M.As. Nos.494/LB of 2004 and 599/LB of 2006, decided on 23rd September, 2006. VS M.As. Nos.494/LB of 2004 and 599/LB of 2006, decided on 23rd September, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 394 (2006)

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

----Ss. 66A, 62(1), 59(4) & 156---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Self assessment---Till expiry of assessment year no order was passed, no disqualification or ineligibility was intimated or confronted---Later on, proceedings under S.62 of the Income Tax Ordinance, 1979 were initiated and ended in acceptance of the declared income---Initiation- of proceedings under S.66A of the Income Tax Ordinance, 1979---Validity---Necessity of accepting the return under S.62(1) of the Income Tax Ordinance, 1979 when the order in terms of S.59(4) oft the Income Tax Ordinance, 1979 deemed to have been passed after the 30th day of June of the financial year next following the income, was not explained--Such fatal legal lacuna had resulted bringing into existence two orders i.e. one was deemed order under S.59(4) and the other under S.62(1) of the Income Tax Ordinance, 1979 which had been subjected to action under S.66A of the Income Tax Ordinance, 1979 and not the deemed order under S.59(4) of the Income Tax Ordinance, 1979---Legal defect was that it was the order passed under S.62(1) of the Income Tax Ordinance, 1979 which had been amended---Order under S. 62 of the Income Tax Ordinance, 1979 which had been the subject-matter of S.66A of the Income Tax Ordinance, 1979 had no legal existence in the presence of deemed order under proviso to S.59(4) of the Income Tax Ordinance, 1979 which was holding the field---In presence of such order no further assessment order was legally required---Proceedings which were against patently illegal order consequently had made proceedings under S.66A of the Income Tax Ordinance, 1979 as being void ab-initio and devoid of any legal sanction behind it---Such transparent legal lacuna had been omitted to be noticed so as to be dilated upon in the original order---Mistakes were floating on surface---Order was rectified by dilating upon the preliminary legal objection on the legality of action under S.66A of the Income Tax Ordinance, 1979---Invoking S.66A of the Income Tax Ordinance, 1979 was declared as annulled; being void ab initio in the eye of law as not maintainable---Assessee's miscellaneous application succeeded whereas application seeking permission for additional ground was dismissed as additional ground in respect of main appeal could not be taken up at this stage.

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

----S. 66A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Captioning the order under S.66A of the Income Tax Ordinance, 1979 as "assessment order"---Validity---Held, it was un-parallel by captioning as "assessment order" and remanding after cancellation of the case because the same was not permitted under S.66-A of the Income Tax Ordinance, 1979.

S.A. Rauf, I.T.P. for Applicant.

S. Ashraf Ahmad Ali, D.R. for Respondent.

ORDER

The titled application is seeking rectification in the order, dated 3-4-2002 passed by this Tribunal in ITA No.290/LB/2001. The other miscellaneous application is seeking permission for taking additional grounds.

2. We have heard both the parties and have also perused the available record. After perusal of the record and on detailed discussion with the representatives the undisputed facts gathered are, that the assessee came in appeal in this Tribunal to assail the order, dated 1-12-2000 passed under section 66A of the repealed Income Tax Ordinance, 1979. This Tribunal vide order ibid has dilated upon the facts but inadvertently omitted to record the findings on the legal objection regarding application/invoking of section 66A in the instant case. The assessee has been made to seek redressal of grievances through miscellaneous applications. It has been admitted before us by both representatives that income tax return for the impugned year was filed under Self-Assessment Scheme and till expiry of assessment year i.e. 3-6-1997 no order was passed, importantly no disqualification or ineligibility was intimated or confronted to the assessee. Later on proceedings under section 62 of the repealed Income Tax Ordinance, 1979 were initiated by issuing notice under section 61. Such proceedings A also ended in acceptance of the declared income under section 62(1) of the repealed Income Tax Ordinance, 1979. It was by a show-cause notice, dated 6-11-2000 that proceedings under section 66A were initiated resulting into passing an order, dated 1-12-2000 by ultimately drawing a conclusion which is reproduced as under:--

"Reply of the AR on this point simply leads to the conclusion that as per explanation, the said expenditures relate to manufacturing expense and hence wrongly claimed in profit and loss account. Therefore, it is concluded that the assessee has furnished inaccurate particulars and claimed inadmissible expenditures to the P&L a/c.

