I.T.A. No. 5795/LB of 2005, decided on 24th January, 2007. VS I.T.A. No. 5795/LB of 2005, decided on 24th January, 2007., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1226 (2007)

2007 P T D (Trib.) 1226

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Istataat Ali, Accountant Member

I.T.A. No. 5795/LB of 2005, decided on 24/01/2007.

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

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---After appeal, no order under S.62 of the Income Tax Ordinance, 1979 existed to be modified under S.122(5A) of the Income Tax Ordinance, 2001.

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

----S.66A(1A)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Before insertion of subsection (1A) in S.66A of the Income- Tax Ordinance, 1979, once an appeal was filed, provision to S.66A of the Income Tax Ordinance, 1979 could not be invoked; after insertion of subsection (IA) in S.66A of the Income Tax Ordinance, 1979 in 1991, the position changed as it was provided that only that part would merge in the appellate order which was appealed against or on which any finding was given by the Appellate Authority---Law as existing prior to 1991 and after insertion of subsection (IA) in S.66A of the Income Tat Ordinance, 1979 was interpreted accordingly---No Court assumed the position which was not available in S.66A of the Income Tax Ordinance, 1979 from 1979 to 1990---Had legislature intended to provide that erroneous order of the Assistant Commissioner of Income Tax was to be revised by his superior officer, it could have done so by an explicit provision as was done in S.5(1)(c) of the Income Tax Ordinance, 1979---Theory of complete merger as such arising from S.66A of the Income Tax Ordinance, 1979 before insertion of sub-section (IA) prevailed for 12 years after promulgation of Income Tax Ordinance, 1979 and the Courts interpreted the law as it was and not as it would have been after 12 years, similarly in S.122(5A) again, any parallel provision like S.66(1A) of the Income-Tax Ordinance, 1979 was missing and Appellate Tribunal interpreted the law accordingly.

I.T.As. Nos.825/KB to 829/KB of 2003 ref.

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

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Jurisdiction of Additional Commissioner---Order passed by the Additional Commissioner lacked jurisdiction as the original assessment order passed under S.62 of the Income Tax Ordinance, 1979 was made well before insertion of subsection (5A) of S.122 of the Income Tax Ordinance, 2001 as the same being substantive law did not have retrospective effect.

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

----S.122(5A)---Amendment of assessments---Use of words prospectively and retrospectively---Effect---Subsection (5A) of S.122 of the Income Tax Ordinance, 2001 being substantive piece of legislation could not operate retrospectively until and unless specifically provided to be so applied---Subsection (5A) of S.122 of the Income Tax Ordinance, 2001 had thus to be applied prospectively and not retrospectively.

I.T.As. Nos.837/KB and 838/KB of 2003; Order No. MA(AG) No.349 to 353/KB of 2004; I.T.As. No.825/KB to 829/KB of 2003; 2005 PTD 1316; 2006 PTD 734; I.T.A. No.846/KB of 2005 and 2006 PTD (Trib.) 2729 rel.

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

----S.122(5A)---Amendment of assessment---Jurisdiction---Powers to amend completed assessment order of Assessing Officer vests in the Commissioner---S.122(5A) of the Income Tax Ordinance, 2001 empowers the Commissioner to amend or further amend, an assessment order if he considers the order erroneous and prejudicial to the interest of Revenue---Only Commissioner had been vested with the jurisdiction to take action under S.122(5A) of the Income Tax Ordinance, 2001 on the basis of his personal examination and consideration of the case himself---Before the power under S.122(5A) of the Income Tax Ordinance, 2001 was exercised or delegated, the Commissioner must be satisfied on the materials-on record that the order, being erroneous, had caused prejudice to the interest of Revenue or was likely to cause such a prejudice.

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

----S. 122(5A)---Amendment of assessment---Nature of power---Section 122(5A) of the Income Tax Ordinance, 2001 vests power in the Commissioner in subjective terms---When an enactment vests discretion in any authority saying "if it appears", "if he is satisfied", "if he considers," that does not mean that it is a matter of only a subjective satisfaction as such authority has not to judge the circumstances appearing in the case in an objective manner.

2005 PTD (Trib.) 344 rel.

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

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Amendment of assessment by Additional Commissioner---Validity---Commissioner had not examined and considered the case record to formulate an opinion of his own to invoke the provisions of S.122(5A) of Income Tax Ordinance, 2001---Notice issued under S.122(5A) of the Income Tax Ordinance, 2001 by the Additional Commissioner of Income Tax was not sustainable in law and was without jurisdiction---Any subsequent proceedings under the said illegal notice shall be void and illegal---Commissioner must give his own reasons for his being satisfied that order passed by the Assessing Officer under S.62 of the Income Tax Ordinance, 1979 was prejudicial and erroneous to the interest of Revenue even before delegation of power--Assumption of jurisdiction by Additional Commissioner while passing order under S.122(5A) of the Income Tax Ordinance, 2001 was unlawful---If an acquiescence lacks jurisdiction, no amount of consent or acquiescence in the proceedings could invest any jurisdiction on him---First Appellate Authority rightly annulled the order passed under S.122(5A) of the Income Tax Ordinance, 2001 which was upheld by the Appellate Tribunal and appeal filed by the Department was dismissed.

2005 PTD (Trib.) 344; C.I.T. v. Gabriel India Ltd. 203 ITR 108; 2002 PTD (Trib.) 3027; 1999 PTD 2851; 1983 PTD 201; 1997 PTD (Trib.) 2137; 2003 PTD (Trib.) 1536; 1996 PTD (Trib.) 1069; 1984 PTD 137; 1996 PTD (Trib.) 750; Mrs. Anjuman Shaheen v. IAC of Income Tax Zone `A' 1993 PTD 1113; 1997 PTD (Trib.) 902; 2005 PTD (Trib.) 1536; 2004 PTD 440; 2001 PTD 3810 (Trib.); (1977) 109 ITR 229; 1991 SDTD 830; 203 ITR 108; Ujala Cotton Mills v. ITO etc. 1985 51 Tax 237; Glaxo Laboratories Ltd. v. IAC.PLD 1992 SC 549 =-1992 PTD 932; CIT East Zone, Karachi v. Atta Muhammad Faiz 1985 PTD 874; Mrs. Anjuman Shaheen v. IAC (1993) 68 Tax 160; Glaxo Lab. Ltd. v. IAC 66 Tax 74; A & B Food Ind. Ltd. v. CIT 1992 SCMR 663 = 1992 PTD 545; 2002 PTD 150; Messrs Sui Southern Gas Company Ltd.'s case Federal Tax Ombudsman Complaint No.1282-K of 2003; Constitutional Petition No.D-1879 of' 1994; I.T.As. Nos.837/KB and 838/KB of 2003; I.T.A. No.1165/KB of 2003; Order No. MA(AG) No.349 to 353/KB of 2004; I.T.As. No.825/KB to 829/KB of 2003; Sugar Refining Company Ltd. v. Irving 1905 AC 369; Messrs Monnoo Industries Ltd. v. C.I.T. 2001 PTD 1525; Constitutional Petition No.D-643 of 2004; 2001 PTD 2919 and 2002 PTD (Trib.) 358 ref.

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

----S.122(5A)---Amendmentof assessment---Expression "if he considers" in S.122(5A) of the Income Tax Ordinance, 2001 postulates a scrutiny by the Commissioner of all the relevant facts for holding that the order was erroneous and prejudicial.

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

----S.122(5A)---Amendment of assessment---Provisions of S.122(5A) of the Income Tax Ordinance, 2001 was so clear that no exception could be taken to this.

(j) Interpretation of statutes---

----If something is required to be done, it needs to be specifically enacted, as the law cannot be interpreted in anticipation---Plain language of law is to be adhered to and no intendment is permitted.

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

----Ss.210(1A) & 122(5A)---Delegation---Amendment of assessment---Legislature through enactment of subsection (IA) of S.210 of the Income Tax Ordinance, 2001 provided that no officer below the rank of Additional' Commissioner could be delegated powers by the Commissioner for the purposes of S.122(5A) of the Income Tax Ordinance, 2001---Delegation of power could not be in respect of orders passed by the Commissioner of Income Tax himself or by the Additional Commissioners as they could not revise/amend their own orders considering them erroneous as well as prejudicial to the Revenue---If they do so they will sit on their own judgments and it will be against the rule of law as no person could be a Judge in his own cause, otherwise the very purpose of insertion of subsection (1A) in S.210 read with S.122(5A) of the Income Tax Ordinance, 2001 will become meaningless.

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

----S.122(5A)---Amendment of assessment---Delegation of powers---Nature---Expression "if he (Commissioner) considers" used in S.122(5A) of the Income Tax Ordinance, 2001 by the legislature clearly spells out that the powers of the Commissioner to invoke the provisions of S.122(5A) of the Income Tax Ordinance, 2001 was wholly, solely and exclusively dependent upon to consider by himself which must be formulated on objective basis and it was not possible to translate, transform and pass on the same consideration and thinking what he himself could do for amending the order as it required continuous learning and experience which the Commissioner himself acquired in a period of time after the elevation and performing his duties as Commissioner of Income Tax---No substitute of knowledge and experience existed which could not be passed on to any other person just with a stroke of pen except what the Commissioner could do himself.

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

---S.122(5A) Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Assessment and amendment of the same order by the same authority---Validity---Original order under S.62 of the Income Tax Ordinance, 1979 was passed by the Additional Commissioner and the order under S.122(5A) of the Income Tax Ordinance, 2001 was also passed by the same authority i.e. Additional Commissioner of Income Tax---Equal authority could not revise/alter/ amend the order of co-jurisdiction/counterpart---Language of S.122(5A) read with S.210(1A) of Income Tax Ordinance, 2001 clearly showed that hierarchy of administration had been kept in view to conform revisional jurisdiction to well-established rule of law that a person could not be judge in own cause.

New Jubilee Insurance Company Ltd., Karachi v. National Bank of Pakistan, Karachi PLD 1999 SC 1126 rel.

(n) Constitution of Pakistan (1973)---

----Art.4---Income Tax Ordinance (XLIX of 2001), S.122(5A)---Right of individuals to be dealt with in accordance with law---Person should not be judge in his own cause---Due process of law as enshrined in Article 4 of the Constitution necessarily required that a person should not be judge in his own cause---If an Assessing Authority (whatsoever may his designation or grade) is given power to sit in his own judgment, it will be violative of supreme law of the land---Such authority is not even available to the superior judiciary of the country, let alone to be enjoyed by revenue authorities while exercising quasi - judicial functions.

