I.T.As. Nos.6691/LB to 6695/LB of 2005, decided on 31st August, 2006. VS I.T.As. Nos.6691/LB to 6695/LB of 2005, decided on 31st August, 2006., 2006 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2773 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 134---Appeal to Appellate Tribunal---Revisional jurisdiction of Inspecting Additional Commissioner---Scope---Assessee had questioned in appeal the entire proceedings initiated under S.66-A of Income Tax Ordinance, 1979 by Inspecting Additional Commissioner for relevant assessment years through consolidated order, on the ground that Revisional Authority had no `jurisdiction' to invoke provisions of S.66-A of Income Tax Ordinance, 1979 in the case---Assessee contended that jurisdiction to assess .a certain case had to be acquired before any further legal proceedings could be undertaken in that case and that before invoking action under S.66-A of Income Tax Ordinance, 1979, Inspecting Additional Commissioner should have been assigned the jurisdiction to assess the case of assessee by the C.B.R. under S.5-(1)(c) of the Ordinance and in the absence of such an order by the C.B.R., proceedings under S.66-A of the Ordinance would become void and nullity in the eyes of law---Assessee further contended that where any order was passed by any forum in excess of jurisdiction or abuse of jurisdiction then superior courts had treated such decisions as being without jurisdiction and void and held them as nullity in the eyes of law---Validity---Word `jurisdiction' as understood in common parlance, was a term of large and comprehensive import and would embrace every kind of judicial action; it was a legal right, power or authority by which the Courts and Judges take cognizance and decide cases-'Jurisdiction' should be first assumed before a matter could be decided by an authority---Proceedings under S.66-A of Income Tax Ordinance, 1979 in the present case, were invoked in a hurried manner by Inspecting Additional 'Commissioner ignoring the legal requirements of having proper `jurisdiction' of the case which was a fatal error not curable in the eyes of law---Proceedings initiated under S.66-A of Income Tax Ordinance, 1979 for all assessment years under appeal, therefore, had no validity in the eyes of law---Said proceedings were accordingly cancelled for lack of `jurisdiction'.

PLD 2005 SC 842 ref.

Mian Ashiq Hussain for Appellant.

Anwar Ali Shah, D.R. for Respondent.

ORDER

These five appeals filed by assessee, an individual, arise out of combined order passed by the learned Commissioner of Income Tax, Appeal Zone-V, Lahore, dated 25-7-2005, for the assessment years 1993-94 to 1997-98. Assessments framed for all the five assessment years under appeal were finalized under sections 62/138 of the repealed Income Tax Ordinance, 1979. Grounds of appeal filed by the appellant are common and these are listed as under:--

The exercise of revisional power by respondent No.2 under section 66A of the repealed Ordinance to revise assessment order passed by the Deputy Commissioner of Income Tax, Circle-E-11, Zone-E, Karachi and edifice built thereon is unlawful- liable to be annulled.

The duplicate assessment proceedings, while the original assessment order, dated 11-6-1996 in Circle-E-11, Zone-E, Karachi held the field, are liable to be annulled.

The Hon'ble Tribunal annulled the duplicate assessment at Lahore under the same fact and circumstances in the case of co-owner in the appellate order reported as 2005 PTD (Trib.) 805.

The learned Commissioner of Income Tax Appeals, Zone-V, Lahore, was not justified to pass order diverging from the order passed in Wealth Tax Appeals under the same facts and circumstances of the appellant's own case.

The estimate of GALV of the property at 16-Commercial Zone, Liberty Market, Lahore, was illegal and unjustified.

Addition of Rs.115,440 in the property income was unjustified and illegal.

In addition to above, the appellant also agitated the orders of the learned CIT(A) in assessment year 1993-94 on the following grounds:--

The addition made under section 13(1)(aa) at Rs.15,91,440 was contrary to law and facts of the case.

The addition made under section 13(1)(d) at Rs.8,408,560 was contrary to law and facts of the case.

2. Brief and relevant facts leading to instant appeals are that the assessee is an individual derives income from property and stitching receipts. Original assessments for the assessment years 1993-94 to 1997-98 were completed under sections 59A and 59(1) of the repealed Income Tax Ordinance, 1979. Subsequently, the assessments had been cancelled by the IAC vide order, dated 6-8-1999, on the grounds that the declared ALV of property measuring 1-Kanals, 2-Marlas situated at 16-C, Liberty Market, Lahore, let out to Messrs Saleem Fabrics at Rs.180,000 per annum, is too low as compared to parallel cases of properties at 97-B, 97-A, Gulberg-III and 9-Commercial Zone-, Liberty Market, Lahore, which were let out @ Rs.11.23, Rs.45 & Rs.23.08 per sq. ft. per month, as compared to assessee's declared rent @ Rs.3 per sq.ft. per month. Further, the lady assessee purchased property comprising basement with floor area, of 4795 sq. ft. in Arif Centre, Karachi, during the period relevant to the assessment year 1993-94 and gross value of Rs.15 lacs is found understated, keeping in view the rates of real estate in the area. Similarly, in the asst. years 94-95 to 97-98, gross value declared by the assessee was also found by the Assessing Officer to be understated. The IAC found that the lady assessee did not have sufficient funds to meet with the heavy investment. The IAC further observed that the assessee is permanent resident of Lahore but she filed returns at Karachi only to avoid proper taxation.

