VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1630 (2008)

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

----S. 156(3)-Rectification of mistake---Application for rectification--Unabsorbed depreciation---Limitation---Order was passed by the Taxation Officer on rectification application after expiry of financial year next following the date in which it was so brought of its notice---Validity---Rectification application, dated 17-8-2000 seeking rectification of order, dated 12-6-2000 relevant to assessment year 1999-2000 was served in the office of Assessing Officer on 21-8-2000---Under the provisions of S.156(3) of the Income Tax Ordinance, 1979, where any such mistake was brought to the notice of any Income Tax Authority by the assessee and no order under subsection (1) of S.156 of the Income Tax Ordinance, 1979 was made by such authority before expiration of the financial year next following the date in which it was so brought to its notice, ,the mistake shall be deemed to have been rectified and all the provisions of the Income Tax Ordinance, 1979 shall have effect accordingly---No order rectification could have been passed in the present case, after the expiration of 30-6-2002---Order of rectification passed on 30-6-2003 was hit by limitation and so it was totally beyond jurisdiction, hence nullity in the eyes of law---Further, no limitation shall run against a non existent void order and the appeal filed by the assessee on 26-7-2005 impugning the order, dated 30-6-2003 passed under Ss.62/132/221 of the Ordinance, was well within time and First Appellate Authority was incorrect in ignoring the submissions made by the assessee and dismissing the appeal in limine---Order passed by the Taxation Officer under Ss.62/132/221 of the ordinance was coram non judice and no limitation shall run against the said order and First Appellate Authority was not correct in dismissing the appeal in line on the point of limitation---Appeal filed before the First Appellate Authority was held within time by the Appellate Tribunal and orders passed by both the authorities below on 30-6-2003 and 12-9-2006 were ordered to be vacated and the claimed rectification was deemed to have been allowed and granted to the appellant unabsorbed depreciation claimed in the rectification application would be understood to have been allowed to the assessee.

2001 SCMR 1822 and PLD 1996 Lah. 99 rel.

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

----S.38 & Third Sched.---C.B.R. Circular No.4 of 1979, dated 23-8-1979---Limitation as to set-off and carry forward of losses in the case of firms, partners, etc.---Depreciation allowance---Unabsorbed depreciation---Limitation---No limitation runs against carried forward unabsorbed depreciation as laid down in para. 9 of C.B.R. Circular No.4 of 1979, dated 23-8-1979.

1985 PTD 389 (Kar. HC) rel.

Shahbaz Butt for Appellant.

Sardar Masood Qazilbash, D.R. for Respondent.

ORDER

NASEER AHMAD, (ACCOUNTANT MEMBER).---These three appeals are directed against three separate orders passed by CIT(Appeals); Faisalabad of even date viz. 12th September 2006.

2. The facts giving rise to the present appeals are stated in brief that the appellant, while filing the return for the assessment year 1999-2000 claimed set off of determined carried forward losses to the extent of Rs.22,80,69,983 comprising of losses from unabsorbed depreciation at Rs.14,69,50,771 and other losses at Rs.8,11,19,212 spread over assessment years 1991-92 to 1998-99. The' assessment in respect of assessment year 1999-2000 was completed on 12th June, 2000 vide an order passed under section 62 of the Income Tax Ordinance, 1979 (hereinafter referred to as "The Repealed Ordinance"). While passing the assessment order referred above, the assessee was allowed set off to the extent of Rs.10,58,86,611 against claimed set off of Rs.22,80,69,983 by ignoring the set off of determined losses of unabsorbed depreciation at Rs. 11,34,01,650 related to assessment years 1991-92 and 1993-94. Statedly upon receipt of order, dated 12th June, 2000, the appellant/assessee moved an application on 17th August, 2000 in terms of section 156 of the late Ordinance, which was followed by a reminder dated 4th May, 2002. In the application and the reminder, it was requested to allow set off of determined/assessed unabsorbed depreciation losses pertaining to assessment years 1991-92 and 1993-94. The assessing officer, while passing an order dated 30th June, 2003 in terms of sections 62/132/221, adjudicated the rectification application and rejected the same by observing as under:

"As regards the issue of unadjusted depreciation in respect of assessment years 1991-92 and 1992-93 amounting to Rs.11,34,01,650 is concerned, the same cannot be given at this stage as it is hit by limitation. It may be pointed out that order under section 62 for assessment year 1991-92 was made on 9th May, 1995 and that for the year, 1993-94 on 15th June, 1996 and in both years limitation for rectification expired on 8-5-1999 and 14-6-2000 respectively. Since application for rectification was moved by the assessee on 4th May, 2002, the same is, therefore, out of limitation. Hence rejected".

