I.T.A. No.4936/LB of 2001, decided on 13th March, 2004. VS I.T.A. No.4936/LB of 2001, decided on 13th March, 2004.
2004 P T D (Trib.) 2261
[Income‑tax Appellate Tribunal Pakistan]
Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member
I.T.A. No.4936/LB of 2001, decided on /01/.
th
March, 2004. Income Tax Ordinance (XXXI of 1979)‑‑‑
‑‑‑‑Ss. 65, 59A, 148, 13(1)(aa) & (d)‑‑‑C.B.R. Circular No.4 of 1996, dated 1‑7‑1996‑‑‑Additional assessment‑‑‑Assessment under S.59A of the Income Tax Ordinance, 1979 was finalized‑‑‑Initiation of proceedings under S.65 of the Income Tax Ordinance, 1979 on the basis of wealth statement and wealth tax return available on record at the time of finalization of assessment under Self‑Assessment Scheme and addition was made under Ss. 13(1)(aa) and 13(1)(d) of the Income Tax Ordinance, 1979 ‑‑First Appellate Authority set aside the assessment for de novo proceedings‑‑‑Validity‑‑‑Assessing Officer by passing an order under section 59‑A of the Income Tax Ordinance 1979 had accepted in letter and spirit whatever information filed by the assessee as 100% correct without . requiring, the collection of further information or probe Assessing Officer now was bound by his own conduct not to take a stand which was contrary to the earlier one when order under S.59A of the Income Tax Ordinance, 1979 was passed Prior to passing of order under S.59‑A of the Income Tax Ordinance, 1979 the Assessing Officer was duty bound to firstly make it sure that without requiring further details/evidence the order of assessing the income under S.59 of the Income Tax Ordinance, 1979 could be made and secondly to follow the provisions of Self‑Assessment Scheme wherein it was clearly written in para.2(i) of the Broad Based Self‑Assessment Scheme, that no concealment of income cases shall be processed under Self‑Assessment Scheme‑‑‑Assessing Officer by subsequent findings drew a conclusion that it was a case of concealment‑‑‑Re‑opening of assessment was also devoid of any definite information‑‑‑Initiation of proceedings under S.65 and thereafter passing an order under S.65 of the Income Tax Ordinance, 1979 was illegal and void ab initio and all the subsequent steps taker. by the Assessing Officer on the basis of such proceedings by invoking the proceedings under S.65 of the Income Tax Ordinance, 1979 were also illegal‑‑‑Issues which had emanated from the illegal action were also not legal which required any type of findings by the Appellate Tribunal‑‑‑Assessment framed under S.65/62 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal with the direction that declared income be accepted under Self‑Assessment Scheme.
(2003) 87 Tax. 120 (Trib.); 2003 PTD (Trib.) 242; Vol. 5 No. 10 Tax Forum 27; 1997 PTD (Trib.) 2344; 1997 PTD 1184 (Trib.); 1990 PTD (Trib.) 774; (2003) 88 Tax 245 (Karachi High Court); (2003) 88 Tax 158 (Trib.); 2003 PTD (Trib.) 714; 1989 PTD 311 and Vol. 6 No. 12 Tax Forum 25 ref.
1993 SCMR 1108 = 1993 PTD 1108 and (2003) 88 Tax 245 (Trib.) rel.
Liaqat Baig for Appellant.
Muhammad Zulfiqar Ali, D.R. for Respondent.
Date of hearing: 13th March, 2004.
JUDGMENT
EHSAN‑UR‑REHMAN (JUDICIAL MEMBER).‑‑‑The title appeal is directed, against the order, dated 22‑8‑2001 by the learned CIT(A).
