VS, 2009 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 779 (2008)

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

----S.122(5A)---Amendment of assessment---Treatment of Courier Services as contractor---Validity---Services rendered had wrongly been interpreted where mental element was involved---No value addition was made by the taxpayer as it was only delivery of letters---Case of the taxpayer had wrongly been treated as that of a contractor and the taxpayer's case did not fall within the category of Presumptive Tax Regime---Invoking the provisions of S.122(5A) of the Income Tax Ordinance, 2001 being illegal the order framed under S.122(5A) of the Income Tax Ordinance, 2001 was cancelled by the Appellate Tribunal.

2008 PTD 1423 and 2004 PTD (Trib.) 2749 ref.

I.T.A. No.457/LB of 2008 rel.

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

----S.122 (5A)---Amendment of assessment---Tax year 2003---Provisions of S.122(5A) of the Income Tax Ordinance, 2001 could be invoked for the tax year 2003---Even otherwise the competent authority had delegated the power to invoke the provisions of S.122(5A) of the Income Tax Ordinance, 2001 to the author of amended order.

M. Ajmal Khan for Appellant.

Javed Iqbal Rana, D.R. for Respondent.

ORDER

The tax payer, an individual, filed return of total income for the tax year 2003 declaring income at Rs.110,000. The figure of tax deducted at source was shown at Rs.11,982. Later on the return was revised on 19-3-2005 declaring total income at Rs.210,000 by virtue of section 122(3) of the Income Tax Ordinance, 2001. The tax payer's revised return was taken for income tax purposes as to be an assessment order. The same was subjected to action under section 122(5A) by the Additional Commissioner of Income Tax, Range 3, Zone A. Against this treatment the taxpayer filed appeal before the first appellate authority. The learned CIT(A) Zone II Lahore vide his order dated 7-1-2006 rejected the appeal. The taxpayer has now come into appeal before this Tribunal against the decision of learned CIT(A) Zone II Lahore. Following grounds of appeals have been taken:---

(1) That the order passed by the authorities below of the Ordinance, 2001 are 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(5A) of the Ordinance, 2001 by the Additional Commissioner and confirmed by the CIT(A) is ab initio null and void as the provisions of section 122(5) are not applicable to the order passed under repealed Ordinance, 1979.

(b) That order passed under section 122(5A) by Additional Commissioner is Coram non-judice as he is not authorized under the Ordinance to pass order.

(c) That assumption of jurisdiction under section 122(5A) by the Additional Commissioner and confirmed by CIT(A) to treat Courier Services as Contractor is illegal and unlawful as the authorities below failed to comprehend and appreciate relevant provisions of law.

(d) The order of Additional Commissioner is not maintainable in the eye of law as he has not adhered to the legal requirements of section 122(6) of the Ordinance, 2001.

2. On behalf of the tax payer the learned AR Mr. Muhammad Ajmal Khan appeared and pressed taxpayer's grievances as per above grounds. In support of the taxpayer's grievances that Additional Commissioner's action of treating Courier services as Contractor to be illegal and unlawful, the learned AR referred to a reported decision cited as 2008 PTD 1423 Lah. H.C. On the other hand, the DR on behalf of the Revenue supported the action of the authorities below.

3. We have heard both the sides and perused the available records. So far as the taxpayer's grievance regarding invoking the provisions of section 122(5A) of the Income Tax Ordinance, 2001 is concerned we do not find any force in the same as for the Tax year 2003 the provisions of section 122(5A) can be invoked and even otherwise the competent authority had delegated the power to invoke the provisions of section 122(5A) to the author of the amended order impugned before us. Hence on this score we decline to interfere. However, regarding other grievances of the taxpayer that action of the Additional Commissioner who has amended the order by treating the taxpayer as a Contractor to be illegal and unlawful we find arguments of the learned AR of the taxpayer quite forceful and convincing. Especially the argument that no value addition is made by the taxpayer while performing its functions, the learned AR's argument that reported case cited as 2004 PTD (Trib) 2749 in this manner does not favour the case of the Revenue. This argument of the learned AR is quite convincing. We also have in mind yet another case of this Tribunal decided as ITA No.457/LB/2008 (Tax Year 2006 dated 15-11-2008) whereby it was held as under:--

"We have heard the DR and considered the grounds of appeal. We find considerable force in the grounds of the tax payer in view of the fact that rendering of or providing of services remained outside the ambit of section 153(6) of the Income Tax Ordinance, 2001 till the Tax Year 2006. Later on vide Finance Act, 2006 the subject of rendering of or providing of services was brought into the ambit of full and final discharge of tax liability. The nature of business clearly carried on by appellant/assessee clearly falls within the scope of section 153(1)(b) i.e., of rendering services, which do not come within the purview of discharge of final tax liability as specifically excluded by the pre-substituted proviso to section 153(6) of Income Tax Ordinance, 2001. Even otherwise we have observed that a regular return was filed by the Tax payer for the year under appeal and the department had no power to convert the same into a statement as required to be filed under section 115(4) of the Income Tax Ordinance, 2001. As per section 115(5) of the Income Tax Ordinance, 2001 the Commissioner may, by notice in writing, require any person who, in his opinion, is required to file a prescribed statement under this section for a tax year but who has failed to do so, to furnish a prescribed statement for that year within thirty days from the date of service of such notice or such longer period as may be specified in such notice or as he may, by order in writing, allow. As is clear from the facts of the case the Revenue failed to issue such notice for requiring statement or calling for the statement as was required to be furnished under subsection (4) of section 115 of the Income Tax Ordinance, 2001. The judgment dated 8-4-2008 as quoted sparely applies to the instant case before us. So in view of these facts and circumstances of the case we are of the opinion that the action taken by the Additional Commissioner Audit Multan Zone is illegal on both the plains i.e. services rendered by the tax payer do not fall within the presumptive tax regime as well as that the department had no power to convert the regular return into statement under section 115(4) of the Income Tax Ordinance, 2001 for which a separate notice was required to be given as per provisions if subsection (3) of section 115 of the Income Tax Ordinance, 2001. In view of this position the order passed by the Additional Commissioner Audit Multan Zone dated 6-12-2007 is cancelled."

We, therefore, are of the opinion that the services rendered by the taxpayer have wrongly been interpreted by the author of the impugned amended order where mental element is involved. In fact no value addition is made by the taxpayer, it is only delivery of letters and as such we are of the considered opinion that the case of the taxpayer has wrongly been treated that of a Contractor. We have no hesitation in holding that the taxpayer's case does not fall in the category of Presumptive Tax Regime. The action of the Revenue by invoking the provisions of section 122(5A) of the Income Tax Ordinance, 2001 is held to be illegal and the order impugned before us statedly framed under section 122(5A) of the Income Tax Ordinance, 2001 is hereby cancelled, resultantly the original order in this case stand restored. The appeal of the assessee is accepted.

C.M.A./14/Tax(Trib.)Appeal accepted.