From the perusal of IT-30 and the assessment order it revealed to the assessee that though the claimed rectification was denied on the point of limitation yet while preparing IT-30 the unabsorbed depreciation losses as claimed were allowed. As the position contained in the assessment order and IT-30 did not commensurate with each other and the assessing officer under certain misconception had adjudicated the reminder to rectification application filed on 4th May, 2002 and has ignored the original rectification application dated 17th August, 2000 presuming that further order was made rectification was sought (sic) was presumed as a rectification for assessment years 1991-92 to 1993-94, a further rectification application was moved on 5th May, 2004 stating that the subject application was filed against assessment order, dated 30th June, 2000 relating to assessment year 1999-2000 and not in respect of assessment years 1991-92 and 1993-94. It was pleaded that the limitation in respect of subject rectification shall commence from 12th June, 2000 viz. the original order passed under section 62 in respect of assessment year 1999-2000. It was also pointed out that since the rectification application was originally filed on 17th August, 2000, the same was well within time, stipulated under section 156 of the repealed Ordinance.

3. The second rectification application dated 5th May, 2004 was rejected vide an order dated 25th June, 2005 on the ground that the rectification application filed on 17th August, 2000 was on the same point and stood rejected vide order, dated 30th June, 2003. It is also important to note that on pointing out the contradiction in order dated 30th June, 2003 and IT-30 attached thereto, the assessing officer initiated proceeding under section 221 of the Income Tax Ordinance, 2001 so as to amend and correct the IT-30 dated 30th June, 2003. A show-cause notice was issued on 27th April, 2004 for compliance on 29th April, 2004. The assessee/appellant again explained the position vide letter dated 5th May, 2004 and rebutted the stance taken by the assessing officer. The explanation dated 5th May, 2004 was however, rejected vide a separate order dated 30th June, 2005 passed under section 221.

4. The order dated 30th June, 2003, passed under sections 62/132/ 221, and order dated 25th June, 2005 passed under section 221 and subsequent order dated 30th June, 2005 were impugned before the first appellate authority separately by instituting appeals on 26th June, 2005, 27th June, 2005 and 22nd August, 2005 respectively, the CIT(Appeals) vide separate orders dated 12th September, 2006 dismissed all the three appeals. The first appeal impugning the order passed under sections 62/132/221 was dismissed on the ground that the same is barred by limitation having been filed late by 649 days and no sufficient cause shown for condonation of delay, while the latter two appeals were dismissed on the common ground that the same were devoid of any merit. This brings the assessee to further appeals before this Tribunal, whereby all the three orders of the first appellate authority have been challenged.

5. Mr. Shahbaz Butt, Advocate Supreme Court of Pakistan learned counsel appearing on behalf of the assessee/appellant vehemently contested all the three appeals. AR contended that all the orders impugned in the present appeals are illegal and bad in law, hence not maintainable. While arguing the case, he stated that the learned first appellate authority was misdirected in dismissing the appeal against order dated 30th June, 2003 passed under sections 63/132/221 on the point of limitation while the subsequent appeals against order, dated 25th June, 2005 and 30th June, 2005 passed under section 221 of the Ordinance of 2001 were dismissed summarily through non-speaking orders and without considering and judicious application of mind on the facts and evidence before the first appellate authority, according to AR the assessment for assessment years 1991-92 to 1998-99 were completed in the following manner:

AR further stated that the assessments pertaining to assessment years 1991-92 to 1995-96 were rectified under 'section 156 of the repealed Ordinance through separate orders passed on 28th June, 1999 for the purposes of charging of minimum tax under section 80-D of the repealed Ordinance. AR stated that despite the above rectification order the position of determined losses remained unchanged. AR further stated that the position and bifurcation of assessed and determined losses stood as under:

