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

----Ss. 66-A, 59-A & 59(1)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Assessment was finalized under Self-Assessment Scheme--Cancellation of assessment under S.66-A of the Income Tax Ordinance, 1979 in absence of any written assessment order---Validity---Assessment was finalized under S.59-A of the Income Tax Ordinance, 1979---Assessing Officer was required to pass an order in writing stating the reason for his being satisfied that the return furnished under S.55 of the Income Tax Ordinance, 1979 was correct and complete---Under the provision of both the Ss. 59(1) & 59-A of the Income Tax Ordinance, 1979, Assessing Officer was required to assess the net income by an order in writing and determine the tax payable on the basis of such assessment---No demand notice- should be issued without an order in writing---Order passed by the Inspecting Additional Commissioner under S.66-A of the Income Tax. Ordinance, 1979 was not maintainable in the absence of a valid assessment order passed by the Assessing Officer---Order passed under S.66-A of the Income Tax Ordinance, 1979 was vacated by the Appellate Tribunal.

2003 PTD (Trib.) 2276; 2003 PTD 1530; 1993 PTD-332; 2002 PTD (Trib.) 912; 2003 PTD 2097; 2000 PTD (Trib.) 1821 and 1989 PTD 1300 rel.

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

----Ss. 66-A, 50 & 53---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Proceedings under. S.66-A of the Income Tax Ordinance, 1979 were invoked by the Inspecting Additional Commissioner for the reason that advance tax paid by the assessee was not shown as an asset in the balance-sheet ---Assessee explained that the same was transferred to the capital account of the partners--Validity---Appellate Tribunal remanded the case with direction that contention of the assessee that tax paid/deducted was credited to the capital account of partners be verified from the account books---Assessee be provided an opportunity to explain the discrepancy, if any, found in the reconciliation statement of tax paid/payable before proceedings under S.66-A of the Income Tax Ordinance, 1979.

Sohail Mutee Babri, ITP for Appellant (in I.T.As. Nos. 975/LB, 4369/LB, 758/LB and 4370/LB of 2001).

Umar Farooq, DR for Respondent (in I.T.As. Nos.975/LB, 4369/LB, 758/LB and 4370/LB of 2001).

Umar Farooq, D.R. for Appellant (in T.As. Nos.4795/LB and 4796/LB of 2001).

Sohail Mutee Babri, ITP for Respondent (in I.T.A Nos.4795/LB and 4796/LB of 2001).

Date of hearing: 4th September, 2003.

ORDER

The appeals of the assessee pertaining to the assessment years 1996-97 and 1999-2000 are directed against the orders passed by the learned IAC of Income Tax/Wealth Tax Range-I, Zone-A, Lahore, dated 16-1-2001 under section 66-A of the income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance). The cancellation of assessment under section 66-A of the Ordinance is contested to be unjustified through the grounds of appeals for both the years under consideration.

2. The assessee as well as Revenue have also filed cross-appeals against the combined order, dated 18-8-2001 pertaining to the assessment years 1996-97 and 1999-2000 of CIT(A) Zone-IV, Lahore passed on first appeal filed by the assessee against the assessments framed under section 62/66-A of the repealed Ordinance.

3. Through the common grounds of assessee's appeals for both the years under consideration, the confirmation of the rejection of accounts is contested to be unjustified for want of notice to be issued under section 62(1) of the Ordinance as well as non-specifying of any defect therein. The estimation of sales fixed by the CIT(A) for both the years under consideration and confirmation of additions made out of the certain heads of P&L accounts as mentioned in the grounds of appeals have also been contested to be unjustified and excessive. For the assessment year 1999-2000, the confirmation of the addition of Rs.93,380 made under section 13(1) is also contested to be unjustified through the grounds of assessee's appeals.

4. As per grounds of departmental appeals for both the years under consideration, the Revenue is aggrieved with the reduction allowed in the estimate of sales.

