I.T.As. Nos. 427(IB) of 2005, 721(IB), 722(IB), 723(IB), 724(IB) and 725(IB) of 2004, decided on 9th April, 2005. VS I.T.As. Nos. 427(IB) of 2005, 721(IB), 722(IB), 723(IB), 724(IB) and 725(IB) of 2004, decided on 9th April, 2005., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1534 (2005)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 5(1)(c), (2)(3),(4) & 66A---Jurisdiction of Income Tax Authorities---Transfer of file from Sheikhupura to Mianwali without getting NOC from Central Board of Revenue and cancellation of assessment by the Inspecting Additional Commissioner of Sargodha---Validity---Department could not prove as to whether the assessee resided in that area of jurisdiction or had any business therein and as to how the file was transferred without getting NOC from Central Board of Revenue, the competent authority for transfer of file from Sheikhupura to Mianwali---Later confirmation of transfer of jurisdiction by the Central Board of Revenue did not remove the legal flaw in jurisdiction---Legal procedure for assigning jurisdiction in every case had been prescribed and the same could be shifted by the Central Board of Revenue for the reasons assigned therein---Two Assessing Officers of two different Regions could not interchange jurisdiction of the cases by themselves---Central Board of Revenue had approved transfer of the case on 26-4-2003 and any action taken by Assessing Officer of Mianwali or .Inspecting Additional Commissioner of Sargodha prior to the same was violative of the legal provisions---Not only that the exercise of territorial jurisdiction by the Inspecting Additional Commissioner Sargodha was not legally correct but his holding the earlier order as `erroneous' was also not based upon the settled definition of the said word---Said term had never been allowed to be applied on the basis of poor quality of order or the reasons of possibilities of better order after cancellation---Since order had been found to be as without jurisdiction, no further discussion or dilation was required---Both the orders of Assessing Officer and Inspecting Additional Commissioner were cancelled by the Appellate Tribunal being without jurisdiction---Orders having been passed prior to the assignment of jurisdiction by the Central Board of Revenue were also held to be illegal and were annulled.

1996 SCMR 856; 2003 PTD (Trib.) 2176; 2004 PTD 330; 2005 PTD (Trib.) 344; 2001 PTD 3810; 1996 PTD (Trib.) 750; PLD 1988 Kar. 587 = 1988 PTD 723; 2002 PTD (Trib.) 99; (1977) 109 ITR 229; 1000 PCTLR 1191 and 1987 PTD (Trib.) 424 ref.

Javed Iqbal and Sirajuddin Khalid for Appellant.

Muhammad Ali Shah, D.R. for Respondent.

Date of hearing: 9th April, 2005.

ORDER

MUHAMMAD FAROOQ SAEED, (CHAIRPERSON).---In all these six appeals the Petitioner is the assessee. One appeal for assessment year 1993-94, was filed on 2-4-2005, against the order, dated 1-6-2002, passed under section 66A of the I.T. Ordinance, 1979, by the IAC Range-II, Sargodha. Another appeal for 1993-94 is against the order, dated 17-5-2004, of the CIT, Appeal Zone, Faisalabad, at Sargodha, against the order, dated 30-6-2003, of the SOIT Circle-09, Mianwali giving effect to the order, dated 1-6-2002, passed by the IAC Range-II, Sargodha and for 1995-96 to 1998-99, where assessments were completed on 12-6-2002, by the SOIT, Circle-09, Mianwali to give effect to the set aside orders, dated 31-1-2001 by the AAC, Appeals Range Lahore. The CIT, again set aside the assessments to be completed after proper opportunity to the assessee of being heard.

