2004 P T D (Trib.) 1424

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

I.T.A. No.4680/LB of 2003, decided on 30/12/2003.

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

‑‑‑‑Ss. 59(1) & 50(7E)‑‑‑C.B.R. Circular No.11, of 1997‑‑‑Self- assessment‑‑‑Under construction building was purchased with its 29 electricity connection meters‑‑‑During the period of demolishing of old structure and the construction of new building these 29 electricity connections were maintained in the premises by making payments of monthly bills and claimed the credit for tax deduction alongwith the paid monthly bills‑‑‑Assessing Officer excluded the return from Self -Assessment Scheme on the ground that electricity bills alongwith tax deduction under S.50(7E) of the Income Tax Ordinance, 1979 had illegally been claimed as these payments were fictitious and return did not qualify for acceptance under broad‑based Self‑Assessment Scheme due to short payment of tax‑‑‑First Appellate Authority upheld the action of Assessing Officer by stating that no documentary evidence in respect of electricity meters were available with the assessee‑‑‑Validity‑‑‑Short payment of tax arose when the assessee had been denied the benefit of tax deduction under S.50(7E) of the Income Tax Ordinance, 1979 without any reason‑‑‑By exercising authority judiciously it was incumbent upon the concerned Assessing Officer to obtain the entire information from the electricity department prior to refusing the credit for the tax deduction‑‑‑First Appellate Authority totally failed to discharge its duty in a judicious manner as it had failed to comment even on the action of the Assessing Officer on denying the benefit of tax deduction and as to how the claiming of credit for tax deduction under S.50(7E) of the Income Tax Ordinance, 1979 could be held as illegal and factually incorrect by Assessing Officer‑‑‑First Appellate Authority failed to take cognizance of the fact that contention of assessee could be cross checked from the relevant electricity authorities who were sitting at the same station‑‑‑Assessment framed was nullity in the eye of law and the same was cancelled by the Appellate Tribunal.

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

‑‑‑‑S. 59(4)‑‑‑Self‑Assessment‑‑‑Limitation‑‑‑Assessment year 1997‑98‑‑ Rejection of claim of Self‑Assessment Scheme after the expiry of financial year next following the assessment year i.e. 30‑6‑1998‑‑ Validity‑‑Act of Assessing Officer was a clear cut violation of expressed provisions oaf S.59(4) of the Income Tax Ordinance, 1979 thus was outside the scope of law which was ab initio void thus was not sustainable‑‑‑Whatever the Assessing Officer was to do should have been done within the scope of law‑‑‑Limitation prescribed in S.59(4) of the Income Tax Ordinance, 1979 should have been strictly followed the Assessing Officer‑‑‑Limitation for acceptance or rejection of claim for Self‑Assessment Scheme expired on 30‑6‑1998‑‑‑Failure of Assessing Officer to proceed till 30‑6‑1998 had debarred the passing of any order‑‑‑Passing of order after 30‑6‑1998 was ultra vires which was nullity in the eye of law.

Shahid, Abbass for Appellant.

Muhammad Zulfiquar Ali, D.R. for Respondent.

Date of hearing: 18th December, 2003.

ORDER

EHSAN‑UR‑REHMAN (JUDICIAL MEMBER).‑‑‑Through the titled appeal the order, dated 1‑8‑2003 passed by the learned CIT/WT(A) has been assailed as by this order the appeal filed was dismissed in toto.

Facts in brief of the case are that the assessee/appellant is a Real Estate Developer. In the first round of appeal the learned First Appellant Authority dismissed the appeal being barred by time. On further appeal from the assessee this Tribunal remanded the case back to the learned CIT(A) for reconsidering the facts of the case and deciding the same on merits. Now on remanding the case back the order has been passed which is being impugned in this Tribunal.

Return was filed declaring a net income of Rs.2,22,500 under broad based Self‑Assessment Scheme. The Assessing Officer after examining the return, confronted the amount of 29 electricity bills alongwith tax deduction under section 50(7E) have illegally been claimed as these payments are fictitious so the return does not qualify for acceptance under broad based Self‑Assessment Scheme due to short payment of tax. So the Assessing Officer by this excluded the return from the scope of Self‑Assessment Scheme and proceeded to complete the assessment under normal law. Statutory notice under section 61 was issued alongwith written notice calling upon assessee to submit the necessary details/documentary evidence for finalization of assessment. In response to this notice it was contended before the Assessing Officer that the case qualifies for acceptance under broad based Self‑Assessment Scheme as the tax paid is higher by 25 % as compared with the preceding year. The assessee did not file any requisite detail but requested for acceptance of the return under broad based Self‑Assessment Scheme. Thereafter the Assessing Officer framed the assessment by estimating, the sale rate, the constructed area and the cost of sales. The estimated cost of sales was deducted from the estimated sales and balance income was arrived at. After deduction of allowed P & L account expenses of Rs.3,00,000 that the total income was assessed at Rs.20,93,250. The assessee went in appeal before the learned CIT(A). Before the learned First Appellate Authority it was contended that the return duly qualifies to be processed as such under broad based Self‑Assessment Scheme as the rejection of claim of tax deduction under section 50(7E) is illegal and factually incorrect. The plea of the appellant/assessee that under construction Plaza was purchased with its 29 electricity connection meters. Such 29 electricity connections alongwith meters/remained installed during the process of construction. And during the impugned year electricity bills pertaining to all the 29 meters were paid by the appellant/assessee as were the property of appellant/assessee. The learned First Appellate Authority by stating that no documentary evidence in support of the contention that all 29 electricity meters were available with the appellant/assessee upheld the action of the Assessing Officer that there was no claim of deduction of tax under section 50(7E) in favour of the appellant/assessee. On merits the treatment accorded by the Assessing Officer was also upheld thus the estimation of sale value with the applied sale rate, the estimated cost of construction and allowing; of P&L account expenses was maintained by the learned First Appellate Authority. The appellant/assessee has come up in further appeal in this Tribunal.

