M.As. Nos.14(PB) and 49(PB) of 2004, decided on 18th September, 2004. VS M.As. Nos.14(PB) and 49(PB) of 2004, decided on 18th September, 2004., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1918 (2004)

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

---S. 156(3) & Second Sched., Part-1, Cl. (118C)---Rectification of mistake---Limitation---Assessee contended that due to non-passing of order on miscellaneous application, dated 8-3-2001, automatic rectification under the deeming provision of S.156(3) of the Income. Tax Ordinance, 1979 had taken place as on 30-6-2002 and passing of order, dated 28-12-2002 on application, dated 8-3-2001 was barred by limitation of one year---Validity---Photocopies of alleged rectification application produced during the hearing showed the date of receipts by the department as 8-3-2001 whereas no such original application showing this date of receipt was available in the departmental record---Attested photocopies of the same application showed the date of receipt as 8-6-2002---Entries relevant to receipt of rectification application were made at proper place of the register, these entries were in sequence of time-frame---No entry of any application by the assessee dated 8-3-2001 was found in the register which was apportioned for receipt of income tax rectification application---Photocopies of alleged application produced on behalf of assessee showed the date of acknowledgement and registration of application as 8-3-2000, while photocopies of the same application duly attested by the Assessing Officer was showing the date of receipt by department as 8-6-2002 required further investigation and same alone was sufficient to reject the miscellaneous applications---Departmental record had been tampered with by subsequent placing of miscellaneous rectification application and efforts were made to convince the Appellate Tribunal on the issue which was an afterthought and intended to mislead---Application was rejected by the Appellate Tribunal in circumstances.

2001 PTD (Trib.) 2922 ref.

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

----S. 156(3) & Second Sched., Part-1, Cl. (118C)---Rectification of mistake---Exemption---Assessee contended that assessment year 1993-94 was the first year of production which was accepted as such while commercial production was started from 'assessment year 1994-95 but the Assessing Officer, due to mistaken fact, had considered it as 2nd year of exemption---Validity---Assessment order of assessment year 1993-94 was silent by not giving any comments on the nature of production as to whether commercial or trial---By drawing the distinction between trial and commercial production, the production of the assessment year 1993-94 was found commercial production---There remained no room for further discussion and was sufficient to negate and disprove the contention of assessee---Applications being devoid of merits were rejected by the Appellate Tribunal in circumstances.

2001 PTD (Trib.) 2922 and (2000) 82 Tax 481 ref.

1998 PTD 2722 rel.

Shaukat Amin Shah, F.C.A. and Mehmood Mirza for Applicant.

Date of hearing: 19th August, 2004.

ORDER

JAVID IQBAL (JUDICIAL MEMBER).---Through these two miscellaneous applications assessee has asked us to -rectify the alleged mistake in the order passed in cross-appeals having I.T.As. Nos. 157 and 172(PB) of 2002 for assessment year 1999-2000. Through M.A. No.49 assessee has agitated in the following manner:--

(a) "That the Hon'ble Tribunal in its order, dated 16th December, 2003 as issued in the aforementioned appeal cases has given the following observations at pages 9 and 10 of the said order:--

"As regard to the claim of assessee that so-called rectification application for assessment year 1994-95 and onward has been filed as on 8-3-2001 and as no order has been passed by the department, therefore, the order should be deemed and considered as rectified. This allegation of assessee is unfounded, because order sheet entry of departmental record is silent, about filing of any such application."

(b) The above, observation is contrary to the departmental record of the case and constitutes a mistake apparent from record, which may be rectified."

2. While through Miscellaneous Application No.14, the assessee has raised the following observations:

(a)"The applicant's appeal along with a departmental cross-appeal (I.T.A. No.172(PB) of 2002 were heard on 3rd December, 2003 and have been disposed of through order, dated 16th December, 2003 (the order).

(b) The appellant presented two additional grounds of appeal during hearing of appeal on 3rd December, 2003, which have been reproduced on page 3 of the order, but these have not been disposed of on merit.

(c) A case reported as 2001 PTD (Trib.) 2922 was brought in writing to the knowledge of the honourable Bench during the hearing on 3rd December, 2003 but it has apparently escaped attention of the honourable Bench as it has nowhere been mentioned in the order. The above case was decided by a Division Bench of the honourable Tribunal comprising of Mr. Inam Ellahi Sheikh, Chairman and Mr. Javid Masood Tahir Bhatti, Judicial Member and the decision had a bearing in the appeal of the applicant.

