I.T.As. Nos. 5258/LB to 5260/LB of 2005, decided on 1st November, 2006. VS I.T.As. Nos. 5258/LB to 5260/LB of 2005, decided on 1st November, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 490 (2006)

Income Tax Ordinance (XLIX of 2001)---

----Ss.1 14(4) & 132(2)---Income Tax Ordinance (XXXI of 1979), S.63---Income Tax Appellate Tribunal Rules, 2004, R.20(2)---Return of income---Assessment was formulated under S.63 of the Income Tax Ordinance, 1979 after issuance of notice under S.114(4) of the Income Tax Ordinance, 2001 asking for furnishing of evidence in support of return income---Assessment was annulled by the First Appellate Authority being patently illegal on the ground that assessment proceedings were initiated by two different enactments which was nullity in law---Validity---Assessment proceedings initiated under the Income Tax Ordinance, 2001 and formulation of assessment under the Income Tax Ordinance, 1979 was declared lawfully made and the order of First Appellate Authority was vacated by the Appellate Tribunal with the direction that assessee's appeals before' the First Appellate Authority shall remain pending for disposal and shall be adjudicated on merits on other grounds, if any.

I.T.A. No.301/LB of 2004, dated 9-9-2004 reversed.

I.T.As. No.1418 and 1419/IB of 2005, dated 22-4-2006 rel.

Sheraz Mirza, D.R. for Appellant.

Nemo for Respondent.

ORDER

RASHEED AHMED SHEIKH (JUDICIAL MEMBER).---This order is intended to dispose of above titled three departmental appeals which are directed against the consolidated order passed by C.I.T.(A) Zone, Gujranwala dated 14-6-2005 in respect of assessment years 2000-01, 2001-02 and 2002-03.

2. The learned D.R. for the revenue was present and has been heard. Conversely none has prosecuted on behalf of the assessee respondent despite proper intimation made to him by way of sending call notice. It is, therefore, decided to proceed ex parte in absence of the assessee- respondent on the basis of available record by resort to section 132(2) of the Income Tax Ordinance, 2001 read with Rule 20(2) of the ITAT Rules, 2004.

3. Facts leading for disposal of the present appeals are that notices under section 114(4) of the Income Tax Ordinance, 2001 were issued calling for the returns but no compliance was made. Subsequently notices under section 61 of the repealed Income Tax Ordinance, 1979 were issued on two occasions and those met the same fate of non-compliance. Accordingly ex parts assessment was finalized by the Taxation Officer in terms of section 63 of the repealed Income Tax Ordinance, 1979 on the basis of available record. Accordingly net income was computed at Rs.120,000 Rs.130,000 and Rs.140,000 respectively on 14-3-2005 by estimating sales and by applying profit rate thereon and by deducting expenses therefrom.

4. Before the First Appellate Authority, it was contended that the assessment framed under section 63 of the repealed Income Tax Ordinance was patently illegal being the assessment proceedings were initiated by two different enactments which are nullity in law. Copy of an unreported judgment of the Tribunal bearing I.T.A. No.3081/LB of 2004, dated 9-9-2004 was placed on record whereby in similar circumstances the assessment was held to be illegally made and as such was annulled. Following the dictum laid down in the said judgment the impugned assessment order was also annulled by the First Appellate Authority. This dispensation has compelled the revenue to come up in appeal before the Tribunal.

5. What happened was that the proceedings in the instant case were taken up under two different enactments; one under the repealed Income Tax Ordinance, 1979 and the other under the new Income Tax Ordinance, 2001; in order to finalize the assessment. Evidently, notices under section .114(4) of the new Income Tax Ordinance, 2001 were issued calling for returns while the assessment was formulated under the repealed Income Tax Ordinance by inviting the provisions of section 63 of the repealed Ordinance after issuance of notices asking for furnishing of evidence in support of the returned income. These notices too were issued under the old Income Tax Ordinance, 1979.

6. The precise question which came up for my consideration was as to whether the assessment made under section 63 of the repealed Income Tax Ordinance, 1979 is a valid assessment or not? I do not take long to dispose of this issue for the simple reason that a Full Bench was constituted to dilate upon this very proposition. In that judgment bearing I.T.As. Nos.1418 and 1419/IB of 2005 etc. dated 22-4-2006 it was observed as under after making a detailed discussion therein.

In the proposition of the case in hand, the calling of the return of income through notice under section 114(4) of the new Ordinance, 2001 being a procedural matter for initiation of proceedings in respect of obligations/liabilities created and incurred during the assessment period relevant to old Ordinance, 1979 would not lead to redundancy by calling the notice as illegal notice and the proceedings thereafter to be without any express savings provided in that regard in section 239 of the new Ordinance, 2001 after all the obligations/liabilities created and incurred under the law during the period falling under the old Ordinance, 1979 must be enforced because the provisions of , assessment under the old Ordinance, 1979 (Sections 59 & 59A, 61, 62, 63) have been saved in the new Ordinance, 2001 for computation of total income and for the tax payable in that regard. This position will advance the main principle of interpretation of the statutes that the law is always taken to be legislated for the advancement of its purpose and not for a futile exercise.

In all these cases there was no option left with the Income Tax Authorities under the new Ordinance, 2001 but to initiate proceedings by calling the returns of income through notice under section 114(4) of the new Ordinance, 2001 and as such their action was justified and lawful in that regard. Accordingly, the finalization/completion of assessments under section 62 or 63 of the old Ordinance, 1979 by the Income Tax Authority/Taxation Officer was also in accordance with the savings provided in subsection (2) of section 239 of the new Ordinance, 2001 for framing assessments under section 62 or 63 of the Ordinance, 1979 relating to "assessment years falling on or before 30-6-2002."

In the light of above discussion, we will respectfully disagree with the view expressed by our learned brothers/ members of the Division Bench of the Tribunal at Lahore in the case reported as 2005 PTD (Trib.) 490 while interpreting the provisions of new Ordinance, 2001 and the old Ordinance, 1979 in respect of case relating to the period falling on or before 30-6-2002. The procedure for initiation of proceedings for calling a return through notice under section 114 was rightly adopted by the Taxation Officer under the new Ordinance, 2001. Moreover, the non-saving of provisions of section 56 will not have any effect on the proceedings initiated through notice under section 114(4) of the new Ordinance, 2001 being a procedural matter and there was no other way but to initiate the proceedings in the cases where the substantive provisions relating to the manner of determination of rights/obligations/liabilities/ computation of income/charge of income tax etc., have been specifically saved in the Savings in section 239 of the new Ordinance, 2001 and, therefore, we resolve the proposition in hand accordingly in favour of the revenue.

Resultantly all the above impugned orders of learned C.I.T.(A)'s are set aside and the cases are remanded to him to re-decide the appeals of the assessees on merits as per other grounds raised by the assessees and as such all the appeals of the assessees shall be deemed to be pending before the learned First Appellate Authority for re-decision on merits on other grounds.

7. Upshot of the Full Bench judgment is that the assessment proceedings initiated under the new Income Tax Ordinance, 2001 and formulating the assessment under the old Income Tax Ordinance, 1979 have been lawfully made. Therefore respectfully following the ratio decidendi in the Full Bench judgment, I have no other alternative but to vacate the impugned appellate order in the present case as well and it is ordered accordingly. Resultantly, the assessee-respondent's appeals before the First Appellate Authority shall stand pending for disposal and he is, therefore, directed to adjudicate the appeals on merits on other grounds, if any raised before him.

8. The departmental appeals on legal premises, accordingly succeed to the extent indicated above.

C.M.A./206/Tax(Trib.)Order accordingly.