Sandal Engineering (Pvt.) Ltd. v. IAC 2001 PTD 1467 and I.T.As. Nos.5763 and 5764/LB of 2004 rel.

Dr. Samra Ashraf, DCIT for Appellant.

Javaid Zakria for Respondent.

ORDER

Through this appeal, the Department has objected to the impugned order of the learned C.I.T. (A), dated 15-6-2005 for the assessment year 2002-2003 on the following grounds:---

2. That the learned C.I.T. (A) was not justified to decide the case without issuing notice under section 128(1) of the Income Tax Ordinance, 2001.

3. That the learned C.I.T. (A) was not justified to annul the order under section 122(5A) of the Income Tax Ordinance, 1979 by holding the same to be illegal and ab initio void, without any cogent reason.

2. Brief facts, as deduced from records, are that the appellant is a public limited company quoted on Stock Exchanges. The main business of the company is to manufacture and sale of Polyester Staple Fibres (PSF) and yarn. The assessee in this case has filed return of income for the year under consideration declaring net income at Rs.706,447,194 accompanied by audited statements of Account for the year ended 30-9-2001. The return of income represents the combined position of following merged companies as per Scheme of Arrangement duly approved by the Honourable Lahore High Court:---

1. Messrs Ibrahim Textile Mills Ltd.,

2. Messrs A.A. Textiles Limited.

3. Messrs Zainab Textile Mills Ltd.

4. Messrs Ibrahim Engery Limited.

The above companies have been merged with the assessee-Company. As per approval of the Lahore High Court the assets, liabilities and reserves of the above companies have been merged with Messrs Ibrahim Fibres with effect from October 1, 2000. The assessee declared income at Rs.706,447,194 which has been assessed at' a total income of Rs.780,261,231 by resorting to addition and disallownces aggregating to Rs.59,396,748. Being aggrieved and dissatisfied with the assessment order under section 62 of the repealed Income Tax Ordinance, 1979 passed on 16-5-2003 by the Additional Commissioner of Income Tax. The assessee filed first appeal before the learned C.I.T. (A).

3. Thereafter the Additional Commissioner of Income Tax sent the following show-cause notice, dated 4-12-2004 under section 122(5A) of the Income Tax Ordinance, 2001 to the assessee-Company:---

"As you are aware that your case has been transferred to Large Taxpayer Unit Lahore. Perusal of the record shows, that for the above referred year you were issued notice under section 122 by the Taxation Officer, Range V, Special Zone, Lahore vide his office letter No.281/.R-V, dated 17-11-2003 which was replied by you vide letter, dated 15-12-2003.

I have examined your case for the above referred year and have found that the assessment framed for the year under consideration is erroneous in so far as it is prejudicial to the interest of Revenue for the following reasons.

DEPRECIATION

I have examined the case and found that depreciation chart and schedule of fixed assets of Messrs Ibrahim Energy Limited revealed that you had allowed depreciation of Rs.126,709,181 for the assessment year 2002-2003 at the time of original assessment. As per Third Schedule to the Income Tax Ordinance, 1979 you are eligible to claim tax depreciation at Rs.36,846,871. The order passed under section 62 for the above referred year is erroneous in so far it is prejudicial to the interest of Revenue.

You have claimed in your above referred reply that the depreciation was not charged for the years when the income of the assessee was exempt. This contention is misconceived. Depreciation has to be claimed from the very first year regardless of the status of income, whether it is exempt or taxable. Therefore, for the year under consideration depreciation had to be allowed on Written Down value as computed, hence you were allowed depreciation erroneously and hence the order is to be amended under section 122(5A) by making addition of Rs.89,862,310 (Rs. 126,709,181 minus Rs.36,846.871) to your already assessed income.

WRONG ALLOWANCE OF FINANCIAL CHARGES

You had claimed financial charges of Rs.23,974,878 which were erroneously allowed to you by the then Assessing Officer. You are aware that the financial charges cannot be allowed as an expense and had to be added back in the computation of your total income. Since this was not done. I intend to make amendment to your order for the assessment year 2002-2003 accordingly.

WRONG ALLOWANCE OF UNABSORBED DEPRECIA TION OF MESSRS ZAINAB TEXTILE MILLS LTD.

You had claimed and were allowed unabsorbed depreciation of Messrs Zainab Textile Mills Ltd. at the time of merger at Rs.82,783,287. You may be reminded that this depreciation was expressly disallowed under section 34-A of the Repealed Income Tax Ordinance, 1979. Since this was not done, I intend to make amendment to your order for the assessment year 2002--2003 accordingly.

4. You are requested to file your explanation, if any, within seven days of the receipt of this notice failing which amendment under section 122(5A) will be made as proposed above."

4. The above said notice was replied by the assessee vide letter dated January, 13, 2005 in the following manner:---

"With reference to your letter No.AC(AUDIT/LTU/567, dated 11-1-2005 along with Notice under section 122(5A) of the Income Tax Ordinance, 2001. Assessment year 2002-2003 we are pleased to make following submissions:

We may emphasize that the issues raised by your good-self have already been clarified by us as far back as in 2003 vide our letters Nos.IFL/420, 421 and 424/03 all dated 15-12-2003 in response to show- cause notices under section 122, dated 15-11-2003 and 17-11-2003 by the then Additional Commissioner/Taxation Officer of Income Tax, Range-V, Spl. Zone, Lahore. The same issues have again been raised after a lapse of nearly a year. However, we would again delve upon the issues raised in your letter under reference to set the record straight.

1.Invalidity and Illegality of notice under section 122(5A) of Income Tax Ordinance, 2001.

1.1 At the outset, we would strongly contest that your notice under section 122(5A) is bad in law and on facts and circumstances of the case. That your said notice and proposed action/addition under section 122(5A) of Income Tax Ordinance, 2001 is also ab initio void, illegal, perverse, arbitrary, capricious, inoperative, incompetent, malicious, mala fide, without jurisdiction or in excess of jurisdiction and of no legal effects, inter alia, on the following factual as well as legal grounds.

1.2 Section 122(5A) empowers the Commissioner to amend or further amend, an assessment order, if he considers the order erroneous and prejudicial to the interest of Revenue.

It is crystal clear by the reading of section 122(5A) of Income Tax Ordinance, 2001 that only Commissioner has been vested with the jurisdiction to take action under section 122(5A) on the basis of his personal examination and consideration of the case.

It needs hardly be emphasized that before the power under section 122(5A) is exercised, the Commissioner must be satisfied on the materials on record that the order, being erroneous, has caused prejudice to the interests of the Revenue or was likely to cause such a prejudice. It is true that section 122(5A) vests power in the Commissioner in subjective terms, but it has been pointed out by the Supreme Court in a series of judgments that even when an enactment vests discretion in any authority saying "if it appears", "if he is satisfied", "if he considers, "that does not mean that it is a matter of only a subjective satisfaction and such authority has not to judge the circumstances appearing in the case in an objective manner. The reliance is placed on most recent judgment reported as 2005 PTD (Trib.) 344.

In the instant case, the Commissioner has not examined and considered our case record to formulate an opinion of his own to invoke the provisions of section 122(5A). As such, the notice issued under section 122(5A) by the Additional Commissioner of income, tax is not sustainable in law and is without jurisdiction. Moreover, any subsequent proceedings under the said illegal notice shall be void and illegal.

1.3. Without prejudice to whatever contended above regarding the illegality of notice under section 122(5A), we lay down other arguments. The original assessment order under section 62 of the Repealed Ordinance was framed after conscious application of mind by the Assessing Officer as he examined the books of account, relevant details/documents, etc. The detailed scrutiny/ total audit carried out by the Assessing Officer before passing the conscious order.

He obtained all the relevant information and explanation to verify, ascertain and deduce conclusion to frame the assessment order.

That raising the already examined and finalized issues which are apparent from the case record and same set of facts available on record tantamount to change of opinion.

The Assessing Officer passed the assessment order in question after applying his mind on the basis of all the facts of the case. Mere, raising frivolous issues has no legs to stand upon legally and transgressing the powers under the law.

1.4. Section 122(5A) cannot be invoked on the same sets of facts/ material which having been consciously considered by the Assessing Officer/ACIT while finalizing total audit assess ment.

It is submitted that the Assessing Officer has passed conscious order under section 62 of the Income Tax Ordinance, 1979 after applying conscious mind to the facts of the case. That the assessment for the year under consideration was finalized after calling various details, documents and books of accounts including the various details/documents with respect to the merger of the company by the Assessing Officer .hence, the order of Assessing Officer cannot be subjected to provision of section 122(5A) of Income Tax Ordinance, 2001. It will not be out of place to mention here that the Assessing Officer has himself recorded in the assessment order that "During the proceedings various details/documents with respect to merger of the company, manufacturing account, profit and loss account, balance sheet were filed. Besides, that books of accounts consisting of cash book, leger, vouchers/bills were also produced and examined". The Assessing Officer after applying conscious mind and after examining various details, passed assessment order, his order cannot be said to be erroneous.

At this juncture we would like to cite few judgments and our view is further fortified from the following judgment:

In the case reported as 203 ITR 108 C.I.T. v. Gabriel India Ltd., this judgment recently followed by the Hon'ble Tribunal in a reported case as 2002 PTD (Trib.) 3027. The Hon'ble High Court observed as under:---

"the power of suo motu revision under subsection (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of revision under this subsection, viz. (i) the order is erroneous, (ii) by virtue of the order being erroneous, prejudice has been caused to the interest of the Revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expression "erroneous", "erroneous assessment" and "erroneous judgment" has been defined in Black's Law Dictionary. According to the definition "erroneous" means "involving error; deviating from the law". "Erroneous assessment" refers to an assessment that deviates from the law of land is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, "erroneous judgment" means "one rendered according to course and practice of Court, but contrary to law, upon mistaken view of law, or upon erroneous application of legal principles."

From the aforesaid definition it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an Income Tax Officer acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him the order should have been written more elaborately. This section does not visualize a case of substitution of the judgment of the Commissioner for that of the Income Tax Officer, who passed the order, unless the decision is held to be erroneous. Cases may be visualized where the Income Tax Officer while making an assessment examines the accounts, the Income Tax Officer while making an assessment examines the accounts makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making, some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the Officer concerned was on the lower' side and left to the Commissioner he would have estimated the income at a figure higher than the one determined by the Income Tax Officer. That would not vest the Commissioner with power to re-examine the accounts and determine the income himself, at a higher figure. It is because the Income Tax Officer has exercised the quasi-judicial power vested in him in accordance with law of land arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the Revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision cannot be exercised. Any and every erroneous, order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed."

