I.T.A. No.321/KB of 2004, decided on 28th April, 2006. VS I.T.A. No.321/KB of 2004, decided on 28th April, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2729 (2006)

Income Tax Ordinance (XLIX of 2001)---

----S. 122---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Assessment finalized under S.62 of the Income Tax Ordinance, 1979 on 29-5-2002 was cancelled under S.122 of the Income Tax Ordinance, 2001 being erroneous and prejudicial to the interest of Revenue---Validity---Assessing Officer had passed the order under S.122 of the Income Tax Ordinance, 2001 without specifying specific provision within ken of S.122 of the Income Tax Ordinance, 2001---Conceivable direction led to the existing provision of S.122 (5A) of the Income Tax Ordinance, 2001 but the same had been introduced on 17th June, 2003 vide Finance Act, 2003---Cogitation mentioned in order under S.122 of the Income Tax Ordinance, 2001 did not stand covered by any statutory provision in S.122 of the Income Tax Ordinance, 2001, existent on the juncture while the assessment was framed---Order framed under S.122 of the Income Tax Ordinance, 2001 amounted to casus omissus as such was not sustainable under law---Order passed under S.122 of the Income Tax Ordinance, 2001 was not livable on legal plane and was cancelled and order passed under S.62 of the Income Tax Ordinance, 1979 was restored.

2005 PTD 1316 and I.T.A. No.1849/KB of 2093 rel.

Sheikh Jalaluddin, F.C.A. for Appellant.

Muhammad Ali Indhar, D.R. for Respondent.

ORDER

S.A. MINAM JAFRI (ACCOUNTANT MEMBER).---Appeal has been tiled at the instance of assessee a private limited company. Principally assessee-appellant has taken up following issues before this Tribunal:--

*That the learned CIT(A) is not justified in upholding the assessment order passed by the Learned IAC under section 122 of Income Tax Ordinance, 2001.

*That the learned CIT(A) is not justified in upholding the action of the learned IAC under section 122 of the Income Tax Ordinance, 2001, in disallowing the expenses amounting to Rs.9,017,596.

*That the learned CIT(A) has erred in upholding the action of the learned IAC according to which he wrongly asserted that the expenses amounting to Rs.9,017,596 were neither claimed nor incurred. The expenses were genuinely incurred, made to verifiable parties and pertain to the business of the appellant.

2. Brief facts depict that appellant filed appeal before the Tribunal against the order passed by the learned CIT(A), dated 26-3-2003. The Tribunal remanded back the appeals vide order I.T.As. Nos. 451, 452 and 453, dated 20-9-2003 with the direction to decide the same on merits. While framing assessment under section 122 of Income Tax Ordinance, 2001, learned I.A.C. disallowed the expenses amounting to Rs.9,017,596 claimed as deferred expenses. In appeal, learned CIT(A) observed that the assessment record shows that in the preceding years 1998-99 and 1999-2000, the expenses were disallowed by the IAC under section 122 of the Income Tax Ordinance, 2001, and the appeals filed by the appellant, against these orders have been withdrawn. Learned CIT(A) upheld the order under section 122 of the Ordinance by observing as under:

"That onus was upon the appellant to prove with details and documents of the expenses claimed to have been deferred, he has failed to discharge primary onus rest upon him, since no cogent evidence were submitted before IAC, hence disallowance of the expenses are justified hence order under section 122 of the Income Tax Ordinance, 2001 is therefore, upheld."

Assessee preferred an appeal before this Tribunal which was dismissed due to default vide order bearing I.T.A. No.32/KB of 2004, dated 11-5-2005. However, the same was recalled vide order No. M.A. (Recalling) No.446/KB of 2005, dated 22-3-2004.

3. During course of the current proceedings learned A.R. challenged the assessment on legal and factual plane. Regarding withdrawal of appeal assessment years 1998-99 and 1999-2000, he clarified that the assessment for the assessment years 1998-99 and 1999-2000 was cancelled under section 122 of Income Tax Ordinance, 2001 by the I.A.C. Range-I, Companies-IV under sections 62/66-A of Income Tax Ordinance. As a result orders under sections 62/66A of Income Tax Ordinance, 1979, dated 29-5-2001 were restored. Since the issues stood sorted out by I.A.C. hence relevant appeal before CIT(A) became infructuous and was to be withdrawn.

However commenting upon appeal under consideration, on legal plane he referred that in the order, the IAC specifically mentions: "perusal of the record shows that the assessment for the assessment year 2000-2001 finalized under section 62 on 29-5-2002 at net income of Rs.2,502,526, is incorrect/erroneous as far as it is prejudicial to the interest of Revenue....".

