COMMISSIONER OF INCOME TAX, SPECIAL ZONE, KARACHI VS AQEEL KARIM DHEDHI, KARACHI
2010 P T D 421
[Karachi High Court]
Before Gulzar Ahmed and Irfan Saadat Khan, JJ
COMMISSIONER OF INCOME TAX, SPECIAL ZONE, KARACHI
Versus
Messrs AQEEL KARIM DHEDHI, KARACHI
I.T.R.A. No.406 of.2007, decided on 15/12/2009.
Income Tax Ordinance (XXXI of 1979)---
----Ss. 13(1)(aa) & 80(c)(5)---Filing of return under Self-Assessment Scheme---Revenue claiming to be in possession of positive evidence of concealment of income by assessee---Burden of proof---Onus would lie on revenue to prove such claim with cogent material so as to exclude return from purview of such Scheme.
Javed Farooqui for Appellant.
Irfan Aziz for Respondent.
ORDER
IRFAN SAADAT KHAN, J.---This Income Tax Reference Application (ITRA) is filed against the order dated 26-6-2007 passed by the learned Income Tax Appellate Tribunal (ITAT) in I.T.A. No.27/KB of 2007 and I.T.A. No.36/KB of 2007, by raising the following questions of law:---
(1) Whether on the facts and in the circumstances of the case, the evidence of concealment of income can be ignored when income is from a particular source or the taxpayer declared income on the higher side then the last year.
(2) Whether on the facts and in the circumstances of the case, in the purview of Para 7(vi) of C.B.R. Circular No.4 of 2001 vide circular No.C.No.7(7)S-asstt/2000 (Self-Assessment Scheme for A.Y. 2001-02) the learned ITAT was justified in holding that the returned income to taxpayer would be covered under Self Assessment Scheme.
(3i) While the assessment included re-assessment, any detection of concealment/inaccurate particular whether disqualifies the return for acceptance under SAS in view of Circular No.4 of 2001 and Circular C.No.7(7) S.Asstt/2000?
Mr. Javed Farooqui, the learned counsel, appeared on behalf of the department and submitted that the ITAT was not justified in directing that the return filed by the respondent qualifies for Self-Assessment Scheme (SAS) whereas the department was in possession of evidence of concealment of income and as per C.B.R's Circular No.4 of 2001 (the Circular) issued by the Central Board of Revenue/Federal Board of Revenue (FBR) it has categorically been mentioned that such returns would be automatically selected for total audit where the department is in possession of evidence of concealment of income. The learned counsel submitted that the case of the respondent was excluded from SAS due to the reason that the income declared by the respondent for the year under consideration was less than the last year's assessed/declared income. However, during the course of assessment proceedings the department noticed an evidence of positive concealment of income. According to the learned counsel such returns would automatically be excluded from the purview of SAS where the department is in the possession of positive evidence of concealment of income. The learned counsel further submitted that the learned ITAT has failed to appreciate that the case of the respondent was not eligible to get the benefit of SAS in view of para. 7(vi) read with para 1.1 of the Circular. He vehemently contended that the respondent has failed to give any plausible explanation with regard to the unexplained accretion in his wealth despite various opportunities ware provided to him to explain the same. The learned counsel submitted that the learned ITAT has proceeded on an incorrect assumption that the issue of concealment is a change of opinion, whereas the department has proceeded under sections 62/135 of the repealed Ordinance on the basis that the issue of concealment of income has been specifically remanded by the learned ITAT to consider the same.
The learned counsel, through written synopsis, submitted that no .appeal was filed by the respondent against the order passed by the learned ITAT dated 7-4-2005, which in his opinion has attained finality, hem* the present impugned order passed by the learned ITAT is not legally correct as in the said decision the learned ITAT, without touching the issue of the concealment of income, has simply allowed the appeal filed by the respondent by holding that exclusion of the return under para.7(vi) of the said Circular is change of opinion on the part of the A.O. To support his contention he has relied upon Saeed-ur-Rehman v. Assistant Commissioner of Income Tax Circle-16 Abbottabad and 4 others 2000, PTD 2379 and Mehmood Ahmad v. Income Tax Appellate Tribunal, Lahore through Chairman and 2 others 2007 PTD 744.
The learned counsel for the department has further submitted that as the learned ITAT has failed to pass a speaking order as provided under section 24A of the General Clauses Act, hence the order is not sustainable under the law. In support of the argument he has relied upon Abdul Aziz Khan Niazi v. Federation of Pakistan and 3 others 1995 PTD 1087. The learned counsel further stressed hat the learned ITAT while passing the order has neither considered the assessment order nor the order passed by the Commissioner of Income Tax (Appeals) [C.I.T.(A)] and request that the order passed by the learned ITAT may be set aside by answering the questions raised by him in negative.
Mr. Irfan Aziz the learned counsel appeared on behalf of the respondent submitted that the return filed by the respondent fully qualifies for acceptance under the Self-Assessment Scheme as the said return has fulfilled all the parameters as provided under the said Circular issued by the F.B.R. and hence the department was not justified in excluding the said return filed by the respondent from the purview of the SAS.
