I. T. A. No. 1916/KB of 2002 VS I. T. A. No. 1916/KB of 2002, 2004 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 618 (2003)

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

----S. 59-D---Tax on undisclosed income---Assessee's declaration of Tax Amnesty Scheme, 2000 under S. 59-D of the income Tax Ordinance, 1979 filed on 30-6-2000 had declared cash for the period from assessment years 1996-97 to 1999-2000---Any investment made after 30-6-1999 would not be covered by the said declaration.

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

----Ss. 65 & 13---Additional assessment ---Approval---Permission-- Where "approval" was mandatory, only "permission" by the Inspecting Additional Commissioner was not enough for addition under S.13 of the Income Tax Ordinance, 1979---Law in this respect favoured the assessee---Assessing Officer and Inspecting Additional Commissioner had, because of their inapt and careless attitude, caused loss to the Revenue---Departmental appeal was dismissed by the Appellate Tribunal.

1998 SCMR 2013; 2003 PTD (Trib.) 1238 and I.T.A. No.676 of 2003 rel.

Faiz Ellahi Memon, D.R. for Appellant.

Abdul Tahir, ITP for Respondent.

Date of hearing: 1st October, 2003.

ORDER

AGHA KAFEEL BARIK (ACCOLTNTANT MEMBER).---This departmental appeal has been filed against order of the CIT(A), dated 22-7-2002 through which he has annulled the impugned order of the DCIT passed under sections 63/56 and deleted addition of Rs.4,72,000 made under section 13(1)(b) and Rs.9,20,000 made under section 13(1)(e) by the DCIT.

2. Heard Mr. Faiz Ellahi Memon; D.R./IAC and Abdul Tahir, ITP/counsel for the, appellant.

3. The facts of the case are as under: --

(i) Originally assessment was finalized on total income of Rs.1,93,820. On information through verification note regarding purchase/ownership of four different vehicles listed by the DCIT in his reassessment order, the DCIT reopened the assessment under section 65, after issuance of show-pause notice and also obtaining permission of the IAC. The assessee explained that all the vehicles were sold out for Rs.6,00,000 in total and that the said amount in cash was declared under TAS 2000. The assessee also submitted details of purchasers with NIC No. to the DCIT. On being summoned some of the purchasers verified the sale of the two vehicles. But the DCIT did not find explanation of the assessee adequate in respect of investment/disposal of vehicles CK 1445 (Suzuki 1997) anti CK 3798 (Suzuki 1988). Accordingly he made addition of Rs.2,97,000 and Rs.1,75,000 under section 13(1)(b) in respect of unexplained investment in two vehicles. He also made addition of an amount of Rs.9,20,000 under section 13(1)(e) for alleged expenses incurred by the assessee on these two vehicles for long period as calculated by him in his assessment order.

4. The learned DR argued that the assessee failed to explain with documentary evidence the investment of these vehicles and also the transfer of ownership of the same vehicles before 30-6-2000 and that declaration of cash as per TAS 2000 had no relevance with the assessee's basic investment in this vehicles. He also argued that the CIT(A) was not justified to interpret that the assessment could not be reopened on the basis of show-cause notice without approval of the IAC. In this regard he submitted that a pre-show notice was, issued on 30-5-2001 whereas permission of the IAC to initiate proceedings under section 65 was obtained on 19-6-2001 and subsequently statutory notice under section 65 was issued on 20-6-2001. He cited the order of the FTO in this regard in which the issuance of any pre-show-cause notice without approval of the IAC under section 65 has been disapproved. However at this point we would like to hold that if the pre-show-cause notice of the DCIT, dated 30-5-2001 was issued without the approval of the IAC was illegal it can be treated as infructuous and withdrawn. However since the subsequent statutory notice under section 65, dated 20-6-2001 was rightly issued with the prior approval of the IAC obtained on 19-6-2001, the proceedings under section 65 were quite legal as the DCIT had legally obtained jurisdiction under section 65.

5. The learned A.R. also argued that while proceedings under section 65 were pending the assessee also declared cash amounting to Rs.6,00,000 under TAS-2000, declaration. This declaration has been produced and examined and it shows that the assessee vide his declaration of TAS-2000 under section 59D filed on 30-6-2000 had declared cash for the period from assessment years 1996-99 to 1999-2000. Thus any investment after 30-6-1999 in the motor vehicles would not be covered by the said declaration.

6. The learned counsel also argued that under section 13 the DCIT is required to obtain approval of the IAC whereas in this regard such approval was not obtained. He pointed out that in fact the DCIT/ITO Circle-B Sukkur vide his letter, dated 13-6-2002 addressed to IAC Sukkur Range Sukkur has sought "permission" of the IAC and in response to this letter the IAC vide his letter, dated 24-6-2002 also granted "permission" to the DCIT. He produced copies of both the letters which support the point raised by the learned counsel. The learned counsel cited two decisions in support of his arguments that where "approval" was mandatory only "permission" by the IAC was not enough for addition under section 13. These two cases cited as judgment of the Supreme Court of Pakistan reported as 1998 SCMR 2013 in Civil Appeals Nos.162 and 163 of 1995 and 2003 PTD (Trib.) 1238 ITAT Lahore Bench decision 15-8-2002 support the arguments of the learned counsel. In its decision, dated 15-8-2002 the learned Tribunal has held as under:--

"Income Tax Ordinance, 1979 (XXXI of 1979)---Sections 13(1) (aa) 156---Rectification of mistake---Addition without prior approval of IAC---Validity-Assessee declared nil income---Assessing Officer accepted the same but made addition on ground that source of investment towards purchase of shop was not properly explained---Failure of Assessing Officer to make addition to obtain approval of LA.C.- --Effect of---Difference between `approval' and `permission'---Whether no finding was recorded on ground taken by assessee in, respect of approval Held yes---Whether contention of assessee is correct that Assessing Officer sought permission and not approval for making addition---Held yes---Whether approval of I.A.C. is condition precedent for exercise of jurisdiction to make addition---Held yes---Whether word `approval' and `permission' have different meaning and their impact is also quite different-- Held yes---Whether admittedly. Assessing Officer, sought permission and I.A.C allowed permission, hence addition made by Assessing Officer after seeking permission from I.A.C. is not tenable in eye of law---Held yes---Whether since Misc. application was decided purely on legal ground in favour of assessee. Tribunal was pleased to rectify its earlier order and addition-made was modified and deleted same---Held yes."

7. In view of the above discussion and in ratio decidendi of the above case-law we have to observe that the DCTI as well as the IAC Sukkur because of their inapt and careless attitude have caused loss or Revenue and the law in this respect favours the assessee. The case-law cited by the learned counsel and referred above have also been followed by us in I.T.A. No. 676 of 2003 (Assessment Year 1998-99) decided on 16-9-2003. Accordingly we confirm the order of the CIT(A) and dismiss department appeal.

C.MA./1031/Tax (Trib.) Appeal dismissed.