In a case law reported as [1999 PTD 2851] wherein the learned Tribunal has held as under:---

"It is well settled principle that section 66A can be invoked only when an order passed by D.C.I.T. is found erroneous and prejudicial to the interest of Revenue. The error and the prejudice should be manifest in the show-cause notice and not subsequently by a fishing inquiry."

Another case law reported as 1983 PTD 201 wherein it has been held that:

"power under section 34A can be exercised only when it is found that assessment was erroneous and prejudicial to the interests of Revenue.

In this case reported as 2002 PTD (Trib.) 3027 wherein the Tribunal while elaborating the scope of section 66-A held that "As regards expenses claimed by appellant and Nil income declared for the years, as earlier mentioned the same was allowed after confronting assessee about the same. Thus, the Assessing Officer has consciously applied his mind while determining the income of appellant and while allowing certain expenses claimed by it". It was held by the Tribunal where assessing officer has consciously applied his mind while determining income of the assessee and while allowing certain expenses claimed by it. Tribunal hold that such order passed under section 66A. was neither erroneous nor prejudicial to the interest of revenue action under section 66A invoked by the I.A.C. was uncalled for . In the case of United Builders Corp. v. C.I.T. 1984 PTD 137 wherein it has been held by the Hon'ble High Court that "the learned I.A.C. cannot invoke jurisdiction under section 34-A of the Income Tax Act, 1922 on arbitrary, vague and fanciful assumption based on hypothesis of personal knowledge. "It has been further held as follows at page 40 of the report the Hon'ble High Court observed that: "Inspecting Assistant Commissioner was not in agreement with the result of assessment made by the Income Tax Officer, was not a genuine reason for resort to section 34A."

In this case reported as 1997 PTD(Trib.) 902 the Tribunal has held that mere disagreement between officers on result of assessment could not be genuine reason to resort to the provision contained in section 66-A of Income Tax Ordinance, 1979 which contains similar provision as in section 34-A of repealed Income Tax Act, 1922. It is further held that if an assessment order is not found up to mark or mere poor quality of assessment order is not sufficient ground for invoking section 66A as a condition precedent is to arrive at an objective conclusion to the effect that the assessment order is erroneous and at the same time prejudicial to the interest of Revenue. Until the unless these two conditions are satisfied mere poor quality of an assessment would not provide justification for invocation of jurisdiction under section 66A. It is observed by the Tribunal that under section 66-A of Income Tax Ordinance, 1979 an I.A.C. has no authority to substitute his own direction and his own way of appreciating the facts for arriving at preconceived desired result.

In this case reported as 1997 PTD (Trib.) 2137 the Hon'ble Tribunal held that materials on record and facts were fully considered as Assessing Officer, IAC discarded original assessment made by Assessing Officer being erroneous and prejudicial to revenue. Tribunal further, observed that order under section 66-A of Income Tax Ordinance, 1979 was based on mere presumption, surmises and conjectures no justification was available to maintain order under section 66A of Income Tax Ordinance, 1979 in circumstances.

A case reported as 2003 PTD (Trib.) 1536. In this case for both the years all the expenses have been examined after conscious application of mind by the Assessing Officer while passing the order under section 62 and there remained no ambiguity warranting any action on the basis of alleged expenses which were otherwise also subjected to audit. This view finds support from the order of the Tribunal reported as 1996 PTD (Trib.) 1069 wherein while agreeing with the learned counsel to the effect that Assessing Officer fully considered the issue, appreciated the relevant facts and thereafter allowed the financial expenses claimed by the appellant and as such, it is not proper to say that order was erroneous as observed by the learned Inspecting Assistant Commissioner of Income Tax and consequently quashed the order passed under section 66A. The learned Inspecting Assistant Commissioner of Income Tax has based his order and has invoked the provisions of section 66A in the years under review on arbitrary, vague and fanciful assumption, while the jurisdiction under. section 66A can be invoked on the basis of sound facts leading to inference that assessment made by the Assessing Officer was in any manner erroneous and prejudicial to the interest of Revenue: The learned Inspecting Assistant Commissioner of Income Tax had no material on the record for considering that the assessment order is erroneous and resulted in loss of Revenue. "It is further held that" mere possibilities and probabilities of coming to some other conclusions had the desired enquiries being held would not provide sufficient justification for exercise of jurisdiction under section 66A." The Hon'ble ITAT in this case further observe that "I am further fortified in my view from the Hon'ble High Court of Azad J&K in the case reported as 1984 PTD 137 wherein their Lordships have held as under: "The powers conferred under section 34A indicated that such powers were exercisable only on the proof and satisfaction that order of the Income Tax Officer was unlawful, as such erroneous, so as to prejudicial to the interest of Revenue. Unless such a condition was fulfilled powers under the section could not be invoked. "Tribunal find force in the arguments of the learned counsel for the appellant that mere poor quality of an assessment not provide justification for invocation of jurisdiction under section 66A of the Ordinance. I am further of the view that until and unless the two conditions that the assessment order is erroneous and at the same time prejudicial to the interest of Revenue are not established, the assessment order cannot be cancelled and in the present case, the learned IAC has made mountain of mole hill and has cancelled the assessment orders which were passed after detailed scrutiny and there was no material on record with the learned IAC for holding that the assessment order for both the assessment years under review were erroneous and prejudicial to the interest of revenue. I, therefore, vacate both the impugned orders passed by the learned IAC under section 66A being not sustainable under the law and the assessment orders are hereby restored."

1.5 The invocation of section 122(5A) is not permissible on the basis of change of opinion.

In this regard we like to quote a case law reported as 1996 PTD (Trib.) 750.

It is further submitted that while invoking section 122(5A) of Ordinance, 2001 the revision of assessment on the basis of change of opinion is not valid. In this connection we would like to cite a case law reported as 1993 PTD 1113 in the case of Mrs. Anjuman Shaheen v. IAC of Income Tax Zone `A' wherein the Hon'ble High Court has observed that assessment cannot be reopened under section 66A of Ordinance, 1979 equivalent to section 122(5A) of Ordinance, 2001 merely on the basis of change of opinion.

1.6 Section 122(5A) is not available on the grounds of mere disagreement with the order of ACIT. Merely disagreeing by ACIT under section 122(5A) of Income Tax Ordinance, 2001 with the order passed under section 62 of Income Tax Ordinance, 1979 by ACIT would amount to change of opinion to which the provisions of section 122(5A) of Income Tax Ordinance, 2001 is not attracted.

Nature of section 122(5A) of the Ordinance, 2001 is revisional which has been enacted to prevent the loss to Revenue. Barrier has, however, been put against the powers of Commissioner that he would only amend that order of the Taxation Officer which is not only erroneous but also simultaneously prejudicial to the interest of Revenue.

That your honour have merely disagreed with the Taxation Officer. In this connection one may rely on the following case-law. Wherein their Lordship observed as under:

"Mere disagreement between officers on result of assessment could not be genuine reason to resort to the provisions contained in section 66A of the Income Tax Ordinance, 1979 which contains similar provision as in section 34A of the (Repealed) Income Tax Act, 1922," = {S.17-B of Wealth tax Act, 1963 = S.122(5A) of Income Tax Ordinance, 2001).

Section 122(5A) could not be pressed into service merely on the basis of mere disagreement with the Assessing Officer. In this regard we would like to cite a case-law reported as 1997 PTD (Trib.) 902. This judgment delivered by the then learned Chairman of Income Tax Appellate Tribunal. The following observations of the Hon'ble Tribunal are relevant.

"The Azad J&K High Court in the judgment reported as 1984 PTD 137 has observed that "mere disagreement between officers on result of assessment could not be a genuine reason to resort to the provisions contained in section 66A of the Income Tax Ordinance, 1979 which contains similar provision as in section 34A of the Income Tax Act, 1922."

Reliance is further placed on the following case-law.

(i) 1997 PTD (Trib.) 902; (ii) 1984 PTD 137; (iii) 2005 PTD (Trib.) 1536; (iv) 1996 PTD (Trib.) 750; (v) 2004 PTD 440; (vi) 2001 PTD 3810 (Trib.); (vii) 2002 PTD (Trib.) 3027; (viii) 1997 PTD 2137; (ix) (1977) 109 ITR 229; (x) 1991 SDTD 830 and (xi) 203 ITR 108.

Section 122(5A) of Income Tax Ordinance, 2001 is not applicable in the instant case.

1.7 The assessment was finalized under section 62 of the Income Tax Ordinance, 1979. (Repealed Ordinance) as such provisions embodied in Repealed Ordinance would be applicable as far as given legal cover in Income Tax Ordinance, 2001.

Section 122(1) of the Income Tax Ordinance, 2001 does not embody section 66A of the Income Tax Ordinance, 1979 (Repealed Ordinance). Moreover, provisions of 66A have not been given legal cover in section 239 of Income Tax Ordinance, 2001; dealing with Repeal and saving clause.

1.8 That your said notice is against the scheme of Arrangement which was sanctioned by the Hon'ble Court and under which merger took place.

Therefore, your notice under section 122(5A) is not sustainable in law in view of the legal position stated above and hence, without jurisdiction and void.

That the original order under section 62 having been merged on which no action under section 122(5A) could be taken. This is the trite law as decided by the Superior Courts. Any deviation from it will culminate into illegality.

The upshot of discussion supra, irrevocably established that the provisions of section 122(5A) of the Income Tax Ordinance, 2001 can only be invoked by the Commissioner and further the impugned assessment order passed under section 62 does not come under the mischief of section 122(5A) of Income Tax Ordinance, 2001.

In view of the legal position described supra, the Notice issued under section 122(5A) by the Additional Commissioner is arbitrary, capricious and not judicious, without jurisdiction and legally untenable.

2. Depreciation.

Your observation regarding depreciation of Rs.126.709,181 allowed in original assessment order on the fixed assets of Messrs Ibrahim Energy Ltd. instead of Rs.36,846,871 is not based on the facts and legal status of the case.

