I.T.As. Nos.2022/LB to 2025/LB of 2000, decided on 6th September, 2003. VS I.T.As. Nos.2022/LB to 2025/LB of 2000, decided on 6th September, 2003., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1947 (2003)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 156(3) & 13(1)(aa)---C.B.R. Circular No. 4 of 1979, dated 23-8-1979---Rectification of mistake---Addition---Setting aside of assessment by the First Appellate Authority---Appeal against by the Department that assessments were rightly made and additions made being in consonance with law were justified---Assessee submitted' that departmental appeals had become infructuous, since the order passed by the First Appellate Authority stood rectified under S.156(3) of the Income Tax Ordinance, 1979 as application seeking rectification was filed before the First Appellate Authority---Validity---Assessee preferred an application seeking rectification as on 1-1-2001 which should have been decided by 30-6-2002 failing which mistake sought to be rectified would be deemed to have been so rectified---Assessee did its level best by sending reminders requesting for disposal of rectification application on different dates---Assessee sent an application requesting for adjudication of said rectification application followed by their further reminders---Assessee was informed by the department that no such application was available on record almost 2-1/2 years after filing the application and exactly one year after the first reminder---Stamps of the department along with signatures on copy of rectification application, reminders and production of original peon book went a long way to belie the departmental stand that they received no such application---Assessee submitted application on 1-1-2002 which should have been finalized till 30-6-2002, failing which the mistake sought to be rectified stood rectified by operation of law---Order appealed against was not holding the field after having been rectified---Appeals having become infructuous were, dismissed by the Appellate Tribunal.

1998 PTD (Trib.) 3478 rel.

Waheed Shahzad Butt for the Assessee.

Bashir Ahmad Shad, D.R. for the Department.

Date of hearing: 4th September 2003.

JUDGMENT

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---The above mentioned appeals relating to assessment years 1994-95, 1995-96, 1996-97 and 1997-98 have been preferred against the combined impugned order, dated 22-2-2000 passed by the AAC of Income/Wealth Tax Appeal Range, Lahore, Following grounds have been agitated by the Revenue:--

(1) That the learned AAC was not justified in setting aside the assessment with the direction to make enquiry and verify the fact whether the bank account belongs to the Individual or not. Perusal of Bank A/c opening form clearly indicates that the account was opened in the name of Shahid Mumtaz and Co. and assessee operates Shahid Mumtaz & Co.

(2) That the peak deposit of Rs.275,000 in the bank and estimate of sales at Rs.1,000,000 have rightly been assessed in the assessee's hands on the basis of Bank statement collected from the Bank.

2. Since the issue under consideration for all the assessment years is identical, we intend to dispose off present appeals through a consolidated order.

3. Brief facts relevant for disposal of the present appeals are that the assessee being an individual, derives income from purchase/sale of iron products. Original assessments in the aforesaid appeals were completed under section 59(1) of the repealed Income Tax Ordinance, 1979 (hereinafter called the Repealed Ordinance). A complaint was received from the CIT office vide No. 497/I&E, dated 11-5-1998 wherein it has been alleged that assessee had purchased goods worth Rs.1,750,000 on 3-10-1996 from' Mr. Mueen A. Mirza, Prop Messrs International Business Consultant, Karachi. A show cause notice was issued confronting the assessee with regard to the purchases and explanation was sought in this regard. During the course of proceedings, the department obtained a bank statement of the assessee wherein following bank deposits were noticed:---

1-7-1993 to 30-6-1994?????????????????????? Rs.2,927,800

1-7-1994 to 30-6-1995?????????????????????? Rs.12,781,882

1-7-1995 to 30-6-1996?????????????????????? Rs.24,490,783

1-7-1996 to 30-6-1997?????????????????????? Rs.8,915,624.

Similarly following peak credits have been noticed in the said account: --

A/Y????????????????? Amount??????????? Date

1994-95?????????? Rs.275,000????? 17-4-1994

1995-96?????????? Rs.500,000????? 2-5-1995

1996-97?????????? Rs.800,000????? 5-12-1995

1997-98?????????? Rs.780,000????? 1-8-1996

Case of the assessee was reopened under section 65 of the Repealed Ordinance after fulfilling the requisite statutory requirements of issuance of notices and additions under section 13(1)(aa) were made in the following manner:

??????????? 1994-95?????????? Rs.275,000

1995-96?????????? Rs.500,000

1996-97?????????? Rs.800,000

1997-98?????????? Rs.780,000

4. The assessee approached the learned first appellate authority who vide order, dated 22-2-2000 set aside the case with the direction to make further enquiries to ascertain whether the bank account relied upon by the Assessing Officer belongs to the assessee individual's name or in the name of Shahid Mumtaz and Co. The Revenue is in further appeal assailing the same.

