2007 P T D (Trib
2007 P T D (Trib.) 2358
[Income-tax Appellate Tribunal Pakistan]
Before Khawaja Farooq Saeed, Chairperson, Muhammad Ashfaq Baloch, Judicial Member and S. A. Minam Jafri, Accountant Member
M.A. (Rect) No. 83/KB M.A. (A.G.) No. 98/KB of 2006 and I.T.A. No. 1283/KB of 1999-2000, decided on 29/06/2006.
Per Muhammad Ashfaq Baloch, Judicial Member---[Minority view]:
Income Tax Ordinance (XLIX of 2001)---
----S.221---Rectification of mistake---Second miscellaneous application---Issues raised in the second miscellaneous application for rectification were already discussed in detail and definite findings were recorded as was evident from order of Appellate Tribunal in first miscellaneous application for rectification filed by the assessee---Application for rectification held was without any merit and was dismissed.
Per S.A. Minam Jafri, Accountant Member, contra---[Majority view]
(a) Income Tax Ordinance (XXXI of 1979)---
----Ss.62, 13 & 30---Income Tax Ordinance (XLIX of 2001), S.221---Rectification of mistake---Issuance of notice under S.62 of the Income Tax Ordinance, 1979 for proposed addition under S.13 of the Income Tax Ordinance, 1979 and addition of same amount .under 5.30 of the Income Tax Ordinance, 1979, was an apparent contradiction---Issue of primary nature, being not apparent in the Tribunal's order amounted to recording a verdict without due consideration of the same an `omission'.
(b) Income Tax Ordinance (XLIX of 2001)---
----S.221---Rectification of mistake---Rectification was a legal remedy which allowed a Court in certain circumstances, to correct or amend documents that do not properly record the issues on facts as well as on law---In contemporary literature of law `development rectification' also had assumed an obvious form of "damage control" on law and on facts which should be considered whenever an error was detected---However such conceptual approach should remain within domain envisaged in statutory provisions of Income Tax Ordinance, 2001.
(c) Income Tax Ordinance (XLIX of 2001)---
----S.221---Income Tax Ordinance (XXXI of 1979), Ss.62, 13 & 30---Rectification of mistake---Show-cause notice had been issued with regard to S.13 of the Income Tax Ordinance, 1979 where an addition had been ' made under S.30 of the Income Tax Ordinance, 1979---Tribunal's order in such context fell within domain of `Non licet' and it will be fair and reasonable if Tribunal's original order was rectified under S.221 of the Income Tax Ordinance, 2001 and issue of addition under S.30 of the Income Tax Ordinance, 1979 be remanded back to the Department for a de novo order after considering all the above grounds of appeal and affording an opportunity to assessee in this behalf.
Ram Kirpal v. UOL 1998(103) ELT 8 (Guj HC DB) and Sri Budhia Swain v. Gopinath Deb 1999(3) SCALE 528= AIR 1999 SCW 1814 ref.
Per Khawaja Farooq Saeed, Chairman---[agreeing with S.A. Minam Jaffery, Accountant Member with different reasons and slight modification of the order].
(d) Income tax---
----`Speaking order'---Connotation---If by an omission one tends to ignore a basic and tangible argument which goes to the very root of the proceedings; it could not be called a `speaking order'.
(e) Income Tax Ordinance (XXXI of 1979)---
----Ss.13 & 30---Income Tax Ordinance. (XLIX of 2001), S.221---Rectification of mistake---Addition---Confrontation under S.13 of the Income Tax Ordinance, 1979 while the addition was made under S.30 of the Income Tax Ordinance, 1979---Validity---No finding had been given on the issue that after reply of the assessee against ashow-cause notice under S.13 of the Income Tax Ordinance, 1979 another notice to assessee for confronting addition under S.30 of the Income Tax Ordinance, 1979 was required or not--Charging provision for assessing the income was S.13 of the Income Tax Ordinance, 1979 and Assessing Officer accordingly confronted the assessee for taxing the same under the said provision---After obtaining reply of the assessee the Assessing Officer thought otherwise and added. the .income under S.30 of the Income Tax Ordinance, 1979 which was never confronted---Change of mind of Assessing Officer after obtaining reply of the assessee called for another notice---Since the assessee was waiting for the fate of his reply against proposed addition under S.13 of the Income Tax Ordinance, 1979 the order came with a surprise---Proposed `deemed income' was assessed as `income from other sources'---Such were two separate charging provisions with separate Para meters---Principles of natural justice required confrontation before addition.
(f) Income Tax Ordinance (XLIX of 2001)---
----S.221---Income Tax Ordinance (XXXI of 1979), S.156---Rectification of mistake---Rectification is a legal remedy which allows the courts in certain circumstances to correct the mistakes as and when the same floats on the surface of the order---Mistake may be rectified either under the provision of Income Tax Ordinance, 2001 or erstwhile Income Tax Ordinance, 1979.
(g) Income Tax Ordinance (XXXI of 1979)---
----Ss.13 & 30---Addition---Nature of provisions---Section 13 of the Income Tax Ordinance, 1979 deals with the income which otherwise may not fall in the normal definition of the term "income"---Section 13 was a deemed income provision where certain kinds of expenditure or unexplained amounts available with the assessee or the receipts not shown in the account are treated as his income, on the other hand S.30 of the Income Tax Ordinance, 1979 deals with income from other sources and covers those sources which are not covered by other specific provisions of the Income Tax Ordinance, 1979.
