M.As. (Rect.) Nos.307/KB and 308/KB of 2004, decided on 24th March, 2005. VS M.As. (Rect.) Nos.307/KB and 308/KB of 2004, decided on 24th March, 2005.
2006 P T D (Trib.) 62
[Income-tax Appellate Tribunal Pakistan]
Before Muhammad Ashfaq Balouch, Judicial Member and S. A. Minam Jafri, Accountant Member
M.As. (Rect.) Nos.307/KB and 308/KB of 2004, decided on /01/.
th
March, 2005. (a) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Rectification of mistake ---Assessee contended that while adjudicating its appeal the arguments, reliances and the case-law had not been mentioned, discussed and adjudicated upon by the Tribunal which constitutes mistake apparent from record warranting recalling the earlier order and re-adjudicating the appeals---Validity---Mistake of non-mentioning of the order sheet entries in their true perspective and not instancing the arguments and the case-law were apparent on record---Such position had resulted into incomplete adjudication of grounds, arguments and reliances---Case-law relied upon by the assessee in respect of scope of rectification application was squarely applicable and when the grounds, arguments and reliances were not mentioned, discussed and adjudicated upon the order was rectifiable---Confirmation of rejection of book version had been made without examining the documents filed and submissions made which actuality had escaped the attention of Appellate Tribunal---Mistake of law had arisen in orders which was floating on the surface of the record and warranted remedial approach to issue under consideration---All the orders passed by the Appellate Tribunal were recalled to be heard afresh.
2002 PTD (Trib.) 1583; 1999 PTD (Trib.) 3892; 2003 PTD (Trib.) 625; 2000 PTD (Trib.) 2193; 1980 PTD (Trio.) 74; 2000 PTD (Trib.) 2157; 2000 PTD 2407 and 79 Tax 108 (Trib.) rel.
(b) Income Tax Ordinance (XXXI of 1979)---
----S. 62---Assessment on production of accounts, evidence etc.---Where books of accounts were produced in support of declared version same could not be discarded merely on account of history without pointing out the specific defects in the books of accounts.
(c) Income Tax Ordinance (XXXI of 1979)---
----S. 62---Assessment on production of accounts, evidence etc.---Notice under S.62 of the Income Tax Ordinance, 1979 was issued before production and examination of books of accounts---After examining the books of accounts no further notice under S.62 of the Income Tax Ordinance, 1979 was issued---In the given facts and circumstances the earlier notice became irrelevant and infructuous.
2003 PTD 625 rel.
(d) Income Tax Ordinance (XXXI of 1979)---
----S. 62---Assessment on production of accounts, evidence etc.---Notice issued before production and examination of books of accounts was irrelevant and rejection of book version without issuing any notice under S.62 of the Income Tax Ordinance, 1979 after examination of the books of account lacked judicial support and amounted to `CASUS OMISSUS'.
(e) Income tax---
----Res judicata---Each year was an independent assessment year and principle of res judicata did not apply to -the income tax proceedings.
(f) Income tax---
----Res judicata---Principle of res judicata could not operate in Income Tax proceedings and every assessment had to be finalized on its own merits.
(g) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Rectification of mistake---Court or Tribunal can be said to have an inherent power and jurisdiction to rectify a wrong or correct an error committed by itself.
ITAT (1965) 58 ITR 626 (AH) rel.
(h) Income Tax Ordinance (XXXI of 1979)---
----S. 156---Rectification of mistake---Although the Tribunal has no power to review its own order yet it can certainly correct its mistakes by rectifying the same in case it is brought to its notice that the' material which was already on record before deciding the appeal on merits was not considered by it.
(1986) 158 ITR 755 rel.
Shahid Perveaz Jami for Appellant.
Shaikh Muhammad Hanif, D.R. for Respondent.
Date of hearing: 16th February, 2005.
JUDGMENT
S. A. MINAM JAFRI (ACCOUNTANT MEMBER).---Miscellaneous rectification applications have been filed at the instance of the assessee company in respect of I.T.A. No.1650/KB of 2002, I.T.A. No.1651/KB of 2002 and I.T.A. No.685/KB of 2003. It has been pointed out that while adjudicating its appeal the arguments, reliances and the case-law have not been mentioned, discussed and adjudicated upon which constitutes mistake apparent from record warranting recalling the earlier order and readjudicating the appeals.
