2010 P T D (Trib.) 17
[Income-tax Appellate Tribunal Pakistan]
Before Jawaid Masood Tahir Bhatti, Judicial Member and Abdul Rauf, Accountant Member
I.T.A. No., 2423/LB of 2004, decided on 25/09/2009.
Income Tax Ordinance (XLIX of 2001)---
----Ss.120, 122 & 131---Setting aside of assessment---Appeal before Appellate Tribunal---Appellant/assessee, which was non-resident company filed appeal against order of Commissioner Income Tax (Appeals) whereby the assessment finalized by the Assistant Commissioner of Income Tax was set aside---Contention of appellant was that instead of setting aside the assessment, the Commissioner Income Tax (Appeals) should have adjudicated the matter by passing a speaking order on the pertinent aspects of the case---Assessing Officer, in the present case was not satisfied with the disclosure in the declaration of undisclosed income, should have first rejected the declaration of undisclosed income filed by the appellant-Company; and then proceeded to assess the income of the appellant Company, but that had not been done---Besides, there was no discussion in the assessment order to establish that the undisclosed income shown for the relevant year in the declaration of undisclosed income, did not cover the income assessed---Accepting appeal, assessment finalized, was cancelled by the Appellate Tribunal.
Shahbaz Butt for Appellant.
Nemo for Respondent.
ORDER
The appellant in this case is a non-resident company which has filed the instant appeal against the order of learned CIT (Appeals) Zone-I, Lahore, dated 13-3-2004, whereby the assessment finalized by the Assistant Commissioner of Income Tax under sections 65/62 of the late Ordinance of 1979 was set aside. In the grounds of appeal it has been vehemently contended that instead of setting aside the assessment the learned CIT(Appeals) should have adjudicated the matter by passing a speaking order on the pertinent aspects of the case.
2. The facts of the case, leading to the appeal under consideration are that the original assessment in the case of appellant was finalized under section 62 of the late Ordinance of 1979 at Nil income on 15-6-1998. Subsequently, the Assessing Officer received information to the effect that the appellant received commission of Rs.2,70,14,915 from different companies to whom electricity generators were supplied by the principal company Messrs Wartisila Diesel OY Finland. Assessment was, therefore, reopened under section 65 of the late Ordinance of 1979 and finalized at the income of Rs.2,70,15,015 under sections 65/62 of the late Ordinance of 1979 on 26-6-2002. During the course of proceedings before the Assessing Office it was pleaded that the appellant-Company filed Declaration of undisclosed Income under section 59-D of the late Ordinance of 1979 on 3-4-2000 declaring the undisclosed income as under:--
| Income Year in which income earned | Asstt. Year | Un-disclosed Income | Tax Paid |
| 30-6-1995 | 1995-1996 | 2,743,047 | 214,305 |
| 30-6-1996 | 1996-1997 | 59,919,263 | 5,991,926 |
| 30-6-1997 | 1997-1998 | 36,585,175 | 3,658,517 |
| | Total | 99,247,485 | 9,924,748 |
It was explained that the said declaration fully covers the income allegedly not offered for tax by the appellant-Company. The Assessing Officer did not entertain the contention raised by the learned AR on the ground that the company had declared expenditure for the year tabulated hereinabove whereas information received by the department pertained to the undisclosed commission of the company.
3. Being aggrieved by the assessment made in the manner discussed above the appellant filed appeal before the learned CIT(Appeals) and contended that the Assessing Officer had failed to appreciate the facts of the case and that it was undisclosed commission income which was utilized in meeting the expenses. Declaration of the said income as expenditure was, therefore, the other side of the same coin which did not nullify the character of the amount as income because income is earned first and expenditure is then met out of the income subsequently. It was further pleaded before the learned CIT(Appeals) that the assessment of income of Rs.2,70,15,015 in utter disregard of the declaration of undisclosed income was thus not justified. The learned CIT(Appeals), after discussing the issue in detail set aside the assessment with the following observation:--
"There is a lot of difference in 'the amounts declared under the Tax Amnesty Scheme Rs.59,919,263 and that on 'which tax has been charged Rs.27,015,015. It would be unfair to charge tax on receipts of Rs.27,015,015 without drawing inference from the books of accounts that the actual income on accrual basis was Rs.59,919,263 and the same was offered as expenditure in the declaration filed under the Tax Amnesty Scheme."
Being still dissatisfied the appellant was come up in appeal before us.