5. The learned representatives of both the parties were present and have been heard.

6. The appeals are being decided in the following manner:

Assessment year 1996 97 'Assessee's appeal against the order passed under section 66-A of the Ordinance:

The brief facts for the year under consideration are that the original assessment for the assessment year 1996-97 was framed by the Assessing Officer Circle-1, Zone-A. Lahore at net income of Rs.3,20,310 under Self-Assessment Scheme. The assessment framed by the Assessing Officer on 24-4-1999 was found to be erroneous insofar as prejudicial to the interest of the Revenue by the learned IAC on examination of the assessment record. As per show-cause notices, dated 3-1-2001 issued under section 66-A of the Ordinance, the assessee was required to submit his explanation that why the assessment completed should riot be cancelled/modified/enhanced under section 66-A of the Ordinance which was erroneously accepted under Self-Assessment Scheme despite the fact that the depreciation claimed at Rs. 1,43,028 on the showed cost of motor-car at Rs. 715.140 at the rate of 20% was erroneously allowed against the maximum limit of Rs.1,20,000 legally admissible as per the provisions of clause 8 of the Third Schedule to the Ordinance. The explanation filed by the assessee was found not satisfactory by the learned IAC who cancelled the assessment completed by the Assessing Officer for the assessment years 1996-97 with the direction to the Assessing Officer to make fresh assessment.

2. The learned AR of the assessee in his arguments contended that the action of the learned IAC to cancel the assessment was unlawful and without any jurisdiction. Learned AR contended that in 'the absence of any assessment order passed in writing by the Assessing Officer the provisions of section. 66-A of the Ordinance could not be invoked by the learned IAC. In this context, the learned AR referred to the decision of the Tribunal reported as 2003 PTD (Trib.) 2276 whereby it was held that an order under section 59(1) of the Ordinance could not be considered formal order which could be subjected to the revisional jurisdiction by the learned IAC under section 66-A of the Ordinance. According to the learned AR of the assessee no order in writing required under the relevant provisions of the law was passed by the Assessing Officer nor there was any such entry on the order-sheet with regard to the acceptance of return under section 59(1) or determining the income under section 59(A) of the Ordinance for the year under consideration. Learned AR submitted that only the calculations of tax were made on the IT-30 Form on the basis of which a demand notice was issued. The learned AR further contended that in the absence of assessment order under section 59(1) of the Ordinance, merely issuance of IT 30-A would not amount to an assessment order. In this context, the learned AR cited the judgment of the Hon'ble Lahore High Court, Lahore reported as 2003 PTD 1530 whereby it was held that mere issuance of the Form IT 30-A would not amount to assessment order which could possibly be reopened under section 65 of the Ordinance. It is 'the contention of the learned AR that the principle laid down by the Hon'ble Lahore High Court Lahore was also applicable in the case of the assessee appellant also being revision of assessment though under different sections i.e. section 66-A by the learned IAC'. The learned AR of the assessee also raised legal objection that the assessment framed under section 59(1) of the Ordinance on 24-4-1999 for the assessment year 1996-97 was void in law in terms of provisions of section 59(4) of the Ordinance. Learned AR stated that neither the case of the assessee was excluded from Self- Assessment Scheme nor any notice under section 61 of the Ordinance was issued till 30-6-1997. According to the learned AR, no assessment under section 59(1) of the Ordinance for the assessment year 1996-97, could be framed after 30th June, 1997. In this context, learned AR cited the decision of the Hon'ble High Court reported as 1993 PTD 332 whereby it was held that the consequence of failure to pass an order in terms of section 59(4) of the Ordinance would be that the. Assessing Officer cannot pass any order subsequently. Another decision reported as 2002 PTD (Trib.) 912 was also referred by the learned AR in this context through which it was held by the Tribunal that if any order is passed subsequently to lapse of period of limitation in term of section 59(4) of the Ordinance that would be a void order and as such would be non-existent in the eye of law and any building is erected on such order that must be crumble down. In support of the alternative ground taken by the assessee whereby it is contended that the action under section 66-A should have been restricted to the modification of the assessment to the extent of excessive depreciation only, the learned A.R. relied upon the decision of the Hon'ble Lahore High Court, Lahore reported as 2003 PTD 2097 and 2000 PTD (Trib.) 1821. According to learned A.R. the revision of assessment should have been confined to the extent of addition of excess claim of depreciation, since no investigation or further probe was required on the issue involved.

3. The learned D.R. in his arguments defended the impugned order on the same reasons as mentioned therein by the learned IAC. According to the learned DR, the action of the learned IAC to cancel the assessment under section 66-A of the Ordinance was justified because the assessment framed by the Assessing Officer was erroneous as well as prejudicial to the interest of the Revenue. The assessment record of the instant case was available with the learned DR at the time of hearing of appeal. Learned DR informed that as per order-sheet entry, dated 24-4-1999 the assessment was finalized under section 59(A) of the Ordinance. However, it was also informed by him that no section was mentioned in the relevant column of IT 30-A. Form. Further the learned D.R. admitted that no order in writing to accept the return under section 59(1) or 59(A) of the Ordinance was available on assessment record. According to the contention of learned D.R., the IT-30 Form being a part of assessment was an order under section 59(A) of the Ordinance.

