VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1625 (2008)

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

----Ss. 114(4) & 121---Return of income---Best judgment assessment---Limitation---Notice was issued on 31-1-2004 under S.114(4) of the Income Tax Ordinance, 2001---Assessment was to be framed on or before 30-6-2006 whereas the assessment was framed under S.121 of the Income Tax Ordinance, 2001 on 5-6-2007---Such order was without jurisdiction and void ab initio being time-barred and legally not sustainable.

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

----S.121---Best judgment assessment---Approval of Commissioner---Assumption of jurisdiction order S.121 of the Income Tax Ordinance, 2001 without delegation of powers by the Commissioner was not justified---In the order there was nowhere mentioned that the Taxation Officer was delegated powers to proceed with the case---Action of Taxation Officer was without jurisdiction/in excess of jurisdiction without lawful authority void 'ab initio and illegal in circumstances.

2006 PTD (Trib.) 2607 rel.

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

----Ss. 121 & 139---Income Tax Ordinance (XXXI of 1979), S.63---Finance Ordinance (XXVII of 2002), Preamble---S.R.O.633(I)/2002, dated 14-9-2002---Best judgment assessment--Application of law---Prospective or retrospective---Amendment in law would apply prospectively as new law could not be applied, to any period prior to the date of its coming into force unless a specific saving provision was provided in the new law---Section 121 of the Income Tax Ordinance, 2001 could not be applied for the assessment period from 1-7-2001 to 30-6-2002 relevant to assessment year 2002-2003 and assessment for the said period was to be completed under S.63 of the Income Tax Ordinance, 1979 instead of S. 121 of the Income Tax Ordinance, 2001---S.R.O.633(I)/2002, dated 14-9-2002 inserted through Finance Ordinance, 2002 had no retrospective effect and was effective from 1-7-2003.

2006 SCMR 109 rel.

(d) Income-tax---

----Assessment of income---Income assessed without formulating the sales/receipts and allowing profit and loss expenses was not legally sustainable under the law.

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

----S.114(4)---Return of income---Assessment year 2002-2003---Words "assessment year" were not available in the statute on the date when the notice under S.114(4) of the Income Tax Ordinance, 2001 was issued by the Taxation Officer on 31-1-2004---Subsequent proceedings thus were nullity in the eyes of law.

2007 PTD (Trib.) 1763 rel.

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

----Ss. 114(4) & 121---Return of income---Notice under postal certificate---Statutory notice under S.114(4) and S.121 of the Income Tax Ordinance, 2001 were sent under postal certificate without acknowledgements and there was no evidence that the notices were served upon the tax payer which clearly showed that the income had been determined without associating the taxpayer---In absence thereof assessment so framed was arbitrary and unjustified.

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

----Ss.114(4) & 115(5)--Return of income---Assessment year 2002-2003--Words `assessment year' in S. 114(4) of the Income Tax Ordinance, 2001 were inserted on 1st July, 2003 and in subsection (5) the words "assessment year" were inserted through Finance Act, 2004 applicable from 1st July, 2004---Subsection (4) of S.114 of the Income Tax Ordinance, 2001 was subject to subsection (5) of S.115 of the Income Tax Ordinance, 2001---Prior to insertion of these words notice under S.114(4) of the Income Tax Ordinance, 2001 could not be issued---As words "assessment year" being not available in statute on the date when the notice was issued under S.114(4) of the Income Tax Ordinance, 2001, the action of Taxation Officer was without any jurisdiction and not in accordance with law.

2007 PTD (Trib.) 1763 rel.

Sabiha Mujahid, D.R. for Appellant.

None for Respondent.

ORDER

JAWAID MASOOD TAHIR BHATTI (JUDICIAL MEMBER).---The appellant-department through this appeal has objected to the impugned order of the learned CIT(A), dated 30-8-2007 on the following grounds:-

"(1) The word "Tax year" has the same meaning/connotation as "Assessment year"

(2) That the word "last five completed years" in the subsection (5) of section 114 of the Income Tax Ordinance, 2001 connotes the last five completed assessment years/tax years.

(3) That the CIT(A) was not justified to impart different meaning of the word Assessment year and Tax year."

I have heard the learned Representative of the appellant-department and have also perused the impugned order and the assessment order.

I have found that the proceedings in this case were initiated on the basis of issuance of notice under section 114(4) of the Income Tax Ordinance, 2001. The notice in this regard was issued on 31-1-2004. Later on notice under section 121 of the Ordinance, 2001 was issued on 28-5-2007 for compliance on 5-6-2007 which remained un-complied with and finally the Taxation Officer passed the order under section 121 of the Income Tax Ordinance, 2001.

