JAVID IQBAL (JUDICIAL MEMBER).---Through these appeals assessee has contested the impugned finding passed by L/CIT(A) in Appeals Nos.672 to 675 dated 18-6-2008. The common objections raised are as follows:--
(1) That the order under section 99 of repealed Ordinance, 1979 for rejection of refund by the Taxation Officer and confirmation by the CIT(A) is illegal and unjustified.
(2) That the order passed by the Taxation Officer is without any jurisdiction.
(3) That the appellant had filed his refund application within the due time in Income Tax Office, Mardan as such, non-acceptance of the same is illegal.
(4) That rejection of refund application on the pleas of time-barred is illegal and CIT(A) was not justified in confirming the order of Taxation Officer.
(5) That any right which was given by any statue cannot denied on any technical flaws or irregularities and passing of order by both the authorities below are illegal, against the pronouncement of Superior Courts and is also against the norm of natural justice and Islamic jurisprudence.
(6) That Income Tax Ordinance is not applicable in the PATA, Income of appellant is not chargeable to tax and tax paid under section 50(5) of the repealed Ordinance, 1979 is fully refundable so refusal for issuance of refund by the Taxation Officer and confirmation by the CIT(A) is illegal and unwarranted.
(7) That no limitation is involved in case of refund and filing of refund application is also not mandatory as per circular Letter C.No.10 of 1995 dated 18-8-1985 which is binding upon the Income Tax authorities so the order under appeal is unjustified and is against the direction of FBR.
(8) That during pendency of refund all verifications were made by the Taxation Officer but in the end he refused to issue the refund which is not understandable.
(9) That the said CIT(A) was also no justified in not giving any finding on legal aspect of the case and based his order just on facts of the case and limitation which is illegal and is against the provision of law.
(10) That as per judgments of Higher Courts, he period of limitation under section 99 is relevant in case of refund assessed under assessment whereas in case of the appellant no assessment was made, even no tax is leviable and tax paid under section 50(5) is automatically refundable and Taxation Officer is bound to issue the same without any delay so the order under appeal is illegal and void ab anitio.
Briefly the relevancy of the facts leading to these appeals as per record are that assessee is an individual, derives its income as an importer and seller. No returns of income were filed because as per claim of assessee, the income was earned from non-taxable area, hence filing of return was not required. Thus vide simply on application under section 170 of Income Tax Ordinance, 2001 refund was asked for. A Taxation Officer rejected the application on the point of limitation. Assessee filed appeals before the L/CIT(A) who confirmed the order of taxation officer. Assessee felt aggrieved from the impugned finding, hence is in present appeals before this forum.
The L/AR of assessee pleaded as per grounds of appeal, while L/DR supported the impugned orders.
After having heard the arguments of the parties, and from perusal of the relevant orders, and material made available before us, it has been seen that assessee has asked for refund of tax withheld at the import stage. Assessee filed refund application in the year 2007 asking for refund for assessm ent years 1999-2000 to 2002-2003 but no return of income tax for any of the years under appeal was filed. Then thereafter as per claim of assessee, he filed return of income and are available on assessm ent record which as per observation of the L/CIT(A) are undated. As per contention of L/AR of assessee these were filed in time, however he failed to prove his stance through producing any type of evidence, even the acknowledgement receipts about the filing of any return.
