I.T.A. No.1481/LB to 1483/LB of 2005, decided on 13th June, 2006. VS I.T.A. No.1481/LB to 1483/LB of 2005, decided on 13th June, 2006., 2007 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 666 (2006)

Income Tax Ordinance (XXXI of 1979)---

----Ss. 56, 58(1) & 61---Income Tax Ordinance (XLIX of 2001), S.239(1)(2)(4)---Notice for furnishing return of total income---Assessment year 2000-2001, 2001-2002 & 2002-2003---Issuance of statutory notices under Ss. 56, 58(1) and 61 of the Income Tax Ordinance, 1979 after promulgation of Income Tax 'Ordinance, 2001---Assessee contended that since Income Tax Ordinance, 1979 had been repealed, the assessing authority had no jurisdiction to invoke the said provisions of law and he was not under legal obligation to make compliance to the notices issued under the Income Tax Ordinance, 1979---Assessments framed were annulled/cancelled by the First Appellate Authority---Validity---Notice under S.56 of the Income Tax Ordinance, 1979 was issued on 3-1-2004 which prompted the initiation of proceedings---No substance/matter was available either in the air or on the ground warranting consideration by any authority, since neither the assessee had filed a tax return subjecting him to the scrutiny of the relevant authority nor had the Revenue invoked its jurisdictional powers by issuing the notices envisaged under the law---Proceedings against the assessee were commenced on 3-1-2004 under the Income Tax Ordinance, 1979 whereas S.239(4) of the Income Tax Ordinance, 2001 contemplates proceedings which were pending on the commencement of Income Tax Ordinance, 2001---Meaning of term "pending" clearly evinces that some step must have already been taken by either of the parties at the time of promulgation of Income Tax Ordinance, 2001---No proceedings were pending on 1-7-2002, the case would go out of the purview of S.239(4) of the Income Tax Ordinance, 2001---Assessing Officer also fell in error, when he issued notice under S.56 of the Income Tax Ordinance, 1979 even for the tax year 2002-2003 because for the said year, after the promulgation of Income Tax Ordinance, 2001, the notice should have been issued under S.114 of the Income Tax Ordinance, 2001 which was a glaring legal error on the part of the assessing authority---Assessing Officer erred in law while invoking S.56 of the Income Tax Ordinance, 1979, hence all the proceedings conducted subsequent thereto were without jurisdiction and void ab initio, hence nullity in the eyes of law---Order of First Appellate Authority was upheld being in consonance with law and departmental appeals being devoid of any merit were dismissed by the Appellate Tribunal.

ITA No.1574 to 1579/LB of 2006 and (2004) 90 Tax 24 (D.C. Kar.) = 2004 PTD 1173 rel.

Balck's Law Dictionary ref.

Wajahat Mehdi Hashmi, D.R. for Appellant.

Sh. Zafar ul Islam for Respondent.

ORDER

SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---The revenue has come up in appeal pertaining to the assessment years 2000-2001, 2001-2002 and 2002-2003 assailing the combined impugned order, dated 15-2-2005 passed by the learned CIT(A) Multan. Common grounds pressed by the Department for all the years under appeal are as under:

"(i) That the learned CIT(A) was not justified to annul the assessments as the assessments were completed by invoking the provisions of repealed Ordinance as provided in subsections (1) and (2) of section 239 of the Income Tax Ordinance, 2001.

(ii) That the learned CIT(A) has mentioned in the appellate order that the words "Assessment Years" have been substituted by Finance Act, 2003 whereas this amendment in subsection (5) of section 114 has been made through Finance Act, 2004 by inserting the words "Assessment years" and not substituted for the last five tax years.

(iii) That the decision of the Honourable High Court referred by the CIT(A) also in the favour of the Department as it has been held "that all the pending matters at the time of commencement of Income Tax Ordinance, 2001 are required to be decided in accordance with the provisions contained in the repealed Ordinance."

