VS, 2008 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 342 (2007)

Income Tax Ordinance (XLIX of 2001)---

----Ss. 122(5A), 120(3) & 114---Amendment of assessments---Computation chart---Non-availability---Effect---Department contended that as no computation chart was available with the return and this being part and parcel of the return attracted provisions of S.122 (5A) of the Income Tax Ordinance, 2001---Validity---Return filed did not carry the computation chart which was a part and parcel---Return was incomplete and invalid as per provisions of S.120(3) of the Income Tax Ordinance, 2001---No notice under S.120(3) of the Income Tax Ordinance, 2001 was issued---Notice under S.114 of the Income Tax Ordinance, 2001 was required to be issued as the original return was incomplete, invalid and was of no legal consequence---Further proceedings, under S.122(5A) of the Income Tax Ordinance, 2001 could be initiated on an invalid document---Superstructure had been built having no foundation at all---Return being invalid and incomplete, order passed under S.122(5A) of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal being an invalid and incomplete return.

Muhammad Ajmal Khan for Appellant.

M. Muzaffar Khan Lashari, D.R.

ORDER

Against the order of CIT(A) Zone III, Lahore in Appeal No.477, dated 28-2-2006, the assessee-appellant, an individual, has filed appeal before this Tribunal. The assessee-appellant derives, income as a U-Phone Dealer. Following grounds have been taken:--

(1)That the order passed by the Taxation Officer under section 122(5A) of the Income Tax Ordinance, 2001 is arbitrary, injudicious, punitive, whimsical and otherwise not maintainable in law and facts of the case inter alia on the following grounds of appeal.

(a) That the order passed under section 122(5) by the Taxation Officer is coram non judice as he is not authorized under the Ordinance to pass order under section 122(5A).

(b) That assumption of jurisdiction by the Taxation Officer under-section 122(5A) is illegal and unlawful as the Taxation Officer has failed to comprehend and appreciate relevant provisions of law.

(c) That order of the Taxation Officer under section 122(5A) is not maintainable in the eye of law as he has not adhered to the legal requirements of section 122 of the Ordinance, 2001.

(d) That the addition made on account of rent payment amounting to Rs.360,000 is not sustainable in law as the Taxation Officer did not conceive the factual as well as legal position of the case.

2. On behalf of the assessee appellant the learned AR argued as per grounds and specifically stressed on the fact that there was nothing erroneous or prejudicial to the interest of Revenue. Hence there was no reason to invoke the provisions of section 122(5A) of the Income Tax Ordinance, 2001 by the Taxation Officer Audit, Regional Tax Office, Lahore. The learned AR in further support of his arguments stated that the author of the impugned amended order has wrongly observed that the assessee-appellant had claimed deduction of Rs.360,000 under the head office rent in the P&L account claims. On the other hand, the learned AR stated that no such computation of income chart was filed along with the return. Hence since there was nothing on record to show how the assessment framed in the assessee-appellant's case was erroneous and prejudicial to the interest of Revenue, he stated it was not understandable. On the other hand, the DR on behalf of the Revenue supported the orders of the authorities below.

3. We have heard both the sides and perused the available records. The assessment records were also requisitioned for examination from MTU, Lahore. The covering letter along with these assessment record bearing No.MTU/648, dated 25-10-2007 duly signed by the Taxation Officer/Additional Commissioner, MTU, Lahore clearly states:--

"Without prejudice to the above, the computational chart is the part and parcel of the return and absence of computational chart tantamounts to the erroneousness in the return which was the deemed assessment order under section 59(1) of the repealed Income Tax Ordinance, 1979. So the Taxation Officer has rightly amended the erroneous assessment order under section 122(5A) of the Income Tax Ordinance, 2001, which had resulted in an assessment prejudicial to the interest of Revenue.

Logically speaking the computational chart is the foundation, is it justified to consider the superstructure flawlessly build upon a wrong foundation."

Now as the learned AR has argued in earlier part of this order that there was no computation chart and has also admitted by Additional Commissioner Audit, MTU, Lahore in his letter that no computation chart was available with the return and this being part and parcel of the return attracted provisions of section 122(5A) of the Income Tax Ordinance, 2001. These are facts of the case and assertions of the author of the amended order. When it has been admitted that there was no computation chart and also the fact that the computation chart being part and parcel of the return, we have to go through the provisions of Income Tax Ordinance, 2001. In this behalf we would like to refer to sub-section 3 of section 120 of the Income Tax Ordinance, 2001 which reads as follows:--

"Where the return of income furnished is not complete the Commissioner shall issue a notice to the taxpayer informing him of the deficiencies (other than incorrect amount of tax payable on taxable income, as specified in the return or short payment of tax payable) and directing him to provide such information, particulars, statement or documents by such date specified in the notice.".

In this connection we would also like to refer to subsection 4 of section 120 of the Income Tax Ordinance, 2001 which reads as follows:--

"Where a taxpayer fails to fully comply, by the due date, with the requirements of the notice under subsection (3), the return furnished shall be treated as an invalid return as if it had not been furnished."

Now from the above discussion this has become quite clear that the return filed by the assessee-appellant which as per Additional Commissioner Audit MTU, Lahore did not carry along with itself the computation chart which is a part and parcel, we hold that the return was incomplete and invalid as per provisions of subsection 3 of section 120 of the Income Tax Ordinance, 2001. We, therefore, hold that in the given circumstances which are also borne out from the assessment record that no notice under section 120(3) was ever issued by the Commissioner of Income Tax or by any other Officer to whom the powers has been delegated. Therefore, in the present case a notice under section 114 of the income Tax Ordinance, 2001 was required to be issued as the original return (so called) was incomplete, hence invalid and was of no legal consequence. Needless to say that on an invalid document how further proceedings i.e. under section 122(5A) of the Income Tax Ordinance, 1979 could be initiated. So we are of the considered opinion that the super structure has been built with having no foundation at all. The return being invalid and incomplete, we therefore, cancel the order passed under section 122(5A) of the Income Tax Ordinance, 2001. The appeal filed by the assessee stands accepted.

C.M.A./170/Tax (Trib.)Appeal accepted.