VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 129 (2009)

Income Tax Ordinance (XLIX of 2001)---

----Ss.131 & 221---Assessment---Rectification of order---Appeal to Appellate Tribunal---Appellant/taxpayer was a private limited company and the assessment for the subject year was completed in year 2002 under provisions of S.62 of repealed Income Tax Ordinance, 1979---Taxpayer had declared total income of Rs. 1,787,824 and export proceeds were declared at Rs. 4,807,040---Taxation Officer after a show-cause notice to the taxpayer rectified the order under S.221 of Income Tax Ordinance, 2001 on the ground that while prorating the expenses between normal sales and exports sales, export freight expenses by mistake were not excluded from the expenses related to normal sales---Taxpayer agitated said order passed under S.221 of Income Tax Ordinance, 2001 before the Commissioner Income Tax (Appeals) who vide impugned order rejected the appeal of the taxpayer and maintained the action of Taxation Officer---Contention of taxpayer was that the assessment for the subject year was completed on 16-3-2002 under S.62 of repealed Income Tax Ordinance, 1979, issuance of show-cause notice under the provisions of S.221 of Income Tax Ordinance, 2001, was change of opinion of the Taxation Officer insofar as the rectification in orders passed. by him under repealed Ordinance was concerned---Assessee contended that while finalizing the case, Taxation Officer having applied his mind, any change in the order requiring interpretation of statute or enhancing tax liability or any action detrimental to the interest of taxpayer was the `change of opinion' by the same authority, which was not permissible under the law---Validity---Action taken by Taxation Officer under provisions of S.221 of Income Tax Ordinance, 2001 and upheld by Commissioner Income Tax (Appeals) vide his impugned order was without any legal basis and lawful authority-Orders of two officers below were annulled, in circumstances---Taxation Officer was directed to examine issues involved in the case and take action as per law after affording an opportunity of being heard to the taxpayer.

2008 PTD 253 ref.

Muhammad Mehtab Khan for Appellant.

Gohar Ali, D.R. for Respondent.

ORDER

This appeal has been filed by the taxpayer against the decision of learned CIT(A) vide his Order No.45 dated 21-3-2007 for assessment year, 2001-2002.

2. The taxpayer has filed grounds of appeals as under:--

"(1) The order passed by the learned CIT(A) is bad in law and on facts.

(2) That the learned CIT(A) was not justified in confirming the order of the respondent when the issuance of notice and subsequent order is not mindful whether the jurisdiction has been assumed under subsection (1) or subsection (1A) of section 221 of the Ordinance.

(3) The learned CIT(A) was not justified to confirm the order of the Taxation Officer which has been passed in violation of section 24-A of General Clauses Act which is binding on him.

(4) Without prejudice to above the learned CIT(A) was not justified in confirming the full disallowance of export freight expenses which is a part of manufacturing and trading account.

(5) Without prejudice to above the learned CIT(A) erred in not directing the adjustment of brought forward assessed loss for the preceding assessment year, 2000-2001 and allowing full credit of tax claimed in the return when the challans and copies of electric and phone bills are available on record.

(6) The appellant craves permission to add, amend, alter and substitute the grounds of appeal on or before the time of hearing."

3. On the date of hearing Mr. Muhammad Mehtab Khan, Advocate attended on the behalf of the taxpayer while Mr. Gohar Ali represented the department as departmental representative.

4. Brief facts of the case are that the taxpayer is a Private Limited Company and the assessment for the subject year was completed on 16-3-2002 under the provisions of section 62 of the Income Tax Ordinance, 1979. The taxpayer had declared total income of Rs.1,787,824 and the exports proceeds were declared at Rs.4,807,040. The Taxation Officer after a show-cause notice to the taxpayer rectified the order under section 221 of the Income Tax Ordinance, 2001 vide D.No.1/081 dated 27-1-2007 on the ground that while prorating the expenses between normal sales and exports sales, the export freight expenses by mistake were not excluded from the expenses related to normal sales.

5. The taxpayer agitated the order passed under section 221 of the Taxation Officer before the learned CIT(A). The learned CIT(A) vide his impugned order quoted supra rejected the appeal of the taxpayer and maintained the action of the Taxation Officer.

6. The learned D.R. vehemently supported the order of the Taxation Officer passed under the provisions of section 221 and order of the learned CIT(A) through which order of the Taxation Officer was upheld.

7. The learned counsel for the taxpayer after discussing grounds of appeal filed argued that the original assessment in the case was finalized by the Taxation Officer under section 62 on 16-3-2002. The issue of show-cause notice under the provisions of section 221 of the Income Tax Ordinance, 2001 was thus change of opinion by the Taxation Officer in so far as the rectification in orders passed by him under section 62 of the Income Tax Ordinance of 1979 was concerned. It was argued that while finalizing the case under the provisions of section 62, the Taxation Officer had applied his mind, therefore, any change in the order requiring interpretation of a statute or enhancing tax liability of the taxpayer or any action detrimental to the interest of taxpayer is the change of opinion by the same authority which is not permissible under the law.

8. The learned counsel for the taxpayer submitted that action under the provisions of section 221 in the case was beyond the legal jurisdiction of the Taxation Officer. He relied upon the judgment of Honourable Supreme Court of Pakistan 2008 PTD 253. Their lordships while discussing the facts of the case reproduced the question of law referred to the Honourable High Court as under:--

"Whether the learned Income Tax Appellate Tribunal was right to hold that the original order passed by the Deputy Commissioner of Income Tax under section 62 of the I.T. Ordinance, 1979 allowing freight expenses had not recorded any finding on the issue and was not a conscious decision and therefore, there arises no question of change of opinion and thus, provisions of section 156 of I.T. Ordinance, 1979 could be invoked?"

9. In this case the Honourable High Court gave the judgment against the revenue and Honourable Supreme Court of Pakistan vide cited decision agreed with the decision of the Honourable High Court. Their lordships in their judgment observed as under:-

"We have considered the provisions of law on the subject discussed by the High Court in its judgment and perused the record. We have not, been able to find out any defect in the impugned judgment and do not agree with the contention of the department that scope of section 156(1) of the Ordinance can be enlarged to all errors of law and facts committed in the assessment."

10. Keeping in view the submission of the learned AR and following the judgment of Honourable Supreme Court of Pakistan quoted supra, we are of the confirmed opinion that the action taken under provisions of section 221 of the Income Tax Ordinance, 2001 by the Taxation Officer and upheld by learned CIT(A) vide his impugned order quoted supra are without any legal basis and lawful authority, therefore, orders of the two officers below are hereby annulled.

11. The taxpayer has also pointed out that learned CIT(A) erred in not directing the adjustment of brought forward assessed loss for the preceding assessment year, 2000-2001 and allowing full credit of tax claimed in the return.

12. The Taxation Officer is directed to examine both the issues and take action as per law after affording an opportunity of being hearing to the taxpayer.

13. The appeal succeeds as to the extent indicated above.

H.B.T./143/Tax(Trib.)????????????????????????????????????????????????????????????? ??????????? Order accordingly.