I.T.As. Nos. 5545/LB and 5546/LB of 2005, decided on 30th November 2006. VS I.T.As. Nos. 5545/LB and 5546/LB of 2005, decided on 30th November 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 639 (2006)

(a) Income Tax Appellate Tribunal Rules, 1981-

----R. 10---Contents of memorandum of appeal---Opportunity to remove vagueness in the memorandum---Scope---If the grounds were vague then opportunity to amend the grounds be provided to the party concerned.

1992 PTD (Trib.) 1176 and 2003 PTD 26 rel.

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

---S. 62(1)---Assessment on production of accounts, evidence etc.--Assessee engaged in car parking business---Notice issued under S.62 of the Income Tax Ordinance, 1979 could in no way be held to be the substitution of a legal notice as the same was so general in its expression to which no significance could be attached and in such notice merely an intention was shown to adopt receipts on the ground that less parking receipts had been declared in the year under appeal viz. the immediately preceding assessment year in particular when the place was equipped with more capacity of parking, as such, the declared receipts were liable to be disbelieved.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---Notice issued prior to examination of the books of accounts established that no notice as contemplated by law was ever issued by the Revenue in order to disbelieve the returned version---Non-issuance of notice under S.62(1) of the Income Tax Ordinance, 1979 specifically pointing out the defect noted in the books of accounts rendered the assessment to have been made illegally---First Appellate Authority should not have quashed the assessment order rather should have ordered for acceptance of the returned version---Findings of First Appellate Authority were modified by the Appellate Tribunal accordingly by holding that the returned version was to be accepted.

(d) Income-tax----

---Merger of orders---Principles---Where higher authority modifies or cancels or annuls or sets aside the order passed by the lower authority, then the order stands merged with the order of the higher authority.

(e) Income Tax Ordinance (XLIX of 2001)---

----S. 122---Amendment of assessments---Amendment of Appellate Tribunal's order---Validity---Appellate Tribunal ordered for acceptance of the returned version---Orders of Assessing Officer and that of the First Appellate Authority were merged with the Tribunal's order---Taxation Officer was not vested with the powers to amend the Tribunal's order by invoking the provisions of S.122 of the Income Tax Ordinance, 2001.

?

Messrs Monoo Industries Ltd. v. The Commissioner of Income Tax Central Zone Lahore (84) Tax 330 (H.C.L.) rel.

Sheraz Mirza, D.R. for Appellant.

Viqar A. Khan, F.C.A. for Respondent.

ORDER

RASHEED AHMED SHEIKH (JUDICIAL MEMBER).---Vide these two appeals the Revenue has called into question two separate orders passed by CIT(Appeals) Zone-IV, Lahore in respect of one and the same assessment year i.e. 1998-99. First one is order discusses about the assessment made under section 62 of the Income Tax Ordinance, 1979 while the other revolves around the order made under section 122 of the Income Tax Ordinance, 2001 and each one is, dated 28-6-2005.

ASSESSMENT MADE UNDER SECTION 62 OF THE I.T. ORDINANCE, 1979

2. The Revenue's sole objection in this regard was that cancellation of the assessment order by the learned Appeal Commissioner was not at all warranted on the facts and in the circumstances of the case.

3. Both the learned representatives appearing at the bar have been heard and have also gone through the orders passed by the two authorities below. At the very outset the learned A.R. pointed out that the ground raised by the Revenue was not only vague but was non-specific as well which should have not entertained being violative of Rule 10 of the Income Tax Appellate Tribunal's Rules. Reference in this regard was made to the case-law reported as 1992 PTD (Trib.) 1176 and 2003 PTD 26. But this objection was overruled as the High Court has already held that if the grounds are vague then opportunity to amend the grounds be provided to the party concerned.