(h) Income Tax Ordinance (XLIX of 2001)---
----S.221---Income Tax Ordinance (XXXI of 1979), Ss.13 & 30---Rectification of mistake---Miscellaneous application was accepted by the Chairman, Income Tax Appellate Tribunal leaving for the Division Bench of the Tribunal to decide the question as to whether the Assessing Officer was justified in making addition under S.30 of the Income Tax Ordinance, 1979 after issuance of a notice under S.13 of the Income Tax Ordinance, 1979 or not---Main order was recalled for disposal of issue which stood ignored in original order i.e. that whether Assessing Officer could add the amount under discussion under S.30 on the strength of a notice under S.13 and that whether on the facts and in the circumstances of the case the income was chargeable under S.30 or not.
Sheikh Jalaluddin, F.C.A. for Applicant.
Rajabuddin, D.R. for Respondent.
ORDER
MUHAMMAD ASHFAQ BALOCH (JUDICIAL MEMBER).---Above captioned Miscellaneous Application for rectification is filed by the assessee, whereby he sought rectification in order passed by this Tribunal in I.T.A. No.1283/KB of 1999-2000 dated 21-11-2002 for the assessment year 1994-95. Assessee has also filed Miscellaneous Application for Additional Grounds by consent of both the parties. M.A. (Additional Grounds) is hereby allowed and these additional grounds are treated as part of M.A. Rectification No.83/KB of 2006 supra. Following rectifications have been sought by the assessee:---
ADDITIONAL GROUNDS:
The learned Income Tax Appellate Tribunal omitted the fact that the learned assessing officer did not comply with the legal requirements to tax the appellant under section 30 of the Income Tax Ordinance, 1979.
That the learned Income Tax Appellate Tribunal also did not consider the fact that the Deputy Commissioner of income Tax did not find any evidence of funds available with the appellant.
That the impugned order of the learned Income Tax Appellate Tribunal may kindly be recalled and rectified under section 221 of the Income Tax Ordinance, 2001, along with the penalty under section 111 of the Income Tax Ordinance, 1979.
MAIN GROUNDS:
(1) That the Honourable Income Tax Appellate Tribunal passed the order in appeal I.T.A. No.1283 LB/DB of 2000-2001 under section 62 for the assessment year 1994-95 on 21-11-2002.
(2) That most of the vital point argued and raised in the grounds of appeal and at the time of hearing was omitted to be discussed and considered while passing the order; which could have material effect on the appeal order.
(3) Following are the facts and arguments raised at the hearing but not considered by the learned member.
(a) The learned DCIT vide notice under section 62, No.Circle-10 Companies-II-97-98 dated 21-8-1998 confronted the appellant to tax the amount of Rs.622.814 million under section 13 of the Income Tax Ordinance, 1979 which section he never confronted.
(b) That the re-opening notice under section 65 of the Income Tax Ordinance 1979 was served to an unauthorized person.
(c) That no new facts have come to the notice of the assessing officer, without which cases cannot be reported under section 65 of the Income Tax Ordinance 1979.
(d) That the entire assessment was based on the reliance of Inspector's report appointed by the SECP. The Govt. appointed auditor Messrs Rehman Sarfraz & Co. were holding office of profit in NFL was working in Multiple capacity as such his report should not have been relied upon.
(e) The learned DCIT did not provide a copy of the Govt. Inspector's Report to the appellant for furnishing reply and explanation, in spite of request by the appellant.
(f) The learned DCIT did not accuse to the request of the appellant to summon the Govt. Inspector for cross-examination.
(g) The learned DCIT did not call the documents and record in. possession of the Govt. auditor to ascertain the genuineness of the report.
(h) The Govt. Inspector conducted inquiry in the absence of the entire of Board of Directors and did not obtain explanation and clarification from the Directors.
(i) The learned Govt. inspector did not have any evidence or supporting statements of his physical verification and findings.
(j) The NFL and Schon Headquarter was raided by the FIA. CBC Karachi and took away all the records, documents, bills vouchers, Contracts, agreements, Bank Statements etc. etc. without obtaining all these records from FIA the Govt. Inspector conducted the inquiry and finalized the reports.
(k) The learned DCIT failed to obtain .the original records and documents from FIA without which the finalization of .assessment is not justified.
(l) The learned DCIT failed to obtain documents of Development Work from FIA custody, how did he write confirmation letters in the absence of above documents.
(m) The learned DCIT did not disclose the names and addresses of the parties he confronted or sent notice of confirmation.
(n) The learned DCIT made a solo visit of the NFL site, there is no evidence of his visit of NFL site. He did not inform the management about his visit. His solo observation without the support and evidence of any official of NFL or Schon or any other official of the tax department cannot be relied upon.
(o) The learned DCIT's observation that the projects like power plant, Twisted Yarn and polyester Fibre yarn was not included in the development expenses is based on surmises and apprehension.
(p) The learned DCIT insisted for the original bills and document of development work from the appellant knowingly that the same are with the F.I.A.
(q) The actual suppliers were never approached by the DCIT for confirmation of payments.
(r) The new management of NFL reversed the claim of depreciation but the assets were continued appearing in the statement of account.
