VS, 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2281 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 62 & 13---Income Tax Ordinance (XLIX of 2001), S.122---C.B.R. Circular No.7 of 2002 dated 15-6-2002, para. (IV)---C.B.R. Circular No.8 of 2003 dated 26-8-2003---Self-assessment---Exclusion of case from the purview of Self-Assessment Scheme in violation of the basic terms and conditions of Self-Assessment Scheme as mentioned in para.8 of the C.B.R. Circular No.7 of 2002 dated 15-6-2002---Addition in respect of purchase of property---Validity---Property was purchased in the year 1995 which could not be taxed in the year 2002-2003---Further said property belonged to wife of assesses, who was existing assesses and declared the same in hex wealth tax return---Such could not be termed as concealed income and taxed in the hands of assessee---. Department before excluding the case from Self-Assessment Scheme had not taken steps as required under para. 8 of C.B.R. Circular No.7 of 2002 dated 15-6-2002---Exclusion of assessee's case from Self-Assessment Scheme was not justified---Orders of the officers below were vacated by the Appellate Tribunal and directed for acceptance of return filed by the assessee under Self- Assessment Scheme.

(1971) 23 Tax (SC Pak) (sic) rel.

1997 PTD (Trib.) 879 and 2000 PTD (Trib.) 2424 ref.

Haji Yousuf for Appellant.

Ali Akbar, D.R. for Respondent.

ORDER

MUHAMMAD ASHFAQ BALOCH (JUDICIAL MEMBER).---The above captioned appeal on behalf of the assessee has been preferred against the order dated 28-4-2005 passed by the learned C.I.T.(A), Zone-V, Karachi. Assessee has contested the appeal on following grounds:--

(1) That the order of C.I.T.(A) is bad on law and on facts.

(2) That the learned C.I.T.(A) was not justified to confirm the DCIT Order under section 62.

(3) That our case stands qualified under SAS vide C.B.R. Circular No.7 of 2002 dated 15th June, 2002.

(4) When deemed order is already completed vide notice under section 122 of the learned IAC dated 3-1-2003, how an assessment already completed under SAS can be deleted from SAS 25-4-2003, one month after the completion of Assessment.

(5) Admittedly notices under section 122 were issued twice on 3-1-2003 and 10-2-2003. Legally .once section 122 is invoked, assessment can only be revised by learned Commissioner under section 122(1). How assessment can legally be completed under section 62 of the Income Tax Ordinance, 1979, when notices under section 122 dated 3-1-2003 are already issued.

(6) Which provision of law permits the simultaneous of Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001. How for concurrent use of section 122 of the Income Tax Ordinance, 2001.

(7) That while disposing of appeal, learned C.I.T.(A) failed to answer following legal issues:

(a) When proceeding under section 122 is withdrawn?

(b) Who withdraw the proceeding under section 122?

(c) When it was communicated to the assessee?

(d) What is the status of the case, once notice under section 122 is withdrawn?

(e) What is the scope of delegation of power? Should it include withdrawal of notice under section 122?

(f) Is it correct that fresh power be delegated by C.I.T. to subordinate. authority for withdrawal of notice under section 122?

(g) Should such power was specially delegated by the then C.I.T.?

(h) What was contained in the original letter of delegation by C.I.T.(A) to subordinate authority?

(8) If for the sake of argument it is accepted that. notice under section 122 withdrawn the order completed under section 59(1) will automatically stored and either afresh exercise for the deletion of the case from audit of SAS fresh show-cause notice or fresh proceeding under section 65 or under section 66(a) of the repealed Ordinance is become mandatory. "

3. From perusal of the orders following position emerged:

4. That return for the year under consideration was filed under Self-Assessment Scheme. Thereafter Department issued notice under section 58(1)' of the Income Tax Ordinance, 1979 (R) for filing of wealth statement, assessee did not file the statement as required by the department and requested for withdrawal of notice. Department issued show cause letter dated 24-4-2003 and assessee was directed to explain about the concealment attracting the provision of para. 7(VI) of Circular No.7 of 2002, warranting the exclusion of case from Self-Assessment Scheme. It was alleged that assessee had not declared assets viz. properties and expenditure incurred on his marriage. Assessee vide letter dated 10-5-2003 claimed that as per section 59(1) of the Income Tax Ordinance, 1979 assessment deemed to have been completed on 31-3-2003. Assessee further informed that the properties mentioned by the department not belong to him this position was confirmed by Taxation Department and expenditure on his marriage was borne by the relatives and brother-in-law. The claim of assessee was accepted and only addition of Rs. 50,000 under section 13(1)(e) of Income Tax Ordinance,. 1979, after approval of IAC Range-II was made.

5. In the meanwhile one Mr. Zia-ul-Umer submitted Sale Agreement of Property bearing No.C-5, Block-4, KDA Scheme No.24, that document revealed that property was purchased by the assessee in the year 1995. On this information assessee was issued notice under section 62 of Income Tax. Ordinance, 1979. As per department assessee did not respond this notice, therefore, assessment was finalized, sales were estimated at Rs.8,00,000 against the declared income of Rs. 1,78,500, GP rate of 41 % applied, addition under section 13(1)(e) of Rs.50,000 (on marriage expenses) addition under section 13(1)(aa) of Rs.15,00y000 (purchase of house) and addition under section 13(1)(c) (raising further construction of house) Rs. 1,20,00,000 were made. This treatment was confirmed by the learned C.I.T.(A). Hence, present appeal.

