VS, 2010 PTD-INCOME-TAX-APPELLATE-TRIBUNAL-PAKISTAN 1777 (2009)

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

----Ss. 221, 148 to 156, 233, 234,235 & 236---C.B.R. Circular No.10(1)IT-Jud/04 dated 23-11-2004, First Schedule---Rectification of mistake---Application for recall of order---Jurisdiction of Commis sioner---Non-taxpayer---Regular taxpayer---Assessee contended that jurisdiction of Commissioner MTU in respect of withholding of taxes was restricted to the cases of persons who were not taxpayers, whereas the assessee was a regular taxpayer and on the basis of clarification letter dated 4-8-2005 of the Central Board of Revenue, Taxation Officer had no jurisdiction over the case and such aspect of the case had not been considered by the Appellate Tribunal while passing the order---Validity---In response to notice regarding monitoring of withholding taxes, Accountant, appeared before the Assessing Officer and filed copies of annual and quarterly statements under S.165 of the Income Tax Ordinance, 2001 and annual audited accounts, instead of challenging the jurisdiction of the Assessing Officer, but in appeal took altogether a different plea on the point of jurisdiction---Initially assessees themselves get them assessed in wrong jurisdiction and later on before appellate forums, get the assessments cancelled, annulled, vacated, nullified and quashed from the appellate forums in order to evade tax, which causes huge loss to the revenue---In view of assessess's own version that it had been assessed in Company Circle, the case was remanded back to Assessing Officer of the Company Circle for de novo proceedings in the matter in accordance with law---Orders passed by forums below were vacated by the Appellate Tribunal in the circumstances.

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

----Ss.209, 148 to 156, 233, 234, 235 & 236---Jurisdiction of income tax authorities--- Non-taxpayer--- Regular taxpayer--- Monitoring of withholding tax---Jurisdiction---Assessee being a taxpayer, will be assessed in the Zone and not in MTU---Taxation Officer MTU, had passed the assessment order in wrongful exercise of jurisdiction, as the clarification letter of Central Board of Revenue exclusively conferred jurisdiction with the Zones in respect of their taxpayers---Where mandatory conditions for the exercise of jurisdiction were not fulfilled, the entire proceedings thereafter will be illegal and without jurisdiction---First Appellate Authority had observed that assessee was taxpayer and was assessed to tax in Company Circle---Appellate Tribunal vacated the order passed by the Taxation Officer.

(c) Income Tax---

----Jurisdiction---Wrong assessment---Remedy against incorrect or wrong assessment was provided by way of appeals, and if such remedies were not invoked, the assessment, even if erroneous on account of wrongful jurisdiction, will be binding on the assessee.

Shamim Pasha for Applicant.

Shamsul Huda, D.R. for Respondent.

ORDER

By this order, we intend to decide above captioned Miscellaneous Application moved at the instance of the assessee, praying therein to recall the order dated 4-12-2007 passed by the Division Bench of this Tribunal in I.T.A. No.1446/KB of 2005 pertaining to assessment year 1991-92 and refix I.T.A. No.1446/KB of 2005, as the Tribunal has committed mistake which is apparent from order and record.

2. Heard the learned Counsel for the assessee and the learned D.R. appearing on behalf of the department.

3. The learned Counsel for the assessee argued that the jurisdiction of MTU in respect of monitoring of withholding of taxes is restricted to the cases of persons who are not taxpayers, whereas the assessee is a regular taxpayer, and the Division Bench of the I.T.A.T. has misinterpreted C.B.R. Circular letter dated 23-11-2004.

He further argued that on the basis of clarification letter dated 4-8-2005 of the C.B.R., the Taxation Officer (ENF-02), MTU, Karachi, has no jurisdiction over the case and this aspect of the case has not been considered by the Division Bench of this Tribunal while passing the order dated 4-12-2007.

The learned Counsel for the assessee vehemently contended that it was argued before the learned Division Bench of the I.T.A.T. that applicant/assessee is a regular income tax payer and assessed by the Taxation Officer, Circle-01, Cos. Zone-V, Karachi, therefore, the order passed by the Taxation Officer (ENF-02), MTU, Karachi, was without jurisdiction and the learned C.I.T. (A-II), Karachi, had rightly vacated the order of the Taxation Officer (ENF-02), MTU, Karachi. He argued that the order of the I.T.A.T. dated 4-12-2007 may be recalled and the Departmental Appeal may be dismissed maintaining the order of the learned C.I.T.(A).

