allocated. After issuing a notice for rectification of the mistake in respect of set off of the losses, the revised assessment, dated 30‑4‑1959 was rectified vide order, dated 15‑7‑1961. Against this order of rectification, a review petition was filed by the company which was rejected by the Commissioner. Thereafter, the assessee‑company challenged the order through writ petition filed in the Dhaka High Court wherein it was observed as under:‑‑
"It may be stated that the order of assessment on the admission of appeal loses its finality and becomes sub judice and subject to the decision of the next higher Appellate Authority provided in the Act and when the case is remanded back to the Income‑tax Officer by the Appellate Authority, the order of assessment passed by the Income Tax Officer to the extent the order of remand is covered becomes non est it loses its existence altogether and the fresh order that is passed after remand will be the only order of assessment."
It was further observed:‑
"It is, therefore, to be seen that the original order of assessment for the year 1949‑50 was passed by the Income Tax Officer on 31‑3‑1954 and after the order of remand, the said officer passed the order of assessment on 30‑4‑1959 and the order of rectification after notice and hearing was passed on 15‑4‑1961 and so calculated from the order of revised assessment, the order of rectification is within four years and as such within time. It may be also noted that the question of rectification arose on the making of the revised order of assessment on 30‑4‑1959 as the company was ultimately found to be non‑resident on appeal. "
It is, thus, clear that the question of rectification arose on 30‑4‑1959 as the company was ultimately found to be non‑resident on appeal. In view of these facts, the Honourable High Court held that the order sought to be rectified was the order, dated 30‑4‑1959 wherein the question of rectification first arose. In the present case also the order sought to be revised is the order in which the issue of admissibility of expenses first arose. The learned A.R. of the assessee relied upon the decision of this Tribunal reported as 1999 PTD (Trib.) 2294 wherein it was held that where the original order passed by the Assessing Officer was appealed against under section 132 of the Ordinance and the issue raised by the learned IAC in his order under section 66A, was not the subject‑matter of appeal the period of limitation as provided in subsection (2) of section 66A of the Ordinance was to be counted from the date of the original order and not from the revised order.
9. As a result of what has been discussed above, we are of the view, that the limitation starts from the date of the assessment order made under section 62 of the Ordinance and not from the revised order made under sections 62/132, as the issue raised by the learned IAC in his order under section 66A was not the subject‑matter of appeal. As such the order made under section 66A of the Ordinance is barred by time under subsection (2) of section 66A of the Ordinance. Accordingly, we annul the same.
10. As a result, the assessee's appeals for both the years succeed and are allowed.
C.M.A./548/Tax(Trib). Appeals allowed.