VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1974 (2009)

(a) Income Tax Ordinance (XLIX of 2001)----

----S.122(9)--Income Tax Rules, 2002, First Schedule, para. 2---Amendment of assessment---Service of notice---Assessee denied service of notice---First Appellate Authority annulled the amended assessment order framed under S.122(1) of the Income Tax Ordinance, 2001 on the ground of technical flaw of the notice---First Appellate Authority had dilated upon the technical defects in the notice issued under S.122(9) of the Income Tax Ordinance, 2001 and had recorded contention of the assessee that the said notice was not served on the assessee and annulled the assessment---Held, it was not understandable as to how the assessee was able to expose the technical flaws of the notice before the First Appellate Authority, when he had not received it---First Appellate Authority did not notice contradiction between the pleadings of the assessee---Mere technical flaw, if any, in the notice under S.122(9) of the Income Tax Ordinance, 2001 was neither of any help to the tax payer nor did it constitute a sufficient basis for annulment of assessment---Non-disclosure of income were not even touched upon and the assessment was annulled merely on technical grounds, which were misconceived and annulment of assessment was not justified---Order of the First Appellate Authority was vacated and the order passed under S.122(1) of the Income Tax Ordinance, 2001 by the Assessing Officer was restored by the Appellate Tribunal.

1997 PTD 47 ref.

CIT v. Abdul Ghani 2007 PTD 967 and Pakistan Fisheries Limited v. United Bank Limited PLD 1993 SC 109 rel.

(b) Income-tax---

----Notice---Technical flaw---Mere technical flaw in the form of a notice cannot vitiate an order of assessment if the charge of tax otherwise stands established beyond any shadow of doubt.

CIT v. Abdul Ghani 2007 PTD 967 and Pakistan Fisheries Limited v. United Bank Limited PLD 1993 SC 109 rel.

(c) Income-tax---

----Notice---Technical flaw---Mere technical flaw in a notice cannot defeat a levy if it is otherwise countenanced by law.

(d) Income-tax---

----Non-service of notice---Assessee's stance regarding non-service of notice before First Appellate Authority did not appear to be correct because in the grounds of appeal, it was contended that the said notice was not in the proper format---Such a stance could be taken only if the assessee was in possession of the said notice.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Nemo for Respondent.

ORDER

The instant department appeal pertaining to tax year, 2004 has been directed against the order dated 18-9-2007 recorded by the CIT(Appeals), Gujranwala, whereby he annulled the amended assessment order dated 7-6-2007 passed under section 122(1) of the Income Tax Ordinance, 2001.

2. Facts of the case, in brief, are that the return filed by the tax payer declaring income at Rs.90,000 was deemed as assessment under section 120 of the Income Tax Ordinance, 2001. Subsequently, it came to the notice of the Assessing Officer that the taxpayer was an agency holder of Messrs Dawood Corporation under the name and style of Messrs. Ahmad Raza Abbas and Co. and during the tax year under consideration he had also made purchases of Rs.246,000 from the said corporation but did not declare the same in the income tax return. Non-declaration of income from the said source was, therefore, considered to be a definite information regarding concealment of income. Accordingly the Taxation Officer issued statutory notice under section 122(9) of the Income Tax Ordinance, 2001 to the taxpayer, but he did not respond. Hence the assessment was amended and income of the taxpayer was worked out at Rs.130,000 by resorting to provisions of section 122 of the Income Tax Ordinance, 2001. Before the CIT(Appeals), taxpayer denied the service of notice under section 122 of the Income Tax Ordinance, 2001, prescribed in para 2 of 1st Schedule to the Income Tax Rules, 2002. The CIT, therefore by placing reliance on a reported judgment of the Honourable Lahore High Court cited as 1997 PTD 47 annulled the amended assessment order framed under section 122(1) of the Income Tax Ordinance, 2001.

3. The learned DR attended on behalf of the department/Revenue whereas none appeared on behalf of the taxpayer despite service of notice. Therefore, appeal is disposed of ex parte by resorting to Rule 20(2) of I.T.A.T. Rules, 2005.

4. The learned DR contended that the learned CIT(Appeals) has unjustifiably annulled the amended assessment order passed under section 122(1) of the Income Tax Ordinance, 2001 on technical grounds. It was argued that a show-cause notice under section 122(9) of the Income Tax Ordinance, 2001 was issued to the taxpayer on 28-5-2007, whereby he was confronted with the non-disclosure of income from Messrs Ahmad Raza Abbas and Co., Galla Mandi, Ghakhar but no response was made by him. The Taxation Officer accordingly assessed income of Rs.40,000 from the said source and added it to the declared income of Rs.90,000. In this way the income of the taxpayer was determined at Rs.130,000.