(d) The applicant submitted an application in the office of the honourable Tribunal on 11th December, 2003 (copy attached) praying for another opportunity of being heard, as he could not properly assist the honourable Bench on 3rd December, 2003 due to paucity of available time and resultant pressure. The aforesaid application duly received in the office of the Tribunal on 11th December, 2003 has apparently escaped attention of the honourable Bench while issuing the order which is dated 16th December, 2003 as neither the opportunity requested for in it was granted nor the order rejects or even refers to it.

(e) The core issue in the case involves a simple matter of mathematical counting of the year of tax holiday starting from the date of commencement of commercial production, which is evident by reading together the assessment orders for the years 1993-94 and 1994-95, which according to the order had acquired finality.

(f) While interpreting production data reproduced on page 9 of the order the data submitted by the applicant highlighting innumerable and frequent stoppage and level of efficiency of production during the income year relevant to the assessment year 1993-94 has been completely ignored. The said characteristics, submitted by the applicant clearly distinguish it from commercial production."

3. At the time of hearing additional grounds were also taken as reproduced as under:

(a) "That item (6) of miscellaneous application, dated 10th April, 2004 may be substituted by the following:--

"(6) While interpreting production data reproduced on page 9 of the order the aspect of capacity utilization in the years relevant to the assessment years 1993-94 and subsequent assessment years has been completely ignored which had a bearing in determining the nature of production of the said years."

4. Representatives of both the parties were heard and record of the case examined.

5. To support the contention raised through these miscellaneous applications the following arguments were delivered by the A.Rs. on behalf of assessee.

That the Hon'ble Tribunal during the hearing of appeals had taken notice of the two additional grounds of appeal but the grounds were not disposed of on merits. Order of the Tribunal holding that application for rectification was not competent, is violation of Rule 14 of the Income Tax Appellate Tribunal Rules, 1981, and facts of case-law reported as (2001) 84 Tax 20 (Trib.) relied upon by appellant, the referred case decides the issue that the finding regarding trial production given in one year could not be probed or changed in the order for another year, the counting of period of tax holiday under clause 118C was to start from the month of commencement of commercial production. The Assessing Officer admitted the. claim of trial production which is confirmed by approval of capitalization of loss. The loss having been capitalized, no allowance for depreciation was due for the assessment year 1993-94. The assessment for the assessment year 1994-95 was made on 30th April, 1997 after the amendment of object clause had been effected. The order for this year, properly allowed tax holiday under the appropriate clause 118C. The Assessing Officer held that the tax holiday allowed for the preceding year under clause 118A was not proper, but he erroneously held that the assessment year 1994-95 was 2nd year of tax holiday, ignoring his own finding that tax holiday under clause 118A had wrongly been granted. Regarding filing of alleged miscellaneous application, dated 8-3-2001 due to non-passing of order on this application on 30-6-2002 automatic rectification under the deeming provision of section 156(3) of the Ordinance had taken place. While passing of order, dated 28-12-2002 on the application, dated 8-3-2001 barred by limitation of one year provided under section 156 of the repealed Ordinance. It was further argued that the counting of year of tax holiday for each subsequent year will be made under clause 118C with the reference to the month of commercial production. It was also submitted that the Tribunal had not drawn proper inference from the production data reproduced in its order at page 9. On behalf of the department the L/DR by supporting the impugned order, about filing of alleged rectification application for assessment year 1994-95, dated 8-3-2001 stated that no such application has been filed by assessee, but by tampering the record the application has been put in record, and even then the application placed in the record is showing the date of receipt by the department as 8-6-2002, whereas no such application showing the date of receipt as 8-3-2001 is available in the departmental assessment record.

6. Brief facts of the case are the that the assessee is a public limited company quoted on stock exchange in Pakistan. The company is situated at D.I. Khan and enjoy exemption from tax for a period of 8 years under clause (118-C) of Part First of the Second Schedule to the Income Tax Ordinance, 1979. Assessments for the assessment years 1998-99 and 1999-2000 were completed under section 62 of the Ordinance by allocating these as 6th and 7th year of exemption. Subsequently through an application, dated 16-8-2001, the assessee asked for the rectification of mistake under section 156, alleging that the assessment year 1999-2000 is 6th year of exemption and the Assessing Officer has wrongly considered it as 7th year of exemption. The said application of the assessee was rejected and remedy was sought by filing the appeal before learned CIT(A), who accepted the appeal of assessee and set aside the order of the Assessing Officer. Against the said order both the parties came in appeal before this Tribunal. We decided the appeals vide our order in I.T.As. Nos. 157 and. 172(PB) of 2002, dated 16-12-2003. Now assessee through these miscellaneous applications has asked to rectify the alleged mistake in the order of the Tribunal. Both the applications are disposed of in the following manner:

