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

----Ss. 65, 59-B & 13(1)(aa)---C.B.R. Circular No. 14 of 1998, dated 14-9-1998---Additional assessment---Assessment tinder the Simplified Procedure for Assessment ---Finalization of assessment under S.59-B of the Income Tax Ordinance, 1979---No formal order for re-opening of assessment---Addition under S.13(1)(aa) of the Income Tax Ordinance, 1979---Validity---Assesrsment framed was not sustainable in the eye of law for numerous defects---Order passed by the First Appellate Authority was vacated and assessment framed was annulled by the Appellate Tribunal for the reasons; firstly that the proceedings concluded under S.59-B of the Income Tax Ordinance, 1979 were not actionable under S.65 as there was no mention of any proceedings under S.59-B in S.65 of the Income Tax Ordinance, 1979, so the proceedings in the case were beyond the scope of S.65 of the Income Tax Ordinance., 1979 which were void ab initio secondly there was no written assessment order, as the subject had the right to know the defects necessitating the re-opening his reassessment for assessment, which was not possible when there was no written order; thirdly proceedings were hit by the limitation as nowhere in the assessment order for the impugned year, it had been mentioned that same were initiated as per directions of the First Appellate Authority on the conclusion of appeals at the first round but no direction had been given for proceeding against the appellant/assessee for the impugned year; fourthly issue regarding the impugned assessment order was nor pending at the first round of appeal, therefore, any findings thereon were of no relevance and lastly that even on merits of the case the Assessing Officer had rejected the declared cost without any plausible reasons.

2002 P T D 1530; 1993 P T D (Trib.) 1336 and 2003 P T D (Trib.) 1167 rel.

Shahid Abbass for Appellant.

Bashir Ahmad Shad, D.R. for Respondent

Date of hearing: 10^th September, 2003.

ORDER

EHSAN-UR-REHMAN, JUDICIAL MEMBER---Through the titled appeal the appellant/assessee has assailed the order dated 5-4-2003 passed by the learned CIT/WT(A) Zone-IV, Lahore. The learned First Appellate Authority has upheld the initiating of proceedings under section 65 as legal, secondly issuance of notice under section 65 is not hit by limitation, thirdly notices under section 65 have been properly served and lastly upheld the addition made under section 13(1)(aa) at Rs.2,50,000. Here in this order (sections referred in. this order are of the repealed. Ordinance, 1979 and shall be read as such in this order).

After series of litigation facts now in brief giving rise to filing of the instant appeal are that the Appellant/assessee is an individual and deriving income from purchase and sale of Sofa Cloth. Original assessment was made by accepting the declared income of Rs.32,000 under section 59-B and also further it has been stated in the order that case was duly entered at DCR No.3645 on 11-3-1999 and for ready reference a copy of IT-30-Form is available on record. Earlier for bringing under tax net the impugned addition of Rs.2,50,000 that after re-opening under section 65, the reassessment was framed for the assessment year 1989-90 by finally passing ex parte order under section 63. The Appellate Authorities in appeal found that the impugned purchase of shop was relevant to assessment year 1988-89, therefore, on the basis of the order passed by the learned CIT/WT(A) Zone-IV, dated 16-6-1998 which was received in the office of the Assessing Officer, on: 16-7-1998 that, a show-cause notice for 'reopening the assessment for the assessment year 1988-89 was issued to the appellant/assessee on 30-4-2001, by taking coverage of the provisions of section 66(T)(b), by the Assessing Officer. The Assessing Officer has stated in the order that since order passed in the first round of appeal by the learned C.I..T.(A) was -received on 16-7-1998 so 'its limitation is to expire on 30-6-2001 under the provisions of section 66(1)(b). The submissions made in reply to the notice under section 65 were rejected by the Assessing Officer and case was reopened under section 65 with the prior approval of the I.A.C. vide. Letter No. 15-B/R-I dated 11-5-2001, No return in response to notice- under section 65 was furnished. Thereafter in response to notice under sections 58(1) and 61, the appellant/assessee contended before the Assessing Officer that the limitation as prescribed for proceedings under section 65 has already expired on 30-6-1994 by further requesting that further proceedings may be withdrawn. The Assessing Officer served a show-cause notice by confronting to the appellant/assessee that for non furnishing of return after notice under section 65 will entail penalty under the relevant provisions of law for which separate proceedings shall be initiated separately and secondly that property was purchased through a registered sale-deed showing the consideration involved at Rs.50,000 whereas the value has been declared at Rs.70,000, therefore, the Assessing Officer estimated the purchase value at Rs.2;50;000 and added the same amount as addition under section 13(1)(aa) in the hands of the appellant assessee. During all these proceedings before the Assessing Officer it was: only once that the learned A.R. on behalf of the assessee appeared and requested for adjournment by stating that representation has been filed before the learned RCIT and also the learned Zonal Commissioner. It was also submitted that for quashment of proceedings initiated under section 65 the petition was moved before the Honourable FTO. Ultimately the Assessing Officer framed the assessment on 7-5-2002 under sections 62/65 by making addition under section 13(1)(aa) read with section 13(2) for the proposed amount of Rs.2,50,000. The learned First Appellate Authority by rejecting entirety the contentions of the appellant/assessee confirmed the assessment as made. This has brought the appellant/assessee in appeal this Tribunal.