Assessment year 1993-94

2. The brief facts of the case are that the assessee-firm was constituted on 1-7-1982 to execute the contracts with Government and semi-government departments. The business place at that time was-situated at Ballo-Khel, Mianwali. The assessments till assessment year 1994-95 were completed at Mianwali before 28-10-1997. In the year, 1993, the assessee obtained contracts for collecting property transfer fee at Sheikhupura, Toba Tek Singh, Okara and Rahim Yar Khan. Accordingly the Head office was shifted to Sheikhupura and the officer at Mianwali was requested to transfer the record to Sheikhu pura. This was on the demand of ITO Sheikhupura vide his Letter No.457/15, dated 24-5-1997 and request of the assessee. The Income-tax Officer, Mianwali, through his Letter No.292, dated 28-10-1997, on change of Head Office to 8-Shami Road, Sheikhupura, transferred to assessment record to ITO Circle-15, Sheikhupura, through proper channel (i.e. IAC Range-II, Sargodha, CIT Sargodha Zone, RCIT Multan, RCIT Lahore). At the time of transfer of record on 28-10-1997, the pending assessment were for 1993-94 (set aside) 1995-96 and 1996-97, as it is evident from the transfer letter, dated 28-10-1997, of the ITO Mianwali.

3. The ITO at Sheikhupura took up the case on 15-6-1998 through notice under section 62 for 1993-94 (set aside) to give effect to the order of the AAC Sargodha. The AAC, while setting aside the case had given specific directions, as reproduced at pages-1 and 2 of the order of the ACIT, dated 30-6-1998. A part of the said directions reads as under:--

"In the interest of fairness and in order to arrive at rational figure of income and in the absence of such basis having been placed on record/relied upon by the Assessing Officer at the assessment stage; it is considered appropriate to set aside the order with the directions to be made de novo in accordance with the law and facts of the case and in the manner prescribed by the higher authorities in such cases, more appropriately in consultation with the Commissioner/Additional Commissioner of Income Tax".

4. The ITO Sheikhupura completed the assessment of 1993-94 (set aside) under sections 62/132 on 30-6-1998 at an income of Rs.14,04,066. The office note on the order, dated 30-6-1998, reads as under:

"(i) Draft assessment order has been finalized with the prior approval of worthy IAC Sheikhupura Range Sheikhupura vide , his Office Letter No.610, dated 30-6-1998.

(ii) No detailed probe as to capital investment by members of AOP in the business could be carried out due to paucity of time as the case record of the assessee had been received in this office on its inter-zonal transfer in the Month of January, 1998. It had immediately been transferred to the learned AAC Gulberg Lahore on the requisition of the record in connection with the appeals of the assessee for the assessment year 1990-91, 1991-92 and 1994-95. The record of the assessee on specific request has been received in this office early in June, 1998 and proceedings were therefore, taken up for finalization of the assessment."

5. Subsequently the record was again transferred to Mianwali by the ITO Sheikhupura, statedly behind the backs of the assessee vide his Letter No.799, dated 2-11-2000. The assessee came to know about the transfer of record to Mianwali on 5-1-2001, when AR made request for inspection of the record at Sheikhupura. Thereafter requests were made by the assessee on 6-1-2001, April 2001 and '9-4-2001 to different authorities for transfer of record to Sheikhupura and also when a notice under sections 62/13(1)(aa), dated 6-6-2003, was received from the officer of Mianwali, intimating that the assessment completed under sections 62/132 (at Sheikhupura) was cancelled under section 66A by the IAC Sargodha. The assessee while replying the notice under section 62, on 21-6-2003, protested against the transfer of record from Sheikhupura to Mianwali and also showed ignorance about the proceedings and the passing of the order by the IAC on 1-6-2002. Separate request, dated 21-6-2003, was made to ITO Mianwali for supply of copy of order under section 66A passed by the IAC. The assessee made another application on 4-12-2004 to the concerned IAC for supply of copy of order passed under section 66A after depositing on the desire of the office staff copying fee of Rs.100 on 2-12-2004. The copy of the order was ultimately made available to the assessee on 28-3-2005. Thereafter an appeal was filed with the Tribunal on 2-4-2005 from Lahore through TCS.