M.A. No.49

7. After having heard and considered the arguments of the parties and from perusal of the relevant order and the case record, it has been noticed that through these M.A. assessee has claimed that alleged rectification application for assessment year 1994-95, dated 8-3-2001 is a part of departmental record, while due to mistaken fact it has not been considered as the ,part of departmental record, therefore, it is a mistake apparent-from the record, therefore, order in cross-appeals in I.T.As. Nos., 157, and 172 (PB),. dated 16-12-2003 is sought to be rectified. At the time-of hearing of these appeals it was argued on behalf of assessee that finding of facts given by the Assessing Officer in the assessment order for assessment year 1993-94 about the nature of production of the company that it was trial production had got finality and it could not be changed in the order of another year if the production even was commercial, while orders of assessment years 1994-95 to 1999-2000 should be allocated as first to sixth years of exemption. At that particular time in the light of cases law referred by the then AR of the assessee it was pointed out to the AR that if the order of assessment year 1993-94 had attained the finality then the orders for assessment years 1994-95 to 1998-99 have also got the finality by allocating these as 2nd to 6th years of exemption against which no remedy has been sought by the assessee. The learned A.R. of the assessee was unable to rebut the same. However subsequently when the case was prefixed for hearing on 3-12-2003 it was pleaded on behalf of assessee that for assessment year 1994-95 and onward they have filed rectification application for the correction of alleged mistake in the assessment order. We while concluding the issues of contentions in our order in I.T.As. Nos. 157 and 172 (PB) of 2002 (assessment year 1999-2000), dated 16-12-2003 has held in the following manner:--

"As regard to the claim of assessee that so-called rectification application for assessment year 1994-95 and onward has been filed as on 8-3-2001 and as no order has been passed by the department, therefore, the order should be deemed and considered as rectified. This allegation of assessee is unfounded, because order sheet entry of the departmental record is silent, about filing of any such application. While on 19-3-2003, the previous date of hearing of the present appeal, the then A.R. of assessee submitted the written arguments where there is no mention of this fact that any of the M.A. relevant to assessment year 1994-95 and onward have ever been field. Record of the case was also examined by the Court at that time where no such application was available on the departmental record. Further the miscellaneous application filed under section 156 for assessment year under consideration has been filed on 16-8-2001 whereas the filing of alleged rectification application for assessment year 1994-95 and onward has been filed as on 8-3-2001, but this fact has neither been established from the subsequent rectification application, dated 16-8-2001, nor in the order of rejection by the Assessing Officer or in the impugned order otherwise this fact should have definitely been mentioned in subsequent application under section 156 for assessment year 1999-2000. Moreover, if the alleged rectification application for assessment year 1994-95 and onward was already filed by the assessee and according to assessee the word "onward" covers all the assessment years, then why the application for the subject year under appeal has been filed."

8. The photocopies of the alleged rectification application produced during the hearing of appeal on 3-12-2003 is showing the date of receipts by the department as 8-3-2001 whereas no such original application showing this date of receipt is presently available in the departmental record. While attested photocopies of the same application produced at the time of hearing of this M.A. is showing the date of receipt acknowledged by DCIT as 8-6-2002. To disprove the allegation of assessee about the filing of rectification application, dated 8-3-2001, following comments were received from the department:

"That the relevant record in the Circle with reference to alleged filing of such application on 8-3-2001 was examined which goes to reveal that this application has not been entered in the receipt register. However, it has been recorded in the rectification register maintained by the Circle. The receipt of this application seems to have been manipulated as on the first page of the application it has been shown as received on 8-3-2001 by the Assessing Officer, while on the last page of the letter this has been shown as received on 8-6-2002 signed by the same DCIT but this entry of such date is not available in the rectification register. On further examination of this register it reveals that the receipt entry Nos. 36 and 37 pertaining to filing of rectification application by Mrs. Ghazala Khanzada and Begum Sarfraz has been received and recorded on 31-5-2001 and 4-6-2001. On the other hand, the alleged application given, the receipt as numbered 39 shown as received on 8-3-2001. In addition to this, the order sheet entry is absolutely silent about the filing of any such application either on 8-3-2001 or 8-6-2002. It has also been commented that the entry at S. No.39, dated 8-3-2001. is not in order of time frame and that the alleged rejection letter No. 288, dated 28-12-2002 received by the assessee on this date also looks doubtful. This letter though looks like intimation letter informting the assessee that his application has already been rejected vide this office letter No.430, dated 10-12-2002 and No.718, dated 19-4-2002. On checking the dispatch register it is amazing to note that after the dispatch entry of two cases on 31-12-2002 i.e. S1. Nos. 286 and 287 this letter has been dispatched at Sl. No. 288, dated 28-12-2002. In fact, this entry also seems to have been tampered as the subject of letter has been given as list of sugar mills, but below it additional entry has been made and shown through an arrow rectification under section 156 of the assessment year. It is further noted that this intimation letter as referred to in the rectification register was initiated by the officer who was not posted in this Circle."

