MR. JUSTICE MUHAMMAD MUNIR PERACHA.- (1). This judgment shall dispose of Writ Petitions No. 517, 518 and 653 of 2009. In all the three writ petitions, interpretation of Section 122 of the Income Tax Ordinance, 2001 is involved.
2. Pakistan Mobile Communication Limited has filed Writ Petitions No. 517 and 518 of 2009. Writ Petition Nos. 517/09 is with respect to Tax Year 2005 and Writ Petition No. 518/09 is with regard to Tax Year 2004. The assessee furnished complete return of income for both the tax years. The return under the law became an assessm ent order issued to the assessee by the Commissioner in terms of Section 120(1) of the Ordinance. However, Additional Commissioner Audit issued to show cause notices under Section 122(9) of the Ordinance, both on 21/8/2006, with respect to Tax Years 2004 and 2005, notifying his intention to proceed to amend to orders treated as issued in exercise of his powers under Section 122(5A) of the Ordinance. After providing an opportunity to the assessee.
Additional Commissioner vide order dated 12.9.2006 passed the amended assessment orders (to separate orders were passed on the same day with respect to Tax Years 2004 and 2005). The assessee challenged the above mentioned assessment orders through appeals filed before Commission (Appeals). It is to be mentioned here that while the appeals were pending before the Appellate Authority, another show cause notice was issued by the Additional Commissioner, this the on 21.10.2006, informing the assessee that the Additional Commissioner intends to further amend the assessm ent order. The Commissioner Income Tax (Appeals) disposed of the appeals against orders dated 12.9.2006 on 22.1.2007. A partial relief was given to the assessee. Feeling dissatisfied with the orders of the Commissioner (Appeals), the assessee approached Income Tax Appellate Tribunal through these appeals. Appellate Tribunal allowed the appeals vide judgment dated 24.10.2007. Tribunal remanded the case with the direction that all the points raised by the assessee in grounds of appeal before the Tribunal against proceedings and the orders under Section 122(5A) be thoroughly examined. It is to be mentioned here that further amended assessm ent order was passed on 12.9.2007. Another show cause notice was issued to the assessee on 22.9.2008 notifying the intention of the Additional Commissioner to further amend the assessm ent order. Yet another notice was issued on 27.9.2008.
3. Proceedings were still pending when through to separate notices both dated 26.2.2009, the petitioner-assessee was informed that its case was selected for audit under Section 177 of the Income Tax Ordinance in respect of Tax Years 2004 and 2005. The assessee challenged the notices dated 26.2.2009 through the present writ petitions.
4. Writ Petition No. 653/09 has been filed by SME Bank. SME Bank Limited filed complete return of income for the Tax Year 2005. The return under the law became the assessment order issued to the assessee by the Commissioner Income Tax. However, Additional Commissioner on 07.2.2009 issued a show cause notice under Section 122(9) informing the assessee that he intends to amend the assessm ent of the assessee in terms Of Section 122(5 A) of the Ordinance. The petitioner was called upon to show cause as to why the assessment be not amended.
5. Through Writ Petition No. 653/09, SME Bank has challenged show cause notice issued to it under Section 122(9) of the Ordinance.
6. I have heard the Learned counsel for the petitioners as well as Learned counsel for the respondent and have gone through the record of the case.
7. Learned counsel for the petitioner in support of Writ Petitions No. 517 and 518 of 2009 submits that amended assessm ent order passed under Section 122(5A) having been appealed against and there being an appellate order in the field, the doctrine of merger is applicable. The amended assessm ent order has ceased to exist and is substituted by the appellate order. The case could not have been selected for audit because in pursuance of audit, the amended assessment order in terms of Section 177(6) cannot be passed in view of the doctrine of merger. He relies on:-
1. Karachi Properties Investment Co. Vs. ITAT Karachi, (2004 PTD 948)
2. Mrs. Anjuman Shaheen, Film Artiste Vs. Inspecting Assistant Commissioner of Income Tax Zone A, Lahore (PTCL 1993 CL. 641)
3. Glaxo Laboratories Ltd. Vs. Inspecting Assistant Commissioner of Income Tax and others [(1992)
66 Tax 74 (S.C. Pak)]
8. In Writ Petition No. 653/09, it is contended on behalf of the petitioner that power under Section 122(5A) of the Ordinance possessed by the Commissioner is Revisional Power. The deeming assessm ent order under the law to be considered to have been passed by the Commissioner of Income Tax. The Additional Commissioner being subordinate to the Commissioner, cannot exercise revisional power against order passed by his superior. It is general principle that the revisional power is exercised by a superior authority.
