I.T.As. Nos. 506/LB and 1233/LB of 2005, decided on 7th September, 2005. VS I.T.As. Nos. 506/LB and 1233/LB of 2005, decided on 7th September, 2005., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1515 (2005)

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

----S.129---Appeal to Appellate Additional Commissioner---Setting aside of assessment instead of annulment---Assessee contended that First Appellate Authority was not justified to remand the case for de novo assessment after having observed that the assessee had some force in its arguments and assessment should have been annulled rather than providing the department another opportunity to fill in the lacuna---Validity---First Appellate Authority decided one ground in favour of the Revenue whereby he upheld the re-opening of the case by the Assessing Authority, however, rest of the grounds were decided in favour of the assessee but still proceeded to set aside the case for de novo consideration---While deciding one ground First Appellate Authority did not elaborate on the issue and decided the same with the observation that on the basis of information received from Sales Tax Department regarding higher quantum of purchases than those declared by the assessee, the proceedings were justified---Finding given while discussing other grounds with the observation that "the grounds had some force" were contradictory to the findings given at the time of disposing of said one ground---First Appellate Authority travelled beyond confines of law while setting aside the case for the reason that while giving findings on other grounds in favour of the assessee---First Appellate Authority almost accepted the contentions put forward by the assessee in toto and there was no justification for remand of the case.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(1), 120, 2(13), 2(65)---Amendment of assessments---Re opening of assessment by Deputy Commissioner of Income Tax---Assessee contended that since the assessment had been amended by the Deputy Commissioner of Income Tax and neither the Commissioner nor the Taxation Officer as envisaged under the law, the same had been passed without jurisdiction and liable to be annulled---Validity---Amended order under 5.122 of the Income Tax Ordinance, 2001 had been passed by the Deputy Commissioner of Income Tax, which was an authority who did not figure anywhere under the Income Tax Ordinance, 2001---Amended order should have been annulled rather than sending back to the Assessing Officer for de novo proceedings---Appellate Tribunal vacated the order passed by the First Appellate Authority and annulled the amended assessment made by the Deputy Commissioner of Income Tax being without jurisdiction.

199 PTD (Trio.) 4026 ref.

Tariq Ahsan, I.T.P. for Appellant.

Rana Muhammad Luqman, D.R. for Respondent.

Date of hearing: 7th September, 2005.

ORDER

SYED NADEEM SAQLAIN, (JUDICIAL MEMBER).---Titled cross-appeals on behalf of the assessee/appellant as well as Department/ respondent have been directed against the impugned order, dated 3-1-2005 passed by the learned CIT(A), Gujranwala Zone, Gujranwala. Both the parties have assailed the impugned order on the following grounds:-- .

Grounds of appeal by the assessee

"(i) The order, dated 3-1-2005 passed by the CIT(A), Gujranwala is injudicious and arbitrary.

(ii) The learned CIT(A), Gujranwala was not justified to remand the assessment for de novo action instead of annulling it when he had accepted the grounds of appeal (3 to 17) in toto by holding that the DCIT was wrong to assess the appellant as commercial importer.

(iii) The CIT(A), Gujranwala was not. justified to remand the assessment for de novo action when he did not dilate upon the ground of appeal at S. No.1 and simply made a summary observation.

(iv) The CIT(A) was not justified to remand the assessment instead of annulling it when the basis of proceedings under section 122 amounted to "change of opinion".

(v) The CIT(A), Gujranwala was not justified to hold that information received from the Sales Tax Department indicated higher quantum of sales than those declared by the appellant whereas the appellant had duly explained and reconciled the position and it was accepted by the DCIT-26, Gujranwala.

(vi) That the FTO vide its judgment, dated 17-7-2004 has clearly observed that frequent changes in the jurisdiction, the conduct of enquiry by deputing two officers indicates departure from established practice and procedure without any bona fide and valid reason falling in the ambit of maladministration within the meaning of the provisions of section 2(3)(i)(a) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000 and directed to issue the refund.

(vii) That the appellant seeks permission to add, alter any ground of appeal if required."

Grounds of appeal by the Revenge

"(i) That. the order of the learned Commissioner of Income Tax and Wealth Tax Appeals, Zone, Gujranwala is against the facts and circumstances of the case.

(ii) That the assessment was amended under section 122(1) of the Income Tax Ordinance, 2001 after appreciating the facts and confronting the assessee.

(iii) That the learned Commissioner of Income Tax and Wealth Tax, Appeals Zone, Gujranwala was not justified to set aside the case after confirming the initiation and finalization of proceedings under section 122 of the Income Tax Ordinance, 2001 confirmed at page of 4 of the referred order while adjudicating ground No.1 of the assessee."

