I.T.A. No.59/IB of 2004, decided on 17th February, 2006. VS I.T.A. No.59/IB of 2004, decided on 17th February, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2614 (2006)

Income Tax Ordinance (XXXI of 1979)---

---Ss. 65 & 62---Additional assessment---Approval---Permission---Department contended that First Appellate Authority was not justified in vacating the order passed under Ss. 65/62 of the Income Tax Ordinance, 1979 on the ground that Inspecting Additional Commissioner had only granted `permission' which could not be a substitute of `approval' required under S.65 of the Income Tax Ordinance, 1979---Subject/title of the Inspecting Additional Commissioner's letter in question mentioned the words "approval" while the body of the letter used the word "permission"---Inspecting Additional Commissioner had granted both an approval as well as permission---While using the word `permission' Inspecting Additional Commissioner had actually granted approval for initiating proceedings to reopen the assessment of the assessee in accordance with S.65 of the Income Tax Ordinance, 1979---Word `permission' was in fact synonymous with `approval' and irrespective of which word was used, the intention of law had been duly fulfilled---Permission granted by the Inspecting Additional Commissioner was his consent to exercise of jurisdiction---No bar existed to treat a permission granted for purposes of S.65 of the Income Tax Ordinance, 1979 to be any different from an approval and was sufficient to assume jurisdiction to reopen a case---Use of discretion by the Inspecting Additional Commissioner was eminently clear and it expressly constituted a final direct affirmative action---Use of the word `permission' instead of `approval' in the body of letter issued by the Inspecting Additional Commissioner was of no material significance---Admittedly the title of the letter in question clearly used the word approval---Said two words in the circumstances of the case carry identical meanings and were interchangeable to satisfy the requirement of assumption of jurisdiction to reopen the case under S.65 of the Income Tax Ordinance, 1979---Order of First Appellate Authority was vacated by the Appellate Tribunal and the case was remanded to the First Appellate Authority for decision on merits.

2003 PTD (Trib.) 1238; 1994 PTD (Trib.) 1288; 1998 PTD (Trib.) 1935; 2001 PTD 3788; ITA No.93(IB)/2004, dated 29-5-2004; 2004 PTD (Trib.) 463; 1998 SCMR 2013; 2004 PTD (Trib.) 726 and (1990) 63 Tax 79 (Trib.) distinguished.

I.T.A. No. 767/(IB) of 2002-03 decided on 27-2-2004 rel.

Shakir Hussain v. Chundoo AIR 1913 All. 567 and Treatise Words and Phrases Permanent Edition, Volume 3-4 at page 502 ref.

1994 PTD (Trib.) 856; 1994 PTD (Trib.) 1268; 1992 SCC 946; 1993 SCC 7149; I.T.A. No. 791(IB)/2003, dated 7-4-2003 Not relevant.

Saeed Ullah Khan, A.C. (Legal) MTU and Muhammad Ali Shah, D. R, for the Appellant.

Mansoor Ali Malik for the respondent.

ORDER

SYED AQEEL ZAFAR-UL-HASAN (ACCOUNTANT MEMBER)---On the request of the AR, a Full Bench was constituted on 8-12-2004 to hear the titled appeal so as to resolve the dispute regarding the true import of the terms `permission' and `approval' in the context of conflicting judgments passed by various Benches of this Tribunal. Later, on an application, moved by the AR on 22-2-2005 expressing his reservations on the inclusion of certain members therein, the Full Bench was re-constituted on 14-5-2005. While the case was yet under adjudication, a letter was received from the C.B.R. seeking withdrawal of the titled appeal vide their letter bearing C. No.1(45)TO-1/2004 (Vol.-III), dated 7th February, 2006 which was received by office on 10-2-2006. Before the matter could be disposed of and the sustainability of the request for withdrawal from a person other than the appellant itself could be examined, however a fresh application was moved on 17-2-2006 by AC (Legal), MTU, Rawalpindi who represented the Department along with the learned D.R. Mr. Muhammad Ali Shah. The application stated that the Department wished to retract the earlier request, dated 7-2-2006 seeking to withdrawal the departmental appeal. The learned AR raised no objection in this regard. In any case the law envisages no role and does not authorize the C.B.R. to itself file an appeal or to withdraw an appeal otherwise filed by a Commissioner. As such, being unauthorized in law, the request for withdrawal of appeal, dated 7-2-2006 cannot be entertained by us. It is dismissed being untenable in law ab intio. The subsequent request, dated 17-2-2006 from the appellant Commissioner is thus rendered infructuous and is dismissed. The case is accordingly proceeded on merits.