Before me the LIAR of assessee altogether took the new plea that as the assessee's income is exempts as per Article 247 of Constitution of Islamic Republic of Pakistan, 1973, therefore, assessee was not required to file any return of Income. To controvert the finding of Taxation Officer, confirmed by L/CIT(A), the L/AR of assessee, relied upon the cases law reported as cited as Pfizyr Chemicals be mentioned, 1982 PTD 274; 1998 PTD 2012, 2008 PTD (Trib.) 370, PLD 2003 SC 614 = 2003 PTD 1913, 2008 PTD 169, 1993 PTD 443, 1973 PTD 530, 2000 PTD 2165 and 2000 PTD 3396. In the light of above cases law, it was pleaded by the L/AR of assessee that department in similar circumstances has entertained the refund application and has issued the refund without completion of assessm ent order. As per judgment cited by the L/AR wherein it has been held that in the cases of genuine refund, it should not be refused, even if the application of refund is filed after prescribed period of time as stipulated in the Ordinance. Now the question here for determination is that as to whether in the instant matter refund claimed by assessee is genuine, I am of the view, it is not so the case. As per the judgments of Hon'ble Supreme Court reviewed in case of Gul Cooking Oil, it has been held that the income in non-taxable area is exempt from taxation, if it is established that income has been earned there from. Now the question is as to how it is to be determined that the income has been earned from non taxable areas , onus lies on assessee to prove the same. The Income Tax Ordinance provides the procedure of assessment for determination of income and creation of refund. As per the law contained in the Ordinance,. The assessment Could be framed for last five years from the end of the financial year in which it was first assessable. In present matter the assessm ent years involved are 1999-2000 to 2002-2003, for which the periods of limitation for computation of assessm ent has already been expired as during prescribed period of limitation, neither the returns of income have been filed, or any proceeding for assessment have been initiated, or any assessm ent has framed or refund has been created. The L/AR expressed his view, that it is correct that no assessm ent could be framed in a case after five years from end of the financial year, in which it was first assessable. However on filing of voluntarily return, assessment could be framed and refund could be created. While in the case of assessee he derives income from nontaxable area and under Article 247 of Constitution of Islamic Republic of Pakistan, he was not liable to file any return. However, on this point the L/AR. Failed to specify any of the provision of law contained in the Ordinance, 1979 where such situation be coped with. In my view in either case whether the return has been filed voluntarily or on notice by department asked for filing of return or returns, no assessm ent could be framed after prescribed period of limitation as envisaged in the Income Tax Ordinance, 1979 and Ordinance, 2001 i.e. 5 years from end of financial year where income was first assessable. In the absence of any proceedings or any assessment order, how it is to be established that income has been earned from non taxable area, which as per reviewed judgment of Gul Cooking Oil does not entitle assessee from exemption of tax because as per the above judgment it is mandatory upon assessee to prove that assessee has earned income from non-taxable area. In this case assessee has imported tea leaf in huge quantity and has failed to prove that the sale of it has been effected in non taxable area. Thus in case even if return is filed within prescribed period of limitation and fact of it sale is not proved or established in non taxable area even then assessee is not entitled to exemption. Also otherwise assessee is commercial importer and tax has been deducted at the time of import, while is discharge of final liability of tax.
As per judgment of Supreme Court, AJK reported as PLD 2005 SC (AJ&K) 373, the tax at import stage is taxable irrespective of destination of raw material. Similarly I also do not find any force in the contention of L/AR of assessee that department in similar circumstances has issued the refund after voluntarily filing of return beyond the prescribed period of limitation of 5 years, 1 stly he has failed to give any stance, 2ndly if it is so, the court is not bound of an illegal act of authorities below, but the courts or tribunals are bound to apply the law on its on. Income Tax Ordinance, 1979 provide the procedure as under: in case income of assessee is required to file the return under section 55 of the repealed Ordinance, 1979. In case assessee do not file the return, and Deputy Commissioner is of the opinion that income of assessee is taxable, through notice under section 56 of Income Tax Ordinance, 1979 assessee could be asked for filing of return of income.
After filing of return, in next stage assessment had to be completed in any of the sections 59(1)
59(A), 62, or 63 as the case may be. Whereas after completion of assessment, there is a procedure to make the additional assessm ent under section 65 as per conditions laid down in this section of law, or in case where the order is erroneous and pre-judicate the interest of revenue the power of revision by IAC has been provided under section 66A of the repealed Ordinance, 1979. In case of additional assessm ent or in the case where no assessment has been framed, it could be framed only for the last 5 assessm ent years from the end of financial year in which the income wax, 1st assessable.
So giving accumulative effect to the above discussed facts, I am of the view, that Taxation Officer has though rejected the application on the issue of limitation Taxation Officer had not consider the non-filing of returns, completion of and passing of any assessment order the non creation of refund in consequence of any assessment orders but rejected the refund application on issue of limitation, where as under the law he was supposed to have taken all the pros and cons of the matter in accordance to law. Regarding the cases law referred by the L/AR of assessee these deals with the situation of genuine refund, while it is not so the case in the instant matter. Assessee has failed to prove the fact that he has effected the sales and has earned the income from non taxable area, hence for the above reasons assessee is not entitled to any refund, hence its rejection is maintained but for the reasons recorded above.
Appeal rejected.
2012 PTD (Trib.) 704 [Inland Revenue Appellate Tribunal of Pakistan] Before Syed Muhammad Farooq Shah, Judicial Member I.T.A. No. 8/KB of 2011, decided on 22nd February, 2011.