The learned counsel, in the alternative, submitted that the issue whether there was any concealment with regard to the incorrect declaration of imputable income under section 80(c)(5) read with section 13(1)(aa) of the repealed Ordinance already stands resolved in favour of the respondent by a decision given by the Division Bench of this Court in the case of Prince Glass Works Ltd and others v. Central Board of Revenue and others, 1995 71 TAX 227 H.C. Kar. He further submitted that the respondent has not concealed any income but has declared the true income from known and verifiable sources. The learned counsel thereafter submitted that the question whether there is any concealment or not a finding of fact and the same could not be challenged under the provisions of section 133 of the Income Ordinance 2001 in support of his arguments he has relied upon the cases of Century Flour Mills Ltd. v. Commissioner of Income Tax 2001 PTD 238 and Commissioner of Income Tax v. Purushottamdas and others 2000 PTD 2334. The learned counsel finally argued that no question of law is arising out of the order passed by the ITAT and this reference application is misconceived and. is liable to be dismissed.
We have heard both the learned counsel at length and have also perused the record in this regard.
Briefly stated the return of income was filed by the respondent by declaring an income of Rs.2,40,057 which was accompanied with a statement filed under section 143-B of the repealed Ordinance showing commission income at Rs.8,000,000 whereupon tax under section 50(4A) of the repealed Ordinance was shown to have been deducted at Rs.8,00,000 and dividend amounting to Rs.24,811,100 whereupon tax under section 59(6A) of the repealed Ordinance was deducted at Rs.699,591, along with the wealth statement of the respondent declaring a net wealth Rs.43,14,93,369. The return filed by the respondent was excluded from the purview of SAS on the ground that certain parameters as provided in the Circular were not fulfilled by the respondent. The return was thereafter processed under normal law and due intimation in this regard was given to the respondent. The respondent attended the proceedings and filed certain details and documents requisitioned by the department. The Assessing Officer (A.O.) while proceeding under the provisions of section 62 of the repealed Ordinance noticed that the respondent had taken credit of Rs.8 Million being the commission receipts on which tax deduction under section 59(4A) of the repealed Ordinance was declared at 10%. As per the A.O. the respondent was required to take credit of the imputable income worked out on the basis of the tax deducted at source hence in his opinion the respondent's actual imputable income comes to Rs.2,477.923 therefore, the difference between the declared income and he imputable income which comes to Rs.5,522,077 was liable to be added to the income of the respondent as an unexplained income under the provisions of section 13(1)(aa) of the repealed Ordinance. The respondent objected to such alleged treatment by asserting that his particular source of income has been received through banking channel and from verifiable parties and thus the provisions of section 13(1)(aa) of the repealed Ordinance, which deals with unexplained income, could not be invoked in. such situation. The A.O. however, did not agree with the contention and added the above amount under section 13(1)(aa) of the repealed Ordinance. The matter firstly went to the C.I.T.(A) who vide his order dated 24-12-2002 vacated the order passed by the A.O. Therefore, the department-filed an appeal to the ITAT which vide its order dated 7-4-2005 remanded the matter back to the A.O. with the directions that the respondent's return be examined and the treatment which is available in the SAS or otherwise, as envisaged in the statutory provisions be given accordingly. The learned ITAT further instructed the A.O. that as far as matter regarding concealment of income is concerned, this issue also require consideration with respect to applicability of statutory provision as envisaged in the Scheme, if attracted in the instant case with reference to chargeability or otherwise. The A.O. thereafter, proceeded under the provisions of sections 62/135 of the repealed Ordinance and once again made the said addition of Rs. 5,522,077 under the provisions of section 13(1)(aa) of the repealed Ordinance, which was previously made by him in the original proceedings finalized by him under the provisions of section 62 of the repealed Ordinance, by holding that as positive evidence of concealment of income is available with the department hence on this basis the return filed by the respondent could not be accepted under SAS and the same is automatically excluded from the said Scheme. The matter once again went to the C.I.T.(A) who this time vide his order dated 28-10-2006 dismissed the appeal filed by the respondent. The respondent then filed an appeal before the learned the learned ITAT which observed that the condition mentioned in para-7(vi) of the FBR' Circular is not relevant in the respondent's case and the return was incorrectly excluded from the purview of the SAS and finally directed that the return filed by the respondent be accepted under SAS.
In order to appreciate the law and the facts prevalent in the instant reference application it would be pertinent if the relevant extracts of the SAS are reproduced below for ease of reference:
INCOME TAX CIRCULAR NO.4 OF 2001,
DATED 18TH JUNE, 2001.
1. Scope of the Scheme:
1.1 All returns filed by taxpayers, other than cases that are in-eligible under para.7 of this Scheme, shall qualify for acceptance if they fulfil the following conditions, namely:
(a) .
(b) .
(c) .
(d) .
(e) cases of persons not being companies, where tax payable on income declared is higher by twenty per cent (20%) or more compared to the payable on the income last declared or assessed, whichever is higher.