9. Learned counsel appearing for the Department Mr. Shahid Iqbal, Advocate, relying on the case of "Noble (Pvt.) Ltd., Karachi Vs. Federal Board of Revenue through Chairman and others [(2009) 99 Tax 239 (H.C. Kar...)]", prays for the dismissal of all the three writ petitions.
10. Before the enactment of Income Tax Ordinance, 2001, under the provisions of Income Tax Ordinance, 1979, the Deputy Commissioner had the power under section 65 to pass order for additional assessm ent. Section 66-A of the repealed Ordinance conferred power on the Inspecting Additional Commissioner to revise an order passed by the Deputy Commissioner. Under Section 122 sub-section (1) and (4) of the Ordinance 2001, the Commissioner has been given the power to.
Amend and further amend the assessment orders. The power under Section 122(5A) is a kind of revisional power possessed by the Commissioner, which under the repealed law vested in Inspecting Additional Commissioner. Sections 122 and 177 of the Income Tax Ordinance are reproduced "122. Amendment of assessm ents.- (1) Subject to this section, the Commissioner may amend an assessm ent order treated as issued under section 120 or issued under section 121 v or issued under section 59, 59A, 62, 63 or 65 of the repealed Ordinance, by making such alterations or additions as the Commissioner considers necessary.
(2) An assessm ent order shall only be amended under sub-section (1) within five years after the Commissioner has issued or is treated as having issued the assessment order on the taxpayer.
(3) Where a taxpayer furnishes a revised return under sub-section (6) of section 114-
(a) the Commissioner shall be treated as having made an amended assessment of the taxable income and tax payable thereon as set out in the revised return; and
(b) the taxpayer's revised return shall be taken for all purposes of this Ordinance to be an amended assessm ent order issued to the taxpayer by the Commissioner on the day on which the revised return was furnished.
(4) Where an assessm ent order (hereinafter referred to as the "original assessment") has been amended under sub-section (1) or (3), the Commissioner may further amend, as many times as may be necessary, the original assessment within the later of-
(a) five years after the Commissioner has issued or is treated as having issued the original assessm ent order to the taxpayer; or
(b) one year after the Commissioner has issued or is treated as having issued the amended assessm ent order to the taxpayer.
(4A) In respect of an assessm ent made under the repealed Ordinance, nothing contained in sub- section (2) or, as the case may be, sub-section (4) shall be so construed as to have extended or curtailed the the limit specified in section 65 of the aforesaid Ordinance in respect of an assessm ent order passed under that section and the time limit specified in that section shall apply accordingly.
(5) An assessm ent order in respect of tax year, or an assessment year, shall only be amended under sub-section (1) and an amended assessment for that year shall only be further amended under subsection (4) where, on the basis of definite information acquired from an audit or otherwise, the Commissioner is satisfied that--
(i) any income chargeable to tax has escaped assessment; or
(ii) total income has been under-assessed, or assessed at to low a rate, or has been the subject of excessive relief or refund; or
(iii) any amount under a head of income has been misclassified.
(5A) Subject to sub-section (9), the Commissioner may amend, or further amend, an assessment order, if he considers that the assessment order is erroneous in so far it is prejudicial to the interest of revenue.
(5B) Any amended assessm ent order under sub-section (5A) may be passed within the the-limit specified in sub-section (2) or sub-section (4), as the case may be.
(6) As soon as possible after making an amended assessment under sub-section (1), sub-section
(4) or sub-section (5A), the Commissioner shall issue an amended assessment order to the taxpayer stating--
(a) the amended taxable income of the taxpayer;
(b) the amended amount of tax due;
(c) the amount of tax paid, if any; and
(d) the the, place, and manner of appealing the amended assessment.
(7) An amended assessm ent order shall be treated in all respects as an assessment order for the purposes of this Ordinance, other than for the purposes of sub-section (1).
(8) For the purposes of this section, "definite information" includes information on sales or purchases of any goods made by the taxpayer, receipts of the taxpayer from services rendered or any other receipts that may be chargeable to tax under this Ordinance, and on the acquisition, possession or disposal of any money, asset, valuable article or investment made or expenditure incurred by the taxpayer.
(9) No assessm ent shall be amended, or further amended, under this section unless the taxpayer has been provided with an opportunity of being heard.