(s) The Prosecutor General Accountability .filed an applications under section 31-B of the NAB Ordinance 1999 dated 31-10-2005 exonerating the entire Schon Group Directors of any such alleged illegal payments and requested a NAB Court to discharge the case, which was accepted by the NAB Court vide order dated 18-10-2005.
(6) In view of above facts it is requested that the case may please be
recalled for re-hearing./Rectify under section 221 of the. "
2. Mr. Jalaluddin, F.C.A. appearing on behalf of the assessee has argued that this Tribunal while deciding the appeal of assessee has not considered the above mentioned issues raised by the assessee, which is mistake apparent from the record.
3. On the other hand Mr. Rajabuddin, learned representative for the respondent/Department has supported the order of this Tribunal and contended that grounds agitated before this Tribunal were duly considered and decided. According to learned D.R prior to this rectification application another Miscellaneous Application No.123/KB of 2003 was filed by the assessee which was dismissed on merit by this 'Tribunal.
4. We have considered the arguments of both the parties and perused the orders of this Tribunal.
5. It is admitted position that prior to this rectification application almost on the similar grounds, rectification application bearing M.A.(Rect) No.123/KB of 2003 (Assessment year 1994-95) was filed by the assessee before this Tribunal which was dismissed with the following observation: -
"The matter has been considered. Out of five categories, those mentioned at serial Nos.1 and 2 relate to reopening of the case under section 65 and its basis have elaborately been discussed in the Tribunal's order Item No.3 relating to the amount in question being income of the appellant has also been discussed in detail in the Tribunal's order. Item No.4 regarding approval of the I.A.C. under. sections 13/30 has been dealt with in the order properly and finding in this regard has duly been given at Para 10 of the order. In respect of~ all these four categories of ground of appeals taken by the learned counsel each one has been discussed in the order so that no rectification is called for on account of any of these grounds having not been brought out in the order. One may differ with the conclusion arrived at in the order on these issues, but that does not constitute a basis for rectification. In respect of the remaining ground alleging that a proper opportunity was not provided to the appellant, the same is not found to be maintainable, as the assessee was properly issued notice under section 62 by the assessing officer before addition to the income was made and the same has been reproduced at Para 5 of the Tribunal's order. Further it is not denied by the counsel at the time of hearing that this Bench due and sufficient opportunity was provided to the assessee so that grievance if any all of such opportunity having not been provided by the offices below has already been made up during the course of hearing before this Bench. On this ground, therefore, there remains no basis for making any rectification or recalling of the order. No other ground has been pointed out by the learned counsel at the time of hearing. Being based on incorrect appraisal of facts as obtaining in the Tribunal's order the application of rectification on the grounds taken by the assessee is held to be without .any merit and accordingly stands dismissed."
6. It is evident from above observation of this Tribunal in 1st Miscellaneous application for rectification filed by the assessee and perusal of order of this Tribunal now under consideration, that issues raised in this 2nd. Miscellaneous Application for rectification wore already discussed in detail and definite findings were recorded.
7. In view of above instant application for rectification is without 'any merit and stands dismissed.
(Sd.)
(S.A. MINAM JAFRI)(MUHAMMAD ASHFAQ BALOCH)
ACCOUNTANT MEMBERJUDICIAL MEMBER
KHAWAJA FAROOQ SAEED (CHAIRPERSON).---I have gone through the orders written by my learned and erudite brother. Academically it is difficult to disassociate with his deep insight and knowledge yet on certain issues reverentially mention my note of dissent on his views expressed in the context of Miscellaneous applications with regard to I.T.A. No. 1283/KB/DB/1999-2000 and I.T.A. No.3931KB/DB/2000-2001. Reliance is made on the following grounds:---
(1) Perusal of the order of this Income Tax Appellate Tribunal No.1283/KB/of 1999-2000 dated 21-11-2000 depicts that certain settling arising from the assessment order and taken up before the Commissioner of Income Tax (Appeals), before the Income Tax Appellate Tribunal at the time of first hearing and also in the Miscellaneous Application for rectification under section 221 of the Income Tax Ordinance. 2001 have fallen in the domain of `omittance' with regard to `due' consideration and decision.
2. Assessee took following Ground in original Appeal before this Tribunal (Page 4):--
"15. that the provisions of sections 13 and 30 of Income Tax Ordinance, 1979 not being applicable to the facts of the case, the learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of Rs.62,28,13,585 (Rs.622.814 Million) to the appellant."
3. Ground No.53 taken up before CIT(A) reads as under:
"That the Learned Deputy Commissioner of Income Tax in his notice under serial No. DCIT/CIR 10/COS-II/97-98/66 dated 22-9-1998 expressed his intention to treat the receipt of Rs.622.814 million in the hands of the appellant as income under section 13 of the Income Tax Ordinance, 1979, whereas he had taken such receipts as income under section 30 of Income Tax Ordinance, 1979, for which the appellant was not confronted and no opportunity of being heard was allowed this amounts to condemning unheard. The assessment order passed by him is self contradictory. "
4. Order of learned CIT(A) mentions as under:--Page 5, (Last Paragraph).
"I am of the view that the case been reopened on fair and proper ground and the addition of Rs.622.814 million as made under section 30 is, therefore, confirmed."