4. Arguments of both the parties have been heard. The impugned order as well as the cases-law cited by the learned AR of the assessee have also been perused: The main and foremost contention of the learned AR is that the proceedings initiated by the learned IAC in the absence of assessment order are unjustified and without lawful jurisdiction. The perusal of the impugned order revealed that the proceedings under section 66-A of the Ordinance were invoked by the learned IAC stating the reason that the return for the year under consideration was erroneously accepted under Self-Assessment Schedule. However, as per the assessment record available with the learned DR the assessment as per order-sheet entry, dated 24-4-1999 was finalized under section 59(A) of the Ordinance. According to the-provisions of section 59(A) of the Ordinance, the Assessing Officer is required to pass an order in writing stating the reason for his being satisfied that the return furnished under section 55 was correct and complete. Further under the provisions of both the sections i.e. 59(1) and 59(A) the Assessing Officer is required to assess the net income by an order in writing and determine the tax payable on the basis of such assessment. Our this view point also finds support by the judgment of the Hon'ble Karachi High Court reported as 1989 PTD 1300 whereby it was held that no demand notice should be issued without an order in writing.

Under the circumstances and facts of the instant case we are not inclined to maintain the order of the learned IAC passed under section 66-A of the Ordinance in the absence of a valid assessment order passed by the Assessing Officer. As a result, the order passed under section 66-A of the Ordinance, by the learned IAC for the assessment year 1996-97 is hereby vacated.

6. The appeal of the assessee against the order passed under section 66-A of the Ordinance for the assessment year 1996-97 stands accepted.

ASSESSMENT YEAR 1996-97---CROSS-APPEALS IN RESPECT OF ASSESSMENT UNDER SECTION 62/66-A.

As a consequence of the cancellation of the order passed by the learned IAC under section 66-A of the Ordinance the cross appeals of-the assessee as well as of the Revenue against the order of the learned CIT(A) regarding assessment framed under section 62/66-A have become infructuous; therefore, stand dismissed.

Assessment year 1999-2000 Anneal against the order under sec tion 66A of the Ordinance.

The original assessment for the assessment year 1999-2000 was framed at net income of Rs.525,000 under section 59(1) of the Ordinance by accepting the return under Universal Self-Assessment Scheme. The proceedings under section 66-A of the Ordinance were invoked by the learned IAC for the reason that the Assessing Officer failed to put the return to initial scrutiny and did not get the cognizance of the fact that the advance tax paid amounting to Rs.73,200 and tax paid under sections 50(7E) and 50(7F) at Rs.20,190 was not shown as an asset in the balance-sheet. The explanation filed by the assessee and reply to show-cause notice issued by the learned IAC that the advance tax under sections 53 and 50 was transferred to the capital account of the partners and could not be considered as, concealment was not found satisfactory by the learned IAC. However, according to the contention of learned AR, the explanation filed by the assessee was partly accepted by the learned IAC stating that as per final observation of learned IAC, the discrepancy pointed out was that an amount of Rs.26,870 was required to be shown as an asset in the balance-sheet as on 30-6-1999. It is the contention of the learned AR of the assessee that the explanation of the assessee regarding the amount of tax deducted/paid having been credited to the capital account of the partners and the reconciliation statement filed in this regard were not given due consideration by the learned IAC. According to learned AR the assessee was also not confronted with the discrepancy of Rs.26,810 finally pointed out by him. It is the contention of learned AR of the assessee that the discrepancy pointed out by the learned IAC could have been explained if an opportunity was provided to him. Considering the arguments of both the parties and facts of the case it is deemed fair to remand the case to the learned IAC with the direction that the contention of the assessee that the tax paid/deducted was not shown in the balance sheet because it had been credited to the capital account of the partners be verified from the account books of the assessee. Further, the assessee be provided on opportunity to explain the discrepancy if any found in the reconciliation statement of tax paid/payable before proceedings under section 66-A or the Ordinance.

2. As a result the appeal of the assessee stands disposed of in the manner and to the extent, indicated above.

Assessment year 1999-2000.---Appeal in respect of assessment under section 62/66-A of the Ordinance.

In view of the order under section 66-A having been remanded to the learned IAC the cross-appeals pertaining to the assessment year 1999-2000 of the assessee as well as Department have become infructuous; therefore, stand dismissed.

C.M.A./988/Tax (Trib.)Order accordingly.