1. ' Out of these nine appeals, eight has been filed by the department for the Tax Years 2003 to 2008 while the one appeal is cross appeal filed by the Tax Payer for the Tax, Year 2004.
2. ' Regarding the cross appeals filed by the both the parties for the Tax Year 2004 and the appeals filed by the department for the Tax Years 2005 and 2006 we have found that the facts of the case are same.
2. The Tax Payer is a private limited company that derives income from development of land and is engaged by Messrs Jammu and Kahmir Co-operative Housing Society (herein after called the Society). The taxpayer filed the income tax returns under section 114 of the Income Tax Ordinance, 2001 within the prescribed time which were deemed assessed under section 120(3) of the Ordinance. During the three years under consideration the Society failed to deduct the tax under section 153(1)(c) from the payments made to the taxpayer. After confronting the tax payer with the default on the part of the Society and not finding their explanation satisfactory, the Taxation Officer went on to levy tax in terms of section 162 of the Ordinance by observing that the receipts of the tax payer were liable to withholding tax from payments made on account of contract executed by the assesses failing under the provisions of section 153(1)(c) of the Ordinance being final discharge of liability under section 153(6) read with section 169(1)(b) of the Ordinance.
3. ' At the first appellate stage during the first round the learned CIR(A) upheld the Order but the Tribunal vacated the assessm ent order vide Order No, ITAs. Nos.494 to 496/1B/08 dated March 10, 2009.
4. However, subsequent to the Tribunal order dated March 10, 2009 the Additional Commissioner audit again found the deemed order as erroneous and prejudicial to the interest of revenue on the similar grounds. Therefore, after usual proceedings the deemed order was amended under section 122(5A) repeating the same income and liability as determined in the assessment order under section 162 for all the three years.
5. ' The tax payer again challenged this treatment being illegal, the learned CIR(A) vide Order No,1039/2010 dated 2-11-2010 for tax year 2004 and Order Nos.1146, 1147/2011 dated 7-2-2011 for tax years 2005 and 2006 has vacated the order passed under section 122 (5A) of the Ordinance in the following manner:- ' Order No,1039/2010 dated 2-11-2010 for the tax year 2004 "I have given my due consideration to the arguments of the learned Additional Commissioner, the factual infirmities pointed by the AR and the case-law produced/presented by both the parties.
6. The proper time for the Department to take action under section 122(5A) was before the issuance of order under section 162 on 9-3-2009, which could not be done, on the contrary in a confused way, it started belated action under section 162, and when it was vacated on 9-3-2009, it accepted the illegality of assessment under section 162 by not filing any appeal or reference against order of Honorable ITAT dated 9-3-2009. After exercise of section 162 and after judgment of the Honorable ITAT on 9-3-2009, any fresh and inappropriate adventure under section 122(5A) would be an exercise in futility, it would be based on old evidence that would amount to change of opinion which is not allowable in law. Due to aforementioned discussion, the order is hereby vacated."
7. ' Order Nos.1146, 1147/2011 dated 7-2-2011 for tax years 2005 and 2006 "I have given my due consideration to the arguments of the learned Additional Commissioner the case-law produced/ presented by both the parties and looked into the factual and legal infirmities of the orders with regard to jurisdiction, not following Tribunal's order dated 6-7-2009, the non attraction of sections 153(6) & 169, the non applicability of word "deducted" to appellant's receipts.
8. The proper time for the department to take action under section 122(5A) was before the issuance of order under section 162 on 9-1-2008, which could not be done and has not been done. One the contrary, it started delayed action under section 162, and when it was vacated vide ITAs/494- 496/IB/08 dated 10-3-2009 it strangely accepted the illegality and irregularity of assessment and recovery under section 162 by not tiling any appeal or reference against the Honorable ITAT's order dated 10-3-2009. After unrewarding and fruitless exercise under section 162 and its vacation on 10- 3-2009, any new and fresh endeavor under section 122(5A) would be an in futility. It would not be based on any definite information but would be founded on old and used evidence already declared as illegal and would also amount to change of opinion which is not allowable under the law. Due to aforementioned discussion and infirmities, both order for Tax years 2005 and 2006 are not sustainable under the law and are hereby vacated."
3. The Tax Payer as well as the as department assailed the learned CIR(A) Order No,1039 of 2010 dated 2-11-2010 for tax year 2004 while the department has also assailed the learned CIR(A) Order Nos.1146, 1147/2011 dated 7-2-2011 for the tax years 2005 and 2006 on the following grounds:-- ' Taxpayer appeal 2004 "(1) That the order dated 2nd November, 2010 issued by the learned Commissioner of Inland Revenue Appeals-I and order dated June 29, 2010 issued under section 122(5A) of Income Tax Ordinance 2001 by the Additional Commissioner Audit-I Large Taxpayer Unit Islamabad are bad in law and contrary to the facts of the case.
