Income Tax Ordinance (XXXI of 1979)-----

----Ss. 66-A & 59-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Order passed under S.59A of the Income Tax Ordinance, 1979 was time-barred---Cancellation of such order by the Inspecting Additional Commissioner under S.59-A of the Income Tax Ordinance, 1979---Validity--Admittedly, assessment was finalized on 30-6-2001 and assessment framed was time-barred by almost 2 years; being a time-barred assessment, there was no assessment order in the eye of law which could not be subjected to revisional jurisdiction by the Inspecting Additional Commissioner---In case of time-barred assessment no legal assessment would be considered to be holding the field and any action taken subsequent thereto would have no legal basis---Order passed by the Inspecting Additional Commissioner under S.66-A of the Ordinance was annulled by the Appellate Tribunal.

2002 PTD (Trib.) 912 rel.

Naseem Akbar, F.C.A. for Appellant.

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

Date of hearing: 10th January 2003.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---Titled appeal has been filed calling in question the impugned order, dated 9-4-2002 passed by the learned IAC Companies Range-II, Lahore who while exercising his revisional jurisdiction under section 66A of the Repealed Income Tax Ordinance, 1979 (hereinafter called the Repealed Ordinance) cancelled the assessment order passed under section 59(A) of the Repealed Ordinance). The assessee has assailed the impugned order agitating that the learned IAC wrongly invoked the section 66A of the Repealed Ordinance for the reason that order passed under section 59(A) of the Repealed Ordinance was time-barred, hence no valid order in the eye of law existed which could be subjected to the revisional jurisdiction by the learned IAC.

2. Briefly stated the facts of the case are that the assessee is an individual and being employee of Messrs Echo West International (Pvt.) Ltd., Lahore in the capacity of Admn. Manager filed return declaring income of Rs.1,70,323 with the break up as under:-

PayRs.1,70,323

Allowances/Utilities. Rs.93,677 (Exempt)

Net income for the year.Rs.1,70,323

3. Additionally on the face of the return, foreign remittances were also declared at Rs.37,979,775 claiming exemption. Assessment in the instant case was completed vide an order, dated 30-6-2001 passed under section 59(A) of the Repealed Ordinance at net income of Rs.1,70,323. The learned IAC after having examined the record of the case, considered the assessment framed to be erroneous as well as prejudicial to the interest of Revenue for the following reasons:

Scrutiny of the assessment record reveals that an amount of Rs. 16,199,500 was paid by Messrs Echo West International (Pvt.) Limited on behalf of the assessee and balance amount of Rs.16,199,500 was paid by the assessee herself vide Pay Order No.317318, dated 14-4-1998 as per para (2) of the sale agreement which deals with the payments. The said para (2) is reproduced for ready reference.

"The seller has already received 50% of the sale amount prior to the execution of this sale deed and the balance 50 % has been, agreed to be paid at the time when this document is presented for registration before the authorized Sub-Registrar of Documents, Lahore. The balance sale price is being paid through Pay Order No.317318, dated 14-4-1998 Rs.16,119,500 issued by the Askari Bank Limited Gulberg Branch, Lahore.

As is evident from above the assessee paid an amount of Rs.16,119,500 on 14-4-1998 whereas foreign remittances were received by the assessee on 14-5-1998 and 26-6-1999 as discussed above. In addition to above, the assessee also made payment of Rs.5,641,825 on account of incidental charges prior to encashment of foreign remittances.

Income declared by the assessee during the previous years is as under;

1996-972,40,000 (Inclusive of all kinds of allowances)

1997-982,40,000 (Inclusive of all kinds of allowances)

1998-99 2,64,000

Moreover, in the Wealth Tax return no valuable asset has been declared except house purchased by the lady. From the above the only logically conclusion one can draw is that the assessee had no source for making such huge payments i.e. Rs.16,119,500 paid by the assessee through Pay Order No.317318, dated 14-4-1998 and incidental charges of Rs.5,641,825 totaling Rs.21,7611325. Accordingly' addition's under section 13(1)(aa) was called for which the Assessing Officer failed to make.

As regards payments made by Messrs Echo West International (Pvt.) Limited, Lahore on behalf of the lady, the same has been made directly to American Embassy, no doubt, through demand draft. In the light of provisions of section 12(18) the lady was under obligation to receive the said amount in her account first, that took through cross cheques and then make payment to American Embassy. As this amount was not received by the assessee in her account through cross cheque, therefore, this transaction is also hit by the mischief of section 12(18). The Assessing Officer failed to take cognizance of the this fact also while finalizing the Income Tax proceedings. Order passed by the Assessing Officer is accordingly not only erroneous but also prejudicial to the interest of Revenue."

The assessee is before us impugning the same.

4. Both the parties have been heard and relevant orders perused. Right from the outset the learned A.R. has submitted that the assessment in the present, case should have been finalized by 30-6-1999 while as a matter of fact the order under section 59(A) of the Repealed Ordinance was passed on 30-6-2001 which is not only belated but time barred by almost by 2 years. He emphatically argued that assessment framed by the Assessing Officer having become time barred was not valid order in the eye of law. He further elaborated that since there was no valid order holding the field, the learned IAC could not exercise his revisional jurisdiction with regard to an order which was void ab initio. In support of his contention, the learned A.R. cited a judgment of the Tribunal reported as 2002 PTD (Trib.) 912. The contention of the assessee in the supra cited case was somewhat identical to the facts of the case of the assessee which is the subject-matter of present appeal. The contention raised by the assessee in the above said case was that the order passed under section 59A/65 of the Repealed Ordinance was not sustainable in the eye of law as no order was in the field since original order for the year udder appeal was beyond the limitation period prescribed for completion of assessment under section 50(4) of the Repealed Ordinance. It was held by the Division Bench of the Tribunal that:

"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 constructed on the basis of void order should crumble down. Since the order under section 59A has been made on 20-6-1996 and not on 30-6-1994 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."

5. The learned A.R. submitted that since the return filed under Self-Assessment Scheme prescribed for the assessment year under consideration qualified for acceptance, the Assessing Officer was legally bound to finalize the assessment on or before 30-6-1999. Having failed in this, no order could be passed subsequently. The learned A.R. on the contrary has supported the reopening of the case by the learned IAC and pleaded for maintaining the same.

6. We have heard the learned counsel for both the parties and have gone, through the relevant orders as well as the case-law cited at the bar. Admittedly, the assessment in the present case was finalized on 30-6-2001, and it has also been conceded that the assessment framed was time-barred by almost 2 years. In such like circumstances, we have no option but to accept the arguments presented by the learned A.R. that being a time-barred assessment, there was no assessment order in the eye of law, hence cannot be subjected to revisional jurisdiction by the learned IAC. The case cited at the bar by the learned A.R. is also on all fours to the assessee's case that in case of time-bared assessment no legal assessment will be considered to be holding the field and any action taken subsequent thereof would have no legs to stand on.

7. For the foregoing reasons the impugned order; passed under section 66A is annulled.

8. It is ordered accordingly.

C.M.A./994/Tax (Trib.)Appeal accepted.