2. Briefly stated the facts of the case are that the assessee is an individual deriving income from running a school. The assessee was booked on T.R. No.4-24-12773 by the Assessing Officer for the reason that the assessee enjoyed telephone facility at business premises being subscriber of Phone No.210796 and yet failed to file return of income as provided under the law. Resultantly, income tax proceedings against the assessee culminated in issuance of statutory notices under sections 56, 58(1) and 61 of the repealed Income Tax Ordinance, 1979 (hereinafter called the repealed Ordinance). The assessee through his A.R. submitted a reply taking the plea that since the repealed Income Tax Ordinance, 1979 already stands abolished, the assessee authority had no jurisdiction to invoke the aforesaid provisions of law. Therefore, the assessee was not under legal obligation to make compliance to the notices issued by the Assessing Officer under the repealed Ordinance. The explanation tendered by the assessee did not find favour with the Assessing Officer who proceeded to frame assessments. against the assessee. Feeling aggrieved with the said assessments, the assessee approached the learned first appellate authority who vide his impugned order, dated 15-5-2005 . annulled/cancelled the assessments framed by the Assessing Officer, hence the instant appeals at the behest of the Revenue.

3. Both the parties have been heard and relevant orders perused. The learned D.R. has strenuously argued the case and contended that the Assessing Officer was quite justified in invoking the provisions of the repealed Ordinance as provided in subsections (1) and (2) of section 239 of the Income Tax Ordinance, 2001. The learned D.R. further argued that the phrase "pending matter" does cover the case of the assessee. The learned D.R. further stated that the Assessing Officer was within his legal domain while exercising jurisdiction in order to invoke provisions of repealed Ordinance. He pleaded that the learned first appellate authority erred in law while canceling the assessments framed by the Assessing Officer.

4. Contrarily, the learned A.R. opposed the arguments advanced by the learned D.R. He submitted that new Income Tax Ordinance, 2001 came into effect from first of July, 2002 while the notice under section 56 was issued on 3-1-2004. The learned A. R. contended that the Assessing Officer could not initiate income tax proceedings against the assessee under the repealed Ordinance after the first of July, 2002. He further argued that if at all the Assessing Officer wanted to proceed against the assessee, the only way out for the Assessing Officer was to invoke provisions of Income Tax Ordinance, 2001. The learned A.R. submitted that since the initiation of proceedings against the assessee being without jurisdiction were void ab initio, all the proceedings conducted subsequent thereto are also not sustainable in the eyes of law. He emphasized that the learned CIT(A) rightly cancelled the assessments framed by the Assessing Officer. The learned A.R. also referred to a judgment of the Tribunal passed in I.T.As. Nos. 1574 to 1579 to substantiate his viewpoint.

5. After attending to the contentions raised by the rival parties at the bar, we find ourselves in full agreement with the averments made by the learned A.R. in this respect it would not be out of place to mention here that supra cited judgment of the Tribunal passed vide I.T.As. Nos.1574 to 1579/LB/2005, dated 19-12-2005 wherein in the similar circumstances proceedings for the assessment years 1996-97 to 2001-2002 were started by issuing a notice under section 56 of the

repealed Ordinance on 2-9-2002. It was held by the Tribunal:--

"(3) I have heard arguments from both sides and perused the record. The learned A.R. has argued that notice under section 5' was issued on 2-9-2002 while Income Tax Ordinance, 1979 was repealed on 30-6-2006 and new Income Tax Ordinance, 2001 has come into field w.e.f. 1-7-2002. Notice under section 56 could not be issued as section 239 being saving clause only covers the pending proceedings. In this case no proceedings were pending. Hence the Taxation Officer was not vested with any of the powers to issue the notice under section 56. I find myself in agreement with the learned A.R. For convenience subsection 2 of section 239 are hereby reproduced as under:--

"239 Savings (1).---Subject to subsection (2) in making any assessment in respect of any income year ending on or before the 30th day of June, 2002 the provisions of the repealed Ordinance in so far as these relate to computation of total income and tax payable thereon shall apply as if this Ordinance had not come into force.