Also same impugned order under section 122 of Income Tax Ordinance, 2001 mentions:-

"As the assessment framed is incorrect, erroneous as far it is prejudicial to the interest of Revenue, therefore, a show-cause notice under section 122 of the Income Tax Ordinance, 2001 was issued -----:

3. Learned A.R. pointed out that above narration leads to conclusion that Assessing Officer has finalized assessment under section 122(5A) of Income Tax Ordinance, 2001. Whereas action under section 122(5A) of the Income Tax Ordinance, 2001 is not valid. He urged that under the circumstances the assessment is liable to be cancelled.

4. Learned D.R. supported the order of the learned CIT(A) and exhorted to maintain the same.

5. Divergent viewpoints have been heard and matter has been considered. In the instant case, Assessing Officer has passed the order under section 122 without specifying specific provision within B ken of section 122 of Income Tax Ordinance, 2001. The provisions of section 122(1) envisage it's the scope as under:--

"122(1). Subject to this section, the Commissioner may amend an assessment order treated as issued under section 120 or issued under section 121 (Commas and words etc. inserted by Finance Ordinance, 2002, dated June, 15, 2002) or issued under sections 59, 59-A, 62, 63, 95, 65 of the repealed Ordinance, by making such alterations or additions as the Commissioner considers necessary (words "to ensure that the taxpayer is liable for correct amount of tax for the tax year to which the assessment order relates" omitted by Finance Act, 2003, dated June 17, 2003.")

6. As far as definite information is concerned the provision of section 122(5) was inserted vide Finance Act, 2003, dated 17-6-2003, The said provision reads as under:

"S. 122(5). An assessment order in respect of a tax year, or, an assessment year, shall only be amended under subsection (1) and an amended assessment for that year shall only be further amended under subsection (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that".

Subsection 5A was inserted by Finance Act, 2003, dated 17-6-2003 which reads as under:--

"(5A) Subject to subsection (9), the Commissioner may amend or further amend, an assessment order, if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of Revenue."

7. In the instant case the order under section 122 categorically mentions "perusal of the record shows that the assessment for the assessment year 2000-2001 finalised under section 62 on 29-5-2002 at net income of Rs.2,502,526 is incorrect/erroneous as far as it is prejudicial to the interest of Revenue."

Again the Assessing Officer repeats similar narration in the same order under section 122: "as the assessment framed is incorrect, erroneous as far it is prejudicial to the interest of Revenue."

8. In the circumstances Doctrine envisaged in ANIMUS AD SI OMINA JUSDUCIT (Intention attracts all law to itself) which is well established in jurisprudence and is attracted in the instant case. Hence conceivable direction leads to the existing provision of section 122(5A) of Income Tax Ordinance, 2001. But the said provision has been introduced on 17th June, 2003 vide Finance Act, 2003.

9. Cogitation mentioned in the impugned order under section 122 of Income Tax Ordinance, 2001, does not stand covered by any statutory provision in section 122 of the Income Tax Ordinance, 2001, existent on that juncture while the assessment was framed.

In the circumstances the decision of the Honourable High Court of Sindh reported as 2005 PTD 1316 being relevant, provides guidance. The ad rem extract reads as under:--

"that the provision contained in subsection (5A) of section 122 of the Income Tax Ordinance, 2001, inserted with effect from 1-7-2003, is not retrospective in operation. Consequently, the assessments finalized before 1-7-2003 cannot be reopened/revised/amended in exercise of jurisdiction under the above provisions. Admittedly, all the notices impugned in these petitions are in respect of the assessments finalized before 1-7-2003, and consequently all the impugned notices are without notices are without jurisdiction, illegal and void ab initio. All the notices impugned in these petitions are there-fore, hereby quashed along with proceedings in pursuance thereof.

The petitions are allowed accordingly."

Thus drawing analogy from Sindh High Court decision, the order under section 122 framed by the Inspecting Additional Commissioner amounts to CASUS OMISSUS as such is not sustainable under the law. Also this Tribunal while adjudicating an appeal pertaining to the order passed under section 122 of Income Tax Ordinance, 2001 vide order No. I.T.A. No.1849/KB of 2003 (Assessment year 2002-2003), dated 7-6-2003 gave verdict as under:--

"We are inclined to agree with the view of the A.R of the assessee appellant that the apparent reason for framing the order under section 122 appears to be that the original order under section 62 was found by the I.A.C. to be erroneous and prejudicial to the interests of Revenue and, therefore, the judgment of the Hon'ble High Court of Sindh, being relied upon by the A.R. of the assessee appellant, squarely applies to the facts and circumstances of this case."

Hence without going into further details, the order under section 122 of the Income Tax Ordinance, 2001 passed by I.A.C. is not livable on legal plane and is hereby cancelled restoring thereby impugned order under section 62 of the repealed Income Tax Ordinance, 1979.

Appeal is disposed of as referred above.

C.M.A./131/Tax (Trib.)Appeal accepted.