5. Relevant extract of the Notice .under section 62 issued to assessee vide Last paragraph, page 13 of assessment order reads as under:
"In view of the foregoing, your case has already been re-opened to retrieve the loss of revenue. Statutory notice under section 65 was served upon you which was to be complied by 20-6-1998. However, no revised return has been filed by you in response to that notice. Now I want to add Rs.622.814 (M) in your total income under section 13 of the Income Tax Ordinance 1979, treating the same as concealed income."
Above anecdote is also part of order of ITAT order (Page 12)
6. Assessment order mentions: (Page 24 Second Last paragraph).
"Under the facts and circumstances "of the case as discussed supra, it stands established beyond any shadow of doubt that assessee had suppressed its total receipts from Messrs NFL and furnished inaccurate particulars of its income by showing only receipts of Rs.16,432,749 from Messrs NFL on account of management services. Hence whole of the amount i.e. Rs.622.814(M) is treated as assessee's escaped income and will be charged under section 30 of the Income Tax Ordinance, 1979."
Above extract of assessment order is also appearing on the main ITAT order under consideration (Page 14)
7. Finally ITAT in its above referred order under consideration has given its verdict (Page 20 & 21): Issuance of Notice under section 62 invoking provision of section 13 of Income Tax Ordinance 1979 and ultimate addition under section 30, has been dealt by ITAT in following narration:--
"10. Relying upon these case-laws we find ourselves in agreement with the conclusion arrived at by the officers below that the reimbursement being in nature of trading receipts and no liability having been shown in the balance sheet in respect thereof such amount constituted the receipts of the appellant assessee on its own account or not on account of any one else. The alleged amount is admitted to have been, received towards purchase consideration and never acknowledged as deposit or any sort of loan. Essentially, therefore, these receipts are revenue in character and have a definite profit earning quality about them. Further as do expenditure is established to have been made against these contractual receipts the entire amount of such receipts obtains character of income of the appellant which has been unilaterally appropriated by the assessee and becomes liable to tax in its hand. The order of the officers below in taxing this amount as unexplained income of the appellant of the assessee accordingly stands confirmed. The alternate plea of the appellant taken in the grounds of appeal that such addition could be made under section 13 requiring approval of the IAC is, therefore, found to be without any merit as addition has finally been made under section 30 and not under .section 13. The appeal accordingly stands dismissed."
As evident from above Tribunal has categorically given verdict:--
"The order of the officers below in taxing this amount as unexplained income of the appellant of the assessee accordingly stands confirmed."
Under statute "Unexplained income" has been exclusively dealt by section 13 of Income Tax Ordinance 1979 whereas section 30 deals `Income from other sources'.
8. (a) On facts, issue was raised before the Income Tax Appellate Tribunal vide ground No.4 reproduced below:--
"That the entire record of the appellant in respect of bills and management assistance provided to National Fibre Limited relating to cost of construction machinery etc. have been ceased by the F.I.A Department in a raid. The appellant had requested to CIT appeals to requisition the Income Tax record of National Fibres Limited (A Public Limited Company) whereby they have claimed depreciation (Initial and Ordinary) on expansion program. The learned CIT (A) had acted illegally in summarily .discarding the submission of the appellant and dismissing the appeal on the basis of comments of DCIT which did not contain the truth nor- are based on the fact of the case."
(b) Issue of corresponding availability of funds could not be established by the assessing officer neither could be considered by the Learned CIT (A) nor this Tribunal. The audited statement of accounts could have been referred and relied upon in this behalf.
9. Issuance of Notice under section 62 for proposed addition under section 13 of the Income Tax Ordinance, 1979 and addition of same amount under section 30, is an apparent contradiction. This issue of primary nature, being not apparent in the Tribunal's order amounts to according a verdict without due consideration of the same or ultimately an `omission'.
10. Rectification is a legal remedy which allows a Court; in certain circumstances, to correct or amend documents that do not properly record the issues on facts as well as on law. In contemporary literature of law development "Rectification" also has assumed an obvious form of "damage control" on law and on facts which should be considered whenever an error is detected. However such conceptual approach should remain within domain envisaged in statuary provisions of Income Tax Ordinance, 2001.
11. In the circumstances, above referred apparent anomaly could not be explained on behalf of the Department which is an equal "potential stakeholder" in the issues under consideration.
12. Statuary provision stands as under:--
Section 221, Rectification of mistakes:-
(1) The Commissioner, the Commissioner (Appeals) or .the Appellate Tribunal may, by an order in writing, amend any order passed by him (Substituted for "them" by Finance Act, 2003) to rectify any mistake apparent from the record on his or its (Substituted for "their" by Finance Act, 2003) own motion or any mistake brought to his or its (Substituted for "their" by Finance Act, 2003) notice by a taxpayer or, in the case of the CIT (A) or the Appellate Tribunal, the Commissioner.
13. In the instant matter findings are missing about the appellant's submission that the grounds indicated in the Miscellaneous application were duly raised at the time of first hearing of appeal. Whether this Tribunal has adjudicated the, pertinent ground or other-wise'?
Remarks or reference to the omission of above referred specific issues raised by the appellant is not reflected in the body of this Tribunal's original order. The procedural fairness is essential to ensure mandatory requirement. Income Tax Law is designed to ensure that substantive authority should correctly apply the substantive law that governs the exercise of power.