2. We have heard the disparate views of learned AR of the assessee as well as learned D.R. Application, arguments of the assessee and the case record have been examined and considered.
3. Learned AR of the assessee pleaded that during the course of original proceedings certified copies of order sheet entries for all the three years under appeal were filed to demonstrate that in the first two years the statutory notice under section 62 was not issued at all whereas in the third year it was issued before the production and examination of accounts and when the same were produced and examined no notice was issued afterwards. He pleaded that reliance was made on the following reported judgments for annulling' the assessment in the given circumstances.
2002 PTD (Trib.) 1583
1999 PTD (Trib.) 3892
2003 PTD (Trib.) 625
However, arguments, contents of the order sheet entries and the case-law relied upon have not been mentioned, discussed and adjudicated upon which had led to above referred adjudication under consideration.
4. Learned AR referred to the order sheet entries and highlighted the contents thereof. He pointed out that for the assessment year 1999-2000 the relevant order sheet entries read as under:--
"22-3-2000Mr. Muhammad Saleem from Ebrahim & Co. attends and produces books of accounts and details and documents vide Letter No. S-90/T-0549/2000. Adjourned for want of -other details and explanations to 30-3-2000 and also regarding rejection of trading result in the past.
30-3-2000Mr. Muhammad Saleem from Ebrahim & Co. attends and
produces explanation and certificate regarding 25(c), 24(ff), 24(fff), 24(b) and 24(c) vide Letter No.S-90/T-0567/2000, dated 29-3-2000. The position regarding trading result is same as in the past. Case discussed and reserved for order. "
Learned AR pointed out that the order sheet entry, dated 22-3-2000 has been signed by counsel of the assessee whereas there is no signature of the AR on the order sheet entry, dated 31D-3-2000 to substantiate his presence and authenticate the proceeding.
5. It was further alleged that words of "and also regarding rejection of trading result in the past" have been inserted afterwards in the order sheet entry, dated 22-3-2000 as evident from the sequence of the sentence and in the difference of writing pattern. Secondly, even otherwise the said sentence in the order sheet entry is neither a substitute of statutory notice under section 62 nor contains specific defects in the books of accounts produced on the said date; thirdly, order sheet entry, dated 30-3-2000 does not contain the acceptance of the AR regarding rejection of book version and fourthly the said entry is not signed by the A.R. so his attendance and acceptance remain unsubstantiated and contrary to record.
6. For the assessment year 2000-2001 the AR has pointed out that the relevant order sheet entry reads as under:--
| "18-5-2001 | Present A.R., produced books of accounts consisting of cash book and ledger along with supporting vouchers. Asked to explain reason for decline in GP rate. Adjourned to 28-6-2001. |
| 28-6-2001 | Present A.R. furnished letter No.FIL/LAIQ/ITA dated 28-6-2001 giving reason for decline in GP' rate, certificate that no exports have been made during the year. Case discussed. Cash book and ledger returned." |
Learned A.R. argued that this year again there is no notice under section 62 and the aforesaid order sheet entry seeking reason for decline in GP rate is neither substitute of a specific notice under section 62 nor constitutes specific defects to be pointed out in the books of accounts. The entry is a general observation and even does not confront with the rejection of account and the proposed treatment. For this year, even acceptance by the attending A.R. cannot be alleged in the absence of any order sheet to that effect.
7. For the assessment year 2001-02 the AR of the assessee pointed out that as per body of assessment order notice under section 62 was issue on 21-5-2002 whereas books of accounts were produced on 12-6-2002 as evident from the following order sheet entry:
"12-6-2002Mr. Laeeq Ahmad attended. Filed partial details and produced books of accounts comprising of cash book; ledgers and vouchers without any vouchers. Case adjourned to 17-6-2002 for presenting balance details and vouchers.
17-6-2002Mr. Laeeq Ahmad attended. Filed explanation letter, dated 17-6-2002 along with annexures and also produced certain vouchers, examined along with books and returned.
