I.T.As. Nos.1185/LB and 1405/LB of 2000, decided on 20th May, 2005. VS I.T.As. Nos.1185/LB and 1405/LB of 2000, decided on 20th May, 2005.
2006 P T D (Trib.) 1844
[Income-tax Appellate Tribunal Pakistan]
Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member
I.T.As. Nos.1185/LB and 1405/LB of 2000, decided on 20/05/2005.
(a) Interpretation of statutes---
----What has been stated in the statute that has to be adhered to in the letter and spirit and no other meanings can be imported from the language of the statute.
(b) Income Tax Ordinance (XXXI of 1979)---
----S.12(18)---Income deemed to accrue or arise in Pakistan---No addition whatsoever in the garb of the words incorporated in S.12(18) of the Income Tax Ordinance, 1979; such as "loan" or "advance" or "gift", could be made unless those were so shown or claimed and had been so received.
(c) Income Tax Ordinance (XXXI of 1979)---
----Ss.65 & 13---Additional assessment---Approval and permission---Explanation---Legislature had used the word "approval" and not the "permission" in order to reopen the already completed assessment or the addition to be made under S.13 of the Income Tax Ordinance, 1979---Subsection (2) of S.65 of the Income Tax Ordinance, 1979, in unequivocal words proclaims that no proceedings under Subsection (1) of S.65 of the Income Tax Ordinance, 1979 shall be initiated unless definite information has come into the possession of the Deputy Commissioner and he has obtained the previous approval of the Inspecting Additional Commissioner in writing to do so---For reopening the case under S.65 of the Income Tax Ordinance, 1979 two conditions precedent were i.e. existence of "definite information" and obtaining of "previous approval" and not the 'permission'-For reopening already completed assessment, one of the mandatory condition was to obtain "previous approval" from the Inspecting Additional Commissioner in order to reopen the assessment---If this mandatory requirement of law was missing the proceedings initiated under S.65 of the Income Tax Ordinance, 1979 or the re-assessment made thereunder was bound to be annulled/cancelled.
(d) Income Tax Ordinance (XXXI of 1979)---
---Ss.13 & 65---Addition made under clauses (aa) to (e) of S.13 of the Income Tax Ordinance, 1979 was liable to be deleted because obtaining of approval from Inspecting Additional Commissioner was the statutory requirement of law which was to be adhered to in its letter and spirit.
(e) Income-tax---
---Assessment---Non-observation of statutory requirement(s) of law, by which jurisdiction to assess was assumed per se (by itself) renders the assessment, additional assessment, addition etc. to be nullity in law and as such was liable to be cancelled, annulled or deleted as the case may be.
(f) Income Tax Ordinance (XXXI of 1979)---
---Ss.13(1)(d) & 65---Unexplained investment etc., deemed to be income---Addition on the basis of "permission" and not by "approval"---Validity---No "approval" whatsoever from the Inspecting Additional Commissioner was obtained by the Assessing Officer prior to reopening of the already completed assessment and also for making additional under S.13(1)(d) of the Income Tax Ordinance, 1979---"Permission" was sought not only prior to issuance of notice under S.65 of the Income Tax Ordinance, 1979 and also while making addition under S.13(1)(d) of the Income Tax Ordinance, 1979---Reopening of assessment under S.65 of the Income Tax Ordinance, 1979 had been accorded and subsequently addition under S.13(1)(d) of the Income Tax Ordinance, 1979 had been made by seeking permission from the Inspecting Additional Commissioner which was a clear violation of the provision of law---Additional assessment had been made in absence of any lawful authority and as such annulled/cancelled by the Appellate Tribunal and assessment made under S.59(1) of the Income Tax Ordinance, 1979 stood restored.
2004 PTD (Trib.) 1052; 2004 PTD (Trib.) 618 and I.T.A. No.2695/LB of 2000 ref.
2000 PTD 3788 and 2003 PTD (Trib.) 1238 rel.
Dr. Shahid Siddique Bhatti, D.R. for Appellant.
Muhammad Shahid Abbas for Respondent.
ORDER
Vide this consolidated order we proceed to adjudge the cross appeals filed by the appellant and the department against the order dated 1-12-1999 passed by learned CIT (A), Zone-1, Lahore pertaining to assessment year 1995-96.