A justification is lacking to negate Rectification and allowing thereby unlawful verdict to proceed without the availability of any kind of remedy.
Palpable mistake is apparent being not in conformity to statutory provision.
The given situation, permits rectification of any `omission' based upon the norms of natural justice with regard to the protection of the right of the defence as well.
14. An error is to be corrected so that justice is done. In Indian decision of Ram Kirpal v. UOI 1998(103) ELT 8 (Guj HC DB); it was held that Tribunal can recall an order to correct any error committed by itself so that justice is done to assessee and the Revenue. In Sri Budhia Swain v. Gopinath Deb 1999(3) SCALE 528 =AIR 1999 SCW 1814, it was held that tribunal can recall its order if there has been a mistake of the court prejudicing the party. This power of correction falling within domain of Rectification is certainly part of a Tribunal's inherent jurisdiction.
15. In the scenario I derive analogical guidance from principle envisaged in "Non alio modo puniatur aliquis quam secundum quod se habet condemnatio" (A person may not be punished differently than according to what the sentence enjoins). Also another Principle i.e. "Nemo potest mutare con silium suum in alterius injuriam (No one can change his mind to the injury of another or to the prejudice of another's right) is also relevant. These principles of law are well-established in jurisprudence and are attracted in the instant case. Show-cause notice has been-with regard to section 13 of the Income Tax Ordinance, 1979 where as addition has been made under section 30 of the said statute. Thus, Tribunal's original order in such context falls within domain of "Non licet"
In my opinion it will be fair and reasonable if Tribunal's original order is rectified under section 221 of the Income Tax Ordinance, 2001 and issue of addition under section 30 be .remanded back to the Department for a de novo order after considering all the above grounds of appeal and affording an opportunity to the appellant in this behalf.
15. Relying upon Doctrine "Sublato Fundamento Cedit Opus' Miscellaneous application pertaining to I.A.No.393/KB/DB/2000-2001 is also remanded back for de novo consideration within purview of law.
(Sd.)
(S.A. Minam Jafri)
Accountant Member
In view of observations recorded supra, a difference of opinion has arisen and the following question is required to be referred:-
"Whether in the facts and circumstances of the case, in assessment year 1994-95 it is legally allowable to make addition of; suppressed receipts from Messrs NFL as escaped income under section 30 of Income Tax Ordinance, 1979 while issuing show-cause notice under section 13 of Income Tax Ordinance, 1979."
(Sd.)
(S.A. MINAM JAFRI)(MUHAMMAD ASHFAQ BALOCH)
ACCOUNTANT MEMBERJUDICIAL MEMBER
MUHAMMAD ASHFAQ BALOCH JUDICIAL MEMBER.---The learned Accountant Member has been pleased to record a contrary view by concluding that issue of addition under section 30 of the Income Tax Ordinance, 1979 is liable to be remanded for de novo order after considering all the grounds of appeal. In this context the learned Accountant Member has also proposed a question to be determined by an Additional Member for the purpose of deciding the case on which there is a difference of opinion. Question proposed by the learned Accountant Member: --
(1) Whether in facts and circumstances of the case in assessment year 1994-95 it is legally allowable to make addition of suppressed receipts from Messrs NFL as escaped income under section 30 of Income Tax Ordinance, 1979 while issuing show cause notice under section 13 of the Income Tax Ordinance, 1979."
The other questions which require consideration would be:--
(2) Whether the order of this Tribunal dated 21-11-2000 baring I.T.A. No. 1283/KB of 1999-2000 is rectifiable 'under section 221 of the Income Tax Ordinance, 2000?"
(3) Whether order in 1st Rectification Application No.123/KB of 2003, dated 13-6-2003, covers all the issues raised in rectification Application No.83/KB of 2006?"
(Sd.)
(MUHAMMAD ASHFAQ BALOCH)
JUDICIAL MEMBER
KHAWAJA FAROOQ SAEED (CHAIRPERSON).---Brief facts of the case are that NFL a Private Limited Company obtained a bank loan for constructing a fertilizer factory by way of addition in the already exiting structure of a running project. This amount was transferred to sister concern "Schon (Pvt.). Limited Karachi" i.e. impugned Company for the raising of the building as well as import and installation of the machinery. Later on for the reason of certain complaints the Securities Exchange Commission of Pakistan (SECP) appointed an Inspector to visit and report the progress of construction as well as installation of machinery etc. 1'he report of the Inspector came out with negative remarks and in fact they denied existence of any such project on the proposed land.
2. In addition to the above report in the case by the Inspector, the assessing officer also found that NFL has revised its return wherein it had shown construction of the .factory and installation of machinery therein. In the revision the depreciation earlier claimed was withdrawn. On the basis of these two information the assessment in the case of this assessee was reopened under section 65 and proceedings thereafter were initiated. During the course of proceedings and before CIT (A) as well as the ITAT the assessee's stand remained that he has spent the entire amount for the purposes it was handed over to him and that it does not fall under the category of the term income in any form. The confirmation of this amount was for the reason of statedly unequivocal statement of the Inspector which had confirmed non-existence of the assets and subsequent visit of the DCIT himself on the spot reconfirmed the same. The visit of the DCIT, therefore, was in a way further confirmation of the report which later had the approval of the CIT as well as the ITAT. This way on factual premises the order had obtained finality and one will not need much to say that further discussion with regard thereto at the stage of this miscellaneous application will be unnecessary. Though before me learned A.R. has reiterated his claim that the assessee has been treated as if he was a badman, hence not entitled to any fair treatment or he is not entitled to justice. He said .that the assessee has been mal-treated and has not been given due time for explaining his point of view in the manner:--
(i) That the learned DCIT vide notice under section 62, No.Circle-10 Companies-II-97-98 dated 21-8-1998, confronted the appellant to tax the amount of Rs.622,814 million, under section 13 of the Income Tax Ordinance, 1979 but addition was made under section 30 which section was never confronted.