2. The present appeal raises the single issue of whether `permission' adequately fulfils the requirements of section 65(2) of the Income Tax Ordinance, 1979. The appellate order of the Commissioner of Income Tax Rawalpindi holding otherwise in appeal No.833 decided on 1-11-2003, has been assailed as being bad in law and against the facts of the case. It is stated by the Department that the case was reopened under section 65 of the said Ordinance with the approval of the IAC Range-III, Rawalpindi as contained in his letter No.1412, dated 23-5-2002 and that the word `approval' was clearly mentioned as the subject of the said letter, dated 23-5-2002. In the circumstances, the Department feels that the learned Commissioner Appeals was not justified in vacating the order passed under sections 65/62 of the Ordinance on the ground that 'the IAC had only granted `permission' A which could not he a substitute of `approval' required. under section 65 ibid. Placing reliance on a decision of the Tribunal reported as 2003 PTD (Trib.) 1238 the learned Commissioner Appeals held that from a perusal of the relevant record, it was clear that the Assessing Officer had sought permission to reopen the ease vide his letter No. 449, dated 21-5-2005 in reply to which the IAC had granted permission to do so vide his letter No.1412, dated 23-5-2002. Holding that `permission' could not be a substitute of `approval', he found the reopening of the earlier assessment as being defective inasmuch as it was held to have been made without proper approval. He accordingly restored the order earlier passed under section 59A of the Ordinance and vacated the subsequent order passed under sections 65/62 ibid.

3. Since the issue involved in the present case namely whether permission granted, by the IAC could substitute the approval required for purposes of section 65 of the Ordinance has already been decided by a Bench of coordinate jurisdiction in the Lahore Registry of the Tribunal and the same appears to have been followed in certain other cases decided elsewhere by other Benches, a conflicting situation has arisen in view of the facts that the Islamabad Bench of the Tribunal in certain cases had decided otherwise. In ITA No.767(IB)/2002-2003 decided on 27-2-2004, a detailed order passed after examining the aforementioned reported case of the Lahore Bench cited as 2003 PTD (Trib.) 1238 as well as 1994 PTD (Trib.) 1288, 1998 PTD (Trib.) 1935 and 2001 PTD 3788 had been examined. The considered opinion of the Islamabad Bench in the said case decided on 27-2-2004 was that the permission granted by an IAC fulfilled the requirement of the approval required under section 65 of the Ordinance. To resolve the conflict thus created, the present Full Bench was constituted which heard the parties to decide the case.

4. It was contended by the learned DR and the IAC Legal (MTU) Rawalpindi that the learned Commissioner Appeals had failed to appreciate that the .assumption of jurisdiction under section 65 of the Ordinance was preceded by a formal approval obtained in accordance with law from the concerned IAC. He referred particularly to the contents of the relevant order under sections 65/62 and said that Para-1 at page-8 clearly records that the IAC's approval was twice obtained. Pages 13-14 also evidence further approval obtained from the IAC. As regards the observation of the learned Commissioner Appeals that no approval but only permission had been granted by the IAC he pointed out that in fact the subject/title of the IAC's letter in question mentioned the word "approval" while the body of the letter used the word `permission'. It was therefore clear that the IAC had granted both an approval as well as permission. Alternatively, he pointed out while using the word `permission' the IAC had actually granted approval for initiating proceedings to reopen the assessment of the assessee in accordance with section 65 of the Ordinance. He further contended that the word `permission' was in fact synonymous with `approval' and irrespective of which word was used, the intention of law had been duly fulfilled in either case.

