VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1382 (2009)

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---C.B.R. Circular No. 7 of 2002, dated 15-6-2002, Para.9(A)(ii)---Self-assessment---Selection of case for total audit---Limitation---No appeal was filed by the department against the order of High Court declaring the selection of the case of the assessee being improper and at naught, the case of the assessee could not be selected for total audit even if the Supreme Court of Pakistan in other cases had reversed the order of High Court regarding appeals of 83 assessees wherein the assessee was not the party in proceedings---Supreme Court of Pakistan specifically mentioned that "pending decision of appeals arising out of that instant petitions, Income Tax Department shall be free to examine the returns of assessee/respondents whose cases had been selected for total audit but no recovery, if any, of the Income Tax shall be made from them till the final decision of the appeals"---Observation of the Supreme Court of Pakistan clearly showed that even regarding the 83 appeals filed by the department against various assessees the Supreme Court of Pakistan realizing the limitation provided under the law had directed to examine the returns of the assessees whose cases had been selected for total audit and only the recovery of the tax had been stayed till the decision of the appeals---Assessment in the case made by the Taxation Officer was barred by time which had been upheld by the First Appellate Authority without any justification---Order of First Appellate Authority was vacated and the assessment order passed by the Taxation Officer was cancelled by the Appellate Tribunal.

Abbas Raza ITP for Applicant.

Ch. Safdar Hussain, DR for Respondent.

ORDER

The appellant through this appeal has objected to the impugned order of the learned CIT(A), dated 21-2-2008 on the following grounds: --

(1) That the income tax assessment order, dated 29-6-2007 is bad in law and contrary to the facts of the case.

(2) That the Taxation Officer Audit-09 Companies Zone-I Lahore should 'have accepted the declared version of the appellant.

(3) That the assessment order, dated June, 29, 2007 is barred by time.

(4) That the Taxation Officer was not justified in stating that "When department was restrained from issuing demand notice, it clearly implies that assessment has to be kept pending till the decision of the Court.

(5) That the Taxation Officer miserably failed to understand that only recovery of demand was restrained by the apex Court of the country and not the finalization of the assessment.

(6) That the Taxation Officer was not justified in estimating sales at Rs.35,00,000 without any basis.

(7) That the Taxation Officer was not justified in applying G.P. @ 15%.

(8) That the learned Commissioner of Income Tax Appeals RTO, Lahore was also not justified in rejecting the appeal of the appellant.

We have heard the learned Representatives from both the sides and have also perused the impugned order of the learned CIT(A), the order passed by the Taxation Officer and other relevant record of the case.

The learned counsel representing the appellant has contended that the Taxation Officer in the case of the appellant has issued the notice regarding the selection of the case of the assessee for total audit under Para. 9(A)(ii) of Circular No.7 of 2002, dated 15-6-2002 and the case of the assessee was so selected vide order, dated 31-3-2003. The assessee filed writ petition before the Honourable Lahore High Court against the selection of the case under total audit and the Honourable High Court held that the selection of the case on the basis of the guidelines was improper and the selection of the case of the assessee for audit was set at naught. The learned counsel has contended that in the case of the assessee no appeal was filed by the department before the Hon'ble Supreme Court of Pakistan against the order of the Hon'ble Lahore High Court. However, he has conceded that on the same issue the department filed appeals before the Hon'ble Supreme Court of Pakistan which were allowed vide judgment, dated 8-8-2006 setting aside the decisions of the Hon'ble Lahore High Court validating the selection of the cases under para. 9(A)(ii) of Circular No.7 referred above. It has been contended by the learned A.R. of assessee that as no appeal in the case of the assessee was filed before the Hon'ble Supreme Court of Pakistan against the order of the Hon'ble High Court, therefore, it was mandatory upon the department to pass order before 30-6-2005 but in the present case the, assessment order has been passed by the Taxation Officer on 29-6-2007 which is ruthlessly barred by time and is, therefore, liable to be cancelled. The learned counsel in this regard has placed before the Bench the consolidated order of the Hon'ble Supreme Court of Pakistan which is regarding 83 various assessees who have challenged the selection of the cases for total audit but the case of the present assessee is not included in that order.

The learned counsel representing the respondent-department, on the other hand, has contended that the selection of the case for audit is strictly in lines with the directions of the Hon'ble Apex Court of the country which consequently does not call for any interference. The learned DR has contended that as regards the issue of assessment being time barred the observation of the officers below in this regard is very correct and carries substantial weight that since in the leave grant order by the Hon'ble Supreme Court of Pakistan recovery of the demand was restrained. According to the learned D.R. it clearly shows that the proceedings regarding the assessments were to be kept pending. He is of the view that when the department was restrained from using of demand notice it clearly implied that the assessment was not to be announced till the decision of the Honourable Supreme Court. The learned DR has contended that the arguments of the learned counsel for the assessee in this regard are devoid of any merits and are liable to be rejected.

We have considered the arguments advanced from both the sides and we are of the view that in the case of the assessee no appeal being filed by the department 'against the order of the Hon'ble High Court declaring the selection of the case of the assessee being improper and at naught, the case of the assessee cannot be selected for total audit even if the Hon'ble Supreme Court of Pakistan in other cases has reversed the above referred order of the Hon'ble High Court regarding appeals of 83 assessees wherein the present assessees were not the party of proceedings. We have further noted that the Hon'ble Supreme Court of Pakistan in its order, dated 16-2-2004 regarding above referred 83 appeals has specifically mentioned in para. 10 that "pending decision of appeals arising out of the instant petitions, Income Tax Department shall be free to examine the returns of assessees/respondents whose cases have been selected for total audit but no recovery, if any, of the Income Tax shall be made from them till the final decision of the appeals.

Above observation of the Hon'ble Supreme Court of Pakistan clearly shows that even regarding the above referred 83 appeals filed by the department against various assessees the Hon'ble Supreme Court realizing the limitation provided under the law has directed to examine the returns of the assessees whose cases have been selected for total audit and only the recovery of the tax has been stayed till the decision of the appeals.

In view of these facts, circumstances and the legal position, we find force in the arguments of the learned counsel for the appellant that the assessment in this case made by the Taxation Officer is barred by time which has been upheld by the learned CIT(A) without any justification. Consequently the impugned order of the learned CIT(A) is vacated and the assessment order passed by the Taxation Officer is cancelled.

The appeal filed by the assessee is allowed.

C.M.A./68/Tax (Trib.)Appeal accepted.