The Honourable Lahore High Court, Lahore approved the merger of Ibrahim Energy Ltd. along with other companies in Ibrahim Fibres Ltd. and has been pleased to pass the following Orders:

"b) The business, assets, properties, rights, authorizations, licences, privileges and liabilities of the petitions Nos.2 to 5 described in the Scheme of Arrangement 'stand transferred and vested in petitioner No.1. "

As such, the fixed assets of the Ibrahim Energy Ltd. got merged with those of Ibrahim Fibres Ltd.

The Scheme of Arrangement approved by the Hon'ble Lahore High Court, assets, liabilities and reserves of Ibrahim Textile Mills Ltd. A.A. Textiles Ltd., Zainab Textile Mills Ltd. and Ibrahim Energy Ltd. have been merged with Ibrahim Fibres Ltd. (the assessee company) w.e.f. 1-10-2000.

As such, the consolidated figures appeared in the statement of accounts of the company for the year ended 30-9-2001.

The fixed assets of all the companies mentioned supra have been shown .in the schedule of Operating Assets (Note: 3 to the published accounts) and depreciation charged thereon.

Had there been any deviation from the accepted principles of accounting, the auditors of the company would have qualified their report. The Auditors' Report to the members annexed to the published accounts, put before the AGM of the members, is clean and without any qualification as consolidated accounts prepared on the basis of Court's approval on merger of the companies and the accepted principles of accounting in consonance with international accounting and audit standards and the accounting policies consistently operated by the company.

We have not been allowed depreciation wrongly as observed by your honour because the merging company Ibrahim Energy Limited has not availed any tax benefit out of-the depreciation. The merging company has lost their entities in Ibrahim Fibres Ltd. in which the consolidation is reflected.

The Assessing Officer finalized the assessment after due verification, satisfaction and consciousness on the basis of scheme of merger duly approved by the Honourable Lahore High Court, Lahore.

3. Financial charges.

That the Note No.2.6 covers Assets subject to finance lease in which the treatment of finance lease vis-a-vis financial charges is defined as under:

Assets subject to finance lease.

In view of certainty of ownership of the assets at the end of the lease period, assets subject to finance lease are stated at cost less accumulated depreciation. Depreciation is charged at the rates and basis' applicable to Company owned assets. The outstanding obligations under the finance lease less financial charges allocated to future periods are shown as liability. The financial charges are allocated to future periods in a manner so as to produce a constant periodic rate of charge on the outstanding liability."

The assets subject to finance lease comprise of cost plus financial charges. Such assets are consciously shown in the schedule of 'Operating Assets as is evident from Note 3 to the published accounts of the company.

The financial charges incurred on such lease of assets are distinctly treated and charged in the accounts as detailed in Notes: 15 & 25. The payment to leasing company is mode of principal plus interest/mark-up.

The liability of principal amount is provided in the accounts as reflected in Note. 15, titled as `Liabilities against Assets subject to Finance lease which amount has been shown in the Balance sheet under the caption of `Long-term loans and deferred liabilities' against which corresponding `Assets subject to Finance Lease' are distinctly shown in operating Assets as is evident from the Schedule of Operating Assets (Note 3). .

Whereas interest/mark-up on finance lease is bifurcated from the lease payments and charged on annual basis to profit and loss account as revenue expenses. Note 15 gives the over all picture of the lease payments for the year and in future periods by bifurcating into capital and revenue expenditure i.e. principal and financial charges. The entire lease payment amount cannot be capitalized as there is no asset of that value vis-a-vis the liability created against that asset. The cost and mark-up have to be segregated to reflect the asset correctly.

As such Rs.23,974,878 have been claimed as charges to finance lease being mark-up/interest on finance which are synonymous to interest/mark up on bank loans/borrowings.

Note 2.6 lays down that the outstanding obligations under the finance lease less financial charges allocated to future periods are shown as liability. The financial charges are allocated to future periods in a manner so as to produce a constant periodic rate of charge on the outstanding liability.

These charges incurred in a normal course of business are legally allowable and rightly allowed by the Assessing Officer as revenue expenditure.

As such, your observation of wrong allowance of financial charges of Rs.23,974,878 is not valid as discussed supra.

4. Unabsorbed depreciation -- Zainab Textile Mills Ltd.

As stated earlier the business, assets, properties, rights, authorizations, licences, privileges and liabilities of the petitions Nos.2 to 5 described in the Scheme of Arrangement stand transferred and vested in petitioner No.1.

The merger approved by Hon'ble High Court had the legal effect of giving a continuity to the operations of the merged companies as a part of the assessee company surviving company i.e. Ibrahim Fibres (Ltd.) consequent and vesting the assessee company with all assets and liabilities of (i) Ibrahim Textile Mills Ltd. (ii) AA Textile Mills Ltd. (iii) Zainab Textile Mills Ltd. and (iv) Ibrahim Energy Ltd. (merged companies). It is evident that if there was any undischarged tax liability of the aforesaid non-surviving companies, the same would have been recoverable from the assessee-Company and that the assessee company would have been bound to duly discharge the same. Similarly, the assessde-Company is clearly entitled to have adjustment of the unabsorbed tax depreciation that have been brought forward.

That while issuing notice under section 122(5A) of Income Tax Ordinance, 2001 your honour has over-looked that they are bound by the orders passed by the Hon'ble High Court on 15-1-2002. This order sanctioned the Scheme of Arrangement under which the assessee-Company came to be vested with all rights and liabilities of merged companies. These rights included the right of adjustment of the unabsorbed depreciation. Under the Constitution all authorities are bound by the orders passed by this Hon'ble High Court. The superior Courts of Pakistan have repeatedly held that a merger approved by the High Court is binding on all concerned including tax authorities. In fact, in response to an argument that tax authorities could not be bound by any merger scheme where the tax department had not been made a party in the proceedings, the Hon'ble Lahore High Court was pleased to hold in the case titled Ujala Cotton Mills v. I.T.O. etc. (1985) 51 Tax 237.

"The contention that the Income Tax Department was not party to those proceedings cannot be heard. There is no such provision to implead them as a party and hence for all purposes any order in this behalf made by the High Court shall be binding on them, otherwise no sanctity could be attached to it and for that purpose the whole exercise in obtaining it will be quite an otiose act. The order by its very nature determines the vesting of assets and incurring of liabilities."

That your stance that the unabsorbed deprecation of Messrs Zainab Textile Mills Ltd. (non surviving company) wrongly allowed by the Assessing Officer in the hands of absorbing company (Ibrahim Fibres Ltd.) is contrary to the law on the subject. In the case of the merger of Faisal Bank of Bahrain (the non-surviving company) with Faisal Bank Ltd. (as the surviving company) it was decided by the Income Tax Appellate Tribunal, Lahore Bench Lahore that all bad debts of the non-surviving bank were adjustable against the income of the surviving bank.

More emphatically, section 34A of the Repealed Ordinance, 1979 does not apply in our case. The said section is reproduced below:

Section 34A of Income Tax Ordinance, 1979 (Repealed Ordinance).

"Where an assessee, being a company listed on registered stock exchange in Pakistan, owns the entire shares capital of another company (hereinafter called the `subsidiary company') in any income year, being an income year relevant to the assessment year ending on the thirtieth day of June, 1982, or any assessment year thereafter, the loss of the subsidiary company under the head `Income from business or profession' (not being a loss on account of depreciation allowed under clause (v) of subsection (1) of section 23 or a loss to which section 36 applies) in respect of the said assessment year as has been determined by an order under sections 62, 63 or 65 and as had not been set-off under section 34 shall, at the option of the assessee and subject to the provisions of subsection (2), be set-off against the income, if any, of the assessee in respect of the said assessment year."

In the very beginning of the said section, the entire ownership of the shares of another company, called subsidiary company falls in that category on which bar on loss on account of depreciation has been put.

But, `Zainab Textile Mills Ltd. is not the subsidiary company as such does not come under the purview of section 34A.

Therefore, your observation of the of wrong allowance of unabsorbed deprecation of Messrs. Zainab Textile Mills Ltd. is not correct legally.

Further, the High Court order clearly envisages the merger of all assets, rights, privileges, benefits etc. Relevant extract of High Court order is as under:

"b) The business, assets, properties, rights, authorizations, licences, privileges and liabilities of the petitions Nos.2 to 5 described in the Scheme of Arrangement stand transferred and vested in petitioner No.1."

The above submission clearly establishes that the intention of Income Tax Law is to encourage merger and amalgamation and to give maximum tax benefits to the company absorbing other companies merged thereof.

In view of the position stated above, the unabsorbed depreciation of Rs.82,783,287 has rightly been allowed by the Assessing Officer in consonance with the Lahore High Court order and in accordance with the law.

Prayer.

From the submissions made above, it can be seen that the impugned notice issued under section 122(5A) of Income Tax Ordinance, 2001 is based on fundamental legal misconceptions. The threats of revision/reopening contained in the impugned notice under section 122(5A) of Income Tax Ordinance, 2001 cannot culminate in a legally sustainable order. However, the presence of this threat is a continuing injury to the assessee company. With this threat hanging as the Sword of Damocles over the head of the assessee company. The assessee-Company is unable to manage and apply its finances in a. manner in which the assessee company would have been able to do if this threat is not removed. The notice contains a threat which should have never been extended by an officer who was acting in accordance with law. Creation of revision/reopening under the garb of section 122(5A) would be disastrous for the assessee-Company.

The entire approach through notice under section 122(5A) of Income Tax Ordinance, 2001 is contrary to the fundamental principles applicable to tax laws. Tax can be raised only if it falls within the four corners of law. There is no scope of any intendment, equities or implications when a tax is being enforced by the State. Under Article 77 of the Constitution no tax can be levied except strictly in accordance with valid law.

The impugned notice/acts under section 122(5A) are in breach of the rights of the assessee company under Article- 4 of the Constitution of Islamic Republic of Pakistan, it is the inalienable right of the assessee company to be treated in accordance with law. That your honour has no authority, by way of colourable exercise of power under the mask of section 122(5A) of the Income Tax Ordinance, 2001, to threat the very corporate existence of the assessee company by visiting it with economic destruction. The impugned notice/acts under section 122(5A) are also contrary to Article 25 of the Constitution. The threatened reopening under section 122(5A) is against the right of the assessee company not to be deprived of property contrary to law, as stipulated in Article 24 of the Constitution. The impugned notice/acts are against fundamental rights of the assessee company as a corporate entity, and of all citizens who choose to carry out economic activity in this corporate form.