4. During the course of hearing the learned AR of the appellant took strong exception to the setting aside of assessment by the learned .CIT(Appeals) and vehemently pleaded that instead of setting aside the assessment the learned CIT(Appeals) should have disposed of appeal through authoritative adjudication on merits. He contended that the amount of income declared under Amnesty Scheme Expenditure far exceeded the income assessed by the Assessing Officer vide order under sections 65/62 dated 26-6-2002; and the former adequately covered the latter. He also drew our attention to C.B.R.'s Circular No.4 of 2000 wherein various aspects of income declared under the amnesty were explained. He specifically drew our attention to paras-8 and 10, which, for the sake of convenience and reference are reproduced hereunder:--
"8. Immunity.
(1) Where a person has paid tax on his undisclosed income in accordance with the Scheme, he shall not be liable to any further" tax charge, levy, penalty or prosecution in respect of such income under the Income Tax Ordinance, 1979.
(2) The undisclosed assets declared in accordance with the scheme and on which tax has been paid would be exempt from wealth tax under the Wealth Tax Act, 1963, for any assessment year commencing on or before the first day of July, 1999, and for five assessment years next following.'
10. Finality of proceedings under the Scheme.
(1) All declaration filed under the Scheme shall be subjected to preliminary examination.
(2) Where a declaration in respect of undisclosed income has been properly made and the tax due on such income has been, fully paid, such declaration shall be accepted by Deputy Commissioner of Income Tax concerned without any further proceedings and the declarant shall be informed accordingly.
(3) Where any deficiency or any mistake in calculation of tax or any other deficiency or mistake is noticed, a show-cause notice with the prior approval of Commissioner of Income Tax shall be issued and served upon the declarant requiring him to meet the deficiency and explain the mistake or omission within 30 days of the service of the said notice. If the said deficiency or mistake is rectified within the due date the declaration shall be accepted and the declarant should be informed accordingly.
(4) In case the declarant does not respond to the notice issued under para 10(3) of the Scheme or does not revise the declaration, such declaration shall be rejected with the approval of the Commissioner of Income Tax and the provisions of paras 7 and 8 of the Scheme shall not apply.
(5) Where it is subsequently discovered that the declaration so made was not true and correct or the particulars of income or assets were inaccurate, the acceptance of such declaration shall be cancelled with prior approval of Commissioner of Income Tax /Wealth Tax concerned provided that no such order of cancellation shall be made without giving an opportunity of being heard to the declarant. However, no order of cancellation shall be made after the 30th day of June, 2005.
(6) Where the declarant claims depreciation allowance in respect of Plant and Machinery for any assessment year prior to the assessment year commencing on or before the 1st day of July, 2000, his declaration for the relevant assessment year shall be cancelled by the DCIT with the prior approval of the CIT and all provisions of the Income Tax Ordinance, 1979 or Wealth Tax Act, 1963 shall apply accordingly.
Advancing his arguments further, the learned AR also referred Para-2-C of Circular. No.9 of 2000 whereunder it was mandatory to communicate the rejection of the declaration of undisclosed income to the declaration 1-3-2000 in case it suffered from any defect or legal infirmity. He stated that no such rejection was communicated to the appellant by the date specified by the C.B.R. and without doing so the assessing officer was not justified to assess undisclosed income of the appellant through order under sections 65/62 of the late Ordinance of 1979. In such a situation, the learned AR vehemently pleaded that the learned CIT(Appeals) should have accepted the appeal of the company because the declaration was filed in' time and fully conformed requirements laid down in Circular 4 of 2000.
5. We have given due consideration to the arguments of the learned AR and feel persuaded to agree with him. We would like to emphasize that instructions issued by the Federal Board of Revenue are binding on all the field formations working under its administrative domain. The assessing officer, in case he was not satisfied with the disclosure made in the declaration of undisclosed income, should have first rejected the declaration of undisclosed income filed by the appellant (Amnesty Declaration by 31-12-2000 and then proceeded to assess the income of the company under sections 65/62 of the late Ordinance of 1979. This was obviously not done. Besides, there is no discussion in the assessment order to establish that the undisclosed income shown at Rs.59,919,263 for the years, 1996-1997 in the declaration of undisclosed income did not cover the income assessed under sections 62/65 of the late Ordinance of 1979. In these circumstances we accept the appeal of the company cancel the assessment finalized under sections 65/62 of the late Ordinance of 1979 at Rs.2,70,15,015. Ordered accordingly.
6. The assessee's appeal succeeds.
H.B.T./153/Tax (Trib.)Appeal accepted.