(ii) That the re-opening notice under section 65 of the Income Tax Ordinance 1979 was served to an unauthorized person.
(iii) That no new facts have come to the notice of the assessing officer without which case reopened under section 65 of the Income Tax Ordinance, 1979 is illegal.
(iv) That the entire assessment was based on the reliance of Inspector's report appointed by the SECP. The Govt. appointed auditor Messrs Rehman Sarfraz & Co. was holding office, of profit in NFL thus working in Multiple capacity as such his report should not have been relied upon.
(v) That the learned DCIT did not provide a copy of the Government Inspector's Report to the appellant far furnishing reply and explanation in spite of request by the appellant.
(vi) That the learned DCIT did not accede to the request of the appellant to summon the Govt. Inspector for cross-examination.
(vii) That the learned DCIT did not call for the documents and record in possession of the Govt. auditor to ascertain the genuineness of the report.
(viii) The Govt. Inspector conducted inquiry in the absence of the Board of Directors and did not obtain explanation and clarification from the Directors.
(ix) The learned Govt. Inspector did not have any evidence or supporting statements of his physical verification and findings.
(x) The NFL and Schon Headquarter was .raided by the F.I.A. C.B.C. Karachi and all the records, documents, bills vouchers, Contracts, agreements; Bank Statement etc, were impounded without obtaining all the record from F.I.A. the Gov. Inspector conducted the inquiry and finalized the report.
(xi) The learned DCIT failed to obtain the original records and documents from F.I.A. without which the finalization of assessment is not justified.
(xii) The learned DCIT failed to obtain documents of Development Work from F.I.A. custody, how did he write confirmation letters in the absence of above documents.
(xiii) The learned DCIT did not disclose the names and addresses of the parties the confronted or sent notice of confirmation.
(xiv) The learned DCIT made a sole visit of the NFL site there is no evidence of his visit of NFL site. He did not inform the management about his visit. His sole observation without the support and evidence of any official of NFL or Schon or any other official of the tax department cannot be relied upon.
(xv) The learned DCIT's observation that the projects like power plant, Twisted Yarn and polyester Fibre yarn was not included in The development expenses is based on surmises and apprehension.
(xvi) The learned DCIT insisted for the original bills and documents of development work from the appellant knowingly that the same were with the F.I.A.
(xvii) The actual supplies were never approached by the DCIT for confirmation of payments.
(xviii) The new management of NFL reversed the claim of depreciation only but the assets were continued appearing in the statement of account.
(xix) The Prosecutor General Accountability filed an application under section 31-B of the NAB Ordinance 1999 dated 31-10-2005 exonerating the entire Schon Group Directors of any such alleged illegal payments and requested a NAB Court to discharge the case which was accepted by the NAB Court vide order dated 18-10-2005.
In view of the above facts the A.R. requested that the case may be recalled for re-hearing and rectification under section 221 of 'the I.T. Ordinance, 2001 may be carried out.
3. Through this second miscellaneous application assessee apparently has objected to mostly those issues which have been decided by the Tribunal in the first round as well as have duly taken care of in the miscellaneous application decided by the earlier Division Bench.
4. When confronted to learned A.R. he insisted that his arguments with regard to non-confrontation of the Inspector's report to them non-inspection of the said Inspector's report by the DCIT himself and non-availability of the entire record of the Schon headquarter having been impounded by F.I.A. C.P.C. Karachi besides final addition under section 30 as against the confrontation of the same under section 13 have not been adjudicated either by the Tribunal in original round or in the miscellaneous application. When this situation on the basis of above description and discussion came for consideration before the learned Division Bench the learned Judicial Member rejected the application by observing that all the points have duly been taken care of in the original order while learned Accountant Member felt that the issue with regard to the addition under section 30 on the basis of the confrontation to the assessee under section 13 has not been properly disposed. This omission in the opinion of learned A.M. has given rise to the miscellaneous application for rectification and that the same should have been decided by the Tribunal. Learned A.M. has further gone to hold that the circumstances warrant set aside of the case.
5. Consequent to the difference of opinion my learned brothers have also proposed questions for my adjudication. The same are as follows:---
(a) "Whether in the facts and circumstances of the case, in assessment year 1994-95 it is legally allowable to make addition of suppressed receipts from Messrs NFL as escaped income under section 30 of Income Tax Ordinance, 1979 while issuing show-cause notice under section 13 of Income Tax Ordinance, 1979?
(b) Whether the order of this Tribunal dated 21-11-2000 bearing ITA No.1283/KB of 1999-2000 is rectifiable under section 221 of the Income Tax Ordinance, 2000?