6. The perusal of the impugned order passed under section 66A reveals that the Show-Cause Notice No.1119, dated 12-4-2002, for appearance on 22-4-2002 was served through courier service (TCS) which remained uncomplied with. Hence ex parte order was passed under section 66A on 1-6-2002, cancelling the assessment order passed under sections 62/132 assessing income of Rs.14,04,066, dated 30-6-1996 (not 30-6-1998). The order supplied on 28-3-2005 contains a crossing on it with the remarks "duplicate copy-original sent by post vide Letter No.1328, on 1-6-2002". Against the order of IAC passed under section 66A, for assessment year 1993-94, the assessee has raised following Grounds of Appeal:--

(1) That this appeal is within time as the same is being filed on obtaining copy on 28-3-2005, as the original allegedly sent on 1-6-2002, was not served upon the assessee.

(2) That even otherwise the order passed under section 66A is void ab initio, being without lawful jurisdiction, the limitation provisions to file appeal would not apply and hence the appeal is entertainable.

(3) That the entire proceedings under section 66A, by the IAC, Range-II, Sargodha, initiated on 12-4-2002, through show-cause notice and culminated into final order, are without jurisdiction and lawful authority as:

(i) the learned IAC initiating the proceedings under section 66A, had no jurisdiction as on 12-4-2002, over the case of the assessee.

(ii) the Deputy Commissioner passing the order on 30-6-1998, was never subordinate to him.

(iii) the show-cause notice, dated 12-4-2002, was not served upon the assessee.

(iv) the final order is passed without opportunity of hearing.

(4) That since the IAC, under section 66A, has cancelled the order, dated 30-6-1996, the assessment order passed under sections 62/132, dated 30-6-1998, is still in the field.

(5) That even otherwise, the order, dated 30-6-1998, was not an order of the DCIT but was a compliance to the direction of the learned AAC.

(6) That the order, dated 30-6-1998, was passed or supposed to be passed in consult Lion with the CIT/IAC, as directed by the AAC, hence the action under section 66A by the IAC is beyond his jurisdiction.

(7) That the order, dated 30-6-1998, has been cancelled only (i) on poor quality of assessment order and (ii) on change of opinion from the DCIT which is not legal for action under section 66A.

(8) That the assessee had sufficient funds/sources to explain the advance payments of Rs.1,14,89,610 as pointed out by the IAC.

7. An affidavit deposing the facts about service of order under section 66A, dated 1-6-2002, has also been attached with the appeal paper.

8. In support of his appeal, the counsel of the assessee submitted that the alleged services of show-cause notice under section 66A, dated 12-4-2002, and of final order passed under section 66A, dated 1-6-2002, are beyond the provisions of section 154(1) of the I.T. Ordinance, 1979, read with section 27 of the General Clauses Act and the appeal filed on 2-4-2005, by obtaining certified copy on 28-3-2005, is within limitation. These facts have been confirmed through an affidavit enclosed with the appeal. It was also submitted that for the purpose of limitation under section 134(3), the knowledge alone of an order having been passed would not constitute as "impugned order is communicated". The required merit of law is the physical communication of order. He submitted that a valid institution of an appeal would be only where there is compliance of section 134(5) read with, rules. 7, 10 and 11 of the ITAT Rules, 1981. The compliance of law is not possible unless a certified copy of the impugned order is made available which in this case was done on 28-3-2005. Further contended that since the order passed under section 66A is void ab initio, the limitation provisions to file appeal would not apply. Reliance is placed on cases reported as 1996 SCMR 856 and 2003 PTD (Trib.) 2176. He particularly invited our attention to 'he relevant observations, which read as under:-

1996 SCMR 856

9. Bar of limitation may be ignored in respect of void orders but not in respect of erroneous orders. The question of limitation may not arise in respect of judgments which are nullities in law, void or ultra vires. As a matter of fact if an order is without jurisdiction and void it need not be formally set aside.

