VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1652 (2008)

Income Tax Ordinance (XLIX of 2001)---

---Ss. 121, 120 & 176---C.B.R., Circular No.7 (8)S) (Asstt.)/03 (Misc.), dated 10-9-2003---Best judgment assessment---Assessee contended that he was an existing taxpayer and assessment had been finalized under S.120 of the Income Tax Ordinance, 1979---In absence of an assessment order, the completion of an ex parte order under S.121 of the Income Tax Ordinance, 2001 was a double assessment, which was unlawful and without jurisdiction---No notice had ever been served and ex parte order had been passed without issuing statutory notice under S.176 of the Income Tax Ordinance, 2001---Validity---Taxation Officer had made the order under S.121(1) of the Income Tax Ordinance, 2001 without proper service of notice ignoring the mandatory provisions of law as no notice under S.176 of the Income Tax Ordinance, 2001 had been issued to the assessee nor any approval from Commissioner had been obtained---Order had been passed on the basis of information regarding purchase of agricultural land and the assessee had explained that no such land had ever been purchased but had purchased the shop which clearly showed that the information was never confirmed from the relevant authorities and no document in this regard had been mentioned in the assessment order---Assessee was an existing taxpayer having NTN but both the officers below had ignored to verify the same and had made the assessment on the basis of presumptions and assumptions without any justification---Order of First Appellate Authority was vacated as it had rejected the version of the assessee without confirming from the record of the case that the assessee was an existing taxpayer and the order passed under S.121(1) of the Income Tax Ordinance, 2001 was cancelled having been passed without any jurisdiction and being void ab intio and illegal ignoring the mandatory requirements of law.

2003 PTD 2037; ITA No. 2714/LB/2002; 1967 PTD 189; 1987 PTD (Trib.) 335; 2004 PTD (Trib.) 1391; 2003 PTD (Trib.) 242 and 2004 PTD (Trib.) 106 ref.

Naeem Munawar for Appellant.

Sabiha Mujahid, D.R. for Respondent.

ORDER

JAWAID MASOOD TAHIR BHATTI, (JUDICIAL MEMBER).---The appellant through this appeal has objected to the impugned order of the learned 'CIT(A) dated 14-6-2007 on the following grounds:-

"(1) That the appellant is an existing Tax payer and assessment for the year under appeal has already been finalized under section 120 of the Income Tax Ordinance, 2001, therefore, in the presence of an assessment order under section 120, the completion of an other ex parte order under section 121 of the Ordinance, 2001 for the same year is unlawful, without jurisdiction and the worthy CIT(A) is not justified in confirming this unlawful treatment.

(2) That the ex parte order passed under section 121(1) of the Income Tax Ordinance, 2001 is confirmed by the worthy CIT(A) is without proper service of statutory notices and without providing opportunity of being heard, hence not sustainable in the eye of law.

(3) That the ex parte order was passed without issuing statutory notice under section 176 of the Income Tax Ordinance, 2001 and worthy CIT(A) is not justified in leaving this ground.

(4) That the ex parte order was passed on the basis of alleged information, which was not obtained/collected through any legal/statutory way, therefore, the same cannot be utilized for imposition of tax in such a harsh manner and the worthy CIT(A) is not justified in ignoring this ground.

(5) Even otherwise, the appellant has never purchased any agricultural land amounting to Rs.11,00,000 during the period relevant to Tax year, 2005. Hence addition of Rs.11,00,000 under section 111(1)(b) being unexplained investment against purchase of agricultural land as confirmed by the worthy CIT(A) is illegal and contrary to the facts of the case.

(6) That without prejudice to above, the ex parte order under section 121(1) of the Income Tax Ordinance, 2001 by making an inclusion of Rs.11,00,000 under section 111(I)(b) in the "year of discovery" viz. Tax year, 2005 is illegal, void and without jurisdiction keeping in view the provision of section 111(2) of the Income Tax Ordinance, 2001 and the worthy CIT(A) is not justified in ignoring this ground.

(7) That the addition made under section 111(1)(b) of the Income Tax Ordinance, 2001 at Rs.11,00,000 as confirmed by the worthy CIT(A) is highly excessive, unjustified and contrary to the facts of the case.

(8) That the Taxation officer has failed to pass a best judg ment order, hence the same is not sustainable in the eye of law."