We have legally clarified the points raised by your honour in your notice under section 122(5A) of the Income Tax Ordinance, 2001 under reference. The factual and legal position has been explained thread-bare.

We would, therefore, request your goodself to kindly vacate your show-cause notice issued under the garb of section 122(5A) of Income Tax Ordinance, 2001 for the assessment year 2002-03 which is ab initio void, without jurisdiction and untenable in law."

4. The Additional Commissioner considering the above said reply partly unsatisfactorily rejected the same with the reasons disclosed in his order and amendment revised the order under section 122(5A) of the Income Tax Ordinance, 2001 by making the following two additions:

1. Addition on account of excess Depreciation claimed/allowed Rs.55,707,014

2. Addition on account of loss of Messrs Zainab Textile Mills Ltd. Rs.82,783,287.

6. Being aggrieved, the assessee filed an appeal before the learned C.I.T.(A) on the following grounds of appeal which are seriatim as under:---

1. "That the order passed by the learned Additional Commissioner of Income Tax [(Audit-B) LTU Lahore] under section 122(5A) of the Income Tax Ordinance, 2001 as on 31-1-2005 is bad in law and on facts and circumstances of the case.

2. That the order passed by the learned Additional Commissioner of Income Tax is purely based on incorrect, inaccurate and invalid observations/assumption and insinuation, hence, the inference drawn, action taken, disallowances and additions made and order passed and amended under section 122(5A) of the Income Tax Ordinance, 2001 is liable to be vacated.

3. That the order passed by the learned Additional Commissioner of Income Tax under section 122(5A) is ab initio void, illegal, perverse, arbitrary, capricious, inoperative, incompetent, mala fide without jurisdiction or in excess of jurisdiction.

4. That the order passed by the learned Additional Commissioner of Tax under section 122(5A) is vague, arbitrary and fanciful assumption based on hypothetical knowledge.

5. That the learned Additional Commissioner of Income Tax has erred in amending the case under section 122(5A) of Income Tax Ordinance, 2001 when the original order passed under section 62 of Income Tax Ordinance, 1979 which having been merged with appellate order passed by C.I.T.(A) under section 132 of Income Tax Ordinance, 1979 and the learned Additional Commissioner of Income Tax is debarred and precluded from invoking section 122(5A) of the Income Tax Ordinance, 2001.

6. That section 122(5A) was inserted in Income Tax Ordinance, 2001 vide Finance Act, 2003 dated 17-6-2003, with effect from 1-7-2003 whereas original assessment order under section 62 of the Income Tax Ordinance, 1979 in the case of the appellant had been completed much before the insertion of subsection (5A) of the Income Tax Ordinance, 2001. Hence, the order passed by the learned Additional Commissioner of Income Tax under section 122(5A) on 31-1-2005 lacks jurisdiction and is liable to be annulled being void ab initio.

7. That section 122(5A) of Income Tax Ordinance, 2001 is not procedural in nature hence does not have retrospective effect and hence not applicable to the already completed assessment, prior to 30-6-2003 therefore, the order passed under section 122(5A) of the Income Tax Ordinance, 2001 on, 31-1-2005 is illegal beyond the jurisdiction and sanction of law.

8. That the section 122(5A) empowers the Commissioner (CIT) "if he considers" and not ACIT. The appellant contends that the impugned order is passed by the learned Additional Commissioner of Income Tax (ACIT) and not by Commissioner of Income Tax (CIT), hence, liable to be annulled. It is urged that CIT cannot delegate his legal obligation to apply independent mind under section 122(5A).

9. The impugned order proves that the learned Additional Commis sioner of Income Tax has arbitrarily used section 122(5A) in the case of the appellant as lethal weapon who has taken it as a licence to destroy the sanctity of past and closed transactions that constitute taxpayers vested right under the law. It is an open mockery of due process of law enshrined in Article 4 of the Constitution and violation of basic norms of justice.

10. That the order passed by the Assessing Officer under section 62 is neither erroneous nor prejudicial to the interest of Revenue and the Additional Commissioner of Income Tax had seriously erred in invoking 'provision of secmn 122(5A) of Income Tax Ordinance, 2001.

Without prejudice to foregoing grounds of appeal:

11. That the Additional Commissioner of Income Tax in any case has erred in amending assessment under section 122(5A) of the Income Tax Ordinance, 2001 whilst assessment under section 62 has been finalized as on 16-5-2003 admittedly on submission and examination of various details, documents and books of accounts as required by the Assessing Officer.

12. That the learned Additional Commissioner of Income Tax has taken the action under section 122(5A) of the Income Tax Ordinance, 2001 merely on the basis of disagreement with the Assessing Officer and section 122(5A) is not available on the ground of mere disagreement with the order of the Assessing Officer.

13. The learned Additional Commissioner of Income Tax cannot amend the order passed under section 62 on the ground of poor quality of an assessment order or being not upto the mark.

14. That the learned Additional Commissioner of Income Tax has no power to amend an earlier assessment order on the ground that it was erroneous and prejudicial to the interest of Revenue such powers can be exercised by the Commissioner as envisaged under section 122(5A) of the Income Tax Ordinance, 2001.

15. The original assessment order passed under section 62 after applying conscious mind after calling various details, books of accounts, ledger and detailed scrutiny, therefore, order under section 62 cannot be held as erroneous and prejudicial to the interest of Revenue.

16. That for holding an order to be erroneous and prejudicial to the interest it is incumbent on the officer to prove that both precedent conditions simultaneously co-exist. Until and unless these two conditions are satisfied there is no justification to invoke section 122(5A) of the Income Tax Ordinance, 2001.

Without further prejudice to the above grounds of appeal:

17. That the learned Additional Commissioner of Income Tax has ignored the order of the Hon'ble High Court which sanctioned the Scheme of Arrangement whereby the assessee-Company was legally bound for all rights and liabilities of merged companies.

18. That the learned Additional Commissioner of Income Tax has ignored the facts that the merger approved by the Hon'ble Court had the legal effect of giving a continuity to the operations of the one company as a part of the surviving company consequent and vesting the appellant with all assets and liabilities of merged companies and the department is bound by the order passed by the Hon'ble High Court. This order sanctioned the scheme of arrangement under which the appellant came to be vested with all rights and liabilities of merged companies. These rights included the right of adjustment of the unabsorbed depreciation etc. Under the Constitution all authorities are bound by the orders passed by this Hon'ble Court. The superior Courts of Pakistan have repeatedly held that a merger approved by the Court is binding on all concerned including tax authorities.

19. The entire approach of the learned Additional Commissioner of Income Tax is contrary to the fundamental principles applicable to tax laws. Tax can be raised only if it falls within the four corners of law. There is no scope of any intendment, equities or implications when a tax is being enforced by the State. Under Article 77 of the Constitution no Tax can be levied except strictly in accordance with law.

20. The impugned order passed under section 122(5A) of Income Tax Ordinance, 2001 is in breach of the rights of appellant under Article 4 of the Constitution of Islamic Republic of Pakistan it is the inalienable right of the appellant to be treated in accordance with law. That the learned Additional Commissioner of Income Tax under the garb of section 122(5A) has no authority, by way of colourable exercise of power. The impugned order under section 122(5A) is not only contrary to the Articles 24 and 25 of the Constitution but also against fundamental rights of the appellant as a corporate entity and of all citizens who chose to carry out economic activity in this corporate form.

21. That the learned Additional Commissioner of Income Tax was not justified in disallowing the claim of depreciation amounting to Rs.55,707,014 and the learned Additional Commissioner of Income Tax further grossly erred in restricting the claim of depreciation amounting to Rs.71,002,167 in respect of Messrs Ibrahim Energy Ltd. as observed on page 7 of the impugned order.

22. That the learned Additional Commissioner of Income Tax has overlooked the fact that the Ibrahim Energy Ltd. never ever claimed or taken benefit of tax depreciation and assets of Ibrahim Energy which have been merged with the assessee-Company as per order of the Hon'ble High Court and accepted principles of accounting in consonance with international accounting and audit standards and the accounting policies of the company.

23. That the learned Additional Commissioner of Income Tax was not justified in disallowing an amount of Rs.82,783,287 Under section 34 of the Income Tax Ordinance, 1979 on account of loss of Messrs Zainab Textile Mills Ltd.

23.1 That section 34 of the Income Tax Ordinance, 1979 was not the subject-matter of show-cause notice and no show-cause notice under section 122(5A) of Income Tax Ordinance, 2001 was ever issued for pressing into service of the provision of section 34. The show-cause notice was for section 34A and no show-cause notice issued for section 34, hence, the impugned order/addition is liable to be annulled on this score alone.

24. That learned Additional Commissioner of Income Tax has ignored the declared law that all bad debts of non-surviving company (Zainab Textile) were adjustable against the income of the surviving company (Ibrahim Fibre).

25. That the learned Additional Commissioner of Income Tax has not distinguished the facts and circumstances of the case and has made the disallowances/additions on presumption and conjectures basis which may be deleted and impugned order to be annulled.

26. That the appellant further craves permission to raise/take/add/ alter/amend and substitute any ground/grounds of appeal earlier or at the time of hearing and pray for appropriate reliefs as may be due under the law."

7. The learned C.I.T.(A) through the impugned order has annulled the order passed under section 122(5A) of the Income Tax Ordinance, 2001 thereby restored the original order passed under section 62 of the Income Tax Ordinance, 1979, hence, the present appeal has been filed by the Department.

8. Dr. Samra Ashraf, the learned D.R. has assailed the order of the learned C.I.T.(A) and has submitted that the learned C.I.T.(A) was not justified to annul the order under section 122(5A) of the Income Tax Ordinance, 2001 by holding the same to be illegal and ab initio void, without any cogent reasons. She therefore, prayed that the order of the learned C.I.T.(A) may be vacated and that of the Additional Commissioner be restored. She further submitted that most of the case laws relied upon by the learned C.I.T.(A) pertain to section 66A of the Income Tax Ordinance, 1979 and not relate to section 122(5A) of the Income Tax Ordinance, 2001, hence, distinguishable and not relevant.

9. On the other hand, Mr. Jawed Zakaria, Advocate the learned counsel for the respondent/assessee has supported the impugned order of the learned C.I.T.(A). He submitted that the order passed under section 122(5A) lacks jurisdiction, absolutely bad in law, hence, not maintainable. The basis on which assessment was amended under section 1.22(5A) of the Income Tax Ordinance, 2001 by issuing show-cause notice is nothing but an abusive use of powers.