Brief facts giving rise to filing of this appeal are that the appellant/assessee is an individual and has been assesses: to tax under the head "Salary Income" as a director of a private limited company. It is quite pertinent to bring on record that the assessment for the impugned year was completed under section 59A at the declared income of Rs.1,20,000 on 10‑3‑1997. This fact has very clearly been stated by the Assessing Officer in the 2nd sentence of the opening para. of the assessment order. The Assessing Officer statedly noticed a disparity in the value of total assets as declared in the wealth tax return and in the wealth statement. This difference represented the not declaring of loan of Rs.5,00,000 in the wealth tax return whereas the same was claimed as a, liability in the wealth. statement by deduction from the value of the total wealth. The Assessing Officer issued notice under section 148 for ascertaining the genuineness of the amount of loans claimed from four different lenders of money. In response to notice under section 148 only one of the lenders turned up to confirm the advancing of loan, statedly the fact of non‑appearance of the rest of three lenders was brought to the notice of the appellant/assessee by the Assessing Officer but no reply was received from the appellant/assessee. Then the Assessing Officer found that the construction of house has also been completed in the impugned year, so the assessment was re‑opened by invoking the provisions of section 65 with the prior approval of the Inspecting Additional Commissioner. In response to notice under section 65 return was filed declaring the income at Rs.1,20,000 which was already declared. Statutory notices under section 13(2) and 61 were issued on 12‑6‑2000 for communicating the declared cost of construction was low and as to why the cost of construction with the value of land may rot be taken at Rs.30,80,000 by adopting the construction rate of Rs.500 per sq. ft. In reply to this notice the appellant/assessee pleaded before the Assessing Officer for acceptance of the declared cost which is fair and reasonable as the major portion of building was constructed in the period relevant to assessment year, 1995‑96 and it was only the required finishing touches which were given during the period relevant to assessment year, 1996‑97 and also the type of construction is ordinary one. The appellant/ assessee furnished the site‑plan giving the constructed area, of 5400 sq, ft. whereas from the information obtained from the Cantonment Board the covered area of the building was found at 6000 sq. ft The Assessing Officer by rejecting the plan that the declared cost of Rs.333 per sq. ft. as reasonable and fair confronted the declared rate of Rs.530 per sq. ft. for factory building in the assessment year, 1995‑96, in the case of an existing assessee at NTN 19‑02‑0679533. The reply furnished by the appellant/assessee was not accepted, the statutory notices under section 13(1)(aa) and 13(1)(d) were issued and on refusal to receive these notices that the same were served through affixture. On the date fixed for hearing none appeared so assessment was completed by the Assessing Officer to the best of his judgments on the basis‑ of‑ facts available on record by passing an order under section 62/65. A total sum , of Rs.4,00,000 was added an addition under section 13(1)(aa) on the failure of the four lenders to come forward in support of advancing of loan by each of the four at Rs.1,00,000. The Assessing Officer by taking the total covered area to 6000 sq. ft. and the per sq. ft. at Rs.500 that the total cost of construction was arrived at Rs.30,00,000 and the declared cost of the plot at Rs.80,000 was also added for determining the total value of the house. After deducting the declared cost of construction of house at Rs.20,00,000 from the assessed cost of construction at Rs.30,00,000 that an addition of Rs. 10,00,000 was made under section 13(1)(d). This assessment was :contested before the learned CIT(A) by firstly raising the issue of framing of assessment under section 65/62, the re‑opening of assessment as not legally justifiable thirdly the addition of Rs.4,00,000 under section 13(1)(aa) despite filing of duly sworn in the affidavits of lenders on stamp papers alongwith copies of NIC and fourthly also the addition of Rs.10,00,000 under section 13(1)(d)as unfounded and illegal. The learned first appellate authority after making the part of his order the contentions of both the parties on the point of proceedings under section 65 and the consequent assessment thereafter has failed to record his findings on these two issues. It is only by finding out that the service of statutory notice under sections 13(1)(aa) and 13(1)(d) through affixture as not sustainable set aside the assessment made and remitted back for de novo proceedings with the following instructions:
"(1) Fresh summons under section 148 may be issued to the creditors who have not complied with. In case no response is made by them the assessee may be informed accordingly and required to produce the creditors.
(2)Proper service of notices under sections 62, 13(1)(aa) and 13(1)(d) may be made and proper opportunity of being heard be given to the appellant. Thereafter fresh assessment may be completed as per merits of the case."
Such passing of the order at the first appeal stage has brought the appellant/assessee in further appeal in this Tribunal.
The learned AR at the very beginning of his arguments challenged the setting aide of the assessment for de novo proceedings as the learned first appellate authority by duly noticing the legal flaws has yet simply set aside which is not legal and quoted which favour the following reported judgments:
(I)(2003) 87 Tax 129 (Trib.); (II) 2003 PTD (Trib.) 242 and (III)Vol. 5 No. 10 Tax Forum 27
By drawing force from the judgments ibid the Learned AR argued that impugned assessment shall have been cancelled.
Secondly the learned AR took the plea that creditors/lenders when have filed their duly sworn in affidavits then the appellant/assessee has completely discharged his onus and such loans shall have been accepted. Thereafter it is the duty of the lenders to prove the money in their hands before the Assessing Officer because such lenders of money are liable to be burdened with an addition of kind and not the appellant/ assessee. In support of this argument the learned AR favourably quoted ` the following judgments:
(I) 1997 PTD.(Trib.) 2344; (II) 1997 PTD 1184 and (iii) 1990 PTD . (Trib.) 774.