Since the facts and issues involved in both the supra appeals are common, we intend to dispose of the same by this consolidated order as under:--

2. Briefly stated the facts of the case are that the assessee is an AOP derivig income from metal work with nomenclature of Messrs Popular Metal International, Gujranwala. Return for the assessment year 2002-2003 was filed declaring net income at Rs.25,98,821 with tax payable at Rs.7,67,239. The said return was filed in the status of AOP and the same was not accompanied with computation chart, wealth statement of the members of the AOP, accounts of members, proof of payment of tax etc. as envisaged in the Self-Assessment Scheme for the relevant assessment year. Various notices under section 61 of the repealed Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance) were issued time and again, in response thereto the assessee submitted various documents. However, on 15-9-2003, the learned A.R. of the assessee for the first time contested his case that same qualified under SAS. Resultantly, the case of the assessee was assessed under section 59(A) of the repealed Ordinance on 16-10-2003. It is pertinent to mention here that the Assessing Authority proceeded to amend the assessment already framed on the basis of information received from Sales Tax Authorities wherein it was observed that the figures of purchases assessed by the Sales Tax Department for the year under consideration were different from the figures declared in the income tax proceedings. Accordingly an amended assessment order, dated 31-5-2004 was passed under section 122(1) of the Income Tax Ordinance, 2001. Feeling aggrieved with the treatment accorded to the assessee, an appeal was preferred before the learned CIT(A) who vide his order, dated 3-1-2005 remanded the case to the Assessing Officer for de novo assessment. Hence the assessee as well as the Revenue are in further appeal before the Tribunal.

3.Both the parties have been heard and relevant orders perused. The learned A.K. has vehemently argued the case and contended that the learned CIT(A) was not justified to remand the case for de novo assessment after having observed that the assessee has some force in its arguments while discussing Grounds No.3 to 17. It was asserted by thelearned A.R. that after coming to such a categorical conclusion, the assessment framed by the Assessing Officer should have been annulled . rather than providing the Department another opportunity to fill in the lacuna, if there was any. It was further pleaded by the learned A.R. that it was a mere change of opinion since the assessee has duly explained and reconciled the position and the same was accepted by the Assessing Officer while completing original assessment.

4.On facts, the learned A.R. of the assessee contended that the assessee manufactures aluminum ingots which are supplied to various limited concern of Gujrat and Gujranwala whose full particulars were furnished but the Taxation Officer impatiently and haphazardly finalized the assessment in a single hearing without any adequate opportunity by brushing aside all norms of justice and fairness. It was further stated that appellant is registered as "Importer-cum-Manufacturer" with the Sales Tax Department and filing his monthly sales tax returns regularly. The learned A.R. stated at the bar that the learned CIT(A), Gujranwala after verifying the above contentions through spot enquiry by his field staff, dated 13-11-2003 issued Exemption Certificate under section 148 of the Income Tax Ordinance, 1979 which also establishes that the appellant is "Importer-cum-Manufacturer".

5.However, main thrust of the arguments advanced by the learned A.R. was that since assessment was amended under section 122(1) of the Income Tax Ordinance, 2001 by the DCIT, Circle-D, Gujranwala there is no such Assessing Authority namely DCIT under the new Income Tax Ordinance, 2001. He took us through section 122 of the Income Tax Ordinance, 2001 and drew our attention to the wordings provided in the said section that it is the Commissioner who has been authorized to amend an order under the aforementioned section. He further pointed out that the Commissioner has been defined in subsection (13) of section 2 of the Income Tax Ordinance, 2001 means a person appointed as a Commissioner of Income Tax under section 120 and included the Taxation Officer vested with any other powers functioning as Commissioner. He elaborated that under the new Ordinance the powers to frame/amend assessment have been conferred on the Commissioner or any other officer who is vested with all such powers has been designated as Taxation Officer. He summed up his arguments by submitting that since in the present case the assessment has been amended by the .DCIT and neither the Commissioner nor the Taxation Officer as envisaged under the law, the same has been passed without jurisdiction and liable to be annulled. In support of his contention he also relied upon the following parallel case reported as 1999 PTD (Trib.) 4026 whereby the ITAT held:--

"The learned A.R. of the assessee further states that the Assistant Commissioner of Wealth Tax is also not listed as a wealth tax authority in section 8 of the Wealth Tax Act, 1963. Therefore, the Assistant Commissioner of Wealth Tax who made these assessments had acted without jurisdiction and his orders are consequently illegal and void. The learned D.R. conceded that there is a lacuna in the law. After considering the arguments of the learned A.R. we find ourselves on agreement with him that the orders passed are illegal and without jurisdiction. Therefore, the order of the learned AAC is vacated and the orders of the Assistant Commissioner of Wealth Tax are annulled."

6. The learned D.R. opposed the arguments advanced by the learned A.R. with full force. He submitted that. subsection (65) of section 2 of the Income Tax Ordinance, 2001 provides that Taxation Officer means any Additional Commissioner of Income Tax, Deputy Commissioner of Income Tax, Assistant Commissioner of Income Tax, Income Tax Officer, Special Officer or any other officer however designated, appointed by the Central Board of Revenue for the purposes of this Ordinance, therefore, the learned DCIT had the authority to invoke section 122 of the Income Tax ordinance, 2001. The learned D.R. further argued that the assessment was rightly assessed by the Assessing Authority and the learned First Appellate Authority erred in law while setting aside the case after re-opening of the case having been upheld by him.

