Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss.66‑A, 59(1) & 59(A)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Assessment year 1998‑99‑‑‑Assessment under Self‑Assessment Scheme‑‑‑Cancellation of assessment order passed under S.59(A) of the Income Tax Ordinance, 1979 as on 30‑6‑2000 which was required to be passed before 30‑6‑1999‑‑‑Assessee contended that limitation period under the law having expired, the Assessing Officer erred in law to pass an order under S.59(1) of the Income Tax Ordinance, 1979 and that too on 30‑6‑2000 which was to circumvent the provisions of law and in order to overcome the hindrance created due to lapse of time‑‑‑Since original order passed by the Assessing Officer was an order void ab initio being time‑barred order, the Inspecting Additional Commissioner could not exercise his revisional powers under S.66‑A of the Income Tax Ordinance, 1979 and assumption of jurisdiction by the Inspecting Additional Commissioner was nullity in the eye of law ‑‑Even it the stance of the Department is accepted that order was passed under S.59(1) of the Income Tax Ordinance, 1979, still such order could not be subjected to revisional powers conferred by S.66‑A of the Income Tax Ordinance, 1979 for the reason that under the law no formal order was holding the field at the time of invocation of S.66‑A of the Income Tax Ordinance, 1979‑Validity‑‑‑Order passed under S.59(A) of the Income Tax Ordinance, 1979 being time‑barred was an order without jurisdiction and any proceedings subsequent thereto would entail the same consequences‑‑‑Orders passed under S.66‑A of the Income Tax Ordinance, 1979 as well as under S.59(A) of the Income Tax Ordinance, 1979 were annulled by the Appellate Tribunal.  

2002 PTD (Trib.) 912 and 2002 PTD (Trib.) 1949 ref.

Noor Muhammad Qureshi for Appellant.

Mrs. Talat Altaf, D.R. for Respondent.

Date of hearing: 13th June, 2002.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).‑‑‑The instant appeal pertaining to the assessment year 1998‑99 has been filed at the behest of assessee against the impugned order dated 9‑9‑2000 passed by the learned IAC, Appeal Range‑II, Zone‑C, Lahore under section 66 A of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance).

2. As per facts narrated by the learned IAC in his impugned order, the assessment in the present case was completed under section 59(1) of the Ordinance. The learned IAC requisitioned the assessment record and after having examined it, he found that the said assessment was erroneous as well as prejudicial to the interest of Revenue on, the following grounds:

(i) You submitted your return of total income in the status of A.O.P. at Rs.2,50,000 as a new taxpayer. As such you were required to file wealth statements of members of the A.O. P. alongwith the return giving detail of capital invested to the A.O.P. As the same was not done, your return was deficient and did not qualify under Self‑Assessment Scheme 1998‑99. Under the Scheme capital to the extent of three times of the income declared was to be regarded as explained. On the said principle your explained capital computes at Rs. 7,50,000 could cover the investment. It is clear that an industrial establishment cannot be established with meagre capital. It is worth‑mentioning that if your tax ducted at source at Rs.4,88,415 is deduced from the explained sources, a small amount of Rs. 2,61.585 remains with you on the last day of the accounting period if the explained investment/capital is taken at the said figure. Alongwith the return you have failed to give the particulars of the members of the A.O.P. description of the industrial undertaking, landed factory area, covered area, details of machinery and the investment made on the same. As such finalization of the same without requisitioning these documents was erroneous and prejudicial to the interest of Revenue.

(ii) Examination of Wealth Tax return of Malik Israr Saleem for he year 1997‑98 reveals that the said member of A.O.P. ad declared investment in factory in his name where value of the enterprises is declared at Rs.46,00.000 of the assessment dear 1997‑98. So, it is not clear how the individual business concern was changed into an association of persons afterwards. When the declared investment in the under constructed factory for they year 1997‑98 was Rs.46,00,000 how explained capital computed on the basis of declared income of Rs.7,50,000. From the bone facts it is established that this is a case of under statement of income and furnishing of inaccurate particulars of income. The Assessing Officer ignored these facts and finalized the assessment erroneously and prejudicial to the interest of Revenue under the provisions of SAS while the return was deficient and did not qualify for acceptance under this scheme.

