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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Limitation‑‑‑Limitation for invocation of S.66‑A of the Income Tax Ordinance, 1979 would run from the date of passing the order by the Assessing Officer and not from the date of issuance of show‑cause notice by the Inspecting Additional Commissioner.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Limitation‑‑‑Inspecting Additional Commissioner found that limitation for invoking S.66‑A of the Income Tax Ordinance, 1979 would run from the date of issuance of first show -cause notice under S.66‑A of the Income Tax Ordinance, 1979‑‑ Validity‑‑‑Assessment under S.62 of the Income Tax Ordinance, 1979 was formulated on 24‑11‑1995‑‑‑Limitation for invoking the provisions of S.66‑A of the Income Tax Ordinance, 1979 would be counted from the said date‑‑‑Order passed under S.66‑A of the Income Tax Ordinance, 1979 cancelling the assessment was made on 12‑5‑1999‑‑‑Order had been passed by the Inspecting Additional Commissioner after lapse of four years' three months and 18 days whereas that should have been made within four years from the date of passing the order under S.62 of the Income Tax Ordinance, 1979 which date fell on 24‑1‑1999 and not on 12‑5‑1999‑‑‑Action of the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979 was grossly hit by laches‑‑ Inspecting Additional Commissioner had jostled the assessee into a chain of litigation having no fault on his part‑‑‑Order passed under S.66‑A of the Income Tax Ordinance, 1979 was without lawful authority and the same was declared to be of no legal effect by the Appellate Tribunal.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Modification‑‑‑Directions‑‑‑Assessment was cancelled‑‑ Assessment was neither modified by the Inspecting Additional Commissioner nor direction was given to Assessing Officer to make a fresh assessment‑‑‑Validity‑‑‑Once any order or the assessment order passed by the Assessing Officer was cancelled by the Inspecting Additional Commissioner, he shall either modify the order himself or shall direct the Assessing Officer to make a fresh assessment‑‑‑Inspecting Additional Commissioner, after adhering to all the formalities cancelled the assessment order but could neither resort to modify the assessment order by himself nor he directed the Assessing Officer to make a fresh assessment‑‑‑Order of the Inspecting Additional Commissioner had been made in contravention to S.66‑A of the Income Tax Ordinance, 1979 in the circumstances‑‑‑Since the order was void, the same had no sanctions behind the law and as such was bound to be quashed/cancelled.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Gross profit rate‑‑‑Departure from history‑‑‑Cancellation of assessment‑‑‑Validity‑‑‑Departure from history of the case was not a good ground for invoking the provisions of S.66‑A of the Income Tax Ordinance, 1979 because this deficiency in no way suffered from any error of law which would render the assessment erroneous insofar as it was prejudicial to the interest of Revenue so as to empower the Inspecting Additional Commissioner to exercise the powers conferred upon him under S.66‑A of the Income Tax Ordinance, 1979.

1991 PTD (Trib.) 321 and 1997 PTD (Trib.) 831 rel.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Books of accounts/details‑‑‑Cancellation of assessment on the ground that the same was made by the Assessing Officer without obtaining any details or books of accounts or statement of affairs‑‑‑Validity‑‑‑Observation made by the Inspecting Additional Commissioner that assessment had been made by the Assessing Officer without obtaining any details or books of accounts or statement of affairs by no stretch of imagination would fall within the condition precedent for invocation of S.66‑A of the Income Tax Ordinance, 1979‑‑‑Such act of Inspecting Additional Commissioner would amount to checking the quality of assessment order which view was deprecated by the Appellate Authorities‑‑ ‑Such observation was objective in its character and negated the very purport of the provisions of S.66‑A of the Income Tax Ordinance, 1979.

1991 PTD (Trib.) 321 and 1997 PTD (Trib.) 831 rel.

M.M. Akram for Appellant.

Nemo for Respondent.

Date of hearing: 3rd May, 2003.

ORDER

RASHEED AHMAD SHEIKH (JUDICIAL MEMBER).‑‑‑This order is intended to dispose of the titled appeals which are directed against the orders passed by the IAC invoking the provisions of section 66A whereby the already completed assessments under section 62 were held to be erroneously made and were also prejudicial to the interest of Revenue.