3. The assessee challenged the IAC's invocation of the provisions of section 66A before the learned ITAT, who vide I.T.As. Nos. 5415 to A 5419/LB of 1999, dated dismissed the assessee's appeal.

4. Proceedings were initiated by the Assessing Officer by issuing notice under section 61 which remained un-complied with. Notice under section 62 was then issued and in response to it, the assessee filed written reply which was found unsatisfactory by the Assessing Officer. Finally, the Assessing Officer issued notice under section 61 but the same remained un-complied with, hence the assessments for all the assessment years under appeal were finalized under section 63 after making certain additions including additions under section 13(l)(aa) at Rs.15,91,440 and under section 13(l)(d) at Rs.84,08,560 in the assessment year 1993-94. Total net income for the assessment years under appeals were computed as under:--

5. The lady assessee challenged the treatment accorded by the Assessing Officer before the CIT(A), who vide order, dated 18-4-2001 set aside all the assessments with the direction that notices under sections 61, 62 and 13 should be served on the assessee properly and the assessee be given proper opportunity to explain her position on the, matter. The assessee filed second appeal before the learned ITAT, challenging the setting aside of the assessments. Before the learned ITAT, a difference of opinion had arisen between the learned Members and the matter was then referred to the Hon'ble Chairman to resolve the dispute on the following issue:--

"Whether the facts and circumstances of the case, Judicial Member is justified in annulling the assessments?"

6. The matter was then referred to learned Accountant Member to resolve the issue. The learned Accountant member vide his order, dated 24-8-2002, upheld the setting aside order of the CIT(A) and dismissed the assessee's appeals.

7. To comply with the directions of the CIT(A), the Assessing Officer issued statutory notices under sections 61, 62 & 13(2) and the AR of assessee complied with these notices and filed written reply. The AR contended that the value of property at Asif Arcade, Karachi is according to DC rates notified for the area and also covered by Rule 207A of the I.T. Rules. The Assessing Officer found the reply, of the AR being devoid of any merit as, according to the Assessing Officer, no proof of investment was made and no convincing evidence was produced to refrain the Assessing Officer to make addition under section 13(l)(aa) amounting to Rs.84,08,560 in the assessment year 1993-94. The Assessing. Officer obtained statutory approval from IAC on 30-6-2003, to make addition under section 13(l)(aa). The Assessing Officer finally completed assessment for all the years by rejecting declared ALV of the properties and adopted ALV as in the original assessment order. The Assessing Officer also made additions under section 13(l)(aa) at Rs.15,91,440 and addition under section 13(1)(d) at Rs.84,08,560 in the assessment year 1993-94.

8. Being aggrieved, the assessee filed appeal before the learned CIT(A) agitating the treatment meted out by the Assessing Officer. It was the AR's contention before the CIT(A) that directions of the appellate authorities were not followed by the Assessing Officer as no adequate opportunity was provided to the assessee. It was contended by the AR that the additions made under sections 13(1)(aa) & 13(1)(d) in the assessment year 1993-94 were not justified as the assessee declared value of the property according to the DC rates notified for the area for purposes of stamp duty and additions made were also violation of Rule 207A of the Income Tax Rules. The assessee also contested GALV assessed for all the assessment years under appeal for the property at Liberty Market, Lahore, as unjustified as, according to the AR, it was assessed @ Rs.12 per sq. ft. in the case of other cases.

9. The learned CIT(A) after considering the arguments of the AR and after examining the record observed that proper opportunity was adequately accorded to the assessee, as per directions of the appellate authorities but the assessee had failed to substantiate his claim with the help of relevant documentary evidence. The learned CIT(A) finally found that the assessments for 1993-94 to 1997-98 having been found to be reasonably framed and legally tenable in law and he confirmed the assessment framed for all the years under consideration.

10. We have heard both sides and have examined the orders passed by the authorities below.

11. The learned AR of the assessee questioned the entire proceedings initiated under section 66A by the IAC for assessment years 1993-94 to 1997-98, through consolidated order, on the ground that the revisional authority had no "jurisdiction" to invoke the provisions of section 66A in the case. In this context, the AR. pointed out that the assessments had been finalized by the Assessing Officer in Karachi, which were subjected to action under section 66A by the IAC, who was posted in Lahore.