The learned A.R. has contended that the assessment amended under section 122(5A) of the Income Tax Ordinance, 2001 is not maintainable being based on illegal, invalid show-cause notice. If the superstructure built on illegal foundation/base the same is liable to be demolished.

He has contended that the Additional Commissioner was not justified to amend the order under section 122(5A) of the Income Tax Ordinance, 2001, as the order passed by the Additional Commissioner of Income Tax under section 62 of the Income Tax Ordinance, 1979 has merged with the appellate order under section 132 of the Income Tax Ordinance, 1979, hence, the learned Additional Commissioner of Income Tax is debarred and precluded from invoking section 122(5A) of the Income Tax Ordinance, 2001. According to the learned counsel, the order passed by the Additional Commissioner of Income Tax lacks jurisdiction and has rightly been annulled being void ab initio as subsection (5A) of section 122 of the Income Tax Ordinance, 2001 effective w.e.f. 1-7-2003 is not procedural in nature and does not have retrospective effect and is not applicable to the already completed assessment on or before 30-6-2003. In the instant case original assessment order under section 62 passed on 16-5-2003, hence, the order passed by Additional Commissioner of Income Tax under section 122(5A) of the Income Tax Ordinance, 2001 on 31-1-2005 lacks jurisdiction and patently without jurisdiction and ab initio is a void order without any legal effect. He has argued that powers to amend already completed assessment order of the Assessing Officer vests on the Commissioner of Income Tax and not on Additional Commissioner of Income Tax, as envisaged under section 122(5A) of the Income Tax Ordinance, 2001 hence the order passed by the Additional Commissioner being ab initio void lacks jurisdiction. According to the learned A.R., the original order under section 62 was passed by the Additional Commissioner of Income Tax and order under section 122(5A) of Income Tax Ordinance, 2001 was also passed by the Additional Commissioner of Income Tax hence the equal authority/same authority cannot revise/amend the order of equal authority i.e. Additional Commissioner of Income Tax under the garb of section 122(5A). He has submitted that the learned C.I.T.(A) has accepted the submissions of the assessee after applying conscious mind to the arguments, case laws and grounds of appeal.

The learned counsel has submitted that the order passed by the Additional Commissioner of Income Tax under section 62 of the Income Tax Ordinance, 1979 has merged with the appellate order under section 132 of the Income Tax Ordinance, 2001, hence the learned Additional Commissioner of Income Tax is debarred and precluded from invoking section 122(5A) of the Income Tax Ordinance, 2001. He has contended that it is an admitted fact that the assessee (respondent) had filed an appeal against original order passed by the Additional Commissioner of Income Tax under section 62 of the Income Tax Ordinance, 1979 before the C.I.T.(A), who passed the order on 8-9-2004. Hence as per doctrine of merger set forth by the superior Courts in numerous judgments the order of the Assessing Officer/ Additional Commissioner of Income Tax has automatically merged with the order of the learned C.I.T.(A), therefore, due to law of merger the Additional Commissioner of Income Tax has been debarred/precluded from taking any action under section 122(5A) of the Income Tax Ordinance, 2001. In section 122(5A) of Income Tax Ordinance, 2001, there is no subsection pari materia to subsection (1A) of section 66A of Income Tax Ordinance, 1979. Hence the present provision of section 122(5A) of Income Tax Ordinance, 2001 in respect of law of ,merger would be at par with provision of section 66A of Income Tax Ordinance, 1979 as it existed before amendment was made vide Finance Ordinance, 1991. He relied on the decision of Hon'ble Supreme Court of Pakistan in the case of Glaxo Laboratories Ltd. v. IAC reported as PLD 1992 SC 549 = 1992 PTD 932 whereby it was clearly held that when an appeal order was passed by an Appellate Authority the order of the Assessing Officer did not exist. He submitted that decision of the Hon'ble Supreme Court of Pakistan is binding in terms of Article 189 of the Constitution of Pakistan. He contended that in the present case the Additional Commissioner of Income Tax while amending the order under section 122(5A) of Income Tax Ordinance, 2001 has totally ignored the basic fact that when original order against which an appeal order has already been passed the original order does not exist because it has been merged into an appellate order and the provision of section 122(5A) cannot be invoked for amending the appellate order. Therefore, the Additional Commissioner of Income Tax has become a functus officio to invoke the provision of section 122(5A) of Income Tax Ordinance, 2001 while amending the merged 122(5A) order which was due to the theory of merger as decided by the Hon'ble High Court/Supreme Court of Pakistan. Hence, he urged that the order passed under section 122(5A) of Income Tax Ordinance, 2001 is void ab initio and illegal. In support of his contention the learned counsel for the assessee has relied on the following reported decisions:

(i) CIT East Zone, Karachi v. Atta Muhammad Faiz 1985 PTD 874;

(ii) Mrs. Anjuman Shaheen v. IAC 1993 PTD 1113;

(iii) Glaxo Lab. Ltd. v. IAC PLD 1992 SC 549; A & B Food Ind. Ltd. v. CIT 1992 SCMR 663 = 1992 PTD 545 and decision of Hon'ble Sindh High Court reported as 2002 PTD 150.

The learned counsel while giving his opinion has submitted that recently a similar issue came up for adjudication before the Hon'ble Federal Tax Ombudsman Complaint No.1282-K of 2003 in the case Messrs Sui Southern Gas Company Ltd. wherein it has been held that "it was an act of harassment, neglect, intention, incompetence, and ineptitude and "mal-administration". In that case, assessment was originally finalized under section 62 of repealed Income Tax Ordinance, 1979 on 29-5-1999 and against the said order the assessee preferred appeal before the learned C.I.T.(A) who passed an order dated 31-7-1999. Subsequently the assessee and the department preferred appeal before this Tribunal. Notice under section 66A of the repealed Income Tax Ordinance, 1979 was issued and replied and disposed of. Thereafter, the Taxation Officer issued notice under section 122(5A) of Income Tax Ordinance, 2001 dated 11-7-2003. It was pleaded before the Hon'ble Tax Ombudsman that the notice issued under section 122(5A) of the Income Tax Ordinance, 2001 is time-barred and beyond the scope of section 122(5A) of the Income Tax Ordinance, 2001. It was argued that the original order of the DCIT dated 29-5-1999 had merged with the appeal order of the appeal authority. Sections 132/135 of the repealed Income Tax Ordinance, 1979 and section 122(5A) of Income Tax Ordinance, 2001 only authorized the Commissioner or any other officer to whom the powers are delegated to amend the order passed under section 59, 59A, 62, 63 or 65 of the repealed Income Tax Ordinance, 1979 and sections 120 and 121 of the repealed Income Tax Ordinance, 2001 and the said section 122(5A) does not include authority to modify the orders passed under sections 66-A, 132 and 135 of the repealed Income Tax Ordinance, 1979. Further it was argued that as per theory of merger the original order of the DCIT passed under section 62 of the repealed Income Tax Ordinance, 1979 was no more in existence and the same had merged with appeal orders. It was further argued before F.T.O. that notice under section 66A of the 'repealed Income Tax Ordinance, 1979 was issued and the case had become time-barred on 29th May, 2003 (four years from the date of passing of order under section 62). Reliance was also placed on decision of Hon'ble High Court of Sindh in Constitutional Petition No.D-1879 of 1994 as notice under section 66A of the repealed Income Tax Ordinance, 1979 had been issued. It was argued on behalf of the Department that the original notice under section 66A of Income Tax Ordinance, 1979 did not culminate into passing of an assessment order and therefore no adverse inference can be drawn in this respect. It was further argued that the issues raised in the present notice under section 122(5A) of Income Tax Ordinance, 2001 were not exactly similar to those raised in notice issued under section 66A of the repealed Income Tax Ordinance, 1979. The Hon'ble Federal Tax Ombudsman held that the provisions of section 122(5A) of Income Tax Ordinance; 2001 only authorizes the Commissioner to modify only assessments passed under sections 59, 59A, 62, 63 or 65 of the repealed Income Tax Ordinance,' 1979 and sections 120 and 121 of Income Tax Ordinance, 2001 and not orders passed under any other section. Further it was held that notice under section 66A of the repealed Income Tax Ordinance, 1979 having been issued on 7-3-2002 the same became time-barred and the action under section 122 of Income Tax Ordinance, 2001 was cancelled. In this respect, he has also referred the decision of this Tribunal in I.T.As. Nos.837/KB and 838/KB of 2003 dated 8-11-2004 wherein, it has been held that:-

"As regards the objections raised in respect of the impugned action for assessment years 1996-97 and 1997-98 being illegal and unjustified as the order framed under section 62 these years stood merged with appellate orders for the year and in the absence of provisions similar to them of section 66(1A) of the repealed Ordinance, 1979 in the provisions of section 122 of the Income Tax Ordinance, 2001 the assessments could not be subjected to action under section 122 of the Income Tax Ordinance, 2001 for these years. We are of the considered view that this objection is valid in respect of amendment of such assessments which were framed under section 62 as per the provisions of the repealed Income Tax Ordinance, 1979 and had been the subject-matter of appeals and the theory of merger applies to these assessment orders which were framed for assessment years 1996-97 and 1997-98."

According to the learned counsel, in another case bearing I.T.A. No.1165/KB of 2003 dated 6-4-2005 this Tribunal has restored the original order while approving the theory of merger by following the land mark judgment of the Hon'ble Supreme Court of Pakistan in case reported as PLD 1992 SAC 549 = 1992 PTD 932 and the judgment of this Tribunal vide Order No.M.A.(AG) No.349 to 353/KB of 2004, I.T.As. Nos.825/KB to 829/KB of 2003. The learned counsel for the assessee has contended that the learned C.I.T.(A) has rightly held that the order passed by the Additional Commissioner of Income Tax lacks jurisdiction and has annulled the order being void ab initio as subsection (5A) of section 122 of the Income Tax Ordinance, 2001 is not procedural in nature and does not have retrospective effect and is not applicable to the already completed assessment on or before 30-6-2003. He submitted that in the instant case the original assessment order under section 62 was passed on 16-5-2003, the subsequent order passed by Additional Commissioner of Income Tax under section 122(5A) of the Income Tax Ordinance, 2001 on 31-1-2005 lacks jurisdiction and patently without jurisdiction and ab initio void and without any legal effect. It is submitted that subsection (5A) of section 122 of the Income Tax Ordinance, 2001 is a substantive law and does not have any retrospective effect. The general principle with regard to the interpretation of statutes as laid down in the case of the Colonial Sugar Refining Company Ltd. v. Irving 1905 AC 369 is that if the matter in question be a matter of procedure only, then the provision would be retrospective, on the other hand, if it be more than a matter of procedure, the legislature would not operate retrospectively. The provision of subsection (5A) of section 122 of the Income Tax Ordinance, 2001 being substantive law and is not a procedural law is not applicable retroactively.