The learned AR contested the passing of this impugned order by submitting that all the 29 electricity meters were installed in the premises when this place of Plaza alongwith its construction was purchased by the appellant/assessee. During the period of demolishing of old structure and the construction of the new Plaza these 29 electricity contentions were maintained in the premises by making payments of the monthly bills thus also claiming the credit of the tax deduction alongwith the paid monthly electricity bills. By submitting these facts the learned AR argued that the Assessing Officer is wrong in not allowing credit for the tax deduction which was duly claimed by the appellant/assessee, such disallowing of the claim of tax deduction at source is without any plausible reason as under the law there is no such prohibition on the appellant/assessee on claim of this credit for the amount of electricity bills paid by them. Secondly the learned AR pleaded that the assessment if not completed till the end of impugned assessment year i.e. by 30‑6‑1998 such return stood accepted by the operation of law after the expiry of 30‑6‑1998. To elaborate this arguments the learned AR. submitted that it was by a notice under section 61, dated 2‑6‑2000 that the income‑tax return was brought out of the scope of relevant Self- Assessment Scheme as till 30‑6‑1998 no notice, as to the rejection of the claim of Self‑Assessment Scheme was served. So framing of the assessment is adversely hit by the limitation as given in section 59(4). The learned AR further submitted that filing of account statements was required as per Circular 11 of 1997, of C.B.R. Circular for the returns covered in the "immunity class". In support of his contention that no assessment could be passed after the expiry of 30‑6‑1998. The learned AR referred to the following judgments with their citations:‑‑

(I) 1993 PTD 332 (Lahore High Court); (II) 1993 PTD (Trib.) 1421 and (III) 2003 PTD (Trib.) 2298.

The learned DR on the other hand supported the order passed by the learned CIT(A) by reading out the concluding part of the impugned order and also the contention of the Assessing Officer given in the assessment order.

Here it is quite pertinent to reproduce section 59(4) which is as under:‑‑

"(4) No order under subsection (1) shall be made in any case after the thirtieth day of June of 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, order under subsection (1) shall be deemed to have been passed on such date."

In the citation quoted by the learned AR at Sr. No. 1 ibid the relevant paras. are 9 to 14. As far as the applicability of section 59(4) is concerned it is given in this order in paras. 9,10,11, and 12. This reported judgment is on all fours on the issue of provisions of section 59(4) as the Assessing Officer has been forbidden from passing any order after the expiry of limitation. Here is in the instant case before us order for processing of the case under normal law has been passed on 30‑6‑2000 when the assessee was served with the notice under section 61 which was, dated as 2‑6‑2000. In this reported judgments their lordships have also dealt with the issue of short payment of tax where return has been filed under Self‑Assessment Scheme. The issue of non or short payment of tax with the return filed under Self‑Assessment Scheme the relevant para. 13 it has explicitly been dealt with by holding that in such like eventualities the right of Self‑Assessment cannot be denied arbitrarily. In the judgment at Sr. No. 1, ibid reliance has been placed on the reported judgment of the Honourable Supreme Court of Pakistan in Messrs Novitas International Versus Income Tax Officer (Films Circle) and others, 1991 PTD 968.

Here before us the short payment of tax arose when the appellant/assessee has been denied the benefit of tax deduction under section 50(7E) without any reason. By exercising authority judiciously it was incumbent upon the concerned Assessing Officer to obtain the entire information from the electricity department prior to refusing the credit for the tax deduction.

Prior to concluding the discussion it has to be given in unequivocal manner that here the belated act of the Assessing Officer is a clear cut violation of the expressed provisions of section 59(4) thus is outside the scope of law which is ab initio void thus is not sustainable. Whatever the Assessing Officer was to do should have been done within the scope of law. The limitation as prescribed in section 59(4) should have been strictly followed by the Assessing Officer. In this case before us, the limitation for acceptance or rejection of claim for self‑assessment expired on 30‑6‑1998, and failure of the Assessing Officer to proceed till 30‑6‑1998 has debarred the passing of any order. The passing of order after 30‑6‑1998 is ultra vires which is nullity in the eye of law. The learned First Appellate Authority has failed to take cognizance of this violation of law.

The learned First Appellate Authority also totally failed to discharge his duty in a judicious manner as has failed to comment even on the action of the Assessing Officer on denying the benefit of tax deduction under section 50(7E) and as to how the claiming of credit for tax deduction under section 50(7E) could be held as illegal and factually incorrect by the Assessing Officer. The learned First Appellate Authority failed to take cognizance of the fact that the contention of the assessee could be cross checked from the relevant electricity authorities who were sitting at the same station.

So keeping in view the discussion supra we do not have any reluctance in declaring the assessment framed as nullity in the eye of law which has to be cancelled. Thus the assessee's/appellant appeal succeeds.

C.M.A./40/Tax (Trib.) Appeal accepted.