9. To clarify further the entries made in the Circle register maintained for registration of rectification applications has also been examined and the extract of the same from the departmental record have been placed on the record. In the register maintained for the receipt and registration of rectification applications, one part is apportioned to the entries about the receipt of income tax rectification applications while the other part for registration of wealth tax rectification applications. For the sake of convenience the aforementioned entries made at the relevant pages of register are reproduced as under:--

Entries made in the portion of register meant for receipt of income tax rectification applications.

This entry is also made at Serial No. 38 of the portion of the register meant for wealth tax rectification application.

10. It is noteworthy that all the above mentioned entries relevant to receipt of income tax rectification application are made at proper place of the register, these entries are in sequence of timeframe, i.e., in chronological order. No. entry of any application by Chashma Sugar Mills, dated 8-3-2001 find place in this part of the register which is apportioned for receipt of income tax rectification application. Had the assessee filed any rectification application on 8-3-2001 this should have been entered just after the entry at S. No.100, dated 3-3-2001 an prior to the entry at S. No.101, dated 14-3-2001 as the date of 8-3-2001 falls between the two. However, the entry of receipt of the aforementioned alleged application has been incorporated in the portion of the register, which is meant for wealth tax rectification application at S. No. 39, which is the last entry in this part of the register. It will also be useful to reproduce the registration and entries made in the register maintained for registration of wealth tax rectification applications.

All the above entries except the registration and entries of Rehmat Salam and the assessee are relevant to registration of wealth tax rectification. While the registration of applications of Rehmat Salam and assessee are only relevant to the income tax. However, it is interesting to note that Rehmat Salam rectification application, dated 3-3-2001 has also been registered at S. No.100 at right and proper place meant for the registration of income tax rectification application. Further it is important to mention here that the entries at S. Nos. 36 and 37 are later in time then the assessee's alleged rectification application but are entered prior in time than the assessee's application. It establishes the fact that even in this portion of circle's rectification register apportioned for registration of wealth tax rectification applications, the entry of the assessee's applications is dubious and clearly made post datedly as the the chronological order of entries upon S. No.37 been disturbed by post dated entries Nos. 38 and 39. The entry at S. No. 37 is dated 4-6-2001, entry at S. Nos. 38 and 39 (Rehmat Salam) pertaining to (Rehmat Salam) and assesses alleged rectification application are made on 3-3-2001 and 8-3-2001 respectively. The register also closes at entry No.39. Even a cursory look at the register suggest that the entry at S. No.38 pertaining to Rehmat Salam income tax rectification application has been made to cover up the subsequent entry of the assessee's alleged rectification application at S. No. 39 with deliberate intent. Further from the scrutiny of this register it is clearly established that finding no space in the relevant income tax part of the register, entry of alleged rectification application has been made in the other portion of the register meant for registration of wealth tax applications, but here too the disturbances of chronological order of the entries could not be avoided.

Further it is also important to note that the DCIT, who initiated the alleged rectification application and has acknowledged the receipt of the same, he at the time of hearing of the appeal filed, the comments duly signed by him which have also been incorporated in our appellate order in the form of arguments on behalf of department where filing of any rectification on behalf of assessee was denied by the same DCIT. Further that no application with any initial of the income tax officials with departmental seal acknowledging the date of receipt, as 8-3-2001 even presently available on the departmental record and in the absence of any such application, how the reminder and the order of DCIT, dated 16-12-2002 and 28-12-2002 could be made. The photocopies of alleged application produced on 3-12-2003 on behalf of assessee is showing the date of acknowledgement and registration of application as. 8-3-2000, while photocopies of the same application duly attested. by DCIT, D produced by the L/AR of the assessee at the time of hearing of the present miscellaneous application is showing the date of receipt by department as 8-6-2002 requires further investigation and alone is sufficient to reject the miscellaneous applications.