It is submitted that the provision contained in section 122(5A) of the Income Tax Ordinance, 2001, are pari materia to the provision contained in section 66A of the repealed Income Tax Ordinance, 1979. In saving clause i.e. section 239 of the Income Tax Ordinance, 2001, the legislature has not saved the provision contained in section 66-A of the repealed Income Tax Ordinance, 1979. Section 122(5A) was inserted in Income Tax Ordinance, 2001 vide Finance Act, 2003 dated 17-6-2003, with effect from 1-7-2003, and assessment order under section 62 of the repealed Income Tax Ordinance, 1979 has completed on 16-5-2003 much before the insertion of subsection (5A) of the Income Tax Ordinance, 2001. He contended that the provision of subsection 122(5A) of the Income Tax Ordinance, 2001 are not attracted and therefore, impugned order passed under section 122(5A) looses its, sanctity. He strongly argued that in the taxation history such type of actions of revising amending/reopening of assessments have been disapproved by the Superior Courts and the highest appellate forum. He has submitted that similar situation arose at the time of insertion of section 66A in the repealed Income Tax Ordinance, 1979 and repealed Income Tax Act, 1922 with effect from 1-7-1979. Section 34A of the repealed Income Tax Act, 1922 was not saved by section 166 of the repealing Ordinance, 1979 and no analogous provision was enacted in the late Ordinance, 1979. The provision of section 66-A inserted by Finance Ordinance, 1980 with effect from 1-7-1980 a question was raised whether the provision of section 66-A of the repealed Ordinance, 1979 had retrospective effect and the assessment finalized before 1st July, 1980 could be revised by recourse to section 66-A of the Income Tax Ordinance, 1979, the Central Board of Revenue vide its Circular C. No.1(48)IT-I/79, dated 17-2-1981 clarified the situation that section 66-A of the repealed Income Tax Ordinance, 1979, had no retrospective effect. The assessment finalized before 1st day of July, 1980 could not be reopened under section 66-A of the Income Tax Ordinance, 1979. The Hon'ble Lahore High Court vide judgment reported as Messrs Monnoo Industries Ltd. v. C.I.T. 2001 PTD 1525 has approved the view taken by the Central Board of Revenue and held as under:

"having considered the submission made at the bar we are persuaded to agree that section 66-A of the repealed Income Tax Ordinance, 1979 is not procedural in nature, and therefore, it could not have retrospective effect to touch the completed assessments before its introduction on the statute book. The interpretation made by the C.B.R. through the aforesaid circular appears to be more in consonance with law. Particularly in view of the fact that revisional provisions were not saved by section 166 of the Income Tax Ordinance, 1979 providing for repeal and savings of the late Income Tax, 1922".

It is further submitted that a Division Bench of the Hon'ble High Court of Sindh at Karachi in C.P. No.D-643 of 2004 has held 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 assessment finalized before 1-7-2003 cannot be reopened/revised/amended in exercise of jurisdiction under the above provision. Hence the order passed under section 122(5A) lacks jurisdiction and is liable to be annulled being void ab initio. The relevant observations of the Hon'ble High Court are reproduced as under:

"The facts and circumstances in the present petitions being squarely similar, we are persuaded to agree with the contention of Mr. Mansoorul Arfin, learned counsel for the petitioners 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 provision. 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 jurisdiction, illegal and void ab initio. All the notices impugned in these petitions are therefore, hereby quashed along with proceedings in pursuance thereof. The petitions are allowed accordingly."

In a recent judgment of this Tribunal in the case I.T.A. Nos.825 to 829/KB of 2003 dated 8-11-2004 in the case of Jahangir Siddiqui & Company Ltd., Karachi v. IAC it has been held that on the date on which the impugned notices were issued proposing action under section 122(5A), to amend an assessment was not available to the learned ACIT/IAC. The relevant extract from the order is reproduced as under:

"As regards contention that at the point of time on which the impugned notices were issued; proposing amendment of the earlier completed assessments for the impugned assessment year for the reason that these were erroneous and prejudicial to the interest of revenue, the law prevailing at that point of time did not give the requisite jurisdiction to the Additional Commissioner as subsection (5A) containing the requisite .provisions for jurisdiction purposes were inserted in law w.e. f. 1-7-2003, we find force in the arguments made by the A.R. of the assessee appellant on this issue and it is our considered view that ort the date on which the impugned notices were issued proposing action under section 122, the power to amend an assessment on the ground that it was erroneous and prejudicial to the interests of revenue, was not available to the concerned officer as per the related provisions of law prevailing at point of time. Furthermore, it is evident from the text of the show-cause notices issued by the said officer, as incorporated in his impugned order, that he continued the proceedings which he had initiated on 3-9-2002 till recording of the impugned order under section 122, which were passed well before insertion of subsection (5A) in law on 16-6-2003 through Finance Act, 2003. In this position, we are of the considered view that all the impugned orders framed by the Additional Commissioner lacked jurisdiction and, therefore, they were liable for cancellation by the C.I.T.(A)."

The learned counsel has submitted that powers to amend under section 122(5A) of Income Tax Ordinance, 2001 already completed assessment order of the Assessing Officer/ALIT vests on the Commissioner of Income Tax and not on Additional Commissioner of Income Tax, as envisaged under section 122(5A) of the Income Tax Ordinance, 2001 hence the order passed by the Additional Commissioner being ab initio void lacks jurisdiction, a careful reading of section 122(5A) of the Income Tax Ordinance, 2001 clearly shows that the order passed by the Additional Commissioner of Income Tax is without lawful authority as such powers of amending the order are available only to the Commissioner of Income Tax and not to the Additional Commissioner. He urged that the impugned order passed under section 122(5A) by the Additional Commissioner of Income Tax is liable to be annulled. Further, there is no provision in Income Tax Ordinance, 2001 whereby the Commissioner can delegate his mind for independent consideration under section 122(5A) of the Income Tax Ordinance, 2001. Without prejudice to this, it is submitted that it is not the duty of the Additional Commissioner of Income Tax to amend each and every assessment order passed by the Assessing Officer/ACIT. It can only be after conscious application of mind as subsection (5A) provides that the COMMISSIONER may amend, or further amend, an assessment order, "IF HE CONSIDERS" and not the word "shall amend". He went on to argue that it is crystal clear by the reading of section 122(5A) of Income Tax Ordinance, 2001 that only Commissioner has been vested with the jurisdiction to take action under section 122(5A) on the basis of his personal examination and consideration of the case. It needs hardly be emphasized that before the power under section' 122(5A) is exercised, the Commissioner must be satisfied on the materials on record that the order, being erroneous, has caused prejudice to the interests of the Revenue or was likely' to cause such a prejudice. It is true that section 122(5A) vests power in the Commissioner in subjective terms, but it has been pointed out by the Hon'ble Supreme Court in a series of judgments that even when an enactment vests discretion in any authority saying "if it appears", "if he is satisfied", "if he considers," that does not mean that it is a matter of only a subjective satisfaction and such authority has not to judge the circumstances appearing in the case in an objective manner. The reliance is placed on judgment reported as 2005 PTD (Trib.) 344. In this case, the Additional Commissioner has not examined and considered case record to formulate an opinion of his own to invoke the provisions of section 122(5A). As such, the notice issued under section 1.22(5A) by the Additional Commissioner of Income Tax is not sustainable in law and is without jurisdiction. Moreover any subsequent proceedings under the said illegal notice shall be void and illegal. He has argued that the original order under section 62 was passed by the Additional Commissioner of Income Tax and order under section 122(5A) of the Income Tax Ordinance, 2001 was also passed by the Additional Commissioner of Income Tax hence, the equal authority/same rank authority/counter part cannot revise/amend the order of equal authority i.e. Additional Commissioner of Income Tax under the garb of section 122(5A). It is admitted position that in this case the order under section 62 of the repealed Ordinance, 1979 was passed by the Additional Commissioner of Income Tax (Mr. Muhammad Iqbal Ahmed, ACIT) and the order under section 122(5A) of Income Tax Ordinance, 2001 was also passed by the same authority i.e. Additional Commissioner of Income Tax (Mr. Amjad Iqbal ACIT). It is well settled principle of law that an equal authority cannot revise/amend the original order passed under section 62 by invoking section 122(5A) of the Income Tax Ordinance, 2001. He cited the case law reported as 2001 PTD 2919 and 2002 PTD (Trib.) 358 wherein, it has been held that "When Inspecting Additional Commissioner acts as Assessing Officer, he could not, in respect of such assessments exercise the powers of revision under section 66-A of the Income Tax Ordinance, 1979 --"Notice issued under S.66-A was neither based on any enquiry, evidence or material on record, nor issued after examination of the case with an independent, impartial and unbiased mind, especially when most of the original assessments had been made by his counterpart Inspecting Additional Commissioner---Inspecting Additional Commissioner was not competent to pass the impugned order under section 66-A of the Income Tax Ordinance, 1979 in circumstance."

10. We have heard the learned representatives from both the sides and have also perused the impugned orders of the authorities below, record of the case and case laws cited at bar.