2. Facts leading for disposal of the appeals are that the original assessment in this case, by an individual deriving Income from manufacture and sale of sweetmeat, was completed at net income of Rs.55, 000 under section 59(1) of the repealed Income Tax Ordinance, 1979. Later on, a complaint was received alleging that the appellant had paid corporation fee of Rs. 72,000 for the purposes of registration of the property bearing No. P-2 Bhawana Bazar, Faisalabad. Confirmation of this information was also made from the office of Taxation Officer of Municipal Corporation Faisalabad and two show-cause notices were issued, firstly on 20-1-1996 and secondly on 7-5-1996, confronting as to why the case may not be reopened in terms of Section 65 of the Income Tax Ordinance, 1979 on account of understatement of value of the property in question. In response to such notices, it was stated that confirmation thereof by the department on the strength of a photocopy of challan of payment of fee was not possible and a request to call for the original receipt/record from the office of the Municipal Corporation was made. It was also added that photocopy was, in fact, tampered one. Moreover, it was requested to call for seller of the property or the contractor for the purposes of recording their statements so that the truth could come on the surface. Nevertheless, the assessing officer, having been dis-satisfied with this explanation, worked back value of the property on the basis of payment of corporation fee which evolved at Rs.18, 89,600 against registered value of Rs.2,07,000 Resultantly, the difference of two values, the declared and the evolved one, was considered by the assessing officer to be the deemed income from undisclosed sources. Accordingly, sum of Rs.16, 54,600 was added under Section 13(1)(d) of the income Tax Ordinance towards the business income determined at Rs.3, 65,000 which was worked out by estimating sales at Rs.16, 00,000 and applying GP rate of 25% thereon. This treatment was strongly objected, in first appeal, before the first appellate authority who after making a detailed discussion in his order dated 1-12-1999 had not only maintained, reopening of the assessment but also upheld rejection of declared version as well as determination of business income.
3. However, the addition made under section 13(1)(d) was deleted by holding that when payment of Rs.72, 000, to be the transfer of property fee having not been established, the value declared in the registered deed was to be adopted in view of the ratio decidendi in the reported cases on this subject. This has grieved both the parties and they have opted to come up in appeal before the Tribunal.
4. It was the appellant's contention that once the learned CIT (A) has arrived at a conclusion that the impugned action, concerning reopening of already completed assessment, was found to be suffered from legal infirmity, he should have cancelled the additional assessment instead of resorting to delete addition of Rs.16, 54,600 made under section 13(1)(d) of the Income Tax Ordinance.
5. Once again the learned AR of the assessees vehemently attacked reopening of the case under section 65 on legal as well as on factual premises. According to him, there was no valid material whatsoever with the assessing officer in order to reopen the assessment reason being the information on the strength of which the case had been reopened was already in possession of the department when the order under section 59(1) was passes. Thus, cancellation of such assessment in absence of availability of new facts was not at all warranted. Continuing further it was stated that prior to issuance of show cause, approval of IAC was mandatory and non-observance of legal requirements of law certainly renders the additional assessment to be nullity in' law. Par excellence it was pleaded that no "approval" whatsoever was obtained rather "permission" for reopening of the assessment as well as the addition to be made under section 13(1)(b) was sought. As per the leaned A.R these two words convey altogether different connotations. It was added that where in a case "permission" for reopening of the case or addition under section 13 of the Ordinance in consequence of that permission has been granted, such assessment or the addition so made had been declared to be not lawfully made.
Support in this regard was sought from the following cited Tribunal's decisions:---
(1) 2004 PTD (Trib) 1052
(2) 2004 PTD (Trib) 618
(3) I.T.A. No.2695/LB of 2000 dated 26-1-2004
On merits the learned A.R. submitted that assessing officer has failed to call for the original receipt of payment of corporation fee from the Taxation Officer of Municipal Corporation despite various requests made by the appellant coupled with 'it the seller's statements and that of the contractor were recorded after framing the additional assessment. According to him, such statements have no legal sanctity in the eye of law. This shows that the assessing officer was himself not sure about authenticity of the receipt. Further submitted that the assessing officer's contention does not carry any weight considering the fact that if appellant had paid less registration fee, as was alleged by the department, how could then the Registrar had endorsed that document because no registry can be endorsed where value of a property is understated. Thus, all these facts lead to the conclusion that the payment receipt of corporation fee is not a valid piece of information basing upon which the assessment could be reopened.
6. The learned DR on his turn strongly asserted that when the Taxation Officer of the Municipal Corporation had affirmed payment of higher Corporation fee by the assessee, the learned CIT (A) was patently incorrect in deleting the impugned addition. It was urged that once the leaned Appeal Commissioner has maintained reopening of the assessment, then there arose no occasion to delete the impugned addition. It was, thus, prayed for vacation of the appellate order and restoration of that of the assessing officer in its entirety.
7. We have given our anxious thought to the averments put forth by the rival parties in appeal and perused the orders passed by the two authorities below as well as the case law produced at the bar. However, we are taking up the point relating to prime importance and goes to the root of the assessment that is to say non-obtaining of "approval" from the IAC for reopening the assessment and the addition to be made under section 13 of the Ordinance. From the facts recorded supra the position emerges as to whether prior "permission" is required either for reopening the already completed assessment under Section 65 and the, addition to be made under section 13(1)(b) of the Ordinance. The answer to this question is very simple. That is "No". It is cardinal principle of law that what has been stated in the Statute that has to be adhered to in its letter and spirit and no other meanings can be imported from the language of the Statute. We remember that while interpreting the words used in Section 12(18), a similar situation had cropped up. Ultimately the Honourable High Court came at the assessee's rescue by observing that no addition whatsoever under the garb of the words incorporation in Section 12 (18) of the Ordinance; such as "loan" or "advance" or "gift", can be made unless those are so shown or claimed and have been so received.