Learned AR exhorted that the order sheet entries and body of the assessment order depict that assessment was completed without issuing any notice under section 62 after examining the books of accounts on 12-6-2002 and 17-6-2002 and urged therefore the notice issued on 21-5-2002 before the production and examination of books of accounts becomes irrelevant/infructuous as per judgment of the Appellate Tribunal reported as 2003 PTD 625.
8. In support of the scope of rectification provision the AR relied upon the following judgments:
(1) 2000 PTD Trib. 2193
Full Bench has been constituted on the request of the learned counsel for the applicant/assessee to consider if the order sought to be rectified and recalled are at variance with the earlier orders of the Tribunal and the mistake of law apparent on record has taken place, whereby the relevant provisions of law have been wrongly applied and the earlier decisions of the Tribunal as well as the authoritative pronouncement of the Honourable Supreme Court of Pakistan have been ignored.
(2) 1980 PTD 74 Trib. Page 81
Appeal originally decided by the Tribunal without considering affidavit of the appellant. On rectification application the order was recalled for rehearing with the following observation in para. 4:
.any mistake which is apparent from the record and goes to very root of the case and if rectified could change the fate of the case and could in fact reverse the view taken earlier, would certainly be a mistake as envisaged under section 35. Therefore, if such a mistake is discovered, the Tribunal is not only competent but bound to recall its earlier order."
(3) 2000 PTD (Trib.) 2157
"However, it is obvious from the record that assessee has furnished two judgments which he considered were relevant to the facts and circumstances, but the Tribunal had not discussed it not being impressed for its relevance. However, in the absence of any such observation and for the substantial justice we have no hesitation in recalling our order to this extent."
(4) 2000 PTD 2407 (HC)
16. The jurisdiction to rectify mistakes apparent on the face of record is obligatory. Once such mistake is pointed out, the Authority is under a mandatory obligation to rectify the mistakes brought to its knowledge (see Hirday v. ITO 1978 ITR 26 (SC of India). Also is Sidhramappa Andannappa Manvi v. CIT Bombay (1952) 21 ITR 333 the Bombay High Court has held that once the mistake which is apparent on the face of record is detected by the Authority, the power to correct the mistake is wider and not confined to only such rectifications which are available and floating on the face of record. In other words, once the mistake is corrected all consequential orders can be passed. In Maharana Mills (Pvt.) Ltd. v. ITO (1959) 30 ITR 350 the Indian Supreme Court was pleased to hold that while looking into any mistake apparent on the face of record it was not necessary to look only at the order. The term "record" contemplated proceedings, evidence and record which were relatable to the order of assessment including the applicable law determining the error. In India, section 154 of the Indian Income Tax Act, 1961 is paramateria with our section 156 of the 1979 Ordinance. In one case reported in (1969) 73 ITR 287 at page 2298 and 300 the scope of rectification has been spelt out to be elimination of errors even to the extent of cancellation of the whole order, if necessary
(5) 79 Tax 108 (Trib.)
Decision of a Division Bench is binding on another Division Bench.
9. The AR concluded that the mistakes of non-mentioning of the contents of the order sheet entries in their true perspective, arguments thereof, case-law relied thereof are apparent from record.
10. Learned AR specifically assailed the finding of rejection of account which was confirmed in view of the fact that in the preceding years, the rejection of book version was confirmed at the level of ITA. He vehemently argued that substantial evidence in respect of comparative date was furnished during the course of appeal in which it was demonstrated that purchases are verifiable as major part of it are imports and purchased from fully verifiable parties. Learned AR further expanded that during the .appeal proceeding it was established that gross profit rate had decreased due to the fact of decreasing or constant selling prices and increasing cost of sales. It was emphasized that each year is self-contained unit for assessment and principle of res judicata does not apply in the income tax regime. The learned AR epitomized that confirmation of rejection of book version has been made without examining the document filed and submission made have escaped attention. Probably the reason was that issue of notice under section 62 was rejected and ground taken was not accepted. He therefore, prayed that mistake has arisen which is floating on the surface of the record and may be taken cognizance of in the interest of justice. He opined that resultantly the principle of natural justice and propriety warrants that the earlier orders are recalled and the appeals are accepted as warranted as per grounds, arguments and reliances.