7. We have heard the learned counsel for both the parties and have gone through the relevant orders passed by the learned lower officers as well as case law cited at the bar. After giving due consideration to the argument's advanced by the respective parties, we are of the considered view that arguments urged by the learned A.R. carry weight. It is pertinent to mention here that almost 17 grounds of appeal were agitated by the learned. A.R. before the learned CIT(A). The learned CIT(A) decided the Ground No.1 in favour of the Revenue whereby he upheld the reopening of the case by the Assessing Authority, however, rest of the grounds ranging from 3 to 17 were decided in favour of the assessee but still proceeded to set aside the case for de novo consideration. It is worth noting that while deciding Ground No. l , the learned CIT(A) did not elaborate on the issue and decided the same with the observation that on the basis of information received from Sales Tax Department regarding higher quantum of purchases than those declared by the assessee, therefore, the proceedings mentioned above were justified. We are constrained to observe that the findings given while discussing Ground Nos. 3 to 17 with the observation that "the above grounds have some force", are contradictory to the findings given at the time of disposing of Ground No. 1.

7-A. Now coming to the issue whether DCIT is an appropriate competent authority to initiate any proceedings to reframe the assessment or amend the same under the Income Tax Ordinance, 2001, we will have to go through the relevant law. At this juncture it .is pertinent to reproduce subsection (13) of section 2 which reads as under:--

Section 2(13). " `Commissioner' means a person appointed as a Commissioner of Income Tax under section 208, and includes a Taxation Officer vested with all or any of the powers, and functions of the Commissioner."

Section 120. Assessments:--(1) Where a taxpayer has furnished a complete return of income (other than a revised return under subsection (6) of section 114) for tax year ending on or after the 1st day of July, 2002;

(a) the Commissioner shall be taken to have made an assessment of taxable income for that tax year; and

(b) the return shall be taken for all purposes of this Ordinance to be an assessment order issued to the taxpayer by the Commissioner on the day the return was furnished."

Section 122. Amendment of assessment:--(1) Subject to this section, the Commissioner may amend an assessment order as issued under section 120 or issued under section 121 (or issued under sections 59, 59-A, 62, 63 and 65 of the repealed Ordinance), by making such alterations or additions as the Commissioner considers necessary.

(2) An assessment order shall only be amended under subsection (1) within five years after the Commissioner has issued ..."

(3) Where a taxpayer furnishes a revised return under subsection (6) of section 114---

(a) the Commissioner shall be treated as having made an amended assessment......return. "

(b) the taxpayer's revised return shall be taken for all the purposes of the Ordinance to be an amended assessment order issued to the taxpayer by the Commissioner on ..was furnished."

(4) Where an assessment order ..has been amended ..the Commissioner may further amendwithin the later of---

(a) five years after the Commissioner has issued...."

(b) One year after the Commissioner .."

(4A) .."

(5) An assessment order ..shall only be amended under subsection (1) and an amended assessment for that year shall only be amended under section (4) where, ..the Commissioner is satisfied that"

(5A)Subject to subsection (9) the Commissioner may amend, or further amend, an assessment order ..prejudicial to the interest of Revenue."

(5B) " ......................................."

(6) As soon as possible after making an amended assessment under subsection (1), subsection (4) or subsection (5-A), the Commissioner shall issue amended assessment order to the taxpayer stating:

(a)

(b)

(c)

(d)

8. Bare perusal of the aforementioned provisions of law of the new Income Tax Ordinance, 2001 clearly show that for all intents and purposes, to initiate proceedings under different sections either the Commissioner himself has been vested with these powers or in case the authority of framing assessment delegated to the person who will be called Taxation Officer. We are mindful of the fact that in sub-section (65) of section 2 the Taxation Officer means DCIT but we are of the considered view that it is the Taxation Officer who could exercise his powers under the new Ordinance, the Taxation Officer could be the Deputy Commissioner of Income Tax, Assistant Commissioner of Income Tax or Income Tax Officer etc. Even otherwise we think that these designations have been used in the new Ordinance for the reason that sometimes the proceedings may be initiated under the repealed Income Tax Ordinance, 1979 where the nomenclature of DCIT or Additional Commissioner of Income Tax is to be used under the old law.

9. In view of the facts and the law discussed above, we have no hesitation in holding that the First Appellate Authority travelled beyond confines of law while setting aside of the case for the reasons that firstly while giving findings on Grounds Nos.3 to 17 in favour of the assessee. He almost accepted the contentions put forward by the assessee in toto, hence, there was no justification for remanding. Secondly, the amended order under section 122 of the Income Tax Ordinance, 2001 has been passed by the DCIT, which is an authority who does not figure anywhere under the new Income Tax Ordinance, 2001. In such-like circumstances, the amended order should have been annulled rather than sending back to the Assessing Officer for de novo proceedings. We, therefore, vacate the impugned order passed by the learned CIT(A) and annul the amended assessment made by the DCIT being without jurisdiction.

C.M.A./38/Tax (Trib.)Order accordingly.