2003 PTD (Trib.) 2176

10. The superior Courts have even gone to hold that no limitation runs against an illegal order and this again is to strengthen the right of appeal and decision of the case on merits.

11. The counsel also contested the validity of initiation of proceedings on 12-4-2002, and the final order passed under section 66A on 1-6-2002, being without lawful jurisdiction as the order, dated 30-6-1998, sought to be revised under section 66A, was passed with the approval of IAC Sheikhupura Range through his Letter No.610, dated 30-6-1998 and applied consultation with the CIT as directed by AAC setting aside the order. Reliance was placed on the cases reported as 2004 PTD 330 (H.C. Kar)/345, 2005 PTD (Trib.) 344, 2001 PTD 3810, 1996 PTD (Trib.) 750 and PLD 1988 Kar. 587 = 1988 PTD 723. The counsel vehemently submitted that the transfer of record by ITO Sheikhupura to ITO Mianwali was beyond his power as the matter was between two Regions. The objection letters to the jurisdiction of the ITO Mianwali were obstinately ignored. Legally the IAC at Sargodha and ITO at Mianwali had no jurisdiction till the jurisdiction was assigned to them by the C.B.R. through its letter C. No.4(594) TO-1/2002, dated 18-4-2003. The ITO Mianwali, through its Letter No.1060, dated 28-4-2003, addressed to the assessee has admitted that C.B.R. assigned the jurisdiction in the case of the assessee on 18-4-2003. Therefore, the order passed by the IAC Sargodha, under section 66A on 1-6-2002, was without lawful jurisdiction.

12. He further contended that the order sought to be revised was in fact passed by the ITO under sections 62/132 in compliance to directions of the AAC and hence the same was beyond the provisions of section 66A. Reliance was placed on cases reported as 2002 PTD (Trib.) 99, (1977) 109 ITR 229, 2005 PTD (Trib.) 344 (paragraph 13). In the last it was submitted that the partners had sufficient funds to explain the advance payments of Rs.1,14,89,6I0 which are made basis for passing order under section 66A. Summing up his arguments it is submitted that the order passed under section 66A by the IAC Sargodha Range is ab intio void and of no legal effect.

13. The learned D.R. supported that action of the IAC but has not said anything on the fact of filing the appeal on 2-4-2005. He said that the early shifting of files and subsequent return both were legal and there is no legal flaw in this transfer. Even if the file has been shifted from one Region to another since there is no legal flaw in jurisdiction the transfer of file even without informing C.B.R. is of no prejudice to the assessee. Furthermore, the IAC has cancelled the assessment after due confrontation. Regarding sources he remarked that the same should have been explained before the IAC and not before the Tribunal. He added that even if the appeal is declared as within the time the same still merits rejection.

Assessment years 1993-94 and 1995-96 to 1998-99

14. The appeal for 1993-94 pertains to giving effect to the IAC order, dated 1-6-2002, passed under section 66A and appeals for 1995-96 to 1998-99 challenge the orders, dated 12-6-2002, giving effect to set aside order, dated 31-1-2001, by the AAC Lahore.

The assessee has voluntarily filed revised concise and specific . grounds of appeal for all the above years, relying on Lahore High Court case reported as 2000 PCTLR 1191. The grounds of appeal are identical and read as under:

(1) That the order passed by the Taxation Officer Mianwali, on 12-6-2002, is without lawful jurisdiction because the jurisdiction was never transferred to him under section 5 of the Income Tax Ordinance, 1979, till 26-4-2003, therefore the learned GIT(A) was not justified to set aside the order instead of cancelling.

(2) That source of jurisdiction of Income Tax Officer was challenged by the assessee under section 5 of the Income Tax Ordinance, 1979, on different occasions, the Income Tax Officer Mianwali was bound to refer the matter to the Commissioner or the Regional Commissioner or C.B.R. as the case might be, for determining the question of jurisdiction or firstly should have decided the objection.