I have heard the learned Representatives from both the sides and have also perused the impugned order of the learned CIT(A) and the assessment order passed under section 121(1) of the Income Tax Ordinance, 2001.

While perusal of the order passed by the Taxation Officer under section 121(1) I have found that as per that order the proceedings in this case were started on the basis of information collected from the office of the Sub-Registrar regarding purchase of 2-Kanals 16-Marlas agricultural land for consideration of Rs.10,00,000 on 27-5-2005 during the period relevant to the tax year 2005 by the taxpayer/appellant. As per assessment order Rs.100,000 was .estimated as mutation charges and the total investment as assessed by the Taxation Officer is at Rs.11,00,000. The Taxation Office has assessed the total income of the assessee at Rs.11,00,000. Letters, dated 21-11-2005, 30-12-2006 and 21-3-2007 were issued but as per assessment order no compliance was .made by the taxpayer.

The assessee agitated the order passed by the Taxation Officer before the learned CIT(A) on the ground that the order has been passed without proper service of statutory notices and without issuing any notice under sections 121/176 of the Income Tax Ordinance, 2001. It was further contended that the appellant is an existing taxpayer and the 'assessment for the year under appeal has already been finalized under section 120 of the income Tax Ordinance, 2001 at NTN.2434110, therefore in the absence of an assessment order, the completion of an ex parte order under section 121 of the Income Tax Ordinance, 2001 for the same year is a double assessment, which is unlawful and without jurisdiction but the learned CIT(A) has not accepted the version of the assessee and has dismissed the appeal filed by the assessee with the following observations:-

"Assessment record has been examined vis-a-vis grounds of appeals and comments of the Taxation Officer. It has been observed that statutory notices as well as show-cause notices issued were properly served upon the appellant but remained un complied with. Ex parte action of the Taxation Officer is therefore, maintained. As regards, the contention of the AR that the appellant is an existing taxpayer, the same is without any basis and unsubstantiated. The appellant never disclosed this fact before .the taxation officer at assessment stage inspite of the fact that the statutory notices were properly served. Addition made under section 111(1)(b) is therefore, upheld.

In view of the above facts and circumstances of the case the taxation officer rightly proceeded to make the addition under section 111(1)(b) of the Income Tax Ordinance, 2001. The action taken by the assessing officer is justified being in accordance with laws. The same is therefore upheld and no interference is made."

The learned counsel representing the appellant has contended that no notice has ever been served on the assessee or his Representative and the ex parte order has been passed under section 121(1) of the I.T. Ordinance, 2001 without issuing statutory notice under section 176 of the Income Tax Ordinance, 2001. It has further been contended that the assessee is an existing taxpayer and the assessment for the year under appeal has already been finalized under section 120 of the Income Tax Ordinance, 2001 at NTN. 2434110, therefore, in the presence of an assessment order under section 120, the completion of an ex parte order under section 121 (1) of the Income Tax Ordinance, 2001 for the same year is a double assessment which is unlawful and without jurisdiction. He has argued that the assessment order in this case was passed on the basis of an information which was not obtained/collected through a legal/ statutory way, therefore, the same cannot be utilized for imposition of tax in such a harsh manner. He has contended that the appellant has never purchased any agricultural land amounting to Rs.11,00,000 during the period relevant to the tax year, 2005 and, therefore, the addition made under section 111(1)(b) of the Ordinance, 2001 being unexplained investment .against purchase of agricultural land is illegal and contrary to the facts of the case. It has been contended that the appellant being an existing taxpayer have sufficient sources to make any investment, therefore, the Taxation Officer was not justified to make addition under section 111(1)(b) which is unjustified and contrary to the facts of the case. He has contended that the learned CIT(A) has also not considered all these facts.

The learned counsel has further contended that the Central Board of Revenue in Circular No.7 (8)S (Asstt.)/03 (Misc.) dated 10-9-2003 has specifically directed regarding indiscriminate use of powers available to the Taxation Officer regarding issuance of notice under section 176 of the Income tax. Ordinance, 2001 for obtaining information and evidence. In para. 2 of the letter it has been directed to all the C.B.R. officers that "The matter was considered in the Board with deep consideration and has been decided that henceforth notice under section 176 calling information and evidence shall not be issued to any person without prior approval of the concerned Commissioner".