While finalizing the assessment, the Assessing Officer failed to take cognizance of the understated income declared by the assessee and passed an order which is erroneous in so far as prejudicial to the interest of revenue. Therefore., by invoking the provisions of section 66-A of the repealed Income Tax Ordinance, 1979, already finalized assessment under section 62(1) is hereby cancelled and remanded to the Assessing Officer with the directions to re-frame the assessment with the consultation and approval of this office."

The learned DR was directed to produce the assessment record as well IAC office record to verify the "contentions of the assessee's learned representative that record was not requisitioned by IAC for invoking the provisions of section 66A and it was simply belated exercise to harass the assessee for the motives best known to the officers. The "IAC File Movement Register" was also examined where no entry existed pertaining to movement of applicant's file prior to passing of order under section 66A regarding requisitioning the assessment record and also on the order sheet entries maintained for the assessment proceedings, where nothing has been mentioned of requisitioning of assessment record by the IAC and also of the 66A proceedings.

3. After detailed discussion and verbal contemplations the learned DR was asked to explain the necessity of accepting the return under section 62(1) when the order in terms of section 59(4) deemed to have been passed after the 30th day of June, of the financial year next following the income year up till 30-6-1997. No explanation could be offered on this fatal legal lacuna which has resulted bringing into existence two orders i.e. one is deemed order under section 59(4) and the other under section 62(1) which has been subjected to action under B section 66A and not the deemed order under section 59(4). Thus other important legal defect is that it is the section 62(1) order which has been amended. But this section 62 order which has been the subject-matter of section 66A has no legally existence in the presence of deemed order under proviso 59(4) which was holding the field, thus in the presence of it no further assessment order was legally required. So invoking of 66A proceedings which were against patently illegal order, consequently it has also made section 66A proceedings as being void ab initio so devoid of any legal sanction behind it. Such transparent legal lacuna has been omitted to be noticed so as to be dilated upon in the original order, dated 3-4-2002. With this backdrop of matter the order ibid has become rectifiable. Even as per ground No.1, of raising the objection on the legality of action under section 66-A nothing has been expressed in the original order, only on disputed facts that findings have been recorded without commenting upon the assessee's contention of correct calculation/apportionment of expenses in accordance with the C.B.R. Circular No. 12 of 1991, dated 30-6-1991 which is also a mistake.

4. The learned DR was also called upon to explain as to the legality of captioning the order under section 66A as "Assessment Order." and thereafter by concluding that order under section 62(1) is hereby cancelled and remanding the case to the Assessing Officer with directions C to re-frame the assessment with its consultation and approval. Again it is an un-parallel by captioning as "Assessment Order" and remanding after cancellation of the case because both these arc not permitted under section 66-A of the repealed Income Tax Ordinance, 1979. This defect too is fatal going to the roots, of the case.

5. Keeping in view discussion supra evidentaly, the prima facie mistakes are floating on surface, thus we feel inclined to rectify our order, dated 3-4-2004 by dilating upon the preliminary legal objection on the legality of action under section 66A, so invoking section 66A which is view of the discussion supra is declared as annulled, being void ab- initio to the eye of law as not maintainable. The assessee's miscellaneous application succeeds whereas the application seeking permission for additional ground is dismissed as additional ground in respect of main appeal cannot be taken up at this stage. Sections referred to in this order are of the repealed Income Tax Ordinance, 1979.

C.M.A./176/Tax (Trib.)Application dismissed.