I.T.As. Nos. 2953/LB and 2954/LB of 2004, decided on 30th November, 2005. VS I.T.As. Nos. 2953/LB and 2954/LB of 2004, decided on 30th November, 2005., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2413 (2005)

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

----S. 156---Rectification of mistake---Mistake apparent on the lace of record could only be considered to be a mistake, if same was floating on the surface of record and did not require further probe---Since First Appellate Authority himself set aside the case so that the Assessing Authority should come to definite conclusion with regard to issue in hand after making inquiries same was not a mistake apparent on the face of the record.

1992 PTD 570; I.T.A. No.2024/LB of 2004 and 1999 PTD (Trib.) 4026 ref.

2004 PTD (Trib.) 320 and 1988 PTD 147 rel.

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

----S. 221---Income Tax Ordnance (XXXI of 1979), S.156---Rectification of mistake---Assessing Officer in first two rectification orders invoked S.156 of the Income Tax Ordinance, 1979 while the last one was passed under S.221 of the Income Tax Ordinance, 2001---Rectification of order and order passed by the First Appellate Authority were liable to be annulled because the same was rectified under S.221 of the Income Tax Ordinance, 2001 despite that the initial two rectification orders have already been made under S.156 of the Income Tax Ordinance, 1979.

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

----S. 221---Rectification of mistake---Rectification of assessment order by Assistant Commissioner of Income Tax---Validity---Assessment order was rectified under S.221 of the Income Tax Ordinance, 2001 by an officer designated as an Assistant Commissioner of Income Tax, but no such assessing authority had been mentioned in the Income Tax Ordinance, 2001---Order passed under S.221 of the Income Tax Ordinance, 2001 was not sustainable in the eye of law being without jurisdiction.

1999 PTD (Trib.) 4026 rel.

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

----S. 221-Income Tax Ordinance (XXXI of 1979), S.156---Rectification of mistake---Three times rectification of an assessment order and setting aside of the same by the First Appellate Authority---Validity---Power under S.156 of the Income Tax Ordinance, 1979 as well as under S.221 of the Income Tax Ordinance, 2001 was exercised three times by the same officers but coming to different conclusions each time which amounted to firstly, change of opinion and secondly, reviewing the order passed by the predecessor earlier---If the departmental officials were allowed to proceed in such a manner whereby the succeeding officers substituted their own opinions with the one already held by their predecessors without any rhyme or reason it would create chaos and the concept of finality in the judicial proceedings would become a mockery---Order setting aside the case for de novo consideration was vacated and resultantly, rectified order passed under S.221 of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal.

Monim Sultan for Appellant.

Rana Muhammad Luqman, D.R. for Respondent.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---Through the titled two appeals, the assessee has challenged the order, dated 31-3-2004 passed under section 221 of the Income Tax Ordinance, 2001 by the learned CIT(A), Gujranwala whereby he set aside the case for de novo consideration. Since in both the appeals the issue 'involved is common, the same are being disposed of by this consolidated order as under.

2. Briefly stated the facts of the case are that the assessee is a private limited company deriving income from doing construction work for others. Original assessment for the assessment year 1996-97 was completed on 30-4-1997 under the Presumptive Tax Regime (PTR) by filing statement under section 143-B of the repealed Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance). Subsequently, a suo motu rectification order, dated 30-9-1998 under section 156 of the late Ordinance was passed whereby gross receipts were treated as receipts from services/contracts, which attracted tax @5%,

3. On an application of the assessee, once again, another rectification order under section 156 was passed on 23-10-1999 accepting the plea of the assessee that receipts be bifurcated between supplies and services/erection work respectively, and tax be deducted at the rate of 3.5% and 5% accordingly. The said plea of the assessee was accepted and total receipts were bifurcated as such.

4. However, a further rectification under the recently promulgated Income Tax Ordinance, 2001 was made on 7-10-2003 whereby receipts were once again consolidated under the head of contracts/services and were subjected to uniform tax @ 5%. Being aggrieved, the assessee preferred appeal before the learned CIT(A) who vide his order, dated 31-3-2004 set aside the case for de novo consideration.