The learned counsel for the appellant has contended that in this case no approval from the Commissioner regarding notice has been described in the assessment order or in the record of the case. The learned counsel in this regard has referred the decision of the Honourable High Court reported as 2003 PTD 2037 wherein it has been held that "Acts, deeds and things required to be done should be done in accordance with law or should not be done at all." It has been further held in this decision that "evidence collected through illegal means not admissible in evidence in any legal tradition/jurisdiction. Same needs to be discarded through and through".

The learned counsel has contended that in this case there was no information in accordance with law. He has in this regard referred an un reported decision of this Tribunal, dated 11-12-2007 in ITA No.2714/LB/2002 (Assessment year 1994-95) wherein it has been held that there cannot be two assessments made on one assessee for the assessment year and the assessment improperly made at later date has to be cancelled. The learned counsel in this regard has also placed before me sale-deed regarding purchase of shop measuring 28 x 12 ft. in consideration of Rs.10,00,000 vide registered deed executed on 27-5-2005 and has contended that the assessee has purchased the shop and not the agricultural land as has been observed by the officers below on the basis of false information which cannot be made basis for amending the already completed assessment.

Regarding the service of notice the learned counsel has placed before me the decision of Honourable Supreme Court of Pakistan reported as 1967 PTD 189 wherein it has been held that "the notice to file return served on salesman not authorized in writing by the assessee to accept such notices. Facts of service of notice within knowledge of assessee are not valid in law".

Another decision has been referred by the learned counsel for the assessee reported as 1987 PTD (Trib.) 335 wherein it has been held that "the service of notices had to be strictly in accordance with law as the entire superstructure of assessment was built on them. Any shortcoming in service in respect of such notices could render the assessment liable to annulment or quashment of proceedings".

This Tribunal in a case reported as 2004 PTD (Trib.) 1391 has held that "the service of notice on servant of assessee could not be regarded as a proper service because other than service by post the service could be made firstly on the assessee in person or upon his agent empowered/authorized to accept and in their absence then an adult male member of the family of the assessee. Servant/employee of a person could not be taken to be an authorized or empowered person to accept service on behalf of his master except when he had been specifically empowered or authorized to accept the service proceeding carried out in consequence of service of notice on employee of assessee by presuming the service to have been effected upon the assessee, would stand vitiated because the mandatory requirement of law for a proper and valid service of notice to be made upon the assessee, had not been complied with by the department".

In another decision of this Tribunal reported as 2003 PTD (Trib.) 242 it has been held that "the first appellate authority was not justified to proceed to set aside the case after observing such flagrant violation of legal provision and holding same to be against the law and he was required to annul the assessment proceedings conducted by the assessing officer, since the case had been decided on the legal ground of absence of proper service of notice".

In another case reported as 2004 PTD (Trib.) 106 the similar observations have been made by this Tribunal.

The learned counsel has contended in this case, admittedly no proper service has been effected upon the assessee and the notice under section 176 has not been issued by the Taxation Officer neither any approval has been obtained by the Taxation Officer from the Commissioner. The learned counsel in this regard has also placed before me returns filed by the assessee for the tax years, 2004 to 2006.

After considering all these facts I have found that in this case the Taxation Officer has made the order under section 121(1) of the Income Tax Ordinance, 2001 without proper service of notice ignoring the mandatory provisions of law as no notice under section 176 has been issued to the assessee nor any approval from Commissioner has been obtained. I have noted that the order has been passed on the basis of information regarding purchase of 2-Kanals 16-Marlas agricultural land and the assessee has explained that no such land has ever been purchased by the assessee and he has purchased the shop which clearly shows that the information as collected by the Taxation Officer was never confirmed from the relevant authorities and no document in this regard has been mentioned in the assessment order.

The assessee in this case is admittedly the existing taxpayer having NTN.2434110 and the learned counsel for the assessee has also placed before this bench the Online NTN Verification Certificate which should have been confirmed by the Taxation Officer as well as the learned CIT(A) but both the officers have ignored to verify the same and has made the assessment on the basis of presumptions and assumptions without any justification.

Considering all these facts and the legal position, the impugned order is vacated as the learned CIT(A) has rejected the version of the assessee without confirming from the record of the case that the appellant is an existing taxpayer and the order passed under section 121(1) is cancelled being passed without any jurisdiction, void ab initio and illegal ignoring the mandatory requirements of law.

The appeal filed by the assessee is allowed.

C.M.A/63/Tax (Trib.)Appeal accepted.