5. Opposing the departmental appeal the learned AR defended the orders of the Commissioner Appeals and termed the same as being elaborate and in accordance with law. He maintained that the impugned order had been passed after perusal of relevant record and the difference noted between the word `approval' and `permission' was relevant and pertinent in the facts of the present case. In addition to the case law relied upon by the learned Commissioner Appeals, he also placed reliance on an unreported order of the Tribunal bearing ITA No.93(IB)/2004, dated 29-5-2004 wherein the 'Tribunal had once again followed the reported order of the Lahore Bench cited as 2003 PTD (Trib.) 1238. A compilation of certain other cases claimed to be on the same principle was also submitted by him to defend the order of the learned Commissioner Appeals.

6. Having heard the parties, examined the case law and considered the relevant facts of the case, we would first like to record our appreciation of the cases relied upon by the learned AR. In 2004 PTD (Trib.) 463 a similar question arose where the grant of approval by the IAC was challenged by the assessee. It was pointed out that the IAC had merely granted permission and not approval for reopening the case under section 65 of the Ordinance. Relying upon a case reported as 1998 SCMR 2013 and (2003) 87 Tax 3 (Trib.) the assessment made under sections 65/62 was cancelled by the Tribunal. In the body of order in question, the Supreme Court's decision has also been partly reproduced. The words `permission' and `approval' have been differentiated by the apex Court with reference to Standing Order II issued by the Government of N.-W.F.P. as discussed in its order in Civil Appeal No.163 of 1995. The point at issue before the honourable Supreme Court was whether the Standing Order which held the ground for a number of years as issued by the Government of N.-W.F.P. without express prior approval could be taken to carry an "implied approval" of the Government or otherwise it would have to be declared to have not been approved. The notification was struck down by the apex Court with the observation that merely because a standing order had held the ground for a number of years was not sufficient to assume that the approval had been granted for the issuance of a Standing Order by the Provincial Government. Respectfully, we observe that the point at issue before the apex Court has no bearing on the present case. In fact, in the body of the judgment, the two terms have been discussed as obiter dicta in the following words:--

"Ordinarily, the difference between "approval" and "permission" is that in the first the Act holds good until disapproved, while in other case it does not become effective until permission is obtained. But permission subsequently obtained may all the same validate the previous Act."

The bare perusal of the above noted interpretation of approval derived from the case of Shakir Hussain v. Chundoo (AIR 1913 All. 567) is not extensive. On the contrary, it has brought out a difference between approval and permission.

(7) In the Treatise Words and Phrases Permanent Edition, Volume 3-4 at Page 502, ordinarily the term "approval' in its most obvious meaning has been taken.

"to commend, confirm, ratify, sanction, or to consent to some act or thing done by another. As used in some statutes or texts, the act of "approval" implies the act of passing judgment, the use of discretion, and a determination as a deduction therefrom, unless ,limited by the statute. As used in other statutes the term implies the exercise of sound judgment, practical sagacity, wise discretion, and final direct affirmative action. In some cases the term implies the exercise of judicial action or discretion, while in other cases the exercise of only an administrative function or capacity and not a judicial sense."

7. A perusal of the foregoing would show that in the context of the case presently in hand the permission granted by the IAC was his consent to exercise of jurisdiction. Accordingly, there is no bar to treat a permission granted for purposes of section 65 of the Ordinance to be any different from an approval and is sufficient to assume jurisdiction to reopen a case. The use of discretion by the IAC is eminently clear and it expressly constituted a final direct affirmative action.

8. As regard reliance on the reported case cited as 2003 PTD (Trib.) 1238 we may refer to a specific examination thereof in an earlier judgment of the Tribunal passed in ITA No.767(IB)/2003, dated 27-2-2004 which reads as under:--

"(7) So far as the legal Objection raised by the assessee contending that the assessment should have been annulled since the approval of the IAC and not the permission was required, for addition to be made under section 13(1)(aa) of the Ordinance we are not inclined to agree with the view point expressed by learned AR of the assessee in this behalf. The decision of Tribunal reported as 2003 PTD (Trib.) 1238 as relied upon by the learned AR of the assessee before the Bench, in our opinion has no binding force for the reason that the said judgment was given by relying on another judgment of the Tribunal 1994 PTD (Trib.) 1288 the facts as well as issue involved wherein were not relevant to those of the above referred case i.e. reported as 2003 PTD (Trib.) 1238. It has been held by the Tribunal through the above mentioned judgment relied upon by the AR of the asses see that the (words) "approval" and "permission" have different meanings. The relevant findings of the Tribunal in the case reported as 2003 PTD (Trib.) 1238 is reproduced as hereunder : --

"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 IAC is not tenable in eye of law. It is pertinent to mention here that when law required one thing 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."

