2008 P T D 1722
[Income-tax Appellate Tribunal of Pakistan]
Before Jawaid Masood Tahir Bhatti, Judicial Member and Iqbal Ahmed, Accountant Member
I.T.As. Nos.545/KB to 549/KB of 2003, decided on 28/04/2008.
Income Tax Ordinance (XXXI of 1979)---
----Ss.65, 80D & Fourth Sched.---Additional assessment---Assessee a Life Insurance Company---Appellate Tribunal directed that income falling under S.80D of the Income Tax Ordinance, 1979 regime shall 'be properly sifted/examined and after providing, an opportunity to the assessee, the income may be worked out as pointed out in the order of the Appellate Tribunal---Against such direction, Assessing Officer rectified the assessment order and increased the amounts of items assessed as well as brought in new taxes instead of confining himself to the specific directions of the Appellate Tribunal---Assessing Officer charged tax on dividend income @ 5% which was not charged in the original assessment order which was subject-matter of earlier appeal---First Appellate Authority observed that Assessing Officer could not do so without first issuing notice under S.65 of the Income Tax Ordinance, 1979---If, Assessing Officer felt that some of the source of income or quantum of income from some of the sources were missing, which required the reopening of the assessment under S.65 of the Income Tax Ordinance, 1979, for which he was legally authorized/empowered--Dividend income were deleted by the First Appellate Authority and original assessment orders were restored-Validity-Fourth Schedule of the Income Tax Ordinance, 1979 laid the prescribed rules for computation of profits and gains of insurance business---Income of Life Insurance Company was to be taken as one unit income or a single basket income---First Appellate Authority had rightly decided that no notice under S.65 of the Income Tax Ordinance, 1979 was issued which was a legal requirement---Order of First Appellate Authority was confirmed by the Appellate Tribunal in circumstances.
2000 PTD (Trib) 3776 and 1997 PTD 1693 (SC Pak.) rel.
2006 PTD (Trib.) 1979 ref.
Farrukh Ansari, D.R. for Appellant.
Muhammad Farid for Respondent.
ORDER
These five appeals have been filed by the Department against the order of the learned CIT(A), dated 21-1-2003. There is only one ground of appeal which is common in all the 5 appeals which is reproduced as under:
That the learned CIT(A) has erred in deleting tax levied @ 5% on dividend income in accordance with Full Bench judgment reported as 2000 PTD (Trib) 3776.
That the learned CIT(A) has erred in deleting tax levied @ 5% on dividend income in accordance with the ratio of judgment reported as 1997 PTD 1693 (SC Pak.).
That the learned CIT(A) has erred in holding that Taxation Officer has taxed some income including dividend income which was not taxed in the original assessment when dividend income was charged to tax @ 42% in the order passed under sections 62 and 0.50% in the order passed under section 156 of the Income Tax Ordinance, 1979 and the issue was readjudicated in the light of the order of the learned CIT(A), dated 14-5-2002.
2. Brief facts of the case are that assessments in all these years made by the department have been the subject-matter of appeals before the Commissioner of Appeals and ITAT previously as well. In fact the learned ITAT has heard these appeals in all the above mentioned assessment years and have passed a consolidated order, bearing ITATs Nos.1171, 1172, 1173, 1174 and 1175/KB of 2000-2001 to 511 and had observed as under:--
"So far as next common issue is concerned, the order reveals that the learned Commissioner of Income Tax (Appeal) has extended relief while observing hereunder:--
It has been claimed that certain items, recorded supra, stand beyond the ambit of 80D but has been bracketed with turnover. This calls for verification. The issue is thus remitted back to the circle with the direction that sifting shall be made after affording fair opportunity to the appellant. This pronouncement does not, in anyway affect the verdict as contained in paras 4 and 5 above."
3. In the consolidated order mentioned above the learned ITAT had directed that the income falling under the 80D regime shall be properly sifted/examined and after providing an opportunity to the appellant the income may be worked out as pointed out in the main order of the learned Tribunal. Against these directions the Taxation Officer rectified the assessment order and increased the amounts of items assessed as well as brought in new taxes instead of confining himself to the specific directions of the ITAT. The DCIT has also charged tax on the dividend income of Rs.102,135,916 at 5% which was not charged in the original assessment order which was subject-matter of earlier appeals. The taxpayer filed an appeal again before the learned CIT(A) who after considering the entire situation and the facts and legal points involved has given its findings as under:--
"But the learned Taxation Officer-II, Audit Division, Large Taxpayers Unit, Karachi has taxed some income including dividend income, which was not taxed in the original assessment and has increased income from some of the sources as explained by the assessee in the written arguments above. The learned 'taxation Officer-II could not do but without first issuing notice under section 65 of the Income Tax Ordinance, 1979. If he felt that some of the source of income or quantum of income from some of the sources were missing, which require the reopening of the assessment under section 65 of the Income Tax Ordinance, 1979, for which he was legally authorized/empowered as stated by the Honourable High Court in their judgment cited above. Since, the learned Taxation Officer-II, Audit Division, Large Taxpayers Unit, Karachi does not find any point for allowing relief to the assessee as directed by the learned Commissioner of Income Tax (Appeals) and the learned Income Tax Appellate Tribunal, because the assessment is in accordance with the decisions of the learned Income Tax Appellate Tribunal, he is directed to repeat the same figure as is given in the original assessment order. The increase in various figures as compared to the original assessment and taxation of new item, which were not taxed in the original assessment for example dividend income are therefore, deleted and all the original assessment orders for all the five years after giving appeal effect are restored".
4. It is against this treatment and only against the taxing of dividend income separately that the department has filed these appeals. The department has quoted the Full Bench judgment of this Tribunal reported as 2006 PTD (Trib.) 3776 and a judgment of the Supreme Court reported as 1997 PTD 1693 (SC Pak.) in support of their arguments. On the date of hearing Dr. Farrukh Ansari, D.R. of the department appeared and stated that as per the above quoted judgments the observations of the learned CIT(A) that notice under section 65 had to be issued before these additions are not tenable under law as such the DCIT was correct in separating and taxing the dividend income separately during the course of proceedings under section 156 of the Income Tax Ordinance, 1979 and while giving affect to the findings of appeal orders. Mr. Muhammad Farid Advocate appearing on behalf of the taxpayer has however, quoted another decision of the Appellate Tribunal reported as 2006 PTD (Trib.) 1979 and has agitated the taxing of dividend income as a separate block of income and that also without issuing notice under section 65 of the Income Tax Ordinance, 1979.
5. We have examined the case and consulted the 4th Schedule of Income Tax Ordinance, 1979, which lays the prescribed rules for computation of profit and gains of Insurance Business in Pakistan. Perusal of the judgment quoted by the learned D.R. and A.R. specially the judgment 1997 PTD 1693 makes it abundantly clear that in the case of Life Insurance the income of the Life Insurance Company is to be taken as one unit income or as single basket income. This is further given strength by the decision of the Supreme Court reported as 1997 PTD 1693 (SC Pak.) which apart from many other issues discussed and decided considers income of the life insurance business as a single basket income. Furthermore, as rightly decided by learned CIT(A) no notice under section 65 was issued in the case which was a legal requirement. We find no fault with the order of the learned CIT(A) which is confirmed.
6. The appeals stand disposed of in the manner indicated above.
C.M.A./55/Tax (Trib.)Appeal dismissed.