5. We have given due consideration to the facts of the case and also considered the judgment of the Honourable Lahore High Court reported as 1997 PTD 47 whereby the assessment was annulled because of the reason that none of the three stipulated conditions i.e. Escapement of assessment under assessment of income and assessment at too low a rate as incorporated in the notice was ticked.

6. The question whether a technical flaw in a notice is fatal to an assessment finalized on the basis of such notice was considered by the Honourable Supreme Court of Pakistan in the case of CIT v. Abdul Ghani reported as 2007 PTD 967. In the said case matter under consideration before the apex Court was whether an assessment finalized on the basis of a notice under section 56 of the Income Tax Ordinance, 2001 was legally valid when the notice should have been issued under section 65 of the repealed Income Tax Ordinance, 1979. The apex Court quoted with favour the following extract from the judgment of the I.T.A.T.:--

"We therefore hold that if the income of the assessee was assessable and the Assessing Officer had proper jurisdiction for making assessment or passing an order of the limitation period is not expired under section 65 of the Ordinance, issuing of wrong form of notice is immaterial and the assessment framed and the order passed consequent upon that notice, warrant or other document would not vitiate that assessment order."

Thereafter the Honourable Court also made a reference to the case of Pakistan Fisheries Limited v. United Bank Limited PLD 1993 SC 109 wherein it was held that:

"As long as power to hear and decide a matter vests in a Court mere reference to a wrong provision of law for invocation of that power would not be a bar to the exercise of that power. Applying this pronouncement to the present case, there can be no doubt with regard to the power of the Assessing Officer to re-open the assessment for the previous assessment years under section 65 of the Ordinance, if he is satisfied that there has been escapement of assessment. Thus the fact that the Assessing Officer instead of issuing a notice under section 65, issued a notice under section 56 would neither invalidate the notice issued under section 56 of the Ordinance nor would render the assessments framed in pursuance of such notice as illegal and without jurisdiction."

7. Relying upon the extracts from the judgments of the I.T.A.T. and Supreme Court quoted supra we are of the view that mere technical flaw in the form of a notice cannot vitiate an order of assessment if the charge of tax otherwise stands established beyond any shadow of doubt. There is no rebuttal to the fact that the taxpayer in the instant case, did not declare income from Messrs Ahmad Raza Abbas and Co. which was the agency holder of Messrs Dawood Corporation of Pakistan. In his order, the learned CIT(Appeals) has dilated upon the technical defects in the notice issued under section 122(9) of the Income Tax Ordinance, 2001 and has also recorded the contention of the taxpayer that the said notice was not served on the appellant/assessee for the annulment of assessment. We fail to understand as to how the appellant was able to expose the technical flaws of the notice before the CIT(Appeals), when he had not received it. It appears that the CIT(Appeals) while disposing of the appeal did not notice contradiction between the pleading of the AR and grounds 2 and 3 which are reproduced hereunder:---

(a) That no prescribed notice under section 122 was issued which is illegal.

(b) That the notice issued under section 122(9) does not indicate under. what subsection of the section has been issued. Provision of section 122(5) stipulates three conditions for issuing notice under section 122 of the Income Tax Ordinance, 2001.

8. As discussed above mere technical flaw in a notice as pronounced by the Supreme Court cannot defeat a levy if it is otherwise countenanced by law. As regards service of notice, the AR's stance before the CIT(Appeals) also does not appear to be correct because in the grounds of appeal before the learned CIT(Appeals), it was contended that the said notice was not in the proper format. Obviously, such a stance could be taken only if the appellant was in possession of the said notice.

9. For reasons discussed above, we are of the considered opinion that mere technical flaw, if any, in the notice under section 122(9) of the Income Tax Ordinance, 2001 is neither of any help to the taxpayer nor does it constitute a sufficient basis for annulment of assessment. From the perusal of the order of the learned CIT(Appeals) it transpires that merits of the case i.e. non-disclosure of income from Messrs Ahmad Raza Abbas and Co. Ghalla Mandi, Ghakhar were not even touched upon and the assessment was annulled merely on technical grounds, which, in our opinion were misconceived for reasons discussed supra. Even otherwise annulment of assessment was not justified in view of the judgment of the august Supreme Court of Pakistan. We, therefore, vacate the order of the learned CIT(Appeals) and restore the order passed under section 122(1) of the Income Tax Ordinance, 2001 determining income of the taxpayer at Rs.130,000.

10. The departmental appeal succeeds.

C.M.A./106/Tax(Trib.)Appeal accepted.