6. My roll being of a referee member is restricted to the extent of the above questions.
7. The members have agreement to the extent of the question (a) however, learned Judicial Member has added question (b) in addition to question (a).
8. Above situation when confronted to learned D.R. he vehemently said that the assessee is trying to blow butter out of water. He said that the entire arguments. he has advanced in the miscellaneous application have already been discussed and rejected by this Tribunal through its main as well as addition subsequent order on a miscellaneous application filed by him. He said that the assessee is known for his financial irregularities. The report of the SECP as well as of the DCIT all are against his assertions and claims. The action of the NFL of withdrawing their depreciation on the assets which were in their balance-sheet and were not in existence makes the departmental claim as correct that the entire accounts prepared by the assessee are fabricated. He, however, could rot satisfactorily reply as to whether there was a notice to the assessee for making the addition under section 30 or not and also could not point out from the record as to whether the said issue has been discussed in the earlier orders or not.. He, however, brought our attention to the earlier miscellaneous applications wherein 5 questions raised by the assessee have been discussed by this Tribunal in the following manner:--
(i) Initiation of proceeding under, section 65 by issuing show-cause notice without obtaining approval of the IAC.
(ii) Lack of definite information for reopening of the case.
(iii) Amount in question is not income of the appellant.
(iv) Lack of approval of IAC for making addition under section 13 read with section 30.
(v) Lack of adequate opportunity of being heard by both the authorities below.
9. That all the above 5 questions have been replied by the learned Accountant Member in the order at page 5:-
The matter has been considered. Out of five categories, those mentioned at serial Nos. 1 and 2 relate to reopening of the case under section 65 and its basis have elaborately been discussed in the Tribunal's order. Item No. 3 relating to the amount in question being income of the appellant has also been discussed in detail in the Tribunal's order. Item No.4 regarding approval of the IAC under sections 13/30 has been dealt with in the order properly and finding in this regard has duly been given at para. 10 of the order. In respect of all these four categories of ground of appeals taken by learned counsel each one has been discussed in the order so that no rectification is called for on account of any of these grounds having not been brought out in the older. One may differ with the conclusion arrived at in the order on these issues, but hat does not constitute a basis for rectification. In respect of the remaining ground alleging that a proper opportunity was not provided to the appellant, the same is not found to be maintainable, as the assessee was properly issued notice under section 62 by the assessing officer before addition to the income was made and the same has been reproduced at Para 5 of the Tribunal's order. (underlining is mine)
10. The A.R. in his rejoinder said that the entire proceedings right from the stage of the assessing officer to the Tribunal are on the presumption that assessee is a bad man thus not entitled to any right or legal favour. It has not been appreciated that even in criminal cases the nominated person is given fair trial and has always been considered as entitled to the benefit of doubt. In the present case even the Ehtasab Bureau after finalization of the proceedings etc. have directed to withdraw the entire cases against the assessee. He said that even if one agrees with the learned D.R. that the assessee's' claim of an unfair treatment has been decided by the Tribunal ignoring the entire claim that he was not confronted with Inspector Report orthe assessee was never invited at the time of visit by the CIT besides that the assessee was handicapped because of non-availability of his record being with the F.I.A-/Ehtisab Bureau etc., one can-still not ignore that by issuance of a notice under section 13 addition cannot be made under section 30. He said that the learned Tribunal has in miscellaneous application said that this issue has been duly taken .care of in para 10 of the order. For all practical purposes this was the core legal issue which has been mentioned in just 3 sentences by considering it as an alternate plea. Further, NFL did withdraw depreciation as the machinery was non-functional but the assets do exist and can still be verified.
11. Rectification is a legal remedy which allows a Court in certain circumstances to correct or amend documents that do not properly record the issues on facts as well ason law. In contemporary literature of law development `Rectification' also has assumed an obvious form of "damage control" on law and on facts which should be considered whenever an error is detected. However, such conceptual approach should remain within the domain envisaged in statutory provisions of Income Tax Ordinance, 2001. Keeping above verse in view if we look into the discussion made in earlier M.A. Since the honourable ITAT has particularly referred para. 10 of its order for checking the claim of the assessee in miscellaneous application reproduction of the same shall be necessary. The same speaks as follows:--
"Relying, upon these case-laws we find ourselves in agreement with the conclusion arrived at by the officers below that the reimbursement being in nature of trading receipt and no liability having been shown in the balance sheet in respect thereof such amount constituted the receipt of the appellant assessee on its own account or not on account of any one else. The alleged amount is admitted to have been received towards purchase consideration and never acknowledged as deposit or any sort of loan. Essentially, therefore, these receipts are revenue ire character and have a definite profit earning quality .about them. Further as no expenditure is established to have been made against these contractual receipts the entire amount of such receipts obtains character of income of the appellant which has been unilaterally appropriated by the assessee and becomes liable to tax in its hand. The order of the officers below in taxing this amount as unexplained income of the appellant assessee accordingly stands confirmed. The alternate plea of the appellant taken in the grounds of appeal that such addition could be made under section 13 requiring approval of the I.A.C. is, therefore, found to be without any merit as addition has finally been made under section 30 and not under section 13. The appeal accordingly stands dismissed." (Underlined for emphasis)
12. As is evident the learned Tribunal in the said para. have mainly discussed the issue of taxability of the amount as a trading receipt and only four/five lines have been devoted to decide the issue with regard to the point under discussion now.
