I.T.As. Nos.602/LB and 467/LB of 2002, decided on 26th November, 2004. VS I.T.As. Nos.602/LB and 467/LB of 2002, decided on 26th November, 2004.
2005 P T D (Trib.) 960
[Income-tax Appellate Tribunal Pakistan]
Before Ehsan-ur-Rehman, Judicial Member and Mazhar Farooq Shirazi, Accountant Member
I.T.As. Nos.602/LB and 467/LB of 2002, decided on /01/.
26th November, 2004. (a) Income Tax Ordinance (XXXI of 1979)---
----S. 64---Limitation for assessment---Service of order---Assessee contended that assessment order could not be taken as passed within time mentioned in S.64 of the Income Tax Ordinance, 1979 as the same was served within such limitation period---Service of order was to be made within the prescribed time under S.64 of the Income Tax Ordinance, 1979 as making of an order under statutory provisions means that the order must be communicated to the party affected by such order within said period of limitation---Validity---Contention of assessee that assessment order had been hit by limitation due to non-service of order within the stipulated time under S.64 of the Income Tax Ordinance, 1979, was valid---Appellate Tribunal, declared the order as null andvoid by agreeing with the contention of the assessee and did not dilate uponthe issues emanating from such order---Appeal of assessee was accepted and that of department dismissed being legally not maintainable.
I.T.A. No.6288/LB of 1999 rel.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 62---Assessment on production of accounts, evidence etc.---Unsigned assessment order, its validity---Assessee contended that assessment order had not been signed by the Assessing Officer and he had only signed the notice of demand---Validity---Principle---Such Assessment should have been cancelled by the First Appellate Authority being illegal and declared results should have been accepted instead of reduction in sales---Department had not denied the fact that order was unsigned but pleaded that signed notice of demand was available on record which was enough to justify the framing ofassessment---Validity---Notice of demand and IT 30 Form would get a legal shape only after passing of an order---Putting signature by the Assessing Officer on the order and his seal was sine qua non of an order but notice of demand and IT 30Formweretobebackedbyapropersignedorder---In the closing sentence of the assessment order it was specifically given as assessed as per IT 30 issued demand notice and challan ---Assessing Officer was required to order for issuing copy of order as thereafter signature with office seal were to be placed/affixed---Proper sequence of events was that firstly an order was to be passed which was to be followed by issuing a notice of demand, IT 30 Form and copy of assessment order---Essential pre-condition was missing as order had not been signed which an officer was required to sign prior to issuance of any notice of demand---Assessment order became valid only when the order had been signed---Revenue failed to produce a signed assessment order---Legalizing the unsigned order was fraught with disastrous consequences not merely in judicial process but also in administrative matters---Notice ofdemandandIT30Formhadnotsucceededtheorder as the order remained unsigned---Such unsigned order was invalid intheeyeoflawandhadnoexistence---No liabilityorrightcouldbe created as a result of such order---Order was declared as null and void and appeal of the assessee was accepted by the Appellate Tribunal.
1997 PTD 616 (S.C. India) rel.
(c) Income-tax---
----Legal issues, when to be raised---Raising of legal issues at any stage of the proceedings were permitted---Permission was granted for raising legal issues as basic and preliminary objection prior to deciding the appeals on merits.
Mrs. Sabiha Mujahid, D.R. for Appellant
Muhammad Shahid Abbas for Respondent.
Date of hearing: 26th November, 2004.
ORDER
Through the titled cross-appeals which are pertinent to assessment year 1997-98 the assessee as well as the Revenue/Department has called in question the order, dated 7-11-2001 passed by the learned Commissioner of Income Tax/Wealth Tax (Appeals) Zone-1, Lahore. (The Sections referred to in this order are of the repealed Income Tax Ordinance, 1979).
Brief facts of the case are that the assessee is a private limited company engaged in the business of manufacturing and sale of textile wading. Return was filed declaring income at Rs.147,563 with the following trading results:--
SalesRs.2,01,40,384
Gross ProfitRs.17,27,399
G.P. Rate8.57%
On the basis of history of the case the Assessing Officer recasted the G.P. rate in the following manner:--
Net SalesRs.2,01,40,384
Add:Depreciation charged to cost of sales Rs.10,34,387
Rs.2,11,74,771
Less:Cost of salesRs.1,84,12,985
Gross ProfitRs.27,61,786
G.P. Rate13.71%
The assessee wasconfronted through notice under section 62 of the repealed Income Tax Ordinance, 1979 regarding the discrepancies noted from the books of account i.e. claim of depreciation on leased assets, advance from customers etc. In this regard the explanation submitted by the AR of the assessee was not found satisfactory by the Assessing Officer who in view of the discrepancies and defects mentioned in the assessment order rejected the declared trading results and estimated the sales at Rs.2,65,00,000 by applying G.P. rate at 15.56%. Against the said treatment meted out by the Assessing Officer the assessee went in appeal before the learned First Appellate Authority who vide its order cites supra in view of the history of the case confirmed the G.P. rate at 15.56%. The learned First Appellate Authority did not adjudicate the ground regarding assessment being barred by limitation, however, reduced the sales to Rs.2,25,00,000.
Before us the appellant/assessee has challenged that the assessment order for the year under consideration could not be taken as passed within time mentioned in section 64 of the repealed Income Tax Ordinance, 1979 because it was also to be served within this limitation period, secondly, that the assessment order has not been signed by Assessing Officer, therefore, the assessment should have been cancelled by the learned CIT(A) being illegal and declared results should be accepted instead of reduction in sales. On the other hand, the Revenue/Department has agitated against the reduction in sales by the learned First Appellate Authority.
