' In this reference under section 133 of the Income Tax Ordinance, 2001 the petitioner/Commissioner of Income Tax/Wealth Tax, Legal Division, Regional Tax Office, Mull= claims that following questions of law arise out of the order of the Tribunal dated 23-2-2008 recorded in departmental appeal re.
Commissioner of Income Tax, Sahiwal Zone, Sahiwal v. Khalid Address Matti of Okara.
Question of Law "(1) Whether under the facts and circumstances of the case the learned ITAT was justified to uphold rectification order of CIT (Appeals) when error was not apparent, obvious and floating on the surface of his earlier order by ignoring the decision of Honourable Supreme Court of Pakistan reported as PLD 2007 SC 308 = 2007 PTD 967?
(2) Whether under the facts and circumstances of the case the learned ITAT was justified to uphold the decision of the CIT (Appeals) who quashed the amended order accepting taxpayer's plea that notice issued under section 122(9) of the Income Tax Ordinance, 2001 is not on the format prescribed under Rule 68 of the Income Tax Rules, 2002 whereas no such binding has been mentioned in section 122(9) of the Income Tax Ordinance, 2001?
(3) Whether under the facts and in the circumstances of the case the learned ITAT was justified to assume that prescribed demand notice under section 137(2) of the Income Tax Ordinance, 2001 is mandatory part of the assessm ent order by ignoring the provisions of section 126 of the said Ordinance?
(4) Whether the Tribunal was justified to confirm the impugned order of the CIT(Appeals) which was passed sitting in judgment on the order of his predecessor?
(5) Wether the Tribunal fell in error by not first adjudicating on this crucial aspect of the case that impugned order passed by the CIT(Appeals) was void ab-initio?"
2. The respondent despite having been served through his brother Mr. Sohail Adrees has defaulted in appearance, proceeded ex parte.
3. According to the statement of the case the respondent/assessee is an individual and a member of AOP. For the assessm ent year, 2002-2003 his returned income at Rs.132,000 from business and the share for AOP was accepted under self-assessment scheme. Subsequently on information received from the Registrar Okara that the assessee during this period invested in different properties a sum of Rs.9,61,625 which was not disclosed to the Revenue, he was served with a show-cause notice under section 122(9) of the Income Tax Ordinance. Also a notice under section 116(1) of the Ordinance was issued calling for wealth statement for the year, 2003.
4. The assessee after availing a number of opportunities finally defaulted in appearance and, therefore, the Taxation Officer, Circle 11, Okara proceeded to amend the assessment in the light of the notice under section 122(9) dated 16-6-2005 read with section 122(1) of the Income Tax 'Ordinance, 2001. Accordingly, net income of the assessee for the year, 2003 was assessed at Rs.10,93,625 by way of the assessm ent order dated 15-7-2005.
5. The appeal filed by the assessee before Commissioner of Income Tax (Appeals) was rejected, on 19-1-2006. Subsequently on 23-2-2007 the assessee made an application for rectification under section 221 of the Income Tax Ordinance, 2001 which was allowed by the same appellate forum viz. CIT (Appeals) Multan. Through his order recorded on 11-4-2007 in the operative part CIT (Appeals) observed as under:-- "It is explained that the addition on account of unexplained investment was made at Rs.961,625 while the appellant had capital/cash at Rs.13,00,000 in hand as on 30-6-2003 exceeding the invested one in acquiring the 1/6th share in properties under consideration. Hence there was no justification with the Taxation Officer in issuing notice under section 116(1) dated 6-4-2005 which amounts to flagrant violation, of the directions conveyed by CBR as per Circular No. 1(1) chief 9USAS/03 dated 21-5-2004 and subsequent additions were termed as having been made merely on presumption. No solid material was available with the Department."
' Accordingly the assessm ent order in question was quashed while exercising powers vested in him for rectification of order under section 221 of the Ordinance.