2. The precise question, which came up for adjudication before us in respect of the assessment year 1994‑95, is‑as to whether limitation for invoking section 66A would run from the date of issuance of a show -cause notice under section 66A or from the date of the order sought to be revised. What happened in this case was that during the course ‑of inspection of Circle‑18, Kasur, certain, discrepancies, were observed by the IAC, which before drawing any inference, were confronted to the assessee by way of a show‑cause notice issued under section 66A on 26‑10‑1998. Legality of issuance of the said notice was challenged by the assessee to say that the proceedings initiated under section 66A in respect of assessment year 1994‑95 were hit by limitation and as such those may be filed. The explanation tendered was not found convincing by the IAC by holding that the same was without any merits. It was thus concluded by the IAC that as the first show‑cause notice; under section 66A, was issued by my predecessor on 26‑10‑1998, therefore, limitation for invoking section 66A would run from this date. Having taken regard to this factum, it was held that the proceedings initiated under section 66‑A by virtue of a show‑cause notice issued on 26‑10‑1998 are within the time limit specified in subsection (2) of section 66‑A of the Income Tax Ordinance, 1979. Accordingly, the already completed assessment under section 62 for the assessment year 1994‑95 was cancelled by the IAC on 12‑5‑1999 by observing that there is no reason to disbelieve that the assessment made was erroneous in so far as it was prejudicial to the: interest of Revenue. This action of the IAC has compelled the assessee to come up in appeal before us.

3. Mr. Malik Muhammad Akram, Advocate, the learned counsel for the assessee has been ‑heard at some length while none prosecuted on behalf of the Revenue to defend the impugned order despite the fact that proper intimation by way of sending call notices was made at the relevant quarters. It is, therefore, decided to proceed in the absence of the learned DR by resort to rule 20(2) of the ITAT Rules, 1981.

4. We have deliberated the contentions put forth by the learned counsel for the assessee before us and perused the orders of the Authorities below as well. According to section 66A(1) the IAC is vested with the powers to pass such order as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment to be made if he after calling for and examination of the record of any proceedings under this Ordinance, considers it fit that any order passed therein by the DCIT is erroneous insofar as it is prejudicial to the interest of Revenue. The IAC is also competent to make or causing to be made any enquiry before invoking the provisions of section 66A if it is deemed necessary and an opportunity of being heard shall be given to the assessee prior to invoking the provisions of section 66A. Anyhow in clause (1A) of subsection (1), of this section, the Statute .has put an embargo on the powers of the IAC and to invoke section 66A where any appeal has been filed under sections 129, 134 & 137 or under section 136 against an order passed by the DCIT and which has been decided in respect of any point or issue which was the subject matter of such appeal.

5. Then comes subsection (2) of section 66A, which is pivotal one around which whole controversy of this case revolves. This subsection blocks the IAC that he shall not make any order under section 66A(1) after the expiry of four years from the date of the order sought to be revised. From this it is manifestly clear that limitation for invocation of section 66A would run from the date of passing the order by the DCIT and not from the date of issuance of show‑cause notice by the IAC as has been held in the present case. To our mind the IAC has introduced an innovative proposition that limitation for invocation of provisions of section 66A would commence from the date of issuance of show‑cause notice to the assessee. This observation of the IAC is tantamount to enlarge the scope of limitation in order to invoke the provisions of section 66A which has certainly no legal sanctity. Thus, objection of the IAC that limitation for invoking the provisions of section 66A would run from the date of issuance of show‑cause notice is not sustainable in law hence is overruled.

6. Reiterating to the facts of the case it is noted that the assessment, under section 62, in the instant case for the assessment year 1994‑95 was formulated by the ACIT on 24‑1‑1995. Thus limitation for invoking the provisions of section 66A would count down from this date. As per the record the order passed under section 66A cancelling the already completed assessment was made by the IAC on 12‑5‑1999. Reckoning the, period for invocation of section 66A, in view of the narrated facts, the order under section 66A has been passed by the IAC after lapse of four years three months and 18 days whereas that should have been made within four years from the date of passing the order under section 62 which date falls on 24‑1‑1999 and not on 12‑5‑1999. Patently, the action of the Assessing Officer under section 66A is grossly hit by latches. Had the IAC taken pain to appreciate the contention raised before him with regard to initiation of time‑barred proceedings, the assessee would have saved from agony of protracted litigation. We have no hesitation in observing that, in fact, the IAC has jostled the assessee into a chain of litigation having no fault of his. Accordingly, the order passed by the IAC under section 66A for the assessment year 1994‑95 is held to have been passed without any lawful authority and is declared to be of no legal effect.

ASSESMENT YEARS 1995‑96 and 1996‑1997

7. For these assessment years, first contention of the learned counsel for the assessee is that the impugned order under section 66A is void ab‑initio as the assessment order was lawfully made by the Assessing Officer in strict adherence to law. Thus, rendering the assessment order to be erroneous insofar as that was prejudicial to the interest of Revenue has no legs to stand upon. The other plea was that mere disagreement between the officers on result of assessment is negation of action to be taken under section 66A of the Ordinance. According to the learned counsel for the assessee this was a no account case and all the necessary details and documents were provided to the Assessing Officer during the course of assessment proceedings. Thus, invoking the provision under section 66A simply on the ground that the Assessing Officer while accepting the declared Gross Profit rate did not consider history of the case is tantamount to check quality of assessment which has been disapproved by the Tribunal in a number of cases. He also added that departure from history of the case does not render the assessment erroneous in so far as it is prejudicial to the interest of Revenue warranting action under section 66‑A of the Income Tax Ordinance, 1979. Reference in this regard has been made to the reported judgment cited as 1991 PTD (Trib.) 321 and 1997 PTD (Trib.) 831.