(iii) An information received from Central Excise Department is placed on file where an order under section 35 of the Central Excise Act has been passed. As per said order you concealed excise duty on the production of 378306 containers during the period July, 1997 to May, 1998. Due to the above facts you were required to pay additional excise duty amounting to Rs.8,77,730 penalty was also imposed upon you under rule 10 of the Central Excise Rules, 1944. From the above facts it is clear that your case has been assessed erroneously and prejudicially to the interest of Revenue."

3. The assessee submitted reply to the above‑said notice and controverted the observations made by the learned IAC. However, the learned IAC was not satisfied with the reply tendered by the assessee therefore, he while exercising his powers under section 66‑A of the Ordinance cancelled the assessment framed under section 59(1) of the Ordinance and remanded the case back to the Assessing Officer for afresh assessment.

4. It is pertinent to mention here that at the time of filing of appeal the assessee assailed the impugned order on the factual as well as legal basis that the order passed by the learned IAC was not a fit case where section 66‑A could be invoked. It was the main contention of the assessee that refund amounting to Rs. 11,49,260 was due to the assessee, and when the assessee applied for the refund of said amount on 29‑6‑2000, instead of conceding to the request of the assessee, the learned IAC embarked upon the course of pressurizing the assessee through issuing show‑cause notice on 8‑7‑2000 in order to invoke section 66‑A of the Ordinance. At the time of hearing of appeal the learned A.R. of the assessee filed additional grounds of appeal wherein it was pleaded that since the return of the assessee was filed under SAS and an order thereon was required to be passed before 30‑6‑1999 but the Assessing Officer passed an order under section 59(A) of the Ordinance on 30‑6‑2000. Thus making the assessment under consideration time -barred and jurisdiction under section 66‑A assumed by the learned IAC in respect of time‑barred order was illegal and hence the order impugned in appeal was liable to be annulled. Application of the assessee with regard to the filing of additional grounds of appeal seems to be reasonable and justified since it is legal ground and goes to the roots of the case on the issue of assumption of jurisdiction by the learned IAC, we allow the same.

5. Both the parties have been heard and relevant orders perused. The learned A.R. has vehemently argued the case and contended that since return filed by the assessee was under Self‑Assessment Scheme, the Assessing Officer was bound to pass an order under section 59(1) of the Ordinance before 30‑6‑1999 and in case of failure to pass an order under' section 59(1), section 59(4) came into play for the reason that the Assessing Officer was bound to pass an order in case of return filed under Self‑Assessment Scheme by the end of 30th 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 of the Income Tax Ordinance, 1979. The learned. A.R. of the assessee further submitted that no order under section 59(A) could be passed beyond the particular date provided under the law. In this respect he took us through section 59(4) which reads as under:

"Section 59(4).‑‑‑No order under subsection (1) shall be made in any case after the thirtieth date 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.

Provided that if such order is not passed by such date the acknowledgement issued under section 55A in respect of the return of total income shall be deemed to be the assessment order and notice of demand referred to in section 85."

6. The learned A.R. further contended that the limitation period under the law having expired, the Assessing Officer erred in law to pass an order under section 59(A) of the Ordinance and that too ‑on 30‑6‑2000 which was to circumvent the provisions of law and in order to overcome the hindrance created due to lapse of time. He further emphasized that since the original order passed by the Assessing Officer was an order void ab initio being time‑bared order, the learned IAC could not exercise his revisional powers under section 66‑A of the Ordinance, hence assumption of jurisdiction by the learned IAC is nullity in the eye of law. Even if the stance of the department is accepted that order was passed under section 59(1) of the Ordinance, still such order cannot be subjected to revisional powers conferred by section 66‑A of the Ordinance for the reason that under the law no formal order was holding the field at the time of invocation of section 66‑A of the Ordinance. In support of his contention the learned A.R. relied upon two latest judgments of the Tribunal reported as 2002 PTD (Trib.) 912 and 2002 PTD (Trib.) 1949. In the first judgment cited at the bar i.e. 2002 PTD (Trib.) 912, the return was filed under Self‑Assessment Scheme, the assessment was completed by the Assessing Officer under section 59(A) of the Ordinance. However, the case was reopened under section 65 of the Ordinance for the reason that the return of income did not qualify for acceptance under Self‑Assessment Scheme, therefore, resulting in additions under sections 13(1)(aa) and 13(1)(d) of the Ordinance. The learned First Appellate Authority set aside the assessment to be made afresh. In further appeal before the Tribunal, it was held by the Tribunal.