12. According to the AR, the jurisdiction to assess a certain ease has to be acquired before any further legal proceedings can be undertaken in a case. Dilating further, the AR stated that before invoking action under section 66A, the IAC concerned should have been assigned the jurisdiction to assess the case of the assessee by the C.B.R. under section 5(1)(c) of the Income Tax Ordinance, 1979 and in the absence of such an order by the C.B.R., the proceedings under section 66A became void and nullity in the eyes of law.

13. The AR further added that where any order is passed by any forum in excess of jurisdiction or abuse of jurisdiction than the superior Courts have treated such decisions as being without jurisdiction and void and held them as nullity in the eyes of law. To support his contention, the learned AR relied on the ratio of the case decided by the apex Court of the country and reported as (PLD 2005 Supreme Court 842), and for sake of reference, we produce the relevant extract as under:

"The question of jurisdiction of a forum is always considered to be very important and any order passed by a Court or a forum, having no jurisdiction, even if is found to be correct on merits, is not sustainable. The jurisdiction of a Court lays down a foundation stone for a judicial or quasi-judicial functionary to exercise its powers/authority and no sooner the question of jurisdiction is determined in negative, the whole edifice, built on such defective proceedings, is bound to crumble down as held in the case of Pearey Lal v. Nanak Chand (AIR 1948 PC 108), Perveaz Igbal v. Muhammad Hanif (1979 SCMR 367), Chief Settlement Commissioner v. Muhammad Fazil (PLD 1975 SC 331)."

14. That AR also staled that in case of a formal order assigning jurisdiction to IAC was available on the assessment record, the same should be produced for perusal of the Bench. A number of adjournments were given to the learned DR to produce the relevant record and the notification, if any, by the C.B.R. assigning jurisdiction to the IAC for invoking the section 66A, as provided in section 5(1)(c) but the DR was unable to produce any documentary evidence in support of the availability of jurisdictional order with the IAC in the case. The learned AR also brought to our notice that in the wealth tax case of the co-owner of the property which had been subjected to action under section 17-B of the Wealth Tax Act, the Hon'ble ITAT vide its order 13-11-2004, cancelled the proceedings initiated under section 17-B, for lack of jurisdiction. Even in assessee's own wealth tax case for the assessment years 1993-94 to 1997-98, the learned CIT(A) Zone-V, Lahore, vide order, dated 18-4-2005, had cancelled the proceedings initiated under section 17-B, for lack of jurisdiction.

15. A final attempt was made by the Bench, to obtain from the RCIT, the jurisdiction order in the case vide our letter, dated 22-8-2006, but the RCIT vide his letter No. RCIT/J-2/Miscellaneous/S.OI/959, dated 28-8-2006, has replied inter alia, that "the case of the assessee was transferred from the Southern Region, Karachi, to this Region on the basis of `inherent jurisdiction', so no specific jurisdictional order was required. On receipt of the record, the same is transferred to the CIT, Zone-B, Lahore, for necessary action at his end".

16. In the above context, there is no room for any doubt regarding absence of jurisdiction with the IAC, Zone-B, Lahore, to exercise his revisionary powers under section 66A of the repealed Ordinance. It is pertinent here to reproduce the authoritative pronouncements of the superior judiciary on the word "jurisdiction" which simply means "power" though it bears slightly the narrower sense of "power to decide".

17. In other words, the word "jurisdiction" as understood in common parlance is a term of large and comprehensive import and would embrace every kind of judicial action. Broadly stated, it is a legal right, power or authority by which the Courts and Judges taken cognizance of and decide cases. The superior Courts have also held that "jurisdiction" should be first assumed before a matter can be decided by an authority.

18. Section 66A of the repealed Ordinance, 1979, gives powers to the revenue authorities to enhance/modify the tax liability of an assessee in case his assessment order is erroneous and prejudicial to the interests of revenue. Invariably, the assessee is burdened with substantial tax liability, in view of which, it is "incumbent" upon the assessing authorities to exercise the revisional jurisdiction with utmost care and the methodology laid down for exercise of the powers under sections 66A should be strictly adhered to.

19. After due consideration of the matter, in our judgment, it appears that the proceedings under section 66A were invoked in a hurried manner by the IAC, ignoring the legal requirements of having proper "jurisdiction" of the case which is, in our view, is a fatal error not curable in the eyes of law, in view of which, proceedings initiated under section 66A for all the assessment years under appeal have no validity in the eyes of law, considering a number of judgments of the superior Courts in this regard and the proceedings initiated are accordingly cancelled for lack of "jurisdiction" and the original orders passed under sections 59A and 59(1) of the repealed Income Tax Ordinance, 1979 are hereby restored.

20. The appeals of the assessee for all the years under consideration succeed in the manner and to the extent as dilated supra.

H.B.T./168/Tax (Trib.)Appeals accepted.