6. The contentions of Mr. M. Yousuf, Advocate, for the assessee were that only joint notice under section 62with section 13(2) was issued but no specific notice under section 13(1,) was issued as required under law, reliance was placed on 1997 PTD (Trib.) 879. Further it was contended that property in question was purchased in the year 1995. It is in the name of wife of assessee such declaration already made in the wealth tax .statement of owner, and. it cannot be taxed in the hands of assessee and it is now time-barred, reliance was made on (1971) 23 Tax SC Pak. (sic), (ii) 2000 PTD (Trib.) 2424 and Circular No.8 of 2003 dated 26-8-2003. It was also contended on the assessee's side that-notices under section 122 were issued twice on 3-1-2003 and 10-2-2003, assessment cannot be completed under section 62 of the Income Tax Ordinance, 1979.

7. On the other hand, the learned D.R. supported the impugned order.

8. We have considered the arguments of both the parties and perused the record.

9. It is an admitted position that in the present case return was filed under the Self-Assessment Scheme for the assessment year 2002-2003. Therefore, Circular No.7 of 2002 (Income Tax) dated 15-6-2002 is relevant. And it is mandatory for processing the return in manner as prescribed in this circular. In the assessment year under consideration before excluding any case from the Self-Assessment Scheme as per para. 8 of Circular the Department has to take following steps, relevant portion is reproduced as under:---

"8. Processing of Returns filed under the Scheme.

(a) The Assessing Officer, will make initial scrutiny of the returns with respect to the provisions of Scheme to determine the acceptability thereof.

(b) In case of non-filing of documents as required by this Scheme, a notice shall be issued to the person indicating the deficiency to be made up within 15 days of the receipt of such notice:

(c) do gases of non-compliance within the time so allowed, the DCIT shall exclude the case from the SAS by passing a speaking order immediately but not later than fifteen days from the expiry of prescribed time. "

10. But we are surprised to notice that department while processing the case of assessee for the purpose of excluding the same from purview of Self-Assessment Scheme had not taken those steps as mentioned in para. 8 of the Circular and violated the basic terms and conditions of the Scheme.

11. So far the issue of concealment of interne about purchase of property and expenses on marriage are concerned, the assessee's side during the assessment proceedings claimed that these properties were not owned by the assessee. This plea of the assessee at the initial stage was admitted by the Department, subsequently this plea was rejected by the department on the basis of copy of the sale agreement of the property in question received by the Department and affidavits filed in civil courts about the ownership of property in question.

12. It is evident from the contents of notice under section 62, that department was informed by the assessee that property in question belonged to Mst. Shaista Usman wife of appellant, an existing assessee vide NTN 27-8-3075434 and property was purchased on 3-5-1995 and department added this. amount as income under section 13(1)(aa) and 13(1)(e) in assessment year 2002-2003 after period of 5 years which as per Circular No.8 of 2003 dated 26-8-2003 is time-barred. As it is already mentioned above that property in question belongs to wife of appellant, who is also existing assessee having NTN, further she already declared this property in return of .wealth tax in the assessment year 1997-98. Department has not been able to rebut this factual and legal position. Reliance is placed on 2000 PTD (Trib.) 2424, wherein it was held: ---

"The matter has been considered. On the factual ground, it is seen that claim of the appellant that assets had already been taxed in the hands of the son has not been disputed by the Department in respect of any of the assessment years involved. The claim of the appellant that these assets were purchased out of fund provided by the son has also not been subjected to any verification by the Assessing Officer. In other words the claim of the appellant that he was not a real owner of the property and was just a benami holder has not been rebutted by the Assessing Officer with any evidence brought on record so that the claim of the appellant about being just a benami holder of these assets remains uncontroverted. On the basis of this factual position, the case cited by the learned counsel is found to be on all fours with the facts obtaining in the present case. The assessments of these assets in the hands of the son having been completed and not being annulled before their subsequent inclusion in the wealth of that father does not make the re-assessment maintainable and are accordingly all the three orders of officers below are vacated."

13. In view of above discussion when property in question was purchased in the year 1995, in view of circular supra, it cannot be taxed in the year 2002-2003. Further property belongs to wife of assessee, who is existing assessee and declared the same in her wealth tax return, in view of the judgment supra, how it can be termed as concealed income and taxed in the hands of assessee. Furthermore, as already mentioned above that department before excluding the case from Self-Assessment Scheme had not taken steps as required under para. 8 of Circular No.7 of 2002 (Income Tax) dated 15-6-2002. Therefore, we are of the considered view that exclusion of assessee's case from the Self-Assessment under the present circumstances and facts was not justified. Resultantly we have reasons to vacate the orders of officers below and direct for acceptance of return filed by the assessee under Self-Assessment Scheme 2002-2003.

C.M.A./92/Tax(Trib.)Appeal accepted.