Income Tax Ordinance (XLIX of 2001)- ----Ss. 128(5), 161, 205 & 131---Failure to pay tax and additional tax---Admission of documentary evidence by Commissioner (Appeals) not produced earlier-Authorized representative of the taxpayer filed certain details and documents before Officer Inland Revenue, which were found illegible and the Officer observing that the taxpayer had committed default in payment of tax, passed ex parte order under Ss.161 & 205 of Income Tax Ordinance, 2001-Commissioner Inland Revenue (Appeals) having set aside order of the Officer, the department had filed appeal before Appellate Tribunal---Taxpayer had produced sufficient documentary evidence which had been discarded by the Officer Inland Revenue, merely on the ground that he found documents illegible- Commissioner (Appeals) neither admitted fresh documentary evidence, which had allegedly not produced, nor adopted illegal approach, but relied upon the details of documentary evidence earlier produced before the Officer---Commissioner (Appeals) under provisions of S.128(5) of the Income Tax Ordinance, 2001, had been empowered to admit fresh evidence, if he found himself satisfied that taxpayer was prevented by sufficient cause to produce the same before the Assessing Officer---Mere technicalities should not be hindrance to do complete justice---Exercise of the discretion in law by the competent Authority, would not be opened to any exception--- Grounds of appeal agitated by the department against impugned order of Commissioner (Appeals) were not tenable in law and on the facts---Impugned judicious appellate order, did not suffer from any gross irregularity, illegality and infirmity and did not warrant any interference by Appellate Tribunal. [pp. 705, 706, 707, 7081 A, B, C & D 2010 PTD (Trib.) 2463 distinguished.
PLD 1975 SC 678; (2006) 94 Tax 1451 (H.C.) (sic) and 2004 PTD 173 ref.
Rajabuddin DR for Appellant.
Syed Azhar Nawab for Respondent.
Date of hearing: 22nd February, 2011.
SYED MUHAMMAD FAROOQ SHAH, JUDICIAL MEMBER.---This appeal has been directed at the instance of the department against the order dated 6-10-2010 passed by the learned CIR(A) pertaining to the Tax Year 2009, whereby the order passed by the Officer Inland Revenue under sections 161 and 205 of the Income Tax Ordinance, 2001 was not held sustainable in law.
2. The captioned appeal has been preferred on the following grounds:-- "(1) That the order passed by the learned CIR(A) is bad in law and contrary to the facts of the case;
(2) That the learned CIR(A) was not justified in deleting the tax charged under section 161 and additional tax charged under section 205 of the Income Tax Ordinance, 2001 because reasonable opportunity of being heard was provided by the OIR which was not availed by the taxpayer intentionally;
(3) That the learned CIR(A) erred in holding that the Officer Inland Revenue was not justified.To treat the appellant as a taxpayer in default under sections 161/205 of the Income Tax Ordinance, 2001 because the action of the OIR based on the information received from the taxpayer himself which the taxpayer failed to reconcile and to furnish complete evidences in support of his claim;
(4) That the learned CIR(A) was not justified in rejecting the information gathered by the OIR as "Definite Information" which is very much relevant with the facts of the case;
(5) That the learned CIR(A) erred in violating the provision of section 128(5) of the Income Tax Ordinance, 2001 by accepting such documents/material evidences which not produced before the Officer Inland Revenue;
(6) That the learned CIR(A) also erred in accepting and relying on the exemption certificate issued to Messrs Farooq Motors Limited, which is irrelevant to the facts of the case as this certificate was also not produced before the Officer Inland Revenue."
3. Ground No.1 is of formal nature. Ground Nos. 2 and 3 are interconnected to each other, hence taken together. On the agitated grounds, I have heard Mr. Rajabuddin, learned DR who supported the order passed under sections 161/205 of the Income Tax Ordinance, 2001 by the Officer Inland Revenue and asserted that the 'impugned order passed by the learned CIR(A) is not sustainable in law.
4. On the other side, Syed Azhar Nawab, Advocate argued that the Officer Inland Revenue was biased and did not discuss the merits of the case. It is argued that the Officer Inland Revenue has adopted unjust and unreasonable attitude by passing an illegal order.