177. Audit.-(1) The Board may lay down criteria for selection of any person for an audit of person's income tax affairs, by the Commissioner.
(2) The Commissioner shall select a person for audit in accordance with the criteria laid down by the Board under sub-section (1).
(3) The Board shall keep the criteria confidential.
(4) In addition to the selection referred to in sub-section (2), the Commissioner may also select a person for an audit of the person's income tax affairs having regard to:--
(a) the person's history of compliance or non-compliance with this Ordinance;
(b) the amount of tax payable by the person;
(c) the class of business conducted by the person; and
(d) any other matter which in the opinion of Commissioner is material for determination of correct income.
(5) After selection of a person for audit under sub-section (2) or (4), the Commissioner shall conduct an audit of the income tax affairs (including examination of accounts and records, enquiry into expenditure, assets and liabilities) of that person.
(6) After completion of the audit under sub-section (5) or subsection (8), the Commissioner may, if considered necessary, after obtaining taxpayer's explanation on all the issues raised in the audit, amend the assessm ent under sub-section (1) 6r sub-section (4) of section 122, as the case may be.
(7) The fact that a person has been audited in a year shall not preclude the person from being audited again in the next and following years where there are reasonable grounds for such audits, particularly having regard to the factors in sub-section (4).
(8) The Board may appoint a firm of Chartered Accountants as defined under the Chartered Accountants Ordinance, 1961 (X of 1961), to conduct an audit of the income tax affairs of any person and the scope of such audit shall be as determined by the Board on a case to case basis.
(9) Any person employed by a firm referred to in sub-section (8) may be authorized by the Commissioner, in writing, to exercise the powers in sections 175 and 176 for the purposes of conducting an audit under that sub-section."
11. Comparing the powers possessed by the Commissioner under sub-section (5A) or (5B) with the powers conferred on the Commissioner under sub-sections (1) and (4) of Section 122, I have come to the conclusion that the powers under sub-section (5A) or (5B) are exercisable on the basis of data already available in shape of return and other documents annexed with the return. The jurisdiction can be exercised if Commissioner on the basis of the available data considers that the assessm ent order is erroneous and is prejudicial to the interest of the revenue. The assessment order means order treated as issued or order passed under Section 121. However, if the Commissioner acquires some additional information from audit or through any other source (additional means additional to data already available) and the information is definite information and he is satisfied that:-
(i) any income chargeable to tax has escaped assessment; or
(ii) total income has been under-assessed, or assessed at to low a rate, or has been the subject of excessive relief or refund; or
(iii) any amount under a head of income has been misclassified, he can exercise his powers under sub-section (1) to amend assessment order treated as issued under Section 120 or passed under Section 121. Since the power under sub-section (5A) is exercisable on the basis of the material already available. If order passed is appealed against and the appellate order comes into field, the doctrine of merger would be applicable. Appellate order cannot be amended. However, powers under sub-sections (1) and (4) are altogether different. Even in the presence of appellate order, if the Commissioner acquires definite information through audit or otherwise, he can proceed under the law to amend or further amend the assessment order. The reason is that the appellate order has been passed in the absence of the information subsequently acquired by the Commissioner.
12. In my view, the Commissioner had the power to select the case of Pakistan Mobile Communication Limited for audit even after the order passed under sub-section (5A) and even in the presence of the appellate order passed by the Income Tax Appellate Tribunal. The Commissioner can in pursuance of the audit pass amend assessment order, if conditions mentioned in subsection (5) do exist. Writ Petitions No. 517 and 518 of 2009 are therefore, liable to be dismissed.
13. The argument of Learned counsel for the petitioner in support of Writ Petition No. 653/09 that since the order treated as issued under Section 120 is deemed to have been passed by the Commissioner under the law, the Additional Commissioner cannot amend such an order under sub-section (5A) is to technical to be accepted. As a matter of fact, said order is not passed by the Commissioner. It is only treated to have been passed by him. The law empowers the Commissioner to revise such order under subsection (5A) of Section 122. Section 210(1) confers power on the Commissioner to delegate its powers subject to sub-section (1A) to a Taxation Officer. The Commissioner has delegated his powers under Section 122(5A) to Additional Commissioner. He was therefore competent to issue notice to the petitioner in Writ Petition No. 653/09. There is no force in the Writ Petition No. 653/09.
14. Resultantly, all the three listed writ petitions are dismissed with no order as to costs.