5. As per original grounds of appeal taken for both the years the assessee mainly contested the setting aside of the case by taking argumentative grounds of appeal, however, through additional grounds of appeal, the permission for which was granted by the Bench vide its order, dated 15-9-2005, the assessee also raised legal ground that the order passed by the ACIT under section 221 of the Income Tax. Ordinance, 2001 and subsequent setting aside of the assessments by the learned First Appellate Authority for de novo proceedings are unlawful and against facts of the case.

6. The learned A.R. of the assessee vehemently argued the case by contending that there was no mistake apparent on the face of record which is a prerequisite for invoking jurisdiction for making rectification. He submitted that where the authority concerned feels compulsion to probe in the matter to dig out mistake or to conduct an enquiry, such case would not be considered as an appropriate case for rectification, He argued that despite the, fact that original assessment framed under section 143-B was purportedly rectified about three times by the same authority but to different ends, would by itself show that there was no consensus between the concerned officers since, on same facts they were holding different opinions. The learned A.R. also pointed out that contract executed between the assessee and the parties for which assessee did the construction work, showing the ratio of supplies and contracts/services was also provided to the Assessing Authority which was absolutely ignored. To substantiate his contention, the learned A.R. relied upon judgment of the august Supreme Court of Pakistan reported as 1992 PTD 570 and an unreported judgment of the Tribunal passed in I.T.A. No.2024/LB/04. Second limb of the argument advanced .by the learned A.R. was that last rectification order was passed under section 221 of the Income Tax Ordinance, 2001, while the earlier two orders were passed under section 156 of the late Ordinance of 1979. He entreated that the Assessing Authority could not sail in two boats by resorting to section 221 of the Income Tax Ordinance, 2001 as well as to section 156 of the repealed Income Tax Ordinance, 1979 for making rectification in the assessments pertaining to the assessment years (1996-97) and 1997-98 which was erroneous in law, thus warranting indulgence of this Court. It was also brought to the notice of the Bench that the rectification order passed under section 221 of the Income Tax Ordinance, 2001, was made by the Assistant Commissioner of Income Tax but, no such authority designated by this nomenclature does find mention in the hierarchy of judicial authorities in the newly promulgated Income Tax Ordinance, 2001. To substantiate his contention the learned A.R. drew strength by placing reliance on a judgment cited as 1999 PTD (Trib.) 4026. The learned A.R. further stated that when same authority. embarks upon substituting its own viewpoint with one already given by his predecessor under the garb of exercising his powers of making rectification without identifying the mistakes or bringing anything new on record in support of its view, this change of opinion amounts to reviewing the matter instead of rectifying the mistake as envisaged under section 156 of the late Ordinance or section 221 of the Income Tax Ordinance, 2001.

7. The learned D.R. has controverted the arguments advanced by the learned A.R. and pleaded for maintaining the impugned order being in consonance with the law. It was contended by the learned D.R. that since it could not be ascertained what was the extent of services vis-a-vis supplies, proper incidence of taxation could not be determined. He stated that case was rightly set aside since the Assessing Officer was the most appropriate person to ascertain the true nature of the facts after making factual enquiry.

8. We have heard the learned counsel for both the parties and have also gone through the relevant orders along with case-law cited at the bar. We are of the considered view that arguments advanced by the learned A.R. carry weight. The first issue which was agitated at the bar was whether there was a mistake apparent on the face of the record which necessitated rectification by the competent authority. Obviously, in order to resolve this controversy that whether assessee's receipts fell under the head of supplies or services warranted factual inquiry. It is very much apparent from the perusal of the order passed by the learned lower officers that rectification order was passed thrice by the same authority but none of the officers who was seized of the matter was sure the extent of supplies vis-a-vis services. This divergent view held by the Assessing Authority would clearly indicate that this controversy could not be resolved without making an inquiry in depth. It has been held time and again by the Tribunal as well as the higher legal fora that mistake apparent on the face of record could only be considered to be a mistake which is floating on the surface of record and does not require further probe. Since in the present case the learned CIT(A) himself set aside of the case so that the Assessing Authority comes to a definite conclusion with regard to issue in hand after making inquiries, we can safely hold that this was not a mistake apparent on the face of the record. In this regard reference was made to a reported judgment cited as 2004 PTD (Trib.) 320. Wherein it has been held.