AR contended that while filing the return for assessment year 1999-2000, the assessee claimed set off of losses including the loss in respect of unabsorbed depreciation relating to assessment years 1991-92 and 1993-94. AR stated that the assessing officer while completing the assessment for assessment year 1999-2000 under section 62 vide an order dated 12th June, 2000 allowed set off of losses to the extent of Rs.10,58,86,611 against claimed set off of Rs.22,80,69,983. This was done by ignoring the losses of account of unabsorbed depreciation to the tune of Rs.11,34,01,650 related to assessment years 1991-92 and 1993-94. Since the losses including the losses on account of unabsorbed depreciation stood already determined, therefore, curtailment thereof was a mistake apparent from record. In this background an application under section 156 was moved on 17th August, 2000, which was followed by reminder dated 4th May, 2002. AR produced the copy of the original rectification application dated 17th August, 2000, which bears acknowledgement of receipt of the said application on 21st August, 2000 by the assessing officer, in shape of stamp, signatures and date. AR pleaded that rectification was sought in respect of assessment order, dated 12th June, 2000 passed under section 62 in respect of assessment year 1999-2000. AR pointed out that in the circumstances the limitation to rectify the assessment order, dated 12th June, 2000, in terms of section 156(3) of late Ordinance expires on 30th June, 2002. AR further stated that the assessing officer under certain misconception has taken the date of reminder to rectification for purposes of adjudicating the rectification on one hand, whereas accordingly to him the limitation under section 156 shall run from 21st August, 2000 viz. date of receipt of rectification application and shall expire on 30th June, 2002. AR further stated that the assessing officer under certain misconception incorrectly assumed that the rectification was sought in respect of assessment years 1991-92 and 1993-94 against the factual position and consequently on the basis of misconceived facts dismissed the same on the point of limitation. AR stated that the order refusing the rectification in this context through order dated 30th June, 2003 was not only barred by time but was based on wrong presumption and on contrary facts contained in the rectification application. In this context AR stated that the order passed under sections 62/132/221 refusing the rectification on 30th June, 2003 was nullity in the eyes of law as no such order could have been passed after expiry of 30th June, 2002. AR further stated that in the body of the assessment order the assessing officer having refused the rectification in respect of claimed unabsorbed deprecation losses allowed the same in IT-30. Therefore, the assessee instead of availing remedy of appeal, moved a further rectification application before the assessing officer pointing out that the rectification was sought in respect of assessment year 1999-2000 and not in respect of assessment years 1991-92 and 1993-94. It was pointed out that despite refusing rectification the unabsorbed depreciation losses were allowed in the IT-30 form attached with the said order. The said rectification application dated 5th May, 2004 was dismissed vide an order dated 25th June, 2005 on the ground that the rectification application filed on 17th August, 2000 was on the same point and stood rejected vide order dated 30th June, 2003. AR stated that when the assessee pointed out the contradiction in order dated 30th June, 2003 and IT-30 attached thereto, the assessing officer, initiated proceedings under section 221 so as to amend and rectify the IT-30 dated 30th June, 2003 by issuing notices dated 27th April, 2004 for compliance on 29th April, 2004. The explanation filed by the assessee in rebuttal of the initiated proceedings was again turned down vide an order dated 30th June, 2005 passed under section 221. Since the taxation officer was not considering the subject matter of rectification applications and without looking on his record, had rejected the requests, therefore, the assessee filed appeals on 26th June, 2005, 27th June, 2005 and 22nd August, 2005 impugning respectively the orders dated 30th June, 2003, 25th June, 2005 and 30th June, 2005 statedly passed under section 221.

The Learned AR contended that written arguments were submitted before the CIT(Appeals) along with all necessary evidence vide letter, dated 30th August, 2005, but the learned first appellate authority ignoring the submissions made at Bar as well as to the explanation referred supra dismissed the first appeal being barred by limitation and other two appeals on the ground that the same were devoid of merit. AR stated vehemently that the appeals filed by the assessee on 30th June, 2005 impugning the order dated 30-6-2003 passed under sections 62/132/221 was well within time for multiple. reasons, firstly that it is proved from the application dated 17th August, 2000 that the same was served in the office of the assessing officer on 21st August, 2002 and, therefore, the assessing officer could lawfully adjudicate the same within a period provided under section 156(3) of the Income Tax Ordinance, 1979 i.e., one year from the end of the income year in which the application was filed. Therefore, AR stated that the order dated 30th June, 2003 was void ab initio and without jurisdiction and, therefore, AR submitted that no limitation shall run against such a non-existent void order passed after the expiration of limitation provided in the statute. In support of this contention reliance has been placed upon cases cited as 2001 SCMR 1822 and PLD 1996 Lah. 99. AR further stated that in this view of the matter no limitation shall run against the void order and the appeal having been filed on 26th July, 2005 was well within time and the assessee having explained the sufficient cause for the delay i.e., imparity in the assessment order and the IT-30 and wrong assumption of facts, wherein the assessing officer on one hand has rejected the .rectification application and on the other hand has allowed the set off of unabsorbed depreciation losses as per IT-30. Therefore, as per AR under a bona fide belief instead of filing an appeal against the above said void order the appellant has preferred a further rectification application stating the correct state of facts of the case warranting the rectification. AR stated that the contents of the impugned orders passed by the assessing officer on subsequent applications prove the context of the earlier application as well as date of filing of the original rectification application. In this background he submits that the order passed in all the three appeals were not only unlawful but the same were not sustainable and the first appellate authority was not right in confirming the action of lower authority without applying judicious mind on the facts of the case and ignoring the submissions made at bar.

