VS, 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 2544 (2007)

(a) Income Tax Appellate Tribunal Rules, 2005---

---R.14---Income Tax Ordinance (XXXI of 1979), Second Sched., Cls. (29) to (31), 53 & 54---C.B.R. Circular No. 7 of 2002 dated 15-6-2002, Para. 1.1---Grounds which- may be taken in appeal---Additional grounds---Contention was that additional grounds of appeal were not permissible in appeal before Income Tax Appellate Tribunal as the same were hit by R.14 of the Income Tax Appellate Tribunal Rules, 2005 which provided that the appellant shall not, except by leave of the Tribunal, urge or be heard in support of any ground not set forth in the Memorandum of Appeal---Validity---Validity of the return and that it fell outside the purview of Self Assessment Scheme as per Para. 1.1(b) of the Central Board of Revenue's Circular No.7 of 2002 dated 15-6-2002 was a legal ground. touching the merits of the appeal, even if it was not allowed, it may be taken during the course of arguments being a relevant legal issue---As regards additional ground pertaining to claim of exemption of compensatory allowance, even without amending the grounds of appeal, the Appellate Tribunal may consider as to whether claims fell within the ambit of Cls. (29) to (31), (53) & (54) of Part-1 of the Second Schedule to the Income Tax Ordinance, 1979---Additional ground regarding non-reply of notice under S.61 of the Income Tax Ordinance, 1979 related to factual controversy which could be raised during the course of arguments even if not taken as ground 'of appeal---Additional grounds were necessary for proper adjudication of the matter.

(b) Income Tax Appellate Tribunal Rules, 2005---

----R.14---Income Tax Appellate Tribunal Rules, 1981, R.14---Income Tax Ordinance (XLIX of 2001), Ss.127 & 128(3)---Income Tax Ordinance (XXXI of 1979), S.131 (2)---Grounds which may be taken in appeal---Additional grounds---Provision for amending the grounds of appeal was only available in case of appeal under S.127 of the Income Tax Ordinance, 2001 which provides appeal to the Commissioner (Appeals) and the legislature had not accorded such powers to the Appellate Tribunal, whereas R.14 of the Income Tax Appellate Tribunal Rules, 1981, which refers the grounds which may be taken in appeal, provides that except by leave of the Appellate Tribunal, the appellant shall not be heard in support of any ground not set forth in the Memorandum of Appeal---Validity---Rule 14 of the Income Tax Appellate Tribunal Rules, 1981 and Income Tax Appellate Tribunal Rules, 2005, provide that additional grounds shall be allowed subject to leave of the Tribunal and be heard in support of any ground not set forth in the Memorandum of Appeal---Sufficient powers had been delegated through such rules to allow the amended/additional grounds and the miscellaneous application was nothing less than an application for leave of the Tribunal requesting to allow the Department to argue further grounds not taken in appeal---Section 131(2) of the Income Tax Ordinance, 1979 permits the Commissioner (Appeals) to allow the appellant to file new grounds of appeal and the same procedure was adopted vide S.128 of the Income Tax Ordinance, 2001---Powers to allow the amended grounds, had not been provided either in the Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001, but R.14 of the Income Tax Appellate Tribunal Rules, framed under the two Ordinances, empowers the Appellate. Tribunal to allow the grounds of appeal---Provision simply restricts the arguments on the ground for which no leave was granted by the Appellate Tribunal and miscellaneous application fell within the ambit of R.14 of the Income Tax Appellate Tribunal Rules, by virtue of which, the Tribunal had powers to allow the additional grounds---Department was allowed to add additional grounds of miscellaneous application in the memo of grounds of appeal initially furnished with the appeal---Arguments that appellant had neither applied nor obtained leave of Income Tax Appellate Tribunal to urge additional ground, was of no consequence, as the application for additional grounds of appeal, was exactly in line with R.14 of the Income -Tax Appellate Tribunal Rules.

Chaman Lal, D.R. for Applicant.

Masood Abbasi for Respondent.

ORDER

S. HASAN IMAM (MEMBER).---By this order, we would prefer to decide above captioned application for allowing additional grounds of appeal. The applicant/appellant has requested that in addition to grounds already taken in appeal, the applicant/appellant may further be allowed to argue on the following issues:---

(1) That the CIT(A), has erred not to consider that the return filed was invalid and it automatically fell outside the scope of SAS, as per Para 1.1(b) of the C.B.R Circular No.07 of 2002 dated 15-6-2002. It was neither in the statutory form I.T.11B, Rule 190(3), nor the verification of the return was correct and complete for non-disclosure of the mandatory "basis for claim of exemption" in respect of the income at Rs.1,360,000 (Arbitration fees) and Rs.72,000 (compensatory/sumptuary allowance) total Rs. 1,432,000.

(2) That learned CIT(A), has erred not to appreciate that clause (65) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979 was omitted vide Finance Act, 1996 w.e.f. Assessment year 1996-97.

(3) That the learned CIT(A), has erred not to appreciate that the sumptuary/entertainment/compensatory. Allowance (Rs.72,000) claimed exempt by the taxpayer did not fall in any of the provisions of clauses (29) to (31), (53) and (54) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979.

(4) That the CIT(A), has erred not to appreciate that the Taxation Officer had confronted (vide his notice under section 61 and. the Letter bearing No. 241, both dated .22-6-2005 for hearing on 25-6-2005) the taxpayer to the effect that both the amounts were taxable and he completed the assessment accordingly, after waiting for the taxpayer's promised written reply upto 30-6-2005. Copies of notice under .section 61, Letter No.241 .both dated 22-6-2005 and courier receipt dated 23-6-2005 are enclosed. As per order sheet entry dated 25-6-2005, the assessee's default under section 61 stands established- and cognizance of the default taken on 25-6-2005.