Before us the appellant assessee has challenged the assessment also by raising other legal issue which was not taken up before the learned first appellate authority, in addition to these grounds which were already taken at the first appeal stage. The department is simply agitating the reduction in sales from Rs.2,65,00,000 to Rs.2,25,000.
The learned AR in support of raising the new issues i.e. assessment order without signature cannot become a legal order and also even if this assessment order is taken as properly legal even then it has become illegal as it been passed on 30-6-2000 whereas its service has been made on 15-5-2001 i.e. after a lapse of ten months and 15 days which is an unreasonable delay. But it has not been dilated upon at the First Appeal Stage. In support of raising these two legal issues at the second appeal stage, the learned AR pleaded that legal issues can be taken up at any stage of the appeal proceedings. We find that this plea is tenable as the superior judiciary has permitted raising of legal issues at any stage of the proceedings so after hearing both the parties, permission is granted for raising these two legal issues as a basic and preliminary objection prior to deciding the appeals on merits.
The learned AR at the very beginning of his arguments has pointed out that the assessment order has not been signed by the Assessing Officer and it is only the signed notice of demand which is available. The learned AR challenged this order as being invalid in the eye of law. In support of this the learned A.R. relied upon an Indian authority where the judgment has been passed by the apex Court of the country and reported as 1997 PTD 616 (S.C. India). To verify this contention of the learned AR, assessment record was summoned.
The learned DR produced the record and it was found that the assessment order has not been signed and it is only a notice of demand which has been signed, which is available on record. Secondly, the learned AR drew the attention towards the provisions of section 64 and pleaded that assessment as framed has been hit by the limitation as prescribed under section 64. The learned AR elaborated this contention by submitting that after filing of return within the due date that assessment was made on 30-6-2000 which is the last day of the stipulated time as per provisions of section 64, but assessment order was served on 15-5-2001 i.e. after a lapse of 10 months and 15 days. By tendering this explanation the learned AR intended to prove that after passing of assessment order its service was to be made on the assessee within the time prescribed in terms of section 64 but it has not been done and secondly the order has lost validity as has been served beyond the reasonable time required for service. So, firstly it is hit by the limitation under section 64 because according to the learned AR service of order was to be made within the prescribed time under section 64, as making of an order under statutory provisions mean that the order must be communicated to the party affected by such an order within this period of limitation. By his other contention the learned AR is trying to prove that even if the order is taken as valid but it has lost its characteristic of legal validity due to unreasonable delay of over 10 months for serviceon assessee. The learned DR on the other hand has opposed the submissions placed before us by the learned AR but could not dislodge the same with any case-law. The learned DR has not denied the fact that order is unsigned but has pleaded that signed notice of demand is available on record which is enough to justify the framing of assessment. The learned DR has also opposed the arguments of the learned AR that the assessment order is adversely hit by the limitation as prescribed under section 64 but failed to produce any citation in support of his argument as against the case-law cited by the learned AR on this very issue.
We have heard the arguments placed at bar before us and have also the opportunity of going through the available record and also assessment record as produced before us by the concernedcircle. Even at the cost of repetition it is to be stated that assessmentorder has not been signed. Prior to expressing any opinion on this point it is to be highlighted that notice of demand and IT 30 Form geta legal shape after passing of an order. Putting signature by the officer passing the order and his seal is the sine qua non of an orderbutnoticeofdemandandIT 30 Form are to be backed up byproper signed order. In the closing sentence of the assessment order it is specifically given as assessed as per IT 30 issue demand notice and challan . The Assessing Officer is also required to order for issuing copy of this order as thereafter signature with office seal are to be placed/affixed. The sequence of the events is that firstly an order is passed which is followed by issuing a notice of demand. IT 30 Form and copy of the assessment order. In this very case beforeus the essential pre-condition is missing as order has not been signed which an officer is required prior to issuance of any notice of demand. The assessment order becomes valid only when the order has been signed. The Revenue failed to produce a signed assessment order. Legalizing the unsigned order is fraught with disastrous consequences not merely in judicial process but also in administrative matters. The Indian authority as cited by the learned AR is on all fours in this very case before us. In the instant case before us the notice of demand and IT 30 Form have not succeeded the order as the order remained unsigned, such unsigned order is invalid in the eye of law, thus has no existence. Secondly no liability or right could be created as a result of this order. So the assessment order is null and void and the appeal of the assessee on this issue succeeds. Secondly, the other argument of the learned AR that the assessment order has been hit by limitation due to non-service of order within the stipulated time under section 64 is also valid as this Tribunal vide its order in I.T.A. No.6288/LB of 1999, dated 19-9-2000 has already upheld the following findings given at the first appeal stage on anexactly identical issue:--
That under the law the making of an order under statutory provisions means that the order must be communicated to the party effected by such an order. Unless the order is communi-cated to the affected party on or before the date prescribed under section 64, the order shall be invalid and ineffective. In this regard reliance has been placed by the appellant on reported case as (1994) 93 ITR 215 and AIR 1996 SC 1313.
Keeping in view the discussion supra we do not find any hesitation in declaring the assessment order as null and void by agreeing with both the contentions of the appellant/assessee, so wedo not find any legal justification for dilating on the issues emanating from this illegal order. As a result the appeal filed on behalf of the appellant-assessee succeeds whereas the appeal filed by the department being legally not maintainable is dismissed.
C.M.A./346/Tax (Trib.)Appeal accepted.