5. Succinct facts leading to the instant case are that the respondent/assessee received a notice under section 176 of the Income Tax Ordinance, 2001 which has been duly replied. Subsequently, the company/assessee has been served with a show-cause notice on 21-4-2010 for compliance on 28-4-2010. On 29-4-2010 the Officer Inland Revenue passed an order under sections 161/205 of the Income Tax Ordinance, 2001. From perusal of the order passed under sections 161/205, it appears that on the due date i.e. 28-4-2010 neither the taxpayer nor AR appeared before the Assessing Officer but perusal of the order passed by Officer Inland Revenue transpires that the authorized representative of the taxpayer filed certain details and documents which were found illegible by the Officer Inland 'Revenue and observed at page 2, para-1 that "authorized representative of the taxpayer has committed the default under section 161 of the Income Tax Ordinance, 2001."
Consequently the Officer Inland Revenue issued a final show-cause notice under sections 161/205 of the Income Tax Ordinance, 2001 for compliance on 28-4-2010 and on the due date in absence of any intimation or reply from the assessee he has passed an ex parte order which was impugned before the learned CIR(A).
6. It has rightly been contended by the learned AR that if the documents and details viz copies of audited account, return of income, annual statement filed along with acknowledgment of withholding tax paid challan and reconciliation statements were not found eligible then what was the fun of receiving those documents by the Officer Inland Revenue and what prevented him to call for the legible documents and details. The mentioned documents have also been perused and examined by the learned CIR(A) and observed that the Officer Inland Revenue was not justified to treat the taxpayer "a taxpayer in default". I very humbly diagree with the contention of learned DR that under the law the learned CIR(A) cannot admit any documentary evidence which was not produced earlier before the Adjudicating Officer as in the instant case the Officer Inland Revenue neither admitted the evidence produced before him nor he afforded sufficient opportunities to the taxpayer. The citation 2010 PTD (Trib.) 2463 is therefore, not applicable in circumstances of the present case. In the mentioned citation, it appears that assessment proceedings stretched over a period of more than a year during which the assessee could have produce the evidence but he failed to do so, however, in the instant case the taxpayer has produced sufficient documentary evidence which has been discarded by the Officer Inland Revenue merely on the ground that he founddocuments illegible.
7. So far as the applicability of section 128(5) is concerned, neither the learned CIR(A) admitted fresh documentary evidence which has allegedly not produced before the Officer Inland Revenue nor he adopted an illegal approach but relied upon the details of documentary evidence earlier produced before the Officer Inland Revenue. It is an admitted position that the taxpayer was not under obligation to charge tax on the amount related to the purchase of motor vehicle from Messrs Dew an Farooq Motors Limited, to whom the department had issued an exemption certificate vide No.218 dated 31-12-2007, particularly the payment against the said vehicle was made during the period related to Tax Year 2008 and the delivery of the said vehicle was received in the period related to Tax Year 2009 but the same was added to the fixed assets. It is also an admitted fact that the Officer Inland Revenue may confront the taxpayer on the basis of annual statement electronically filed by the taxpayer on FBR's e-portal, if desired so. It is beyond understanding that why the Officer Inland Revenue arrived at the conclusion of income tax liability under this head by applying average rate of. 20% on gross amount of salary claimed by the taxpayer. In this view of the matter, the learned CIR(A) has correctly observed that there was no urgency to pass the order in haphazard manner, was not going to be time barred.
8. Under the aforementioned provision of subsection (5) of section 128 of the Income Tax Ordinance, 2001 the Commissioner Inland Revenue (Appeals) has been empowered to admit fresh evidence if he found himself satisfied that the taxpayer was prevented by sufficient cause to produce the same before the Assessing Officer. It is a settled principle of law that mere technicalities should not be hindrance to do complete justice as laid down by the Hon'ble Supreme Court of Pakistan reported in PLD 1975 SC 678. Moreso, the exercise of the discretion in law by the competent authority would not be opened to any exception. In this regard reliance may conveniently be placed on the cases reported in (2006) 94 Tax 1451 (H.C.) (sic) and 2004 PTD 173.
9. In view of the aforementioned discussion, I reached at the irresistible conclusion that the grounds of appeal agitated by the department against the impugned order of the learned CIR(A) are not tenable in law and on facts. Suffice to say that judicious appellate order of the learned CIR(A) impugned before me does not suffer from any gross irregularity, illegality and infirmity which does not warrant any interference by this Tribunal. Consequently, the departmental appeal is having no merits for consideration and hereby dismissed. .