13. I have underlined relevant para. for emphasis. In the entire order there is only one sentence which deals with the issue of application of section 30.
14. For all practical purposes giving a finding on an issue of the like importance in such summary manner obviously cannot be appreciated. Every natural person can develop prejudice against the another person in the circumstances like of this assessee. However, this cannot be ignored that having dealt with all other issues in highly professional manner such an important argument should not have been decided in 4/5 lines. One can understand that while dictating a long order involving almost 24 pages one can omit a point or may give less importance to some matters which obviously is never intended. However, if by such an omission one tends to ignore a basic and tangible argument which goes to the very root of the proceedings, it cannot be called a speaking order. In the above lines the honourable ITAT has only said that since addition has not been made under section 13 the requirement of approval of the IAC was obviously unnecessary. However, no finding has been given on the issue that after reply of the assessee against a show cause issued under section 13 another notice to assessee for confronting addition under section 30 was required or not. The departmental earlier action of treating it as deemed income under section 13 was definitely as per law and rules. The assessee was found having received an amount for a particular purpose. As per reports the same was not spent on the project for which it was received by this assessee. In clear words allegation is that the amount has been mis appropriated by this company hence it was its income. The charging provision for assessing the same was section 13 and the assessing officer accordingly confronted the assessee for taxing the' same under the said provision. After obtaining reply of the assessee the assessing officer thought otherwise and added the income under section 30 which was never confronted. The change of mind of the assessing officer after obtaining reply of the assessee called for another notice. Since the assessee was waiting for the fate of his reply against proposed addition under section 13 the order came with a surprise. The proposed deemed income was assessed as income from other sources. These are two separate charging provisions with separate para meters. The law of natural justice requires confrontation before addition. Whether confrontation under one charging provision and addition under some other provision is proper compliance of this requirement? Moreover, whether the Tribunal has given a finding of this issue? These, are the questions which require adjudication here.
15. The rectification as already mentioned is a legal remedy which allows the Courts in certain circumstances to correct the mistakes as and when the same float from the surface of the order. In this regard the mistake may be rectified either under the provision of I.T. Ordinance, 2001 or erstwhile I.T. Ordinance, 1979. The judgments on the issue are very clear and definitely applicable on the facts and circumstances of the case before us. It does not need any emphasis here to add that rectification can always be made of the mistakes which are apparent from record. It is beyond any doubt that while dealing with the issue of charge of income under section 30 a speaking and categorical verdict has not been given. Besides no dilation has been made on the same. Section, 13 deals with the income which otherwise may not fall in the normal definition of the term "income". It is a deemed income provision where certain kinds of expenditure or unexplained amounts available with the assessee or the receipts not shown in the account are treated as his income. On the other hand section 30 deals with income from other sources. It covers-those sources which are not covered by other specific provisions of the Income Tax Ordinance. Since I have to restrict to the discussion of my two learned brothers I do not want to enter into the discussion as to whether in this case section 13 or section 30 was applicable or not.
16. So far as the question No.1 which has been referred by the 2 brothers jointly is concerned, I feel that the question is beyond the framework of the miscellaneous application before us. It clearly wants me to say as to whether the addition of the receipt from NFL for renovation/addition in assets as escaped was assessable under section 30 after issuance of show-cause notice under section 13 or not this question does not arise from the miscellaneous application at all. The miscellaneous application as discussed above is only to say as to whether the original order of the ITAT has disposed of this issue or not and this is what has been raised as question No.2 by my learned brother J.M. In principle I agree with him that this is the correct question which could emerge from the orders before us. However, my feeling after going through the order of the ITAT para 10 which has been reproduced in the above judgment twice, once by learned A.M and secondly by me is that issue as to whether addition under section 30 could be made or not has not been disposed. My answer to the question after agreeing with learned J.M. that this question therefore is obvious. The issue has not been disposed by the learned Tribunal hence it requires proper disposal.
17.The above para. fully cover the question proposed by my learned brother as question (b). I have already held in the above paras. of this order that .the rectification application No.523 has not covered the issue as legally was required. However, the same becomes unnecessary in view of the fact that the present application of rectification is tocorrect the mistake which has occurred during the decision of the main appeal vide order dated 21-11-2002.
18. The upshot of the above .discussion, therefore, is obvious I agree in principle with learned A. M. to the extent that the order of the Tribunal has not disposed the issue with regard to issuance of the notice under section 13 and for that matter the order should be recalled for regular hearing and decision on this issue. However, I do not subscribe to the view of my brother learned Accountant Member that the case can be set aside through this miscellaneous application. This way we shall again be repeating the same mistake which has been pointed out through this miscellaneous application.
19. As a result I leave this for the Division Bench Karachi to decide the question that whether the assessing officer was justified in making addition under section 30 after issuance of a notice under section 13 or not? This, however, means part acceptance of miscellaneous application. The main order is hereby recalled for disposal of following issues which stood ignored in original order:--
(i) Whether assessing officer could add the amount under discussion under section 30 on the strength of a notice under section 13?
(ii) Whether on the facts and in the circumstances of the case above income was chargeable under section 30 or not?
C.M.A./107/Tax(Trib)Order accordingly.