6. On his turn the learned DR has supported the orders of the lower authority on the basis of the reasoning contained in the impugned orders.

7. Both sides have been heard and available record perused. We have carefully examined the contentions raised by both the sides. It is evident from the copy of the rectification application dated 17th August, 2000 produced before us that the said application was firstly related to assessment years 1999-2000 seeking rectification of order dated 12th June, 2000 and secondly the same was served in the office of the assessing officer on 21st August, 2000. Therefore, under the provisions of section 156 subsection (3) of the late Ordinance, where any such mistake is brought to the notice of any Income Tax Authority by the assessee and no order under subsection (1) is made by such authority before expiration of the financial year next following the date in which it' was so brought to its notice, the mistake shall be deemed to have been rectified and all the provisions of the late Ordinance shall have effect accordingly. Therefore, in our humble understanding of law no order of rectification could have been passed after the expiration of 30th June, 2002. The order of rectification passed on 30th June, 2003 was, therefore, hit by limitation referred supra and so it was totally beyond jurisdiction, hence nullity in the eyes of law. Further that we agree with the learned AR of the assessee that this being the position no limitation shall run against a non-existent void order and, therefore, the appeal filed by the assessee on 26th July, 2005 impugning the order dated 30th June, 2003 passed under sections 62/132/221 was well within time and the CIT(Appeals) was incorrect in ignoring the submissions made by the assessee/appellant at Bar before him and dismissing the appeal in limine. Therefore, under the circumstances we are of the considered opinion that the order passed by the assessing officer under sections 62/132/221 was a void order as the taxation officer was quorum non judice and no limitation shall run against the said order and the CIT(A), therefore, was not correct in dismissing the appeal in limine on the point of limitation. In this background, the appeal is held in time and therefore, the orders passed by both the authorities below on 30th June, 2003 and 12th September, 2006 are ordered to be vacated and the claimed rectification is deemed to have been allowed and granted to the appellant in consequence whereof unabsorbed depreciation claimed in the rectification application dated 17th August, 2000 stands to have been allowed to the appellant.

8. We may further point out here that no limitation runs against carried forward unabsorbed depreciation as has been laid down in para 9 of CBR Circular No.4 of 1979 dated 23rd August, 1979. We further solicit support on this issue from the case reported as 1985 PTD 389 (Kar. HC) wherein at page 395 it has categorically been held as under:

"The carried forward losses under section 24(2) capable of being adjusted up to a maximum of 6 years. The depreciation allowance which is permitted to be carried forward is however, allowed to be carried forward without any time limit until it is totally absorbed."

Therefore, respectfully agreeing with the order of the Karachi High Court we hold that the claimed set off of unabsorbed depreciation was allowable to the appellant.

9. The appeal against order dated 30th June, 2003 passed by the assessing officer and the order dated 12th September, 2006 passed by the CIT(Appeals) confirming the action dated 30th June, 2003 have been allowed, therefore, the remaining two appeals impugning the orders dated 27th June, 2005 passed by the assessing officer under section 221 as confirmed by CIT(Appeals) vide order dated 12th September, 2006 and the appeal against order dated 30th June, 2005 passed by the assessing officer and subsequently confirmed by CIT(Appeals) vide order dated 12th September, 2006 becomes infructuous for the reason that both the appeals bring upon allowance of set off of losses on account of unabsorbed depreciation and therefore, the same have become infructuous and there is no need to adjudicate the same. Consequently, the same are, dismissed being in fructuous.

C.M.A./51/Tax(Trib.)Order accordingly.