(3) That the assessee has no business premises at Mianwali. The principal place of business of the firm is at Ittefaq Plaza Basement Chowk Yadgar, Sheikhupura, hence jurisdiction lies with officer at Sheikhupura.

(4) That the Income Tax Officer Sheikhupura has no powers to transfer the assessment record to Mianwali at his own, as the matter was between two Regions.

(5) That the learned Commissioner of Income Tax, Additional Appeal Zone Faisalabad at Sargodha has revealed the drawbacks faced by the Department during the appellate proceedings in the case but has not opined on issue of jurisdiction.

(6) That the income assessed for the year by the Assessing Officer is bald estimate and in a summary manner, hence not assessable.

15. With regard to assessment year 1993-94, where the assessment was completed in pursuance to the IAC's order passed under section 66A on 1-6-.2002, it is contended that since the order of the IAC is ab initio void, the superstructure raised thereon by the Assessing Officer by way of his order passed under sections 63/66A on 30-6-2003, is also illegal. and hence must fall to ground. In respect of assessments for the years, 1995-96 to 1998-99, completed on 12-6-2002 by the SOIT Circle-09, Mianwali, it is submitted that since the jurisdiction by the C.B.R. was assigned to him on 18/26-4-2003, any action taken by him prior to the said date is without lawful jurisdiction and is in violation of the provisions of sections 5(1)(c), (2)(3) and (4) of the repealed Ordinance. The act of the ITO Sheikhupura transferring record, on 2-11-2000, without the indulgence of C.B.R., was beyond and in excess of his jurisdiction. It is further contended, that even otherwise the incomes assessed in a summary manner, at Rs.5,75,000, Rs.6,00,000 Rs.6,25,000 and 6,50,000; respectively for 1995-96, 1996-97, 1997-98 and 1998-99 are violative of the provisions of sections 22/23. The officer has not evolved any basis for the said incomes. It is simply a repetition of bald incomes earlier assessed under section 62 on 20-6-2000 which assessments were set aside by the AAC Appeal Range Lahore vide his order No.11409-12, dated 31-1-2001, as a set aside order, with directions to pass fresh order with opportunity of being heard, loses its existence (1987 PTD (Trib.) 424).

16. The Iearned DR, on his turn, supported the orders of the Assessing Officer making assessments at Mianwali. His arguments remained that the assessments being by the Assessing Officer having jurisdiction at Mianwali was correct. He however, could not prove as to whether the assessee resided in this area of jurisdiction or had any business therein. Further that how the file was transferred without getting NOC from C.B.R. the competent authority for this case for transfer of the file from Sheikhupura to Mianwali. His emphasis was that later C.B.R. confirmed this transfer of jurisdiction hence there is no legal flaw in jurisdiction. We cannot agree with the learned D.R. There is a legal procedure for assigning jurisdiction of every case. The same can be shifted by the C.B.R. for the reasons assigned therein. However, two Assessing Officers of two different regions cannot interchange jurisdiction of the cases by themselves. In this case C.B.R. has approved transfer of the case on 26-4-2003. Any action done by Assessing Officer Mianwali or IAC Sargodha prior to the same is violative of the legal provisions. Not only that the exercise of territorial jurisdiction by the IAC Sargodha is not legally correct but his holding the earlier order as `erroneous' is also not based upon the settled definition of the said word.

This term has never been allowed to be applied on the basis of poor quality of order or the reasons of possibilities of better order after cancellation. In any case since the order has been held to be as without jurisdiction by us no further discussion or dilation shall be required. The order for 1993-94 by the IAC and subsequent order by the Assessing Officer both are hereby cancelled being without jurisdiction. Further the other orders having been passed prior to the assignment of jurisdiction by the C.B.R. are also held to be as illegal and are annulled.

17. This obviously decides all the appeals filed by the assesee.

C.M.A./36/Tax (Trib.)Appeal allowed.