"It is pertinent to mention that the expressly accepting the assessee's‑return of income, though under section 59A, clearly depicts that his return of income was qualified for accepting under the Self‑Assessment Scheme and was never set apart out of the purview of SAS till 30th of June, 1994. This shows that the assessee has been deprived of the benefits conferred upon him by law of being assessed under the SAS. All the discussions made above lead to the conclusion that the Assessing Officer was aware of the facts that limit of time specified under section 59(4) for accepting the return of income under the SAS had been expired since long when he opted to frame the order under section 59A on 20‑6-1996. In fact the Assessing Officer had no choice with him to come out of the mischief of section 59(4) except to pass the order under section 59A so that to enlarge in period of limitation prescribed for completion of assessment under the SAS in terms of section 59(4) of the Income Tax, Ordinance, 1979. This certainly is a fraud upon the statute and the higher appellate Courts have always deprecated such acts. It is so because such acts amount to allowing premium to the Assessing Officer to camouflage his neglects in action to the prejudice of the assessee.

Since the order under section 59A of the Income Tax Ordinance was passed by the Assessing Officer in excess of jurisdiction or without jurisdiction, such order was void and impact of void order has always been held to be nullity in law. So, no finality can be attached to such order which was passed by an authority in excess of its jurisdiction or suffered from want of jurisdiction and should be ignored for all practical purposes and any edifice construed on the basis of void order should crumble down. Since the order under section 59A has been made on 20‑8‑1996 and not on 30‑5‑1994 in accordance with section 59(4) of the Income Tax Ordinance, 1979, being clearly time‑barred the assessee has acquired vested right of escaping assessment."

7. In the second judgment cited before us, the assessment was completed under section 59(1) of the Ordinance. The learned IAC found that income assessed was less than last assessed, therefore, he cancelled the assessment and directed the Assessing Officer to frame fresh assessment. The assumption of jurisdiction by the learned IAC under section 66A was held to be void ab initio for the reason that there was no formal order holding the field so invocation of section 66A was without jurisdiction and nullity in the eye of law which merited annulment.

8. The learned D.R. on the other hand opposed the arguments advanced by the learned A.R. and pleaded for the maintenance of the impugned order.

9. After hearing the learned counsel for both the parties and having given our anxious consideration to the facts of the case and the law cited at the bar, we have no hesitation in observing that the arguments pressed by the learned A.R. carry weight. Undoubtedly, the return in the instant case was filed under Self‑Assessment Scheme and the Assessing Officer was under legal obligation to frame the assessment by 30‑6‑1999. However, order was passed on 30‑6‑2000 under section 59A of the Ordinance. Following the ratio of the judgment reported as 2002 PTD (Trio.) 912 wherein facts of the case were somewhat similar to the facts of instant case which is the subject‑matter of the

appeal before us. The Assessing Officer had to complete the assessment under SAS till 30‑6‑1994, however, the assessment was framed by passing an order under section 59A of the Ordinance on 20‑6‑1996. It was observed by the 1Parnea Members of the Tribunal that this was a device adopted by the Assessing Officer to come out from the mischief of section 50(4) of the Ordinance in order to enlarge the period of limitation prescribed for completion of assessment under the SAS in terms of section 59(4) of the Ordinance. It was further remarked that this was a fraud upon the statute and the higher Appellate Courts have always deprecated such acts because it would amount to allow premium to the Assessing Officer to camouflage his neglects and would also cause prejudice to the assessee. It is further commented that such order will always considered to be in excess of jurisdiction or without jurisdiction, such order was void and cannot be allowed to stand out. Resultantly, it‑was held that since the order, under section 59(A) was passed in flagrant violation of law, therefore, cannot be taken into account for reopening of present case. The subsequent proceeding under sections 62/65 of the Ordinance were directed to be annulled.

10. Since the ratio of the supra cited case is on all for us applicable to the present case, we are constrained to observe that order passed under section 59(A) of the Ordinance being time‑barred was an order of without jurisdiction, hence any proceedings subsequent thereto would entail the same consequences. Even otherwise no formal order has been passed in this case.

11. Since we have decided the instant appeal on legal plain, we do not feel the necessity to dilate upon the facts of the case on merit.

12. For the foregoing reasons the orders passed under section 66‑A as well as order under section 59(A) are hereby annulled.

C.M.A./563/Tax(Trib.) Appeal accepted.