From the pleadings of the parties, it seems to us that the learned C.I.T.(A) is right in annulling the order passed under section 122(5-A) of the Income Tax Ordinance, 2001. The impugned order of the learned C.I.T.(A) is based on sound footings, well-reasoned and after appreciation of the arguments of the learned counsel for the respondent. After considering the arguments of the learned counsel for the assessee, we are of the view that the theory of merger is not a new phenomenon. This theory always remained in the taxation history. The theory of merger has given appreciation just to save the precious time of Courts and to avoid unnecessary litigation between the parties. It is an admitted fact that against the original assessment order passed under section 62 appeal was preferred by the assessee company, hence, order under section 62 passed by the Additional Commissioner was merged with the appellate order of Commissioner of Income Tax (Appeals). After appeal no order under section 62 is existed to be modified under section 122(5A). In section 66A of the repealed Ordinance of 1979, before the insertion of subsection (IA), the Courts held that once an appeal was filed, provision of section 66A could not be invoked. After insertion of subsection (IA) in section 66A in 1991, the position changed as it was provided that only that part would merge in the appellate order which was appealed for or on which any finding was given by Appellate Authority. The law as existing prior to 1991 and after insertion of subsection (IA) in section 66A was interpreted accordingly by the Courts. No Court assumed to position which was not available in section 66A from 1979 to 1990. Had legislature intended to provide that erroneous order of the ACIT was to be revised by his superior officer, it could have done so by an explicit provision as was done in the repealed law through section 5(1)(c). The theory of complete merger as such arising from section 66A before insertion of subsection (IA) prevailed for 12 years after promulgation of 1979 Ordinance and the Courts interpreted the law as it was and not as it would have been after 12 years. In section 122(5A) again, any parallel provision like 66(1A) is missing and this Tribunal in I.T.As. Nos.825 to 829/KB of 2003 interpreted the law accordingly by observing:

"As regards the objections raised in respect of the impugned action for assessment years 1997-98 to 2000-2001 being illegal and unjustified as the orders framed under section 62 for these years stood merged with the appellate orders for these years and in the absence of provisions similar to those of section 66(1A) having been incorporated in the provisions of section 122 of the Income Tax Ordinance, 2001, the assessments could not be subjected to action under section 122 of the Income Tax Ordinance, 2001 read with section 66A of the repealed Income Tax Ordinance, 1979 for these years, we are of the considered view that this objection is valid in respect of amendment of such assessments which were framed under section 62 as per the provisions of the repealed Income Tax Ordinance, 1979 and had been the subject-matter of appeals and the theory of merger applies to these assessment orders which were framed for assessment years 1997-98 to 2001-2002."

Regarding the jurisdiction of the Additional Commissioner, we are of the view that the order passed by the Additional Commissioner lacks jurisdiction as the original assessment order passed under section 62 of the repealed Income Tax Ordinance, 1979 was completed well before the insertion of subsection (5A) of the Income Tax Ordinance, 2001. Subsection (5A) of the Income Tax Ordinance, 2001 being a substantive law does not have retrospective effect. The subsection (5A) of section 1.22 of the Income Tax Ordinance, 2001 being substantive piece of legislation cannot operate retrospectively until and unless specifically provided to be applied retrospectively. Therefore, this subsection (5A) has to be applied prospectively and not retrospectively. This theory is also being followed in the statute for the last so many decades. This interpretation has recently been followed in various judgments of the superior., courts, which includes judgment of the Hon'ble High Court of Karachi in the case law reported as 2005 PTD 1316 (HC Kai.) and 2006 PTD 734 and also the judgments of this Tribunal in No.MA(AG) No.349 to 353/KB of 2004 and I.T.As. Nos.825/KB to 829/KB of 2003 dated 8-11-2004 and I.T.As. Nos. 837/KB and 838/KB of 2003 dated 8-11-2004. I.T.A. No.846/KB of 2005 dated 16-5-2006 and 2006 PTD (Trib.) 2729.

Regarding the powers to amend already completed assessment order of the Assessing Officer vest on the Commissioner, we are of the view that section 122(5A) empowers the Commissioner to amend or further amend, an assessment order, if he considers the order is erroneous and prejudicial to the interest of Revenue. It is crystal clear by the' reading of section 122(5A) of Income Tax Ordinance, 2001 that only Commissioner has been vested with the jurisdiction to take action under section 122(5A) on the basis of his personal examination and consideration of the case himself. It needs hardly be emphasized that before the power under section 122(5A) is exercised or delegated, the Commissioner must be satisfied on the materials on record that the order, being erroneous, has caused prejudice to the interests of the Revenue or was likely to cause such a prejudice. It is true that section 122(5A) vests power in the Commissioner in subjective terms; but it has been pointed out by the superior court in a series of judgments that even when an enactment vests discretion in any authority saying "if it appears", "if he is satisfied", "if he considers", that does not means that it is a matter of only a subjective satisfaction and such authority has not to judge the circumstances appearing in the case in an objective manner. The reliance is placed on judgment reported as 2005 PTD (Trib.) 344. In the instant case, the Commissioner has not examined and considered the case record formulate an opinion of his own to invoke the provisions of section 122(5A). As such, the notice issued under section 122(5A) by the Additional Commissioner of Income Tax is not sustainable in law and is without jurisdiction. Moreover, any subsequent proceedings under the said illegal notice shall be void and illegal. Furthermore, the Commissioner must give his own reasons for being satisfied that the order passed by the Assessing- Officer under section 62 of the Income Tax Ordinance, 1979 is prejudicial and erroneous to the interest of revenue even before delegation of power. The conclusion further strengthened by the use of the words "if he considers" in the section which postulates a scrutiny by the Commissioner of all the relevant facts for holding that the order is erroneous and prejudicial. The relevant provision of law i.e. .section 122(5A) of the Income Tax Ordinance, 2001 is so clear that no exception can be taken to this. It is thus clear that if something is required to be done, it needs to be specifically enacted, as the law cannot be interpreted in anticipation. Plain language of law is to be adhered to and no intendment is permitted. The legislature through enactment of subsection (1A) of section 210 clearly provided that no officer below the rank of Additional Commissioner can be delegated powers by the Commissioner for the purposes of section 122(5A). This delegation of power obviously cannot be in respect of orders passed by the C.I.T. himself or by the Additional Commissioners as they cannot revise/amend their own orders considering them erroneous as well as prejudicial to the revenue. If they do so they will sit on their own judgments. It will be against the well-established rule of law that no person can be a judge in their own cause. This has never been the intention of the legislature, otherwise the very purpose of insertion of subsection (IA) in section 210 read with section 122(5A), will become meaningless. The judgments quoted by the assessee company also support the contention of the assessee company. However, if it is presumed that the learned C.I.T. can delegate its powers to the Additional Commissioner, but one may always think that how the Commissioner can delegate his experience, mental equilibrium and faculty of approach to his subordinates i.e. the Additional Commissioner as the legislature has used the word under section 122(5A) "if he (Commissioner) considers" this special provision clearly -without any shadow of doubt, spells out that the powers of the Commissioner to invoke the provision of section 122(5) is wholly, solely and exclusively dependent upon to consider by himself which must be formulated on objective basis. Therefore, it is not possible to translate, transform and pass on the same consideration and thinking what he himself can do for amending the order as it requires continuous learning and experience which the Commissioner himself acquired in a period of time after the elevation and performing his duties as Commissioner of Income Tax. It is but natural that there is no substitute of knowledge and experience which cannot be passed on to any other person just with a stroke of pen than what the Commissioner could do himself. We have further noted that the original order under section 62 was passed by the Additional Commissioner and the order under section 122(5A) was also passed by the same authority i.e. Additional Commissioner of Income Tax. The equal authority cannot revise/alter/amend the order of co-jurisdiction/ counterpart. Language of section 122(5A) read with section 210(1A) clearly shows that hierarchy of administration has been kept in view to conform revisional jurisdiction to well established rule of law that a person cannot be judge in own cause as elaborated by Honourable Supreme Court of Pakistan in New Jubilee Insurance Company Ltd., Karachi v. National Bank of Pakistan, Karachi PLD 1999 SC 1126 which reads as under:

"It may be observed that here are certain basic norms of justice. One of the cardinal principles of above basic norms is that one cannot be judge in his own cause. The breach of the above cardinal principle of jurisdiction will in fact be violative of the right of "access to justice to all" which is a well-recognized inviolable right enshrined in Article 4 of the Constitution. This right is equally found in the doctrine of "due process of law".

As elaborated by the Honourable apex Court, due process of law as enshrined in Article 4 of the Constitution of Pakistan necessarily requires that a person should not be judge in his own cause. So if an Assessing Authority (whatsoever may his designation or grade) is given power to sit in his own judgment, it will be violative of supreme law of the land. This authority is not even available to the honourable judges of the highest court of the country, let alone be enjoyed by Revenue authorities while exercising quasi-judicial functions. This dictum was also explained by honourable Lahore High Court in the case of Sandal Engineering (Pvt.) Ltd. v. IAC 2001 PTD 1467 which reads as under:

"Revisional jurisdiction is never exercised by the same authority. The power to revise, be it suo motu or on the application of an aggrieved party, necessarily involves the consideration of the impugned order by a person or authority placed higher in the hierarchy to adjudge its legality and propriety. The jurisdiction so conferred normally has a colour of supervisory power to correct mistakes on administrative side. Once an authority has passed an order, it cannot act in revision on the same order to pick up faults and. to interfere with by taking a different view of the issues involved."

The dictum that a person cannot be judge in his own cause was also examined by this Tribunal in I.T.As. Nos.5763 and 5764/LB of 2004, dated 19-8-2006 declaring the appeal infructuous because it was filed by the same person who originally passed it. This Tribunal in this case has made the following remarks:

"We find considerable force in the arguments of the learned A.R. and we further add it is against the norms of decency that one may sit on judgment can go for further appeal against his own earlier decision. Even otherwise there is no authority under the law which empowers a person to reverse his own decision/judgment. The action of filing second appeal before this Tribunal by the learned C.I.T.(A) Zone I, Lahore is, therefore, unethical and contrary in nature and accordingly a change of opinion. It is our considered opinion that the authority filing second appeal before this Tribunal was not competent to agitate against his own order. This being the case we hold it to be against principle of natural justice and the appeals filed before us are held to be infructuous."

The above judgment of this Tribunal reaffirms the principle that nobody can be judge in his own cause and law does not permit a person to revise his own decision, or to agitate against his own decision. Since the same person, who passed appellate order filed appeal against the very order, though in a different capacity, this Tribunal has disapproved this practice.

In the present case also, the assumption of jurisdiction by the Additional Commissioner while passing order under section 122(5) of the Income Tax Ordinance, 2001 is unlawful. It is a cardinal principle of law that if an acquiescence lacks jurisdiction, no amount of consent or acquiescence in the proceedings can invest any jurisdiction on him. The learned C.I.T.(A) has therefore rightly annulled the order passed under section 122(5A) of the Income Tax Ordinance, 2001.

11. In view of the above facts and legal position, we find no warrant for interference in the impugned order, which is upheld and the appeal filed by the Department is dismissed.

C.M.A./6/Tax(Trib.)Appeal dismissed.