11. On the other hand learned DR has opposed the application. Learned DR pointed out that the assessee has history of rejection of accounts and the same has been upheld upto the Tribunal in the preceding year. Considering the past history there is no apparent mistake in the order of the Appellate Tribunal which could' be rectified and appeals have been rightly dismissed after considering all the aspects. Therefore, rectification application has no merits and ought to be rejected.
12. The AR exercising his right of rebuttal underscored that each year is an independent assessment year. Further in an account case where books of accounts are produced in support of declared version the same cannot be rejected merely by making reliance on history without pointing out specific defects in the books of accounts through a notice under section 62 nor confronting the proposed pattern of assessment. Whereas in all the three assessment orders Assessing Officer has admitted and acknowledged that the books of accounts were produced so the declared version cannot be rejected without issuing mandatory notice under section 62 containing specific defects in the books of accounts. Therefore, reliance merely on history is irrelevant and out of context.
13. Issues have been premeditated in context of our earlier orders proceedings and considering arguments both the sides. We have found that the- certified copies of the order sheet entries filed during the earlier hearing are available on record as well as case-law relied upon. Therefore, the mistake of non-mentioning of the order sheet entries in their true perspective and not instancing the arguments and the case-law thereof, are apparent on record. Such position has resulted into incomplete adjudication of the grounds, arguments and reliances. The case-law relied upon by the AR in respect of scope of rectification application is squarely applicable and when the grounds, arguments and reliances are not mentioned, discussed and adjudicated upon the order is rectifiable.
14. It is admitted position that assessee has history of rejection of account but it is again a settled principle that each year involves independent assessment and where books of accounts are produced in support of declared version the same cannot be discarded merely on account of history without pointing out the specific defects in the books of accounts.
15. Issuance of notice under section 62 has been dealt in our earlier orders as such any relevant deviation to that extent in this behalf is not possible within purview of section 221 of Income Tax Ordinance, 1979.
16. Assessing Officer has made reliance on the order sheet entries and has termed the same as acceptance of rejection of declared version by the then counsel of the appellant. Whereas contents reproduced in the earlier part clearly indicate that in the assessment year 1999-2000 there are no signatures of the AR on the order sheet entry, dated 30-3-2000 so the question of any admission does not arise. Even otherwise, the words "the position regarding trading result is the same as in the past" do not amount to admission of rejection of declared version. Whereas in the case of assessment year 2000-2001 vide order sheet entry only reasons for decline in GP rate were sought and there is no order sheet entry to limn the position that the attending AR had accepted the rejection of accounts.
17. It is apparent that in the assessment year 2001-2002 the notice under section 62 was issued on 21-5-2002 before production and examination of books of accounts on 12-6-2002 and 17-6-2002. After D examining the books of accounts on the aforesaid dates no further notice under section 62 was issued. In the given facts and circumstances the earlier notice, dated 21-5-2002 becomes irrelevant and infructuous. In 2003 PTD 625 identical issue was involved and the honourable Division Bench gave the following finding:
"(8) Reverting to the facts of the case what happened was that prior to examination of books of accounts, a notice was issued by the Assessing Officer, mentioning section 62 on the top of the said notice, calling for certain documents and details from the assessee which was complied with. Thereafter, books of accounts were scrutinized but no specific defects were pointed out by the Assessing Officer for his disagreement with such accounts. Rather those were discarded by the Assessing Officer by advancing general remarks. In fact the philosophy for issuance of notice under section 62, after examination of books of accounts, is to seek evidence on specific points before disagreement with such accounts. But in the instant case the evidence has been sought prior to examination of books of accounts meaning thereby that no specific defects could be pointed out by the Assessing Officer from the books of accounts maintained by the assessee. It thus stands established that no notice as contemplated by law was issued which was sine qua non for discarding the returned version. We, therefore, hold that the notice issued prior to examination of books cannot be equated with the notice to be issued in terms of proviso to subsection (1) of section 62 which the law requires to be issued before disagreeing with the declared results. This being a mandatory provision of law that Assessing Officer is bound to follow such statutory obligation and violation thereof naturally render the assessment framed to be ab initio illegal void.
(9) In view of foregoing discussion as well as the ratio and the principle decided in the reported case we are persuaded to hold that the declared result were not lawfully discarded as a result of which the Assessing Officer is directed to accept returned version of the assessee. Consequently, the order passed by the first appellate authority stands vacated. This would result into acceptance of the assessee's appeal on legal plane."