4. Coming to the merits of the case the assessee-respondent in this case derives income from extending parking facilities. As per the assessment order parking receipts were shown to have been effected at Rs.1,02,600 which were considered to be on the lower side viz. the preceding assessment year which were disclosed at Rs.1,80,000. Anyhow intention was shown by the Assessing Officer as to why the `annual receipts may not be adopted at Rs. 5,00,000 for the year under appeal. The reply furnished by the assessee-respondent could not convince the Assessing Officer and he proceeded to adopt the same receipts as were confronted to him after having observed that although details of parking receipts were furnished but no agreements whatsoever with the parties concerned were furnished. Accordingly net income was computed at Rs.2,63,995 against declared loss of Rs.56,205. At the first appellate authority, the learned Appeal Commissioner quashed the impugned assessment order being ab initio illegal void on account of non-confrontation to the assessee under section 62 of the Income Tax Ordinance, 1979. This dis?pensation has compelled the Revenue to come up in appeal before the Tribunal.

5. I am not persuaded to intervene in the impugned appellate order on behalf of the Revenue reason being, as per the facts available on record, the assessee-respondent was never confronted to terms of notice to be issued under section 62(1) of the Income Tax Ordinance, 1979. The only notice purportedly issued under section 62 on 30-11-1999 was so general in its expression to which no significance can be attached. In that notice merely an intention was shown to adopt receipts at Rs.5,00,000 on the ground that less parking receipts have been declared in the year under appeal viz. the immediately preceding assessment year in particular when the plaza is equipped with more capacity of parking, as such, the declared receipts were liable to be disbelieved. In no way this notice can be held to be the substitution of a legal notice to be issued under section 62 of the Income Tax Ordinance, 1979. It is also imperative to mention here that this notice was issued prior to examination of the books of accounts. This factum could' not be dislodged by the learned D.R. From all this it stands established that no notice as contemplated by law was ever issued by the Revenue in order to disbelieve the returned version. There are plethora of judgments on this issue that non-issuance of notice under section 62(1) of the Income Tax Ordinance, 1979 specifically pointing C out the defects noted in the books of accounts render the assessment to have been made illegally. To my mind, in such eventuality, the Appeal Commissioner should have not quashed the impugned assessment order rather he should have ordered for acceptance of the returned version. To this extent the learned Appeal Commissioner's findings are modified by holding that the returned version is hereby ordered to be accepted.

ORDER UNDER SECTION 122 OF THE INCOME TAX ORDINANCE, 2001

6. What happened was that subsequent to passing the order under section 62 of the Income Tax Ordinance, 1979 on 19-6-2001, the Assessing Officer showed his intention to modify that order in terms of section 122 of the Income Tax Ordinance, 2001. The reason advanced on the ground was that the assessee-respondent's income had mistakenly been assessed to be the business income. Actually that had to be assessed as a property income under section 19 of the Repealed Income Tax Ordinance. The already completed assessment was, accordingly, amended by the Assessing Officer on 28-6-2003. As a result thereof net property income was computed by the Assessing Officer at Rs.2,62,775. When this issue came up for adjudication before the first appellate authority he cancelled the order passed on June 28, 2003 under section 122 of the Income Tax Ordinance on the ground that provisions of section 122 of the Ordinance were not applicable in view of the ratio decidendi by the Lahore High Court in the case Messrs Monoo Industries Ltd. v. The Commissioner of Income Tax Central Zone Lahore (84) Tax 330 (H.C.L.).

7. The learned D.R. could not controvert this finding of the learned Appeal Commissioner with any plausible reasons. Even otherwise "doctrine of merger" applies to the facts of the present case. Now by this time it is settled principle that wherein a case the higher authority modifies or cancels or annuls or sets aside the order passed by the lower authority, then that order stands merged with the order of the higher authority. In such eventuality the lower authority becomes functus officio to amend the order passed by him to the extent the decision is rendered by the higher authority. Following this principle the Tribunal in the instant order has ordered for acceptance of the returned version for the assessment year under appeal, therefore, the Assessing Officer's and that of the CIT(Appeals)'s order are merged with the Tribunal's order, therefore, the Taxation Officer was not vested with the powers to amend the Tribunal's order by inviting the provisions of section 122 of the Income Tax Ordinance, 2001.

8. Resultantly, the departmental appeals fail and are dismissed being bereft of any merits.

C.M.A./209/Tax (Trib.)??????????????????????????????????????????????????????????????????????? Appeals dismissed.