The assessee agitated that order before the learned CIT(A) who has annulled the order. Hence the department is in appeal before this Tribunal.

The learned DR representing the appellant/department has contended that the word "Tax year" has the same meaning and connotation as of "assessment year". She has contended that the word "last five completed years" in subsection (5) of section 114 of the Income Tax Ordinance, 2001 connotes the last five completed assessment years/tax years. She has contended that the learned CIT(A) was not justified to impart different meaning of the word "Assessment year" and "Tax year."

On the other side on behalf of the assessee no one has appeared.

I have found that the assessment in this case has been framed on the basis of notice under section 114(4) of the Income Tax Ordinance, 2001 which was issued on 31-1-2004. In this way assessment was to be framed on or before 30-6-2006 whereas in the instant case the assessment has been framed under section 121 of the Ordinance, 2001 on 5-6-2007. The order framed by the Taxation Officer under section 121 is without jurisdiction and void ab initio being time-barred and legally not sustainable. I have further found that no authorization was obtained from the concerned Commissioner of the Income Tax as required under the law. The Taxation Officer in this regard has assumed jurisdiction under section 121 of the Ordinance, 2001 without any justification as he had not been delegated powers by the Commissioner and in the order passed under section 121 there is no where mentioned that the Taxation officer was delegated powers to proceed the case; hence the action of the Taxation Officer is without jurisdiction/excess jurisdiction, un-lawful authority, void ab initio, illegal as has already been held by this Tribunal in the reported case i.e. 2006 PTD (Trib.) 2607. I have further noted that an amendment in law through S.R.O. No. 633(I)/2002, dated 14-9-2002 would apply prospectively as new law could not be applied to any period prior to the dated of its coming into force unless a specific saving provision is provided in the new law and as there is no savings provision under section 239 of the Income Tex Ordinance, 2001, section 121 cannot be applied in this case. In this case assessment period is from 1-7-2001 to 30-6-2002 relevant to assessment year 2002-2003 and, the assessment for the said period was to be completed under section 63 of the repealed Ordinance, 1979 instead of section 121 of the new Ordinance, 2001. The S.R.O. No. 633(I)/2002, dated 14-9-2002 has later been inserted through Finance Bill 2002 having no 'retrospective effect and effective from 1-7-2003 as has already been held by the Hon'ble Supreme Court of Pakistan in a case reported as 2006 SCMR 109. In this case the income has been assessed without formulating the sales/receipts and allowing profit and loss expenses which is not legally sustainable under the law and seems to be highly excessive. In this case the learned CIT(A) has observed that no notice was served upon the assessee and in absence of proper service of notice assessment could not be legally made. I have further noted that the assessment has been framed under section 121 without specifying the relevant subsection.

Regarding the word "assessment year" the learned CIT(A) has observed that these words were not available in the statute on the date when the notice in this regard has been issued by the Taxation Officer on 31-1-2004, therefore, the subsequent proceeding is nullity in the eyes of law as has already been held by this tribunal through reported case as 2007 PTD (Trib.) 1763. I have further noted that the learned CIT(A) after perusal of the assessment record has observed that the statutory notices under section 114(4) and under section 121 of the Ordinance, 2001 were sent under postal certificate without acknowledgements and there is no evidence that the referred notices were served upon the tax payer which clearly shows that the income has been determined without associating the taxpayer. In absence thereof assessment so framed is arbitrary and unjustified.

I have observed that in section (4) of section 114 of the Income Tax Ordinance, 2001 the words "assessment year" were inserted on 1st July, 2003 and in subsection (5) the words "assessment year" were inserted through Finance Act, 2004 applicable from Ist July, 2004. Sub-section (4) of section 114 was subject to subsection (5) of section 115 of the Ordinance, 2001, therefore, prior to insertion of these words notice under section 114(4) could not be issued. The words "assessment year" being not available in the statute on that date when the notice was issued by the Taxation Officer (31-1-2004); hence the action of the Taxation Officer is without any jurisdiction and not in accordance with law as has already been held by this Tribunal in a case reported as 2007 PTD (Trib.) 1763.

In view of above legal position, I am of the view that the learned CIT(A) has rightly annulled the assessment framed under section 121 of the Income Tax Ordinance, 2001 and no interference in this regard is required.

The appeal filed by the department is, therefore, dismissed.

C. M. A./59/Tax(Trib.)Appeal dismissed.