Thirdly the learned AR pleaded, before us that the income‑tax return duly accompanied by wealth tax return was filed to avail the Self‑Assessment Scheme. The figures of the assets appearing in the previous years were also available for comparison with the wealth tax return for this year, wherein the cost of construction of house was declared but despite this, the assessment under section 59A was completed on 13‑6‑1997. The filing of wealth tax return alongwith the Income Tax Returns was, a prerequisite for availing the benefit of Self‑Assessment Scheme. The Assessing Officer, instead of scrutinizing the material facts regarding construction of house available in the wealth tax return, accepted the income‑tax return without mentioning as to the service of such order and subsequently invoked the provisions of section 65 due to the same facts which were already available on record and were considered prior to an order under section 59A. So forming two different opinion in respect of the same available facts on record is not legal. The learned AR also argued that Assessing Officer has not complied with the provisions of Self‑Assessment Scheme wherein it has been provided that case of concealment shall not be processed in Self‑Assessment Scheme but should be set apart for proceedings under normal law. With these submissions the learned AR concluded his arguments on this issue on initiating of proceedings under section 65 and thereafter passing of order under section 65 as illegal and not maintainable. In support of his these arguments the learned AR referred reported judgment with citation as (2003) 88 Tax 245 (Karachi High Court). Fourthly, the leaned AR pleaded before us that there was "definite information" with the Assessing Officer as firstly the Assessing Officer noticed that there is a difference of figures as given in the wealth statement and the wealth tax return which was due to non‑disclosure of the liability of Rs.5,00,000 received as loan from five different persons i.e. Rs.1,00,000 from each such lender, which needed to be probed but later on the declared cost of construction of house was taken as understated. So it was by further reasoning and enquiries that later on by bringing more information, on record that such 65 proceedings, took a quite different shape than what was initially stated in the opening sentences of the assessment order. In support of these submissions the learned AR referred to the following reported judgments that in such circumstances proceedings under section 65 cannot be legal:‑‑‑
(1)1993 SCMR 1108 = 1993. PTD 1108 and (II) (2003) 88 Tax 158 (Trib.).
Fifthly the learned AR pleaded that on the basis of parallel cases, the addition under section 13(d) by invoking the provision of S.65 is not legal and. supported his this argument by referring to the following reported case‑law::‑‑‑
(I)2003 PTD (Trib.) 714; (II) 1989 PTD 311 and (III) Vol. 6 No. 12 Tax Forum 25
On the other hand .the learned DR as usual without the assessment record has pleaded that the impugned order is quite fair and proper but when his attention was drawn that no findings has been given in respect of initiating of proceedings under section 65 " and also the necessity of framing the assessment under section 59‑A on 13‑7‑1997 and also on not observing the provisions of relevant Self‑Assessment Scheme making the Assessing Officer duty bound to set apart the cases of concealment there was no explanation for all this at the assessment stage. The learned DR was not able to quote any case‑law demolishing what has been submitted before us by the learned AR alongwith supporting case‑law.
We have heard the arguments and have perused the available record. Prior to dilating the issues, it would be better to reproduce in this order the, provisions of section 59A as under:
(1)"If the Deputy Commissioner is satisfied without requiring the presence of the assessee or the production by him of any evidence that a return furnished under section 55 is correct and complete, he shall, by an order in writing assess the total income of the assessee and determine the tax payable on the basis of such return.
(2)The provisions of subsection (3) of section 59 shall apply to an assessment and determination under this section as they apply to an assessment and determination under that section."
It would be quite pertinent to mention here that the Assessing Officer has passed the order under section 59A which the legislature has brought in the statute book for accepting the return where the Assessing Officer is satisfied without requiring the presence of the assessee or the production of any evidence that return under section 55 is correct and complete, so the same is to be accepted by a proper order in writing. As is evident, from the language of section 59A ibid that the Assessing Officer by, passing an order under section 59‑A has accepted in letter and spirit whatever information filed by the assessee is 100% correct thus without requiring, the collecting of further information or probe, so the Assessing Officer now has been bound by his own conduct not to take a stand which is contrary to the earlier one when order under section 59A was passed. Prior to passing of order under section 59‑A the Assessing A Officer Was duty bound to firstly make it sure that without requiring further details/evidence the order for assessing the income under section 59 could be made, and secondly to follow the provisions of Self Assessment Scheme wherein it is clearly written in para. 2(i) of the broad based Self‑Assessment Scheme of Income Tax for assessneent year, 1996‑97 in Circular No.4 of 1996, dated 1st July, 1996, that no concealment of income cases shall be processed under Self‑Assessment Scheme. Here the Assessing Officer by subsequent finds is drawing a conclusion that it is a case of concealment so section 65 is to be invoked. The Honourable Karachi High Court in the case‑law with citation (2003) 88 Tax 245 (Trib.) has not upheld action, of the Assessing Officer in such a circumstances, this case‑law is on all fours to the issues before us. The reopening is also devoid of any definite information in the light of the verdict of the Honourable Apex Courts in the reported judgment with citation as (1993) 68 Tax 1 (S.C. PA.). The Assessing Officer has totally flouted the same principles while proceedings under section 65 in the instant case so the initiating of proceedings under section 65 and thereafter passing of order under section 65 are illegal and void ab initio, therefore, all the subsequent steps taken by the Assessing Officer on the basis of such proceedings by invoking the proceedings under section 65 are also illegal, therefore, on the issues which have emanated from the illegal action are also illegal which do not require any type of findings by this Tribunal.
So keeping in view the discussion supra we do not have any hesitation in declaring as illegal the initiating of proceedings under section 65 and also the passing of order under section 65 as void ab inito which is not enforceable in law, so the assessment framed under sections 65/62 is hereby cancelled with the direction that declared income be accepted under Self‑Assessment Scheme. As a result the appeal succeeds in the manner as indicated above.
C.M.A./155/Tax (Trib.)Appeal accepted.