(2) The assessment referred to in subsection (1) shall be made by an Income Tax Authority which is competent under the Ordinance to make an assessment in respect of tax year ending on any date after the 30th day of June, 2002 and in accordance with the procedure specified in section 59 or 59A (or 61) or 62 or 63 as the case may be of the repealed Ordinance.

Subsection (1) shows that provisions of the repealed Ordinance are only restricted to computation of total income and tax payable that is why that in subsection (2) of sections 59A, 62 and 63 are specifically mentioned. As far as controversy of jurisdiction is concerned, notice under section 56 could not be issued on 2-9-2002 rather this was to be issued under new Ordinance and then after filing of the return Assessing Officer could proceed in making assessment. The Assessing Officer would have issued notice under section 114 for which he was empowered under this Ordinance. In the absence of the notice under section 114 of all the superstructure built on the basis of issuance of notice under section 56 of the repealed Ordinance has to fall on the ground because jurisdictional defect is incurable. Resultantly all these assessments are hereby cancelled".

6. In the reported judgment cited as (2004) 90 Tax 24 (H.C. Kar.) = 2004 PTD 1173, the Honourable Karachi High Court held:--

"all pending matters at the time of commencement of Income Tax Ordinance, 2001 are required to be decided in accordance with the provisions contained in the repealed Ordinance".

7. Adverting to the facts of the instant case which is sub judice before the Bench, we would recall that notice under section 56 of repealed Ordinance was issued on 3-1-2004 which prompted the initiation of proceedings, meaning thereby that there was no substance/matter either in the air or on the ground warranting consideration by any authority, since neither the assessee had filed a tax return subjecting him to the scrutiny of the relevant authority nor had the revenue invoked its jurisdictional powers by issuing the notices envisaged under the law. In regard to the above mentioned facts, one can safely- say that proceedings against the assessee were commenced on 3-1-2004 under the repealed Ordinance whereas section 239(4) contemplates proceedings which are pending on the commencement of new Ordinance. At this juncture the definition of the word "pending" as given by the Black's Law Dictionary becomes very much relevant which says:

"Begun, but not yet completed; during; before the conclusion of, prior to the completion of; unsettled; undetermined; in process of settlement or adjustment.

Awaiting an occurrence or conclusion of action, period of continuance or indeterminacy. Thus an action or suit is "pending" from its inception until the rendition of final judgment.

?

An action is "pending" after its commencement by either filing a complaint with Court or by the service of a summons".

8. Bare perusal of the meanings of term "pending" clearly evinces that some step must have already been taken by either of the parties at the time of promulgation of Income Tax Ordinance, 2001, which did not take place in the present case, hence it could not be construed that proceedings were pending. Once, one has reached to the conclusion that no proceedings were pending on 1-7-2002, the case would go out of the purview of section 239(4) of the Income Tax Ordinance, 2001. Besides, the Assessing Officer also fell in error, when he issued notice under section 56 even for the tax year, 2002-2003 because for the said year, after the promulgation of Income Tax Ordinance, 2001, the notice should C have been issued under section 114 of the Income Tax Ordinance, 2001 which was a glaring legal error on the par of the assessing authority.

9. In this view of the fact, I am constrained to observe that the learned assessing authority erred in law while invoking section 56 of the repealed Ordinance, hence all the proceedings conducted subsequent thereto being without jurisdiction and void ab inito, hence nullity in the eyes of law.

10. Resultantly, the impugned order, dated 15-2-2005 is upheld being in consonance with law. Departmental appeals being devoid of any merit are hereby dismissed.

C.M.A./211/Tax (Trib.)??????????????????????????????????????????????? ??????????????????????? Appeals dismissed.