11. In the light of above discussion, it can safely be concluded that Departmental record has been tampered with by subsequent placing of the miscellaneous rectification application of assessment year 1994-95 and it seems that whole efforts to convince this forum on the issue is thus an afterthought and intended to mislead us. Hence finding no mistake in the record, M.A. on behalf of assessee is rejected.

M.A. No.14

Regarding the objection raised through the Miscellaneous Application No.49 about the additional grounds agitated during hearing of appeal by the assessee are reproduced as under:--

"That the L/CIT (A) erred in ignoring the position that the profit and gains in the income year relevant to assessment year 1999-2000 could not be counted as 7th year of tax holiday inasmuch as the alleged first year of the holiday (i.e. assessment year 1993-94) admittedly did not have any profits and gains to avail exemption.

That the authorities below have erred in failing to note that while computing profits and gains for the assessment year 1999-2000 depreciation had been allowed as of the sixth year of tax holiday thus there remains no justification in the departmental claim that the profit and gains were of the seventh year of tax holiday."

The company was enjoying exemption, therefore the trading results of the companies were not probed, further on these grounds neither the rectification was asked initially before the Assessing Officer nor these do arise from the impugned order. While we after lengthy discussion and after long drawn arguments of the parties decided the matter, while at this stage we could not pass any order in the appellate status. Therefore, on this issue we do not find any mistake in our order.

As regard the quoted case-law as agitated through the objection at (b) of this miscellaneous application. In this case-law it has been held that if there is any error or mistake in assessment order of any previous year it is the year of mistake or error against which action could be taken or remedy could be sought through due process of law. In the referred case-law error occurred in assessment year 1994-95 about the commencement of production, whereas the order for assessment year 1995-96 was cancelled by IAC under section 66A of the repeated Ordinance. The L/ITAT in its order held that the company was enjoying exemption, and no such tax was payable by assessees company hence no prejudice to the Revenue was caused, while it was assessment year 1994-95 and not the assessment year 1995-96 where the error has occurred therefore order of cancellation under section 66A by IAC for the assessment year 1995-06 was vacated. In the present case it was not the assessment year 1999-2000 where any mistake has occurred but as per contentions of A.Rs. of the assessees the root goes to assessment year 1993-94 and onward and to this effect, we in our order by quoting the case-law reported as (2000) 82 Tax 481 which is at par with the case law reported as (2001) 84 Tax 20 (Trib.) agitated through this miscellaneous application. We held in, the following manner: -

"In our view the orders of assessment years 1993-94 to 1997-98 have got finality. Similarly, the assessment order of assessment year 1998-99, order of which was passed in combine with assessment year under appeal has also attained finality to which the exemption of 6th year has been allocated by Assessing Officer, with the allocation of 7th year to assessment year 1999-2000 whereas the case-law reported as (2002) 82 Tax 481 referred by learned ARs of the assessee also supports the departmental view wherein the aforementioned case-law at page 483A it has been held "that even a wrong order has a finality and unless that finality is disturbed by a process authorized by law, the rights of assessee and Revenue will continue to be governed by the order."

As regard objection at S. No. d, of the miscellaneous application this ground was not pressed, however it will be noteworthy to mention here that while concluding hearing of appeals on 3-12-2003 the fate of appeal was almost intimated to L/ARs of assessee.

As regard to objections e & f of this miscellaneous application, the year under consideration is assessment year 1999-2000 but the roots of it go to assessment year 1993-94 which was the first year of production and as per claim of assessee his claim of trial production was accepted as such while commercial production was started from assessment year 1994-95, but the Assessing Officer due to mistaken fact has considered it as 2nd year of exemption. But we in our appellate order had recorded that assessment order of assessment year 1993-94 is silent by not giving any comments on the nature of production as to whether commercial or trial, therefore in the light of case-law reported as 1998 PTD 2722 by drawing the distinction between trial and commercial production, held that the production of the assessment year 1993-94 was commercial production. Keeping this fact in view there remains no room for further discussion and is sufficient to negate and disprove the contention of assessee. So in the stated circumstances we are not inclined to accept the contention of assessee and the miscellaneous applications being devoid of merits are rejected.

C.M.A./53/Tax (Trib.)????????????????????????????????????????????????????????????? Petitions rejected.