4. The learned D.R. while refuting the arguments advanced by the learned Counsel for the assessee, has argued that the jurisdiction in. the matter has been defined at S. No.15 of the First Schedule attached to the C.B.R. Circular No.10(1)IT-Judl/04 dated 23-11-2004, wherein the Commissioner of Income Tax, Medium Taxpayers Unit, Karachi, is vested with a valid jurisdiction for performing and exercising the powers and functions, therefore, Taxation Officer has rightly passed the assessment order under section 161/205 and rightly restored by the I.T.A.T. vide orders dated 4-12-2007 passed in I.T.A. No.1446/KB of 2005.

5. We have perused the record and have also gone through the order of the I.T.A.T. dated 4-12-2007 passed in I.T.A. No.1446/KB of 2005. Besides two orders below have also been examined in view of the arguments advanced by the learned representative of the two parties.

6. The C.B.A. vide Circular No.10 (I) IT-Jud/04 dated 23-11-2004 has assigned jurisdiction to the Commissioner of Income Tax specified in column (1) of the First Schedule, at Sr. No.15, to monitor the cases of withholding taxes falling under sections 148 to 156 and 233 to 236 of the Ordinance in the cases of all taxpayers and withholding agents who are not liable to income-tax. Later on, the C.B.R., in this respect, vide letter date 4-8-2005 clarified that the jurisdiction of monitoring of withholding taxes would rest with the Zones in respect of their taxpayers and that MUT will exercise jurisdiction in respect of monitoring of withholding taxes in respect of its own taxpayers and withholding agents, who are not liable to income-tax in terms of Central Board of Revenue Letter C.No.10(1)IT-Jud/04 dated November 23, 2004.

Perusal of above said clarification dated 4-8-2005 shows that the jurisdiction of monitoring of withholding taxes would rest with the Zones in respect of their taxpayers. Since the assessee is already a taxpayer, therefore, it will be assessed in the Zone and not in the MTU. Thus the Taxation Officer (ENF-02), MTU, Karachi has passed the assessment order in wrongful exercise of jurisdiction, as the clarification letter of C.B.R. exclusively confers jurisdiction with the Zones in respect of their taxpayers. We, are, therefore, of the opinion that where mandatory conditions for the exercise of jurisdiction are not fulfilled, then the entire proceedings thereafter will be illegal and without jurisdiction. In this respect, we are also in agreement with the learned C.I.T.(A) who has observed that the applicant/assessee is taxpayer and is assessed to tax in Company-V, Circle-01, Karachi, and rightly vacated the order passed by the Taxation Officer (ENF-02), MTU, Karachi.

7. Perusal of assessment order reveals that in response to notice regarding monitoring of withholding taxes, Mr. Shahid Hussain, Accountant, appeared before the assessing officer, filed copies of annual and quarterly statements under section 165 along with annual audited accounts, and instead of challenging the jurisdiction of the taxation officer, voluntarily accepted the jurisdiction for reason best known to him.

8. The remedy against incorrect or wrong assessment is provided by way of appeals, and if such remedies are not invoked, the assessment, even if erroneous on account of wrongful jurisdiction, will be binding upon the assessee. In the instant case, the situation is different, as the assessee, knowingly that it had been assessed in different Zone, who in response to notice regarding monitoring or withholding taxes. Mr.Shahid Hussain, Accountant, appeared before the assessing officer and filed copies of annual and quarterly statements under section 165 and annual audited accounts, instead of challenging the jurisdiction of the assessing officer, but in appeal, took altogether a different plea on the point of jurisdiction.

In numerous cases, it has been seen that initially assesses themselves get them assessed in wrong jurisdiction and later on before appellate forums, get the assessments cancelled, annulled vacated, nullified and quashed from the appellate forums in order to evade tax, which causes huge loss to the revenue/Government Exchequer. In the instant case also, if the assessment order is cancelled/quashed, it would amount to loss to the Government Exchequer to the tune of Rs.4,39,513, besides remand of the case would amount to re-assessment in the hands of same assessing officer from where the instant litigation has arisen. On the contrary, the assessment by the authority having no jurisdiction would amount to escape assessment.

In the circumstances supra, the better course left before us is to remand the case to the assessing officer in whose hand the assessee had already been assessed which is also evident from the appellate order dated 30-7-2005. Therefore, in view of assessee's own version that it had been assessed in Company-V, Circle-01 Karachi, vide NTN 333-01-0816077, we find sufficient reasons to remand the case back to the assessing officer of Cos. V, Circle-01, Karachi, for de novo proceedings in the matter in accordance with law. Consequently the orders below stands vacated, including the impugned order. Let assessment record of this case be sent from Taxation Officer (ENF-02), MUT, Karachi, to Company-V, Circle-01, Karachi.

C.M.A./105/Tax(Trib.)Order accordingly.