Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.86, 85 & 156‑‑‑Additional tax‑‑‑Short levy of‑‑‑Enhancement‑‑‑Assessing Officer proceeded through a notice under S.85 of the Income Tax Ordinance, 1,979 to levy additional tax under S.86 of the Income Tax Ordinance, 1979, for the reason that while preparing IT‑30 for the years under consideration, additional tax levied was short of what should have been actually attracted‑‑‑First Appellate Authority set aside the same for de novo consideration for proper application of rate‑‑‑Assessee contended that once a tax had already been levied under S.86 of the Income Tax Ordinance, 1979; additional tax could not be imposed under the same section and if the Assessing Officer wanted to rectify the mistake and to enhance the additional tax then mandatory notice under S.156 of the Income Tax Ordinance, 1979 should have been issued and that Assessing Officer having committed flagrant violation of law, the order should have been annulled rather than being set aside‑Validity‑‑ Additional tax under S.86 of the Income Tax Ordinance, 1979 had already been levied and the Assessing Officer proceeded to enhance the same by invoking S.86 of the Income Tax Ordinance, 1979 for imposition of additional tax under S.86 of the Income Tax Ordinance, 1979 which could not be permitted under the law for the reason that the same provision could not be used by the Assessing Officer, for levying the tax twice‑‑‑Assessing Officer also failed on count of rectification for the reason that additional tax could not be enhanced without issuing mandatory notice required under S.156 of the Income Tax Ordinance, 1979‑‑‑Assessment.order.did not show as to under which legal provision the Assessing Officer had enhanced the additional tax because in case of rectification, the Assessing Officer was under legal obligation to comply with the provision of law i.e. to issue notice under S.156 of the Income Tax Ordinance, 1979 which he failed to do‑‑‑Appellate Tribunal vacated the order and restored the original assessment order.

2000 PTD 2407; 1993 PTD 580 and 1971 SCMR 981 rel.

Irfan Ilyas, A.C.A. for Appellant.

Nemo for Respondent.

Date of hearing: 16th May, 2002.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).‑‑‑The assessee/appellant has come up in appeal calling in question the impugned order passed by the learned CIT(A) Zone‑II, Lahore. It has been contended by the assessee that the Assessing Officer was wrong to make assessment under section 86 of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance) when the same has already been levied, and the learned CIT(A) was wrong to maintain the same. It has been farther agitated that the Assessing Officer is wrong to raise an additional tax liability under section 86 of the Ordinance without issuing any notice under section 156(2) of the Ordinance.

2. Briefly stated the facts of the case are that through a notice under section 85 of the Ordinance, the Assessing Officer proceeded to levy additional tax under section 86 of the Ordinance, for the reasons that while preparing IT‑30 for the years under consideration, additional tax levied was short of what should have been actually attracted. On appeal the learned CIT(A) set aside the case for de novo consideration with the direction that proper rate should be applied. Feeling aggrieved with the impugned order, the assessee preferred further appeal before us.

3. Both the parties have been heard and relevant orders perused. The learned A.R. has vehemently argued the case and contended that once the tax has already been levied under section 86; additional tax cannot be imposed under the same section i.e. section 86 of the Ordinance. He further argued that if the Assessing Officer wanted to rectify the mistake and to enhance the additional tax then mandatory notice under section 156 of the Ordinance should have been issued. He submitted that Assessing Officer has committed flagrant violation of law. Hence order passed by the Assessing Officer should have been annulled rather than being set aside by the learned CIT(A). In support of his contention he referred to judgments of the Tribunal as well as the High Court. In the case reported as (2000 PTD 2407), it has been held by his Lordship that "The principle of law that orders in contravention of mandatory provisions of law are a nullity and no limitation runs against such order". In another judgment reported as (1993 PTD 580) the Honourable Lahore High Court held that "No order under section 156(1) of the Income Tax Ordinance, which has the effect of increasing the liability of the assessee can be passed unless the affected parties have been given reasonable opportunity of being heard". The assessee has also placed on file another judgment reported as 1971 SCMR 981 wherein it has been held that:‑‑

"The principle, so far as this country is concerned, is accordingly well‑settled that where notice required to be given by the statute is mandatory notice, then the failure to comply with such mandatory requirements of the statute would render the act void ab initio as being an act performed in disregard of the provisions of statute. Furthermore, any further action taken on the basis of such a void order would also be vitiated and the defect at the initial stage would be, incurable by a hearing at a subsequent stage."

4. The learned D.R. on the other hand opposed the arguments advanced by the learned A.R.

5. After hearing the learned counsel for the parties and having gone through the relevant orders coupled with the law produced in support of his contention, we are of the considered view that on both the counts the learned A.R. has succeeded in persuading us, that it is very much apparent that additional tax under section 86 had already been levied but the Assessing Officer proceeded to enhance the same by invoking section 86 for imposition of additional tax under section 86 which cannot be permitted under the law for the reason that the same provisions could not be used by the Assessing Officer for levying the tax twice. As regards, rectification of the assessment order is concerned, the Assessing Officer also failed on that count for the reason that additional tax could not be enhanced without issuing mandatory notice required under section 156 of the Ordinance. Perusal of the assessment order clearly shows that it has not been mentioned by the Assessing Officer under which legal provision he proceeded to enhance the additional tax because in case of rectification, the Assessing Officer was under legal obligation to comply with the provision of law i.e. to issue notice under section 156, to which he failed to do so.

6. In this view of the matter, we would like to vacate the impugned order as well as the second assessment order. The original assessment order stands restored.

7. Appeal of the assessee stands accepted.

C.M.A./562/Tax(Trib). Appeal accepted.