VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1887 (2009)

Income Tax Ordinance (XLIX of 2001)---

----Ss.122 (5A), 122(9) & 115(4) Second Sched., Part-IV, Cl. (41-A)---Amendment of assessment---Taxation Officer observed that assessee filed statement under S.11'5(4) of the Income 'Tax Ordinance, 2001 for the preceding year and by virtue of Cl. (41-A) of Part-IV of the Second Schedule to the Income Ordinance, 2001, the assessee was required to file statement under S.115(4) of the Income Tax Ordinance, 2001 rather than filing of regular return under S. 114 of the Income Tax Ordinance, 2001 for the tax year 2005---Show-cause notice was issued by. the Taxation Officer under S. 122(9) of the Income Tax Ordinance, 2001 to amend the already completed assessment under S.122(5A) of the Income Tax Ordinance, 2001---Taxation Officer treated the return filed under S.114 of the Income Tax Ordinance, 2001 as invalid return and assessment framed on the basis of that return was found to be erroneous in so far as same was prejudicial to the interest of revenue---Exports and supplies made by the assessee were assessed under Presumptive Tax Regime as tax deducted thereon was treated as final discharge of tax liability---Assessment was amended under S.122(5A) of the Income Tax Ordinance, 2001---Assessee contended that he never filed any option under Cl. (40), Part-IV to the. Second Schedule of the Income Tax Ordinance, 2001, to be assessed under Presumptive Tax Regime---Departmental treatment of return as "invalid return" was not maintainable in the eyes of law---Submission of declaration in writing was a legal requirement and not a procedural in nature and no such option was filed---No reason existed for the department to proceed under Presumptive Tax Regime, merely on the basis that since the assessee had furnished statement under Presumptive Tax Regime in the previous two years, therefore, he should have to file a statement under Presumptive Tax Regime in the third year as well---Validity---Since the appellant/ assessee had not furnished any option (in writing) to be assessed under Presumptive Tax Regime, its return of income furnished under S. 114 of the Income Tax Ordinance, 2001, should be accepted as valid return of Income for tax year 2005---As filing of written option under Cl. (40), of Part-IV, of the Second Schedule, of the Income Tax Ordinance, 2001, was a mandatory requirement of law---Order passed by the First Appellate Authority was vacated by the appellate Tribunal and the amendment of assessment made under S. 122 (1) of the Income Tax Ordinance, 2001 by the Taxation Officer, for the tax year 2005 was annulled.

2008 PTD (Trib.) 929 rel.

Shoaib Ahmad Sheikh for Appellant.

Muhammad Tahir, D.R. for Respondent.

ORDER

The titled appeal pertaining to tax year 2005, has been preferred at the instance of taxpayer, arises out of order passed by the learned C.I.T.(A), Gujranwala, camp at Faisalabad, dated 18-4-2008. The appellant contested the order of the C.I.T.(A) on the following grounds:-

(1) That the appellant never filed any declaration of option for the presumptive tax regime and nor fulfilled the condition to opt the presumptive tax regime.

(2) That the appellant filed income return under section 114 of the I.T. Ordinance, 2001, according to the prevailing law as on 30-9-2005.

(3) That the Taxation Officer treated the local sales as supplies which is unjustified.

2. Briefly stated, the relevant facts are that the taxpayer filed return of income under section 114 for the tax year 2005, which was deemed to be treated as assessment completed under section 120 of the Income Tax Ordinance, 2001. Subsequently, on perusal of assessment record, it was observed by the Taxation Officer that the taxpayer filed statement under section 115 (4) for the preceding year i.e. Tax Year 2004, and by virtue of Clause 41-A of Part IV of Second Schedule to the Ordinance, the taxpayer was required to file statement under section 115 (4) rather than filing of regular return under section 114 for the tax year 2005. Accordingly, a show-cause notice was issued by the Taxation Officer under section 122 (9) to amend the already completed assessment under section 122 (5A). In response thereto, the reply submitted by the taxpayer did not find favour of the Taxation Officer. Consequently, the Taxation Officer treated the return filed under section 114 as invalid return and assessment framed on the basis of that return was found to be erroneous insofar as prejudicial to the interest of revenue. The exports and supplies made by the taxpayer were assessed under PTR as tax deducted thereon was treated as final discharge of tax liability. Therefore, the assessment for the tax year 2005, was amended under section 122 (5A) of the Income Tax Ordinance, 2001.

3. Being aggrieved, the taxpayer went in appeal before the learned C.I.T.(A) and challenged the treatment accorded by the Taxation Office. It was the AR's contention before the C.I.T.(A) that he had never filed any declaration of "option" for the presumptive tax regime nor fulfilled the conditions to opt for the PTR. It was contended by the AR that the taxpayer had rightly filed return under section 114, according to the prevailing law. The learned C.I.T.(A) after hearing the arguments of the AR, has held that the Taxation Officer had rightly observed that the return filed by the taxpayer is invalid. The exports and supplies are to be assessed under PTR as tax deducted @ 3.5% is the final discharge of liability. Accordingly, invocation of the provisions of section. 122(5A) for the tax year 2005, were upheld by the learned C.I.T.(A).

4. We have heard both sides and have perused the orders passed by the authorities below. The learned AR of the taxpayer vehemently argued before us that the appellant has rightly submitted return of income for the tax year 2005, under section 114 of the Income Tax Ordinance, 2001, and the Taxation Officer has unjustifiably and illegally declared the same as invalid return which action was confirmed by the C.I.T.(A) without appreciating the facts and circumstances of the case. It is contention of the learned AR that admittedly the taxpayer never filed any option under clause (40), Part-IV of the Second Schedule, to be assessed under PTR, therefore, departmental treatment of taxpayer return as "invalid return" is not maintainable in the eyes of law. It is submitted by the learned AR that submission of declaration in writing is a legal requirement and not a procedural in nature and no such option was filed, there is no reason for the department to proteed under PTR, merely on the basis that since the taxpayer has furnished statement under PTR in the previous two years, therefore, he should have to file a statement under PTR in the third year as well. To support his above contention, the learned AR of the assessee relied on the judgment of the ITAT reported as 2008-PTD Trib 929.

5. The learned DR on behalf of Revenue supported the orders passed by the authorities below and argued that in the tax years 2003 and 2004, the taxpayer exercised option to be assessed under the presumptive tax regime under clause (40), Part-IV to the Schedule, hence, the taxpayer was also liable to be assessed under PTR in the third year also.

6. We have heard both sides and have perused the orders passed by the authorities below. In our considered judgment, we are in agreement with the arguments of the learned AR that since the appellant has not furnished any option (in writing) to be assessed under PTR, therefore, its return of income furnished under section 114, should be accepted asvalid return of income for tax year 2005, as the filing of written option under clause (40), of Part-IV, of the Second Schedule, is a mandatory requirement of law. The learned ITAT in its reported judgment cited supra, has held that:--

"After considering the arguments put forth by the representative of the assessee and perusal of the said clause (9) of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979, I am of the view that as on behalf of the assessee no declaration has been furnished option for the presumptive tax regime, therefore, there was no justification for amending the order on the basis of the statement filed by the assessee under section 143-B of the repealed Ordinance, 1979, for the previous assessment year find no justification for amending the finalized assessment in this case which has been upheld by the learned C.I.T. (A) without any basis"

7. In view of the above, we are inclined to vacate the impugned order passed by the C.I.T. (A) and annul the amendment of assessment made under section 122 (1) by the Taxation Officer, for the tax year 2005.

C.M.A./97/Tax(Trib.)Appeal accepted.