VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1703 (2008)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A), 111(1)(a) & 120---Amendment of assessment---During course of proceedings of refund claimed, assessee revised return declaring same income, but reducing the amount of tax deduction and claimed refund---Balance Sheet was also revised---Taxation Officer amended the assessment on the ground that finalized assessment was erroneous and prejudicial to the interests of Revenue, as the assessee himself failed to declare the, correct results---Amount of receivable in the revised Balance Sheet had been omitted just to avoid proper taxation and the taxpayer had failed to explain with documentary evidence regarding the amount of receivable, which was added in total income of the assessee---Assessee contended that two conditions required for invoking provisions of S.122(5A) of the Income Tax Ordinance, 2001 had not been fulfilled, as firstly the Commissioner could amend the order, if it was erroneous and secondly it was also prejudicial to the interests of Revenue, but revising authority, without bringing on record any legal justification for converting the income, which had already been processed merely on the basis of surmises,. could not be modified/amended; that Taxation Officer may apply subsection (5) of S.122 of the Income Tax Ordinance, 2001, which was regarding any income chargeable to tax and had escaped assessment, or total income had been subject of excessive relief or refund, or any amount under a head of income had been misclassified, but subsection (5A) of S.122 of the Income Tax Ordinance, 2001 could not be applied by any stretch of mind, as assessment was neither erroneous, nor prejudicial to the interests of Revenue---Validity---Taxation Officer had not invoked proper provision of law and had passed the order under S.122(5A) of the Income Tax Ordinance, 2001 on conjectures and surmises, without establishing that order was erroneous as well as prejudicial to the interests of Revenue and the First Appellate Authority had upheld the order passed by the Taxation Officer without any justification---Order of First Appellate Authority was vacated and the order passed by the Taxation Officer under S.122(5A) of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal.

2004 PTD 330 (Kar.) ref.

2008 and PTD (Trib.) 1959 and 2008 PTD (Trib.) 179 rel.

Sohail Mutee Babri, ITP for Appellant.

Saibha Mujahid, D.R. for Respondent.

ORDER

JAWAID MASSOD TAHIR BHATTI, (JUDICIAL MEMBER).----Through this appeal, the appellant/assessee has objected the impugned order of the learned CIT(A), dated 31-10-2007 for the tax year, 2005 on the following grounds;--

(2) That the order under section 122 (5A) of the Income Tax Ordinance, 2001, dated 6-3-2007 has wrongly been upheld by the learned Commissioner of Income Tax (Appeals) Zone-I, Lahore as it was in excess of lawful jurisdiction.

(3) That the order under section 122(5A) of the Income Tax Ordinance, 2001, dated 6-7-2007 is abuse of authority, as the assessment under section 122(3)(a) of the Income Tax Ordinance, 2001, was not an assessment erroneous insofar as prejudicial to the interest of Revenue.

(4) That with amended order under section 122(3)(a) of the Income Tax Ordinance, 2001 in the field the original order under section 120 (1)(b) of the Income Tax Ordinance, 2001 ceased to hold its legal existence for any provision of the law including 122(5A) of the Income Tax Ordinance, 2001.

That without prejudice to the above:

(5) That the learned Commissioner of Income Tax (Appeals) Zone-I, Lahore has wrongly confirmed the addition of Rs.1,569,520 under section 111(1)(a) of the Income Tax Ordinance, 2001.

(6) That the addition made under section 111(1)(a) of the Income Tax Ordinance, 2001 is liable to be deleted in absence of any definite information/material on record.

(7) That the addition and its subsequent confirmation are illegal and unjustified for want of incorrect application of law and non-appreciation of facts of the case.

(8) That the matter of "Other Receivables" stood reconciled and approved by the Commissioner resulting in issuance of refund after satisfying himself for the assessment to be a legal assessment and the subordinate authority could not nullify his act or form a different opinion.

The learned counsel representing the appellant/taxpayer has contended that "Taxation Officer has amended the assessment under section 122(5A) of the Income Tax Ordinance, 2001 without any justification, which has been upheld by the learned CIT(A) without any basis. The learned counsel, in this respect, has placed reliance on the decision of Hon'ble High Court reported as 2004 PTD 330 (Karachi H.C.) and the decisions of this Tribunal reported, as 2008 PTD (Trib.) 1959 and 2008 PTD (Trib.) 179.

On the other hand, learned DR is supporting the impugned orders of the Officers below.

After considering the contentions from both the sides and perusal of the impugned order of the learned CIT(A) and the assessment order, I have found that taxpayer in this case is an individual deriving income from manufacturing and supply of carton boxes. Return for the taxpayer under review was filed declaring income at Rs.4,36,000. After discharging of tax liability of Rs.51,500, refund of Rs.9,50,642 was claimed on account of tax deduction under sections 153 and 236 of the Income Tax Ordinance, 2001. Return filed by the taxpayer was deemed to have been treated under section 120 of the Income Tax Ordinance, 2001. During the course of proceedings of refund claimed, taxpayer revised his income tax return declaring same income, but reducing the amount of tax deduction and claimed refund of Rs.8,63,171. Balance Sheet as on 30-6-2005 was also revised by the taxpayer. The Taxation Officer amended the assessment made under section 120 of the Income Tax Ordinance, 2001 and according to him, finalized assessment was erroneous and prejudicial to the interests of Revenue, as taxpayer himself failed to declare the correct results: As he has shown an amount of Rs.15,69,520 in the current assets side as other receivable and in the revised Balance Sheet, this amount has been omitted just to avoid proper taxation and the taxpayer has failed to explain with documentary evidence regarding amount of Rs.15,69,520, which has, therefore, been added in total income of the taxpayer under section 111(1)(a) of the Income Tax Ordinance, 2001.

On behalf of the taxpayer/appellant, it has been contended that two conditions required for invoking the provisions of section 122(5) of the Income Tax Ordinance, 2001 have not been fulfilled, as firstly the Commissioner can amend the order, if it was erroneous and. secondly, it was also prejudicial to the interests of Revenue, but the revising authority in this case, without bringing on record any legal justification for converting the income, which had already been processed merely on the basis of surmises, cannot be modified/amended. In this respect, the decision of this Tribunal reported as 2008 PTD (Trib.) 179 has been referred. It has been contended that at the most, Taxation Officer in this case may apply subsection (5) of section 122 of the Income Tax Ordinance, 2001, which is regarding any income chargeable to tax has escaped assessment, or total income has been under-assessed, or assessed at too low a rate, or has been subject of excessive relief or refund, or any amount under a head of income has been misclassified, but subsection (5A) in the present case cannot be applied by any stretch of mind, as assessment in this case was neither erroneous, nor prejudicial to the interest of Revenue. In this respect, the decision of this Tribunal reported as 2008 PTD (Trib.) 1959 has been referred.

I find force in the contentions raised by the learned counsel for the appellant. I am of the view that Taxation Officer, in this case, has not invoked the proper section and has passed the order under section 122(5A) of the Income Tax Ordinance, 2001 on conjectures and surmises, without establishing that order was erroneous as well as prejudicial to the interest of Revenue and the learned CIT(A) has also upheld the order passed by the Taxation Officer without any justification.

In view of these facts and circumstances of the case, the impugned order of the learned CIT(A) is vacated and the order passed by the Taxation Officer under section 122(5A) of the Income Tax Ordinance, 2001 is annulled.

The appeal filed by the taxpayer is allowed.

C.M.A./64/Tax(Trib.)Appeal accepte