VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1102 (2007)

Income Tax Ordinance (XLIX of 2001)---

----Ss.221(1A) & 122(5A)---Income Tax Ordinance (XXXI of 1979), S.59 (1) & (4)---Finance Act (1 of 2003)---Rectification of mistake---Imposition of Workers Welfare Fund by rectifying assessment finalized under S.59 (1) of the Income Tax Ordinance, 1979---Provision of subsection (1A) of S.221 of the Income Tax Ordinance, 2001 would not be applicable to the proceedings which pertained to the assessment years which were ending on or prior to 30-6-2003---Assessment years in the present case were ending on or prior to 30-6-2003 thus the proceedings, viz. the order under S.221 of the Income Tax Ordinance, 2001 were illegal void ab initio---Assessing Officer also failed to mention the issuance date of notice under S.221(2) of the Income Tax Ordinance, 2001 and also the person on whom it was served with its date of service---Such defects were fatal because the absence of proper service of notice for a reasonable opportunity of being heard, had made the order as illegal---Creating of tax demand after so inordinate delay could not be approved where a limit of 90 days from the date of passing the assessment order had been taken as legal---Workers welfare demand created in all the assessment years was deleted by the Appellate Tribunal.

2005 PTD 1316 rel.

Noor Muhammad Qureshi for Appellant.

M. Muzaffar Khan Lashari ,D.R. for Respondent.

ORDER

EHSAN UR REHMAN (JUDICIAL MEMBER).---The titled appeals are directed against the single combined order dated 24-1-2007. Common ground have been submitted in respect of identical issues involved in all the years.

Commonly facts in brief giving rise to filing of these appeals are that by an order for each year under section 221(1) of the Income Tax Ordinance, 2001 the Workers Welfare Fund has been imposed by rectifying statedly assessment finalized under section 59(1) of the repealed Income Tax Ordinance, 1979. The learned first appellate authority disposed of appeals, vide impugned order in the manner as reproduced hereinbelow:---

"Appeal proceedings were attended by the AR of the appellant with whom the case has been discussed. During appeal proceedings, the AR of the appellant contended through ground of appeal that the assessing officer was not justified to rectify the assessment orders for all the years which were completed under section 122 (5A) of the Income Tax Ordinance, 2001 and the said section has no retrospective application. He further contended that the orders are without jurisdiction and the imposition of WWF is illegal and unjustified. The contentions of the appellant's AR have been given due consideration and it is observed that the AR did not bother to see original assessment orders which were-finalized under sections 59(1), 59(4) of the repealed Income Tax Ordinance, 1997 and under section 221 of the Income Tax Ordinance, 2001. He just repeated the grounds of appeal and no solid evidence or explanation was forwarded to interfere with the action of the assessing officer. On the other hand, the assessing officer .before rectifying the orders, issued notice to the appellant and confronted him on the issue, but the body of rectification order, the action of the assessing officer is considered to be in accordance with the provisions of law, hence maintained."

It has been argued before us that for all the years a deemed order under the provisions of section 59(4) of the repealed Income Tax Ordinance, 1979, which have been subjected to an action under section 221(1) of the present Income Tax Ordinance, 2001, in a manner that Worker's Welfare Demand has been created against the appellant/ assessee which is illegal for the reason that firstly the appellant/assessee is a trader, secondly, opportunity in terms of section 221 (2) is not afforded which is mandatory. The learned AR has pointed out that subsection (IA) of section 221 ibid was inserted as a result of S.R.O. dated 14-9-2002 and then was given a proper legal shape by an insertion vide Finance Act, 2003. The orders deemed to have been passed pertained to period prior to September 14th, 2002. The learned AR has referred to brief commentary of amendments and insertion of sub-section (IA). The learned AR has also submitted and produced before us a copy of the affidavit submitted before the learned CIT/WT (A) denying the issuance of any assessment order for the impugned order as well as the mandatory notice for initiating the rectification proceeding by the assessing officer. It has further been pleaded that no findings on affidavit filed, viz., the legal defects were recorded by the learned first appellate authority.

The learned DR has supported the order passed by both the authorities below but failed to submit anything concrete keeping in view the insertion of subsection (IA) by Finance Act, 2003, as to how it could become applicable when assessments are prior to it. The learned DR also could not explain as to how as per para 14 marked-C of judgment with citation as 2005 PTD 1316 it could not be applicable. This judgment was cited by the learned AR in support of the arguments.

We have heard both the learned representatives and have perused the available record. The judgment as cited by the learned AR has also been minutely gone through by us. We for convenience, reproduce as below the para. 14 marked with alphabet `C' from the cited judgment as 2005 PTD 1316:---

"The facts and circumstances in the present petitions being squarely similar, we are persuaded to agree with the contention of Mr. Mansoorul Arfin, learned counsel for the petitioners that the provision contained in subsection (5-A) of section 122 of the Income Tax Ordinance, 2001, inserted with effect from 1-7-2003, is not retrospective in operation. Consequently, the assessment finalized before 1-7-2003 cannot be reopened/ revised/amended in exercise of jurisdiction under the above provision. Admittedly, all the notices impugned in these petitions are in respect of the assessments finalized before 1-7-2003, and consequently all the impugned notices are without jurisdiction, illegal and void ab initio. All the notices impugned in these petitions are therefore, hereby quashed along with proceedings in pursuance thereof. The petitions are allowed accordingly."

The principles as laid down in the para. reproduced supra makes it abundantly clear that exercising of jurisdiction under section 221(1A) of the Income Tax Ordinance 2001, is prima facie illegal, so the order passed for each year under section 221 has become ab initio void which is to be cancelled. The judgment as cited is on all fours so is applicable here. The honorable superior judiciary has categorically held while dilating upon the applicability on insertion of section 122 (5A), that it could not be invoked to assessment years falling prior to the date of insertion, to subsection (1A) have in a similar manner been brought in the Ordinance, 2001 vide Finance Act, 2003, so the ratio as settled in the cited judgment 2005 PTD 1316 is squarely applicable here. So the provisions of subsection (IA) of section 221 of Income Tax Ordinance, 2001, would not be applicable to the proceedings which pertain to the assessment year which are ending on or prior to 30-6-2003. Here in the instant case before us, the impugned years are ending on or prior to 30-6-2003, therefore on this score also the proceedings, viz. the orders under section 221 the Income Tax Ordinance, 2001, are illegal, void ab initio. As far as the facts are concerned the assessing officer has failed to mention the issuance dated of the notice under section 221(2) ibid and also the person on whom it was served with its date of service which lacunas are fatal because the absence of proper service of notice for a reasonable opportunity of being heard, has made the order as legal. The creating of tax demand after so inordinate delay has never been approved by this Tribunal where a limit of 90 days from the date of passing the assessment order has been taken as legal, so keeping in view the discussion supra the Workers Welfare demand created in all the impugned years is hereby cancelled.

C.M. A./33/Tax(Trib.)Appeal accepted.