(5) That the CIT(A), has erred to admit additional evidence regarding deduction of tax, in violation of section 128(5) of the Income Tax Ordinance, 2001.

2. We have heard the learned representatives of the two parties. Mr. Chaman Lal, appearing on behalf of the Department, has vehemently argued that additional grounds of appeal are not only necessary but covering legal controversy, therefore, for proper adjudication, it would be necessary to appreciate that clause (65) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979 was omitted w.e.f. Assessment year 1996-97, the learned CIT(A), has not considered that the return filed was invalid, therefore, fell outside the scope of SAS, and the compensatory allowance claimed exempt did not fall in any of the provisions of clauses (29) to (31), (53) and (54) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979 and the learned CIT(A), has failed to appreciate that the Taxation Officer had confronted the assessee through notice under section 61, but the assessee failed to respond the same, therefore, the assessing officer completed the assessment in the absence of reply of the assessee in terms of notice under section 61.

3. The learned counsel for the assessee vehemently opposed the request alleging that application if afterthought, as the same has been furnished after receipt of the preliminary objections, thus through this application, the assessee has been taken to surprise and additional grounds cannot be allowed unless an application is made for leave of the ITAT, besides the additional grounds of appeals are altogether new grounds inconsistent and in contrary to original grounds. It is also) pointed out that the additional grounds of appeal are not permissible in appeal before the ITAT and further hit by Rule 14 of the Income Tax Appellate Tribunal Rules, 2005 which provides that the appellant shall not, except by leave of the .Tribunal, urge or be heard in support of any ground not set forth in the memorandum of Appeal.

4. Before touching the merits of the application, it would not be unaccustomed to take into consideration the additional grounds of appeal. The "validity of the return and that it fell outside the .purview of Self-Assessment Scheme as per. Para: 1.1(b) of the C.B.R. Circle No.7 of 2002. dated 15-6-2002" is a legal ground touching the merits of the appeal, even if it is not .allowed, it may be taken during the course of arguments being a relevant legal issue, so is the case. of ground No.2 which requires appreciation of clause (65) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979. The additional ground No.3 pertains to claim of exemption of compensatory allowance, hence even without amending the grounds of appeal, the Tribunal may consider as to whether claims fall within the ambit of clauses (29) to (31), (53) and (54) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979, So is the case of ground No.4; which relates to factual controversy regarding' non-reply of notice under section 61 and thus may be raised during the course of argument, even if not taken as ground of appeal. As a result .thereof, we find that the additional grounds No.1 and 2 are almost necessary for proper adjudication of the matter, whereas the grounds No.3 and 4, even it not allowed to be added, may be argued.

5. The learned counsel for the assessee also argued that vide sub-section (3) of section 128, the Commissioner (Appeals) has authority to accept new grounds of appeal not specified in the grounds of appeal already. filed by the assessee, if the Commissioner (Appeals) is satisfied that the omission for not taking the ground appeal was neither willful or unreasonable. It is added that the provision for amending the grounds of appeal is only available in case of appeal under section 127 which provides appeal to the Commissioner (Appeals) and the legislation has not acceded to such powers to "the Tribunal, whereas Rule 14 of the Income Tax Appellate Tribunal Rules, which refers the grounds which may be taken in appeal; provides that except by leave of the Tribunal, the appellant shall not be heard in support of any ground not set forth in the Memorandum of Appeal.

6. While accepting the preposition that grounds can only be amended in appeals before the learned CIT(A), we have reasons to state that Rule 14 of the Income Tax Appellate Tribunal Rules 1981 and Income Tax Appellate Tribunal Rules 2005, provides that additional grounds shall be allowed subject to leave of the Tribunal and be heard in support of any ground not set forth in the Memorandum of Appeal. We find that sufficient powers have been delegated through ITAT Rules to allow the amended/additional grounds and the instant miscellaneous application is nothing less than an application for leave of the Tribunal requesting to allow the Department to argue further grounds not taken in appeal. In the Repealed Ordinance, subsection {2) of section 131 permits the Commissioner (Appeal) to allow the appellant to file new grounds of appeal. The same procedure is adopted vide section 128 of the Income Tax Ordinance, 2001. Admittedly in the Ordinance itself, powers to allow the amended grounds, have not been provided either in the Repealed Ordinance or Income Tax Ordinance, 2001, but Rule 14 of the Income Tax Appellate Tribunal Rules; framed under the two Ordinances, empowers the Tribunal to allow the grounds of appeal. The provision simply restricts the arguments on the ground .for which no leave is granted by the Tribunal and since instant miscellaneous application falls within the ambit of Rule 14 of the Income Tax Appellate Tribunal Rules, by virtue of which, the Tribunal has powers to allow the additional grounds, as discussed above, we find sufficient .reasons to allow the Department to add additional grounds No.1 and 2 of the miscellaneous application in the memo of grounds of appeal initially furnished with the appeal for the above said reasons holding that the argument of the Learned counsel for the assessee that the appellant has neither applied nor obtained leave of the ITAT to urge additional ground, is of no consequence, as present application for additional grounds of appeal, is exactly in line with Rule 14 of the Income Tax Appellate Tribunal Rules.

C.M.A./122/Tax(Trib.)Order accordingly.