8. Coming to section 65 of the Ordinance, it is vividly clear that the legislature has used the word "approval" and not the "permission" in order to reopen the already completed assessment or the addition to be made under section 13 of the ordinance. Subsection (2) of this section in unequivocal words proclaims that no proceedings under subsection (1) of section 65 shall be initiated unless definite information has come into the possession of the Deputy Conmmissioner and he has obtained the previous approval of the Inspecting Additional Commissioner (IAC) in writing to do so (underlined for emphasis) thus, for reopening the case under section 65 two conditions are precedent id est (1) existence of definite information and (2) obtaining of "previous approval" and not the permission. It can, therefore, be; safely said that for reopening the already completed assessment, one of the mandatory condition is to obtain "previous approval" from the IAC in order to reopen the assessment, if this mandatory requirement of law is missing the proceeding initiated under Section 65 or the re-assessment made thereunder is bound to be annulled/cancelled. Likewise the addition to be made under clauses (aa) to (e) of Section 13 is liable to be deleted because obtaining of approval from IAC is the statutory requirement of law which is to be adhered to in its letter and spirit. Resume of the discussion is that non-observance of statutory requirement(s) of law, by which jurisdiction to assess is assumed, per se (by itself) renders the assessment, additional assessment, addition etc. to be nullity in law and as such is liable to be cancelled, annulled or deleted as the case may be.
9. We of our own acquire strength from a judgment of the Lahore High Court in re: 2000 PTD 3788 wherein shades of the two words "approval" and the "permission" have been discussed with particular reference to the addition made under section 13 of the Ordinance. In similar chic, the Tribunal in its judgment reported as 2003 PTD (Trib.) 1238 dilated as under:---
"In view of the above facts and the case law cited at the bar we are constrained to observe that the words "approval" and "permission" have different meaning and their impact is also quite different. Admittedly the assessing officer sought permission and the learned IAC allowed permission. Hence addition made by the learned Assessing Officer after,, seeking permission from the I.A.C. is not tenable in eye of law. It is
pertinent to mention here that when law requires one thing is to be done in a particular manner, the same should be done in the same manner or not done at all. Since in this case permission was sought and permission was granted, we have no hesitation in observing that approval in this case has never been sought nor granted and the permission allowed for making addition is not tenable in the eye of law."
10. Reverting to the facts of the Instant case, no "approval" whatsoever from the IAC concerned was obtained by the assessing officer prior to reopening of the already completed assessment and also for making addition under section 13(1)(d) of the Income Tax Ordinance, 1979. Rather "permission" was sought not only prior to issuance of notice under section 65 and also while making addition under section 13(1)(d) of the income Tax Ordinance. We have verified this factum from the documents placed on record by the learned counsel for the assessee during course of hearing of the appeal. The letter issued by the assessing officer dated 25-9-1996 bearing number 117 addressing to the learned IAC states as under:-
SUBJECT:???? REQUEST FOR PERMISSION TO RE-OPEN THE CASE UNDER SECTION 65 OF THE INCCMF TAX ORDINANCE, 1979 IN THE CASE OF MR. MUHAMMAD TARIQ PROP: NIRALA SWEET HOUSE BHAWANA BAZAR, FAISLABAD---ASSTT: YEAR 1995-96---NTN. 0062186.
At the end of the letter it has been requested to accord permission for reopening the case under section 65 of the repealed Ordinance, 1979. The IAC on his turn by virtue of the letter number 496-dated 17-10-1996 repeated the subject in his letter as was written by the assessing officer, which has been reproduced ante. In that letter, the IAC in second para. of the letter accorded permission to reopen the case in terms of section 65 of the Income Tax Ordinance, 1979 for the assessment year 1995-96. Since, reopening of the assessment under section 65 has been accorded and subsequently the addition under section 13(1)(d) of the Income Tax Ordinance, 1979, amounting to Rs.16,54,600 has been made by seeking permission from the IAC which is a clear violation of the provision of law. Viewing the facts recorded supra and acquiring support from the principle laid down in the cited case law we have come to inescapable conclusion that the additional assessment, dated 24-4-1998, under section 65 of the Ordinance has been made in absence of any lawful authority and as. such is hereby annulled/ cancelled. This would result into vacation of the Appeal Commissioner's order and that of the assessment made under section 59(1) stands restored.
11. Hence, the assessee's appeal succeeds on legal plane while that of the department fails and is dismissed being bereft of any merits.
C.M.A./526/Tax(Trib.)???????????????????????????????????????????????????????????? Order accordingly.