(8) On the other hand, the facts of the case reported as 1994 PTD (Trib.) 1288 which was relied upon by the learned AR of the assessee before the Tribunal in the above quoted case, reported i.e. 2003 PTD (Trib.) 1238 were entirely different. The original assessment in the said case was finalized under section 59(1) of the repealed Ordinance under Self-Assessment Scheme. Later on it was noticed that the assessee's imports involved huge amount which did not commensurate with the capital available with him. The explanation offered by the assessee was not found plausible by the Assessing Officer therefore permission was obtained from the C.B.R. which was required under Self-Assessment Scheme for the assessment year 1985-86, for initiating proceedings under section 65 of the Ordinance. It was the contention of the assessee that before reopening of a case finalized under section 59(1) for the assessment year 1985-86 the Assessing Officer was not only required to obtain approval from the IAC but he was also required to obtain permission from C.B.R. It was further contended by the assessee's AR that since no approval was obtained from the IAC, therefore, the notice issued by the Assessing Officer was invalid. This plea of the assessee's AR was not accepted by the Tribunal and the issue was disposed of with the following observations:--

"(6) We have examined the contention of the learned counsel for the assessee and have taken into consideration the facts of this case. The contention of the learned counsel for the assessee that in cases where the assessment is finalized under section 59 and immunity is granted then the Assessing Officer not only is required to obtain prior approval from the IAC but the permission of the C.B.R. is also necessary. But after taking into consideration the facts we are of the view that the approval of IAC and permission of C.I.R. was obtained in this case. From the scrutiny of letter, dated 3-8-1987 written by the ITO to CIT East Zone for the purpose of obtaining permission of the C.B.R. it would appear that the ITO has mentioned in the said letter that the facts of the case justify the reopening of the assessment under section 65. Since this letter was sent through IAC, therefore, it would appear that the IAC also applied his mind before forwarding the letter to the CIT who ultimately obtained the permission of the C.B.R. under para. 6 of Circular No.3 of 1985. In our view there can be many conceivable modes regarding approval and each case can be examined on the basis of documentary evidence available. In our opinion in this case the ITO had made up his mind after considering the explanation offered by the assessee vide his letter, dated 4-7-1987 that there was a case of issuing notice under- section 65. The ITO after applying his mind submitted his proposal to IAC who also applied his mind before forwarding the letter to CIT. The IAC was associated with the whole exercise and had approved the action of the ITO before forwarding his proposal to the CIT who ultimately obtained permission from the C.B.R. In our opinion all these facts suggest that the compliance of provision of section 65 was made by the Assessing Officer, therefore, the submission of learned counsel for the assessee on this point is not tenable."

(9) It is obvious from the above findings of the Tribunal in the (above) case reported as 1994 PTD (Trib.) 1288 that facts and the issue involved as well as the findings of the Tribunal were entirely different from those in the case reported as 2003 PTD (Trib.) 1238.

(10) The perusal of the judgment of the Tribunal quoted before the Bench i.e. case reported as 2003 PTD (Trib.) 1288 further revealed that in the concluding paras another judgment of the. Tribunal was also relied upon for reaching the above mentioned conclusion. The decision of the Tribunal cited as 1998 PTD (Trib.) 1935 has also no relevance to the facts of the above mentioned case before the Tribunal or the issue involved therein. The issue involved in the said judgment related to the taxability of amount received under Golden Handshake Scheme. Similarly the issue decided by the Honourable Lahore High Court in its judgment reported as 2001 PTD (Trib.) 3788 whereby it was held that approval of IAC was a mandatory requirement for making the addition under the provision of section 13(1) is not a. matter of dispute in the case before us. The question to be resolved in the instant case is that whether the "permission" of IAC amounts to grant of "approval" by him for the purpose of addition to be made under section 13(1) of the Ordinance.

