VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1191 (2009)

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.156 & 65---Rectification of mistake---Application for rectification was moved on the ground that not only the proceedings under S.65 of the Income Tax Ordinance, 1979 were illegally initiated but the notice under said section had also been issued in absence of any lawful authority; such plea going to the root of the assessment order, same should have been decided by the First Appellate Authority at the first place---Validity---Such legal controversy needed to be thrashed out at the first appellate stage because it was the preliminary and primary contention of the assessee that the proceedings initiated under S.65 of the Income Tax Ordinance, 2001 were ab initio void and illegal---First Appellate Authority having not passed a speaking order, the case was sent back by the Appellate Tribunal to First Appellate Authority to look into the assessee's contentions in depth and pass a comprehensive judgment on the legal issues raised before him.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss.116 & 111---Imposition of penalty after notice of hearing, etc.---Assessee contended that reasons advanced for imposition of penalty were the same as were noted by the Assessing Officer at the time of formulating additional assessment under S.65 of the Income Tax Ordinance, 1979, whereas the penalty proceedings were independent in its character and were not based on the reasons recorded in the assessment order and that penalty proceedings were criminal in nature and onus to prove guilt on the part of assessee squarely lay on the Department---Validity---Penalty proceedings were criminal in nature---Guilt was to be established independently on the basis of cogent evidence as was required in the criminal proceedings---Assessing officer was supposed to establish mens rea in such cases which was a sine qua non---First Appellate Authority dismissed the appeal in a summary manner without adhering to the judicial pronouncements---First set of appeals having been set aside, penalty appeals were also remanded back by the Appellate Tribunal to the First Appellate Authority for fresh adjudication with the directions that First Appellate Authority shall dispose of the penalty appeals after considering the facts of the case in its totality as well as ratio and principle decided in the case law.

(1992) 65 Tax 2005 (L.H.C.) (sic); 1989 PTD 521; 2001 PTD 1348; 2003 PTD (Trib.) 1068; 2003 PTD (Trib.) 1076; 1994 PTD (Trib.) 688; 2003 PTD (Trib.) 1121; 2004 PTD (Trib.) 1225 and 1994 PTD 675 rel.

Shoaib Ahmad Sheikh for Appellant.

S.A. Masood Raza Qazilbash, D.R. for Respondent.

ORDER

By this single order we proceed to adjudge above titled ten appeals which are directed against two set of the orders passed by the lower authorities. First set contains five appeals which are filed against the order passed by the learned C.I.T., Appeals Zone, Gujranwala dated 25-6-2005. This order mentions about Section 156 of the Income Tax Ordinance, 1979 whereby rectification of the order passed by the first appellate authority has been sought. While the other set of appeals also consists of five appeals and are instituted against the order passed by the first appellate authority dated 9-6-2004 in which the issue involved pertains to levy of penalty under section 111 of the Income Tax Ordinance, 1979.

First set of appeals-order passed by CIT(A) under section 156 of the Income Tax Ordinance, 1979

2. Common issue, in these appeals, relates to dismissal of the miscellaneous application filed by the appellant before the first authority in terms of section 156 of the Income Tax Ordinance, 1979. It was the appellant's contention before the learned Appeal Commissioner that a mistake of law has been crept in the order passed by him while disposing of the appeals pertaining to the order made under sections 62/65 of the Income Tax Ordinance, 1979. Elaborating this plea it was stated that not only the proceedings under section 65 are illegally initiated but the notice under section 65 has also been issued in absence of any lawful authority. Further contended that since, this plea goes to the root of the assessment order, therefore, that should have been decided by the learned Appeal Commissioner at the first place.

3. We have given anxious thought to the rival contentions and have also gone through the case law referred to by the learned counsel for the assessee and find that the legal controversy mentioned supra needs to be thrashed out at the first appellate stage because it was the preliminary and primary contention of the appellant that the proceedings initiated under section 65 of the Income Tax Ordinance, 1979 are ab initio void illegal. Thus, the impugned orders have been passed without lawful and B jurisdiction. Since, the learned Appeal Commissioner has not passed the speaking order in this regard. We, therefore, deem it appropriate to send the case back to the first appellate authority to look into the appellant's contentions in depth and should also pass a comprehensive judgment on the legal issues which will be raised before him.

Second set of appeals-order passed by CIT(A) under section 111 of the Income Tax Ordinance, 1979 - Assessment year 1993-94 - 1997-98

4. Coming to the other set of appeals which relates to imposition of penalty under section 111 of the repealed Income Tax Ordinance, 1979. Facts as emerged are that, after passing the order under sections 62/65 of the Income Tax Ordinance 1979, penalty proceedings were initiated by issuing a notice under section 116 of the Income Tax Ordinance, 1979 for concealment of income. As no reply was furnished on the due date, penalty amounting to Rs.475, Rs.13,065, Rs.200,156, Rs.14,906 and Rs.9,946 was imposed for the assessment years 1993-94 to 1997-98 respectively.

5. It was the assessee's contention before the first appellate authority that since, the reasons advanced for imposition of penalty are the same as were noted by the assessing officer at the time of formulating the additional assessment under section 65 of the Income Tax Ordinance, 1979. Whereas the penalty proceedings are independent in its character and are not based on the reasons recorded in the assessment order. Further contended that penalty proceedings are criminal in nature and onus to prove guilt on the part of the appellant squarely lies on the shoulders of the Department. All these contentions are also reiterated before us by the learned counsel for the appellant and also furnished a few case law during the court proceedings in re:- (1992) 65 Tax 2005 (sic) (LHC), 1989 PTD-521 (LHC), 2001 PTD 1348 (LHC), 2003 PTD (Trib.) 1068, 2003 PTD (Trib.) 1076, 1994 PTD (Trib.) 688, 2003 PTD (Trib.) 1121; 2004 PTD (Trib.) 1225 and 1994 PTD 675 (Kar.HC) to substantiate the contentions raised ibid.

6. There is no cavil to the proposition that penalty proceedings are criminal in nature, therefore, guilt is to be established independently on the basis of cogent evidence as is required in the criminal proceedings. In fact, it is the duty of the assessing officer to establish mens rea in such cases which is sine qua non. We have also noted that the learned Appeal Commissioner has dismissed the appeal in a summary manner without adhering to the judicial pronouncements rendered in this regard by the higher appellate courts. Since, we have set aside the appellant's first set of appeals herein above, it is, therefore, also deemed fit that the penalty appeals may be remanded to the learned Appeal Commissioner for fresh adjudication and it is ordered accordingly. The learned Appeal Commissioner shall also dispose of the penalty appeals after considering the facts of the case in its totality as well as the ratio and the principle decided in the case law cited above.

7. Resultantly, all the ten appeals are disposed of to the extent and in the manner indicated above.

C.M.A./47/Tax(Trib.)Order accordingly.