6. The departmental appeal against the rectified order was rejected by a Division Bench of the Tribunal. By way of the impugned order dated 23-2-2008 learned Members of the Tribunal on being invited to the ratio settled in re: Commissioner of Income Tax, Karachi v. Abdul Ghani, PLD 2007 SC 308 2007 PTD 967 observed that since there were other legal flaws which finally led to cancellation of assessm ent, no possible exception to the rectified order of the Commissioner (Appeals) could be taken.
7. On going through the original appellate order dated 19-1-2006 we will readily agree with the learned counsel for the petitioner/revenue that the addition in question was considered in detail by the then Commissioner (Appeals). There was no mistake which could be seen floating on the face of the record to justify rectification of order as made by the successor in office of Commissioner (Appeals). In the rectified order not only new grounds to assail the impugned addition were entertained and ruled upon but also the reasons stated in the original appellate order were conveniently overlooked. As rightly pointed out by the learned counsel for the revenue it was not rectification but reappraisal of the original appellate order by the same authority though manned by a different officer.. It certainly appears that the successor in office of the original appellate authority entertained the grounds of attack not against the assessment order but the original/first appellate order. The rectified order was therefore, clearly out of the contours of section 221 (Rectification of mistakes) of the Income Tax Ordinance, 2001. It needs to be noted that the parameters of section 156 (Rectification of mistakes) of the late Income Tax Ordinance, 1979 and those of section 221 of the Income Tax Ordinance, 2001 are not A materially different. Therefore, the reliance of the learned counsel for the revenue on the ratio settled in re. Commissioner of Income Tax Karachi v. Abdul Ghani (supra) is pertinent. The Honourable apex Court while setting aside a judgment of the High Court of Sindh recorded in I.T.As. Nos.226 and 227 of 1999 held that in absence of any error apparent on record with regard to its order, the Tribunal ought to have refused to exercise jurisdiction under section 156. The Honourable Court further held that the Tribunal exceeded its jurisdiction by rectifying its judgment which was free from any error in terms of section 156. Also that the High Court lost sight of the fact that the Tribunal under law could not sit on its own judgment/order unless error apparent or floating on surface of record could be pointed out.
8. In the case in hand as observed above, the successor in office of the author of the original/first appellate order sat in judgment against the order recorded by his predecessor. We are also of the view that the learned Tribunal avoided following the ratio settled in the aforesaid judgment of the Honourable apex Court by making an unnecessary reference to the alleged procedural infirmities which, according to them had crept in the original assessment order. The learned Members of the Tribunal accordingly failed to appreciate that before them it was not the assessment order which was being challenged but the rectified order which had been recorded by the first appellate authority in exercise of its powers under section 221 of the Ordinance providing for rectification of the mistakes.
9. There is another reason for our disagreement with the findings of the learned Members of the Tribunal. It is that while hearing the departmental appeal they ignored their basic duty to see if any mistake could be seen floating on the face of original appellate order dated 19-1-2006. Instead they jumped to evaluate the assessme nt order in the light of the findings recorded in the rectified order and expressed their agreement with the same. That was clearly improper. Their rejection of the cross appeal filed by the assessee against the original order dated 19-1-2006 keeping in view the rectified order was all the more legally un-justified. The assessee having already preferred an appeal against the original appellate order could very well be heard by the Tribunal as a forum of second appeal.
10. In the light of what has been said above, our answer to question No.1 is in the negative. The rest of the four questions almost being a repetition of the first question, none of them is needed to be answered.
11. As a result of our answer to question No.1 in the negative, as said above, the order of the learned Members of the Tribunal as well as the rectified order of Commissioner (Appeals) dated 11-4-2007 shall lose their efficacy. And accordingly will not hold the field. However, in view of our findings recorded above and in all fairness to the assessee; whose appeal was rejected only on account of recording of the rectified appellate order, shall be deemed pending before the Tribunal, to be heard and decided in accordance with law after hearing the parties.