1.2 Returns filed by new taxpayers and persons deriving income from any other sources specified in section 15 of the Ordinance, shall also qualify for acceptance subject to the conditions specified in the Scheme.
Note:
The conditions regarding percentage increase in tax shall not be applicable if income consists of or includes salary and such income constitutes more than 50% of the total income declared for the year, or where income is derived only from house property.
7. Returns not eligible:
Following returns shall not be eligible for acceptance and shall automatically be subject to total audit:
(i) .
(ii) .
(iii) .
(iv) .
(v) .
(vi) All returns where there is evidence of concealment of income (underline ours for emphasis).
Perusal of the above Scheme would reveal that all returns filed by the taxpayers would qualify for acceptance on fulfilment of certain conditions, however, it has specifically been provided in the said Scheme that the returns which are ineligible under para-7 of the Scheme would automatically be subjected to total audit. It was further been provided in the said Scheme that in such returns where tax payable on income declared is higher by 20% or more as compared to tax payable on the income last declared or assessed, whichever is higher, would qualify for acceptance in the SAS, however, in the case where salary income is more than 50% of the total income declared for the year, the condition regarding percentage increase in tax shall not apply.
In the instant reference application the return was excluded from the purview of SAS on the ground that the declared income was less than the income assessed last year, however, it is only during the course of assessment proceedings that the department came across the alleged positive evidence of concealment of income and by resorting to the provisions of section 80(c)(5) read with section 13(1)(aa) of the repealed Ordinance made an addition of Rs.5,522,077. Before the learned C.I.T.(A) the respondent challenged the very processing of the case under normal law apart from raising other objections in respect of the other additions made by the department including the addition of Rs.5,522,077. The learned C.I.T.(A) however vide his order dated 24-12-2002 without going-into the merits of the case allowed the appeal filed by the respondent. Thereafter, the department filed an appeal before the learned ITAT which, vide its order dated 7-4-2005 not only directed that the case be examined as far as acceptance of return under SAS is concerned but also gave an explicit finding that the matter relating to concealment of income also required consideration with regard to the applicability of the statutory provisions of the Scheme. It would be interesting to note that against this order of the learned ITAT no appeal was filed by the respondent meaning thereby that this order passed by the learned ITAT had attained finality.
In the second round the A.O. before drawing any adverse inference intimated the respondent that his return could not be processed under SAS as the department is in the possession of evidence of concealment of income and hence as per para.7(vi) of the said Circular his return is automatically subjected to total audit. The A.O. further intimated the respondent that in view of excess credit of income in the wealth reconciliation statement an amount of Rs.5,522,077 is proposed to be added in his income under the provisions of section 80(C)(5) read with section 13(1)(aa) of the repealed Ordinance. It would be pertinent to note that on 17-6-2006 no representation was made by the respondent however, on 20-6-2006 a request was made by the then counsel of the respondent on whose request the case was adjourned for 26-6-2006 and as per record on this date also neither anybody attended the case nor any adjournment was sought. During the course of the arguments by the learned counsel appearing on behalf of the respondent a specific question was asked by the Bench as to why no representation was made by the respondent before the A.O. of which no plausible explanation was given by the learned counsel.
Before the learned C.I.T.(A) also, in the second round, the appeal of the respondent was dismissed on the issue that despite opportunities provided by the A.O. no plausible defence was made by the respondent except contending that para.7 of the said Circular is not applicable. Before the learned ITAT the respondent has assailed that his retune qualifies for acceptance under SAS on the pretext that his salary income constituted more than 50% of the total income and as per Note of para. 1.2 of the said Circular the condition regarding percentage increase is not applicable to such returns. The learned ITAT however while disposing of the appeal noted that the exclusion of return of the respondent from the purview of SAS is a change of opinion on the part of the A.O. as firstly the A.O. has excluded the return from the purview of SAS on the ground that income declared was not higher by 20% as compared to tax payable on the income last declared/assessed, however, no finding whatsoever has been given by the learned ITAT on the issue that whether the department was in possession of any positive evidence of concealment or not as provided under para.7(vi) of the said Circular to exclude the return of income of the respondent from SAS. The learned ITAT in our opinion has failed to consider its previous order dated 7-4-2005 wherein it has specifically been mentioned that the issue of concealment of income requires consideration with respect to applicability of statutory provisions as envisaged in the Scheme.
In our view as this important aspect has not been adjudicated upon by the learned ITAT that whether the department was in possession of positive evidence of concealment so as to exclude the return of the respondent from SAS. The matter is therefore, remanded back to the learned ITAT to ascertain the fact that whether the department was in possession of any positive evidence of concealment of income or not. The onus in this regard lies on the department to prove with cogent material that they were in possession of positive evidence of concealment of income so as to exclude the return of the respondent from the purview of SAS. Ample opportunity of hearing should be provided to both the sides before reaching to any final conclusion and the matter should be decided preferably within a period of 90 days from the date of the receipt of this order. Let a copy of this order be sent to the Registrar Tribunal.
The above Income Tax Reference Application is disposed of in the above terms. However, there shall be no order as to costs.
S.A.K./C-3/KCase remanded.