"From the above finding given by the apex Court of Pakistan, it can be gathered that rectification cannot be made on mere change of opinion or debatable issues. Rectification action can only be initiated where the mistakes are so clear and floating on the surface of the impugned order. Earlier opinion cannot be changed with the later opinion by exercising powers conferred under section 156 in other words no decision can be revised on mere change of opinion by the successor."

In an other case reported as 1988 PTD 147 the Honourable Karachi High Court held as under:--

"Mistake apparent from the record---Income Tax Officer having change of his view to the effect of High Court judgment and issuing notice to assessee---Such change of view, held, could not be said to be a mistake apparent from the record as to warrant Income Tax Officer to re-open the assessment orders in view of the fact that Commissioner of Income Tax had not changed his view."

9. The other argument pressed by the learned A.R. was also convincing and in line with the ratio settled by the judicial authorities. It was argued by the learned A.R that the assessments in the present case related to the assessment years 1996-97 and 1997-98. Initially, the assessments were rectified under section 156 of the repealed Income Tax Ordinance, 1979, however, the third and the latest in series of rectification order was passed under section 221 of the Income Tax Ordinance, 2001. In the reported judgment cited as (2005) PTD (Trib.) 490 the. Tribunal held that the Assessing Authorities could not exercise their jurisdictional powers by invoking two different statutes. This judgment is also on all fours to the assessee's case because the Assessing Officer in first two rectification orders invoked section 156 of the repealed Income Tax Ordinance, 1979 while the last one was passed under section 221 of the Income Tax Ordinance, 2001. Even on this score alone, rectification of impugned order, dated 7-10-2003 and the impugned order passed by the learned CIT(A) are liable to be annulled because the case which is sub juidice before this Bench related to the assessment order 1996-97 and 1997-98 and the same was rectified under section 221 of the Income Tax Ordinance, 2001 despite the initial two rectification orders had already been made under section 156 of the repealed Ordinance 1979.

10. At this juncture we would like to refer to the third argument advanced by the learned A.R. of the assessee that the latest rectification order was passed by the Assistant Commissioner of Income Tax and that too under section 221 of the Income Tax Ordinance, 2001. Bare glance at the newly promulgated Ordinance, 2001 would show that no such authority has been mentioned in the whole scheme of things in the Ordinance. Even on this issue, the Tribunal has already settled the ratio in the reported judgment cited as 1999 PTD (Trib.) 4026 whereby the learned ITAT has been held as under:--

"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 in 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."

11. In the present case, too, the assessment order was rectified under section 221 of the Income Tax Ordinance, 2001 by an officer designated as an Assistant Commissioner of Income Tax, but no such Assessing Authority has been mentioned in the Income Tax Ordinance, 2001. In this view of the fact, following the ratio in the supra cited case, we must hold that the order passed under section 221 of the Income Tax Ordinance, 2001 was not sustainable in the eye of law being without jurisdiction.

12. Lastly, we would like to draw attention of the higher Income Tax Authorities to the prevailing state of affairs. It is worth-noting that the power under section 156 of the repealed Income Tax Ordinance, 1979 as well as under section 221 of the new Income Tax Ordinance, 2001 was exercised about three times by the same officers but coining to a different conclusion. We have no doubt in our mind that it amounts to firstly, change of opinion and secondly, reviewing the order passed by the predecessor earlier. If the departmental officials are allowed to proceed in this manner whereby the succeeding officer substituted their own opinions with the one already held by their predecessors without any rhyme or reason, it would create chaos and the concept of finality in the judicial proceedings would become a mockery.

12-A. In the light of supra discussion and case-law cited at the bar, the combined impugned order setting aside the case for de novo consideration is vacated and, resultantly, rectified orders passed under section 221 of the Income Tax Ordinance, 2001 is annulled. The order, dated 28-10-1999 stands restored.

13. Appeals of the assessee succeed accordingly.

C.M.A./98/Tax (Trib.)Appeals accepted.