18. Comparative data pertaining. to verifiable selling prices since 1991-2003 and break-up of cost of production indicated almost constant or lower selling prices as against continuously rising cost of production. The details of purchases imports constitutes 83.7% and the balance from organized sector which his duly recorded and vouched. Learned AR also mentioned that in the assessment order of 2000-2001 it was accepted that there was no increase in selling prices during last three years as against substantial increase in items of cost of production.
It is evident from company's audited accounts that declared G.P. rate varies between 20.25% in 1988-89 to 24.49% in 1991-1992 and declines to 20.32% in 1994-95, increases to 20.72% in 1995-96, declines to 18.16% in 1998-99 and again increases to 18.97% in 1999-2000, the year under review. As against this pattern assessment has been made at constant G.P. rate of 24.49% in the six years 1995-96 till 1999-2000 which prima facie remains uncorroborated.
19. It is conspicuous from comparative figures that GP rate of 24.4% in 1991 the Gross Profit was only Rs.6.073 million while in the year 1999-2000 under reference GP rate of 18.97% with Gross Profit of Rs.8.187 million. This pattern seems to be in line with business policies for expanding sales and total profit by reducing selling prices which is also manifested by selling price figures.
A glance through statistics during the proceedings delineates that applicant's selling rates have decreased or have shown no improvement whereas cost of sales have shown substantial increase. This evidence too has escaped attention of this Tribunal. Also in context of circumstances the notice, dated 21-5-2002 issued before production and examination of books of accounts is irrelevant and therefore rejection of book version E without issuing any notice under section 62 after examination of the books of accounts on 12-6-2002 lacks judicial support and amounts to `CASUS OMISSUS".
20. Although the rejection of book version was confirmed at the level of ITAT yet assessee appellant's plea is not without merit that substantial evidence in respect of comparative data was accounted during the course of appeal in limine thereby that purchases are verifiable since major position comes from imports as well as from verifiable parties. During the appellate proceedings factum stands established that gross profit rate had decreased due to decreasing or constant selling prices and increasing cost of sale. The position could not be controverted by the learned DR. Besides each year is an independent assessment year and principle of res judicata does not apply in the Income Tax proceedings. ItIF is ostensible that confirmation of rejection of book version has been made without examining the document filed and submission made. This actuality has escaped the attention of ITAT. Thus mistake has arisen which is floating on the surface of the record and warrants remedial approach to the issue under consideration.
21. Matter has been examined. It is an avowed position of record that comparative charts in support of acceptance of Trading version were furnished during the appellate proceedings which indicate that so far as assessment year 1999-2000 is concerned out of total purchases the applicant has imported goods to the tune of 83.7% whereas the other purchases are also from organized sector and duly recorded and vouched. The chart furnished during 'the appeal also displays that applicant's selling rates have decreased or have shown no improvement whereas cost of sales have shown substantial increase. Similar is the situation for other two years. This primary evidence has escaped our attention. In the discrete background a case is thus palpable for rectification. We also feel that learned counsel has correctly argued that principle of res judicata cannot operate and every assessment has to be finalized on its own merits.
22. In the circumstances various citations also provide guidance. A Court or Tribunal can be said to have an inherent power and jurisdiction to rectify a wrong or correct an error committed by itself. (S.B. Singer and Sons v. ITAT (1965) 58 ITR 626 (AH).
It has also been held that failure to consider material on record rectifiable in CIT v. Mithalal Asgijynar (1986) 158 ITR 755 the Madhya Pradesh High Court laid down the principle that although the Appellate Tribunal has no power to review its own order yet it can certainly correct its mistakes by rectifying the same in case it is brought to its notice that the material which was already on record before deciding the appeal on merits was not considered by it.
23. Reckoning above discussion peculiar position a mistake of law has arisen in above orders. Hence, keeping in view the principles of justice all the orders passed in ITA Nos. 1650/KB of 2002, 1651/KB of K 2002, and ITA No.685/KB of 2003 for the assessment year 1999-2000, 2000-2001 and 2001-2002 are recalled to be heard afresh. This office is directed to refix the above appeal according to the roster.
C.M.A./432/Tax (Trib.)Order accordingly.