(11) In view of stated facts and discussion made as above the quoted judgment of Tribunal reported as 2003 PTD (Trib.) 1238 is not considered as binding therefore is being ignored.

(12) We have considered the arguments put forth by the learned representatives of both the parties and the case law relied upon by learned AR of the assessee. In our opinion the expression "permission" of IAC in the case before us has been used in the same sense and has the same meaning as that of "approval" of IAC which is required to be obtained by the Assessing Officer for making any addition under the provision of section 13(1) of the Ordinance. Our this viewpoint also finds support from the findings of the Tribunal in the judgment reported as (1994) 70 Tax 9 (Trib.) in which case the issues although not fully relevant was decided against the assessee and in favour of the department with the observations as reproduced in Para.8 above that since the letter for permission was sent through IAC therefore, it would appear that IAC also applied his mind before forwarding the letter to CIT who ultimately obtained the permission of C.B.R." Under the circumstances we are not inclined to interfere with the findings of CIT(A) which are hereby upheld being justified under the circumstances of the case.

(13) As a result, the appeal of the assessee fails."

9. The reliance placed on an unreported case of the Islamabad Bench bearing ITA No. 93(IB)/2004, dated 29-5-2004 also accordingly is rendered non-binding for reasons recapitulated in the above extracts. We notice that another case cited as 2004 PTD (Trib.) 726 also places reliance on an unreported order of the Karachi Bench. Since the relevant facts of that case have not been reproduced in the order we cannot examine the applicability thereof to the present case. The case reported as (1990) 63 Tax 79 (Trib.) concerns the sustainability of an addition made under section 13(1)(c) of the Ordinance which is not attracted to the facts of the present case. It is accordingly disregarded. For the same reason, the cases cited as 1994 PTD (Trib.) 856 and 1994 PTD (Trib.) 1268 are also not relevant for the present purposes. Another case reported as 2001 PTD 3788 on the issue of approval by the IAC as a condition precedent for exercise of jurisdiction for making addition under section 13(1)(aa) of the Income Tax Ordinance, 1979. As observed in the extracts reproduced above, it does not dilate on the issue of permission as `approval' mid is, therefore again not relevant in the facts of the present case. The learned AR has also furnished copies of 1992 SCC 946 and 1993 SCC 7149 which lay down the parameters of what constitutes definite information for purposes of assumption of jurisdiction under section 65. They are thus not attracted to the facts of the present case. In the same view, I.T.A. No.791 (IB)/2003, dated 7-4-2004 is also on the issue of definite information and is not relevant for present purposes.

10. In view of the foregoing, it is clear that the entire case of the assessee rests basically on the Lahore Bench case reported as 2003 PTD (Trib.) 1238 which in turn is a result of mis-appreciation of the ratio decided in (1994) 70 Tax 9 (Trib.). We tend to agree with the observations of the Division Bench in their afore referred order bearing I.T.A. No. 767(KB)/2003, dated 27-2-2004 that the facts of the case were entirely different and the inference drawn therefrom was misplaced and misdirected by our learned brothers of the Lahore Bench in the case reported as 2003 PTD (Trib.) 1238. It is clear that the IAC in the present has had applied his mind to the facts of the case as reported to him by the Assessing Officer and the issuance of letter, dated 23-5-2002 was the result of a consciously passed judgment and use of discretion in allowing the case of the assessee to be reopened under section 65 of the Ordinance. In this view of the matter, the use of the word `permission' instead of `approval' in the body of letter issued by the IAC is of no material significance. More so, because admittedly the title of the letter in question clearly used the word approval. The two words in the circumstances of the case carry identical meanings and are interchangeable in satisfaction of the requirement of assumption of jurisdiction to reopen the case under section 65 of the Ordinance.

11. As a result of the foregoing, the departmental appeal is upheld. The order of the learned Commissioner Appeals is vacated. However, since other grounds of appeal remained un-adjudicated upon, the case is remanded back to the Commissioner Appeals for decision on merits.

12. The departmental appeal succeeds.

C.M.A./100/Tax (Trib.)Appeal succeeded.