5. Learned DR has argued the case while maintaining that assess?ments were rightly made and additions made under section 13(1)(aa) of the Repealed Ordinance being in consonance with law were justified. Learned AR on the contrary opposed the arguments advanced by the learned DR. Right at the very outset, he submitted that departmental appeals have become infructuous, since the impugned order passed by the learned AAC stood rectified under section 156(3) of the Repealed Ordinance. He submitted that on application under section 156 of the Ordinance seeking rectification was filed before the first appellate authority. Further contended that another reminder was made to the respective authorities through a letter, dated 13-8-2002. Learned AR informed the Bench that assessee kept on pursuing the matter and sent further reminders, dated 5-11-2002, 21-11-2002 and 26-6-2003 so that the pending rectification application could be disposed off by the first appellate authority. Learned AR brought to the notice of the Court that instead of rectifying the assessee's application under law, the department came up with a lame excuse vide their letter, 'dated 2-7-2003 stating therein that assessee's application is not available on record, in support of his contention, learned AR filed photocopies of the original application pointing out that it bears Commissioner Appeal's stamp and it was duly received by the office. Learned AR has also produced copies of all the reminders sent to the CIT(A), Zone IV office. Those reminders also bore signature and stamp of the said office. Besides, original peon book has also been shown to the Bench, indicating that the rectification application was received by the concerned office.

6. On the legal plane, the learned AR has relied upon a Circular No.4 of 1979, dated 23rd August, 1979 which prescribes that where no order is passed on any mistake brought to the notice of the Income Tax Authorities by the end of financial year, next following the date if was brought to the notice, the mistake sought to be rectified shall be deemed to have been so rectified. The learned AR also sought strength from the reported judgment of the Tribunal (1998) 78 Tax 4 (Trib.) which also throws light on the time limitation of section 156 of the Repealed Income Tax Ordinance, 1979 which provides that mistake will be considered to be rectified by the financial year next following the date on which it was brought to the notice of the concerned authorities if no formal action is taken on the said application with regard to acceptance or refusal of rectification sought.

7. We have heard the submissions made at bar by the respective representatives of both the parties and have also gone through the C.B.R.'s Circular No.4 of 1979 as well as supra judgment cited at the bar. We find ourselves in full agreement with the arguments tendered at the bar in the instance case. The assessee preferred an application seeking rectification under section 156 of the Repealed Income Tax Ordinance, 1979 on 1-1-2001. Following the explanation given in Circular No.4 of 1979 and interpretation done with regard to the said Circular by the Tribunal vide judgments 1998 PTD (Trib.) 3478 the aforesaid application should have been decided by 30th June, 2002 failing which mistake sought to be rectified shall deemed to have been so rectified. In this regard the assessee did its level best by sending reminders requesting for the disposal of rectification application on different dates while the 3rd and last reminder was sent on 26th June, 2003. It is pertinent to note that while pursuing the rectification application, the assessee sent an application requesting for adjudication of the said rectification application on August 13, 2002 followed by there further reminders. However, it is strange that assessee was informed vide their letter, dated 2-7-2003 that no such application is available on record, i.e., almost 2-1/2 years after filing the application and exactly one year after the first reminder sent to the concerned authority. Even otherwise the stamps of the department along with signatures on copy of rectification application, reminders and production of original peon book goes a long way to belie the departmental stands that they received no such application. We are not in a position to comment upon Revenue stands with regard to non-availability of rectification application in the record in the presence of cogent documentary evidence produced by the assessee in support of his contention. In nutshell, the assessee submitted application on 1-1-2001 which should have been finalized till 30th June, 2002, failing which the mistake sought to be rectified stood rectified by operation of law.

8. In this view of the matter, we are constrained to observe that the impugned order appealed against was not holding the field after having been rectified as observed in our earlier discussion. Department appeals having become infructuous are hereby dismissed. Departmental appeals fail.

C.M.A./72/Tax (Trib.)????????????????????????????????????????????????????????????? Appeal dismissed.