(2) That the leaned CIRA-I was not justified by not accepting the grounds of your appellant that the order of the learned Additional Commissioner passed under section 122(5A) of the Ordinance is without jurisdiction, illegal and void ab initio. That the order passed under section 122(5A) may kindly be annulled being illegal, without jurisdiction and void ab initio on this count.
(3) That learned CIRA-I was not justified as all ion not annulling the assessment order on the issue of applicability of section 122(5A) of the Ordinance which is not attracted at all on the facts and circumstance of the case. That the order passed under section 122(5A) of the Ordinance may kindly be annulled.
(4) That without prejudice to other grounds, the learned CIRA-I was not justified by not considering the latest judgment of Appellate Tribunal, in ITA No,370/LB/2009 dated 6-7-2009 passed on the basis of the decision of honorable High Court and Supreme Court of Pakistan, embedded therein.
(5) That, without prejudice to other grounds, the learned CIR-I has erred in not adjudicating the grounds of your appellant that the provisions of section 153(6) read with section 169 are not applicable to the facts and circumstances of the case.
(6) That, without prejudice to other grounds, the learned CIRA-I has further erred in not adjudicating the ground of your appellant that the learned AC was not justified at all to interpret the word "deducted" equivalent with the word "deductible" by ignoring the basic principal of interpretation of fiscal laws.
(7) That the learned CIRA-I was not justified in not considering the ground of appeal that the learned AC vide Order No 393, dated 24-11-2009 is without lawful authority because it has not been notified in the gazette of Pakistan as required under sections 5 and 23A of General Clauses Act, 1897. That the order under section 122(5A) being without lawful jurisdiction may kindly be annulled"
9. ' Departmental appeal 2004 the following grounds:- "(2) That Additional Commissioner has rightly amended the assessment under section 122(5A) on the reasons that payments received by Messrs Intercity (Pvt.) Ltd., were falling within the ambit of Final Tax Regime and not under normal law.
(3) That the taxpayer company was oblige to file statement under section 115(4) instead of return under section 114.
(4) That learned ITAT vide its order ITAs Nos.494 to 49611B108 dated 10-3-2009 rejected the appeal on account of charging of tax under section 162 not under section 122(5A).
(5) That learned CIR(A) without appreciating the facts of the case vacated the order which is unjustified and unwarranted.
10. ' For the tax years 2005 and 2006 the following common ground has been agitated by the department:- "(2) That the learned CIR(A) was not justified to vacate the order under section 122(5A) as the Additional Commissioner is fully empowered to amend the order under section 122(5A) on the basis of facts available on record."
4. Regarding these four appeals one filled by the Tax Payer and three filed by the department the learned DR has argued that the learned Commissioner (A) was not justified at all in accepting taxpayer appeals and vacating the amended assessment orders under section 122(5A) as the learned Additional Commissioner has rightful jurisdiction to invoke and amend assessment order under section 122(5A). The learned DR submitted that the earlier order was passed by the taxation officer under section 162 of the Ordinance and not by the Additional Commissioner. He contended that after vocation of assessm ent order under section 162 by the Tribunal the deemed assessment under section 120 of the Ordinance is restored and accordingly the Additional Commissioner can amend the same deemed assessm ent under section 122(5A). He has submitted that the tax payer was obliged to file statement under section 115(4) of the Ordinance instead of filing return total income under section 114. The learned DR contended that in view of the intention of the legislature the expression "deducted" may be construed as "deductible".
5. On the other hand the learned AR of the Tax Payer in the first instance contended that the department in its appeal has not challenged the basis of the judgment of the Commissioner (Appeals) through its grounds of appeal and only agitated the jurisdictional issue of the additional Commissioner (in general) which amounts to acceptance of the order by the department.
11. He has submitted that the order passed by the Additional Commissioner under section 122(5A) is void ab initio both on legal as well as factual grounds and the CIR(A) was justified in vacating the same. He argued that once the Tribunal has annulled the earlier order passed under section 162 on legal as well as factual grounds the Additional Commissioner has no jurisdiction to amend the same on similar grounds. Therefore, the only legal course remained with the department was to file a appeal before the Honorable High Court and since, no appeal was filed the appellate order attained finality and action taken by the Taxation Officer under section 122(5A) is illegal, and ab initio void. The Learned AR submitted that the action of the Additional Commissioner is belated rather it would be out of time because the issue involved is very old and already decided in appeal by the Tribunal on 9-3-2009 and therefore its re-adjudication is not supported by any norms or rule of law and ultimately it will result in futility and illegality.
