2010 P T D (Trib.) 1056
[Income-tax Appellate Tribunal Pakistan]
Before Munsif Khan Minhas, Judicial Member
I.T.A. No.34/IB of 2009, decided on 13/11/2009.
Income Tax Ordinance (XLIX of 2001)---
----Ss.122(5) & 40---Amendment of assessments---Deductions in computing income chargeable under the head "Income from other sources"---Definite information---Ground rent---Claim of expenses---Assessee failed to furnish reply and assessment was amended---Assessee contended that nothing was concealed and expenses claimed against `ground rent' were admissible under S.40 of the Income Tax Ordinance, 2001---Assessment was annulled by the First Appellate Authority---Department contended that First Appellate Authority was not justified to accept the documentary evidence produced before him in the light of S.122(5) of the Income Tax Ordinance, 2001 as the same were neither produced before Taxation Officer, nor taxpayer was prevented by sufficient cause from producing such material before the Assessing Officer---Validity---Assessment should only be amended on the basis of `definite information' acquired by the audit or otherwise--Information had neither come from audit nor it had been received from any other corner---In the absence of `definite information' and that too of concealment, order was to be passed under S.122(5A) of the Ordinance, if it was considered to be erroneous and prejudicial to the interest of revenue---Order passed by the First Appellate Authority was considered to be the correct one---Right course of action, if any, was to resort to the provision of S.122(5) of the Income Tax Ordinance, 2001 which had wrongly been invoked---Order passed by the First Appellate Authority was upheld by the Appellate Tribunal and the departmental appeal was dismissed being without merit.
Ziaullah Khan, D.R. for Appellant.
Hafiz Muhammad Idris for Respondent.
ORDER
MUNSIF KHAN MINHAS (JUDICIAL MEMBER).---The Department has filed this appeal against the combined order dated 18-10-2008 passed by CIT(A-II) Islamabad for the tax year, 2003 on the following grounds:
(i) That the learned CIT(A) was not justified to accept the documentary evidence produced before him in the light of section 122(5) of the Income Tax Ordinance, 2001 as the same were neither produced before Taxation Officer, nor taxpayer was prevented by sufficient cause from producing such material before the Taxation Officer.
(ii) That the learned CIT(A) was not justified to annul the assessment as the assessment in the subject case was finalized after affording reasonable opportunity of being heard to the Taxpayer vide this office notice under section 122(9) of the Income Tax Ordinance, 2001 and all the relevant facts of the case were confronted in the said notice. The taxpayer remained failed to file any plausible reply to the same. Income earned from other sources i.e. Ground Rent does not call for allowance of any direct expenses on account of Telephone, Conveyance and Salary etc. and is inadmissible under the law.
(iii) That the profit earned from National Savings was also required to be offered for the normal Taxation under the law during the relevant tax year i.e. 2003.
2. Brief facts leading to the appeal are that the assessee an individual who derives income from property and other source i.e. profit from saving accounts etc. return was filed declaring net income at Rs.5,77,635 for tax year, 2003. Later on the assessee was confronted with discrepancies noted which remained uncomplied. For the reasons recorded in he order assessment was amended under section 122(5) as confronted. Net income was assessed at Rs.7,03,797. In response thereto the taxpayer was required to file his reply but the taxpayer failed to furnish the same. Being aggrieved, he assessee had come up in appeal before the learned CIT(A) contesting the order under section 122(5) to be illegal and void ab initio as there was nothing concealed and expenses claimed against the ground rent are admissible under section 40 of the Income Tax Ordinance, 2001, who agreeing with the contentions of the learned AR annulled the assessment. With the treatment given by the learned Commissioner (Appeals) the Department preferred this appeal before the Tribunal on the grounds supra.
3. The learned AR of the assessee argued that nothing was concealed by the assessee as ground rent was duly declared and accordingly claimed expenses. The learned AR further states that income/profit from National Saving was duly shown as exempt and there was nothing concealed from the department and the invocation of the provision of section 122(5) is illegal and void ab initio being without any definite information.
4. On the other hand learned DR has supported the assessment order that the learned CIT(A) was not justified to accept the documentary evidence produced before him in the light of section 122(5) of the Income Tax Ordinance, 2001 as the same were neither produced before Taxation Officer, nor taxpayer was prevented by sufficient cause from producing such material before the Assessing Officer. The learned DR further states that the learned CIT(A) was not justified to annul the assessment as the assessment in the subject case was finalized after affording reasonable opportunity of being heard to the Taxpayer vide this office notice under section 122(9) of the Income Tax Ordinance, 2001 and all the relevant facts of the case were confronted in the said notice. The taxpayer failed to file any plausible reply to the same. Income earned from other sources i.e. Ground Rent does not call for allowance of any direct expenses on account of Telephone, Conveyance and Salary etc. is inadmissible under the law and the profit earned from National Savings was also required to be offered for the normal Taxation under the law during the relevant tax year i.e. 2003. So the assessment has rightly been amended under section 122(5) of the Income Tax Ordinance, 2001 in view of reasons embodied in the amended order.
5. I have heard the respective submissions of both parties, perused the relevant record. Undoubtedly it is not the case of concealment. Assessee has declared ground rent as well as profit from National Saving Scheme. As per learned CIT(A) it was the case of invoking section 122(5A)and not 122(5) of Income Tax Ordinance, 2001. I would like to reproduce as under:
"122(5)
An assessment order in respect of tax year, or an assessment year, shall only be amended under subsection (1) and an amended assessment for that year shall only be further amended under subsection (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that-
(i) any income chargeable to tax has escaped assessment;
(ii) total income has been under-assessed, or assessed at too low a rate, or has been the subject of excessive relief or refund;
(iii) any amount under a head of income has been misclassified."
"122(5A)-
Subject to subsection (9) the Commissioner may amend, or further amend, an assessment order, if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of revenue.''
In the above two sections there is a thin line of demarcation. In case of section 122(5) assessment shall only be amended on the basis of definite information acquired by the audit or otherwise. In this case neither the information has come from audit nor it has been received from any other corner. Further the Taxation Officer has written the following lines:--
"Later on it was observed that the income from other source was wrongly calculated from after claiming expenses under the head Telephone, Stationery and Conveyance etc. at Rs.1,33,962 which are inadmissible under the law."
In absence of any other definite information and that too of concealment, order was to be passed under section 122(5A) it if was considered to be erroneous and prejudicial to interest of revenue. Hence order passed by the learned CIT(A) is considered to be correct one that right course of action if any was to resort to the provision of section 122(5A) and retrieve the loss of revenue rather than resorting to the provision of section 122(5) which has wrongly been invoked in this case.
6. In this state of affairs learned DR was offered to withdraw appeal to save revenue from knocking out of the assessment on the legal score as it is departmental appeal and not that of assessee. After taking some time he has stated that department wants to contest this order before the Honourale High Court. So department is not inclined to withdraw appeal. I am quite conscious of this fact that assessee has not filed this appeal. He appears to be satisfied with the order passed by the learned First Appellate Authority. The departmental appeal has been defended on legal aspects. The Bench has decided same kind of issue in many cases that assessment is not sustainable. Hence I have been left with no other alternative except to cancel the order passed by both of the officers below.
7. Resultantly in this scenario I have been left with no other alternative except to uphold the order passed by the learned First Appellate Authority. The departmental appeal under consideration is hereby dismissed without any merit.
C.M.A./193/Tax(Trib.)Appeal dismissed.