The learned A.R. submitted before us that it is evident rather mentioned by the Assessing Officer that there was no written order except IT-3-Form on record and also acceptance of the declared income as such under section 59-B has also been acknowledged by the Assessing Officer. By submitting this the learned A.R. argued that section 59-B has not been mentioned in section 65 to be actionable under it. Thus the learned A.R. pleaded that the initiating of proceedings under section 65, and the subsequently the issuance of notices under section 65 being beyond the scope of section 65 are void abi nitio. Secondly the learned. A.R. submitted that acceptance of the return as per IT-30 Form cannot cause any reopening under section 65, for his this submission placed his reliance on the reported judgment with a citation as 2003 PTD 1530 Lahore High Court. Thirdly the learned A.R. submitted that the learned First Appellate Authority failed to record the clear cut findings so such order is not sustainable and has thus made the contentions of the assessee as successfully. In support of his this argument the reported judgment as 1994 PTD (Trib.) 1336 referred Fourthly the learned A.R. argued that in the first round of appeals the recording of a. verdict that impugned addition is relevant to assessment year 1988-89 was not merely beyond the jurisdiction as the issue regarding the order under appeal was not present at that time and secondly the findings of the Appellate Authority do not Constitute a definite information for proceedings under section 65 for the impugned year. The learned A.R. supported his arguments with the reported judgment as 2003 PTD (Trib.) 1167. Fifthly the learned A.R. pleaded that the exception as set out in section 66 for immunity from limitation when a matter was pending in appeal is not applicable for the reason that the matter regarding impugned year was not in adjudication in the first round of appeal against the appellant/assessee. Sixthly the learned A. R. submitted that proposed addition under section 13 was not confronted by quoting the parallel ease and assessing it at Rs.2,50,000 against the declared cost at Rs.70,000, is without any basis. Seventhly the learned A.R. contested the taking of the entire amount of the adopted cost for addition under section 13(1)(aa) as illegal. Eighthly, the learned A.R. produced before us a copy of Circular No. 14 of 1988 dated 14-9-1988 in respect of simplified procedure for the assessment year 1988-89. The learned A.R. highlighted the para.5(c) of this circular wherein the procedure for processing of income tax returns filed under this scheme has been given. Thus the learned A.R. argued that the procedure adopted for the acceptance in the instant case is not in accordance with the circular issued by the C.B.R. Lastly the learned A.R. submitted that the income from business has been-estimated without any basis.