8. Before appraising factual or legal infirmity arisen in the facts available on record accord we of our own accord have looked into legality of the impugned order from another angle and are of the considered view that the same is not tenable in law. In this case the IAC after inspecting the assessment record, noted certain discrepancies and according to him to which the provisions of section 66A of the Income Tax Ordinance were attracted. Section 66‑A enunciates that if the IAC after calling and examining the record of any proceeding under this Ordinance considers that any order passed thereon by the DCIT is erroneous insofar as it is prejudicial to the interest of Revenue, he may, after giving the assessee an opportunity of being heard and after making, or causing to be made, such enquiry as he deemed necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment or cancelling the assessment and directing a fresh assessment to be made. In nutshell it means that once any order or the assessment order passed by the DCIT is cancelled by the IAC by holding that the same was erroneously made and was also prejudicial to the interest of Revenue, he shall either modify the order by himself or shall direct the DCIT to make a fresh assessment. What the IAC did in the present case that he, after adhering to all the formalities as envisaged in section 66A cancelled the assessment order. But the IAC could neither resort to modify the assessment order by himself nor he directed the DCIT to make a fresh assessment in respect of assessment years 1995‑96 and 1996‑97. In such circumstances we cannot help but reach the conclusion that the order of the IAC, dates 12‑5‑1999 has been made in contravention to section 66‑A. Since the order passed by the IAC is void, therefore, such order has no sanctions behind the law and as such is bound to be quashed/cancelled and it is ordered accordingly.

9. Even otherwise perusal of the impugned order reveals that the IAC in the show‑cause notice has observed that the Assessing Officer had estimated the sales without obtaining any details or books of accounts. Similarly, the Assessing Officer did not requisition statement of affairs. Declared GP rate of 3% was accepted by the Assessing Officer whereas GP rate of 4.5% was declared by the assessee himself in the assessment years 1990‑91 to 1992‑93 particularly when nature of business remained the same. Thus, obviously the income was grossly under assessed causing thereby enormous loss of Revenue. To our mind neither the assessments made were erroneous nor those were prejudicial to the interest of Revenue nor any error whatsoever has been committed by the Assessing Officer while framing the assessment order. The assessments under section 62 seem to have been Made after due consideration to the facts available on record. Although the learned counsel has pointed out that those assessments were made with the approval of the then IAC thus the successor IAC is debarred to cancel such assessments. However, no observation can be made on this plea at this stage on account of non‑corroboration of any evidence to this effect by the learned AR or for non‑production of assessment record by the Department.

10. We have also observed that the IAC could not appreciate factum of declaring abnormal increase in turnover in the years under appeal viz. the preceding assessment years. As per the chart tabulated by the IAC in his order at page 3 it is evident that the turnover for the years under reference has been declared more than twice the previous assessment years i.e. at Rs.15 Million and 18 million viz. 7.2 million. In fact this was the factor coupled with it the wholesale dealers and the Department had arrived at an agreement that where the turnover has been declared less than rupees then million the declared gross profit rate of 2.5% may be accepted, were considered by the Assessing Officer while accepting the declared gross profit rate of 3% by the assessee. It is also a settled law that departing from history of the case is not a good ground for invoking the provisions of section 66A because this deficiency in no way suffers from any' error of law which would render the assessment erroneous insofar as, it is prejudicial to the interest of Revenue so as to empower the IAC to exercise the powers conferred under section 66A of the Income Tax Ordinance, 1979.

11. Moreover, the IAC's observation that the assessment has been made by the Assessing Officer without obtaining any details or books of accounts or statement of affairs by no stretch of imagination fall with the conditions precedent for invocation of section 66A. Actually this act of the IAC amounts to check quality of the assessment order which view has been deprecated by the Appellate authorities in quite a number of cases. To us such observation is subjective in its character and negates the very purport of the provisions of section 66A.

12. In view of the foregoing discussion, we are convinced that the impugned order for the assessment years 1995‑96 and 1996‑97 does also suffer from illegality on number of counts. The appeals are accordingly allowed as a result of which the IAC's order dated 12‑5‑1999 would stand cancelled. Corollery would be restoring the Assessing Officer's orders for all the three years under appeal.

13. The assessee's three appeals pertaining to assessment years 1994‑95 to 1996‑97 are hereby disposed off.

C.M.A./948/Tax (Trib.) Appeals allowed.