The learned D.R. on the other hand supported the order passed by the learned First, Appellate Authority and read out the portions from the impugned order so as to justify the impugned order on upholding the assessment framed. The learned D.R. opined that the pendency of appeal has made the provisions of limitation inapplicable, secondly the proceedings under section 65 has been properly initiated and rightly concluded in the absence of any cooperation from the appellant/assessee, the learned D.R. submitted that the Assessing Officer was quite justified by adopting the purchase value at Rs.2,50,000 and also adding the same under section 13(1)(aa) is quite legal in the circumstances of the case. The attention of the learned D.R. was drawn to a law referred by the learned A.R. with citation as 1994 PTD Trib. 1336 ibid. As in this order the para. has dealt with an identical issue which for convenience is reproduced:--

"The above resume of the case-law from Indian jurisdiction shows that the point in issue has been conclusively decided at least in India and has attained finality. Since the provisions of Indian Statute and Pakistan Statute are in pari materia to each other, therefore, we have no hesitation in applying the same principles to the facts of the present appeal. We respectively follow the authoritative pronouncement from the Indian jurisdiction and hold that the provisions of section 66 are to be read with the relevant provisions of the Income Tax Ordinance conferring jurisdiction on the various authorities created under the Ordinance. Section 66 of the Ordinance purports to lift the bar of limitation only and does not enlarge the jurisdiction of the Appellate Authorities or the Assessing Authority under the relevant sections. The findings or directions referred to in section 66 are, therefore, confirmed to the assessment which is the subject of appeal before the Appellate Authority and as further confined to the relevant year under appeal and the parties in the proceedings.

In order to attract the provisions of section 66 for the purpose of lifting the bar of limitation there should be definite and conclusive finding of the Appellate Authority in consequence or result whereof the Income Tax Officer may merely complete the assessment. However, if the matter is incidentally considered by the Appellate Authority and the question is left open to the discretion of Income Tax Officer or it is a matter of independent enquiry of the Income 'Tax Officer then the assessment sought to be made would be deemed to be in consequence of the finding of the Income Tax Officer and not in consequence of the finding or direction of the Appellate Authority. In such circumstances the provisions of section 66 shall not be available to the Department for the purpose of lifting the bar of limitation provided in sections 64 and 65 of the Ordinance."

The learned D.R. could not quote any case or to distinguish the issue from these findings. The attention of the learned D.R. was also drawn to a reported judgment with a citation as 2002 PTD 1530 Lahore High Court which has duly been referred by the learned A.R. This judgment is authored by Mr. Justice Naseem Sikander in a D.B. and has been held that for invoking of section 65 there has to be an order in existence which is a sine qua non as given in sub-clause (c) to section 65(1). The existence cannot be deemed in respect of any order.

After perusing the record and hearing the arguments/counter--arguments placed at bar before us and by going through the case-law, cited before us we hold that the assessment as framed is not sustainable in the eye of law for the numerous defects, therefore, the order passed by the learned First Appellate Authority is vacated and the assessment framed is annulled. As a result the assessee's appeal succeeds. Here it is essential to bring on record the following reasons for the conclusion drawn by us:--

(1)That the proceedings concluded under section 59-B are not actionable under section 65 as there is no mention of any proceedings under section 59-B-in section 65 so the proceedings in, the instant case were beyond the scope of section 65 which are vide ab initio.

(2)Secondly there is no written assessment order, as the subject has the right to know the defects necessitating the re-opening this reassessment for assessment, which is not possible when there is no order in writing in existence.

(3)The proceedings were hit by the limitation as nowhere in the assessment order for the impugned year, it has been mentioned that these are being initiated as per directions of the learned Appellate Authority on the conclusion of appeals at the first round but no direction has been given for proceeding against the appellant/assessee for the impugned year. Rather this reason is also supported by the reported judgment as PTD 1993 (Trib.) 1336.

(4)The issue regarding the impugned assessment order was not pending at the first round of appeal, therefore, any findings if there are these are of no relevance here.

(5)Even on merits of the case the Assessing Officer has rejected the declared cost without any plausible reasons.

With these remarks recorded above the order is concluded.

C.M.A./1008/Tax(Trib.)Appeal accepted.