12. ' The learned AR submitted that similar issue came under appeal before the Tribunal in-a case reported as 2011 PTD (Trib.) 1807 wherein the learned members of the Tribunal have vacated the order passed under section 122(5A). AR also placed reliance on the case-laws reported as 2002 PTD 2379 of the Honorable High Court where action of the department on similar circumstances was knocked out.
13. ' The learned AR further stated that the action of the Additional Commissioner is not based on independent application of mind, rather it is based on and is result of subsequent judgment, event, information and more specifically it is based on the vacation of the order under section 162 by the Tribunal and therefore such action is without legal foundation and is not sustainable in law. The AR placed reliance on the case-law reported as 2005 PTD (Trib.) 344.
14. He has vehemently pleaded that since the deemed order had once been amended under section 162 and annulled in second appeal had merged into the Tribunal order, therefore, the deemed order is nonexistent and is nowhere in the field. Even then, if the department was still of the view that the order is erroneous and prejudicial, it was the appellate order that was erroneous and has to be amended by the higher authority to the Tribunal and not the Additional Commissioner as done in the present case. It is trite law that proceedings under section 122(5A) are revisional in nature and cannot be exercised by a subordinate authority. In the present case the deemed order was merged into the appellate order, therefore, the Additional Commissioner being a subordinate authority has no power to amend the same as held by the superior courts. The AR placed reliance on the case-laws 2009 SCMR 1279 = 2009 PTD 1392; 2001 PTD 932 (SC); 2004 PTD (Trib.) 2087; 2002 PTD 1014 (High Court).
15. ' He has submitted .That deemed order has been amended twice once under section 162 and again under section 122(5A) on similar grounds repeating the same action. This is a legal preposition that powers under section 122(5A) are revisional and cannot be exercised on the same material which has already been on record and considered by F the department. He submitted that after turndown of assessm ent under section 162 by the Tribunal, the Additional Commissioner resorted to action under section 122(5) on the basis of same old material/record/ basis which is sheer change of opinion not allowed under the law. In this regard he placed reliance on the case- laws reported 1992 PTD 751 (HC); 1990 PTD 338 (SC); 1996 PTD 186 (HC).
16. ' He has submitted that legislature had introduced final taxation under section 169 of the Ordinance in respect of receipts from which tax is deducted under section 153 of the Ordinance. While in appellant case no tax has been deducted under section 153 of the Ordinance by payer while making payment against invoices, as the taxpayer is under litigation on the issue of status of prescribed person for the purpose of section 153. He contended that if the legislature intended to bring the taxpayer from whom tax is not deducted at source form payments under the ambit of final taxation them obviously the word "deductible" would have been used in substitution of word "deducted" currently embodied in sections 153(6) and 169(1)(b). He has argued that the word "deducted" is substituted with the word "deductible" in various withholding sections and section 169 of the. Ordinance through Finance Act, 2012, hence the legislature enlarged the scope of presumptive tax regime effective from July 2012 onward. He also highlighted provisions of section 80C of the Repealed Income Tax Ordinance; 1979, a parallel provision to section 169 of the Ordinance wherein the legislature used the words "deductible or collectable" for providing final taxation. He has placed reliance on various case-laws including 2004 PTD 583 (Trib.) for explanation of principle of interpretation.
6. We have heard both the parties and have also considered the facts of the case and perused the departmental orders. The orders of the first appellate authority whereby the Commissioner Appeals has annulled the amended order as well as the case-law relied upon by the AR have also been perused.
17. The learned AR of the assesses has produced copy of the Tribunal's orders dated 9-3-2009 recorded in ITAs Nos.494 to 496/1B/08 (taxpayer's appeals for the tax years 2004, 2005 and 2006) in the first round of litigation the Tribunal had annulled the order passed under section 162 (passed on similar cause). The contentions put forth by the AR that the original order ceased to exist and stood merged in the appellate order is correct and in the circumstances the legal course for the department was to file reference to the Honorable High Court carry weight. Since the second appellate order remained un-challenged it had attained finality and the invocations of provisions of section 122(5A) are not sustainable. In the case reported as 2011 PTD (Trib,) 1807 in an identical circumstances the Tribunal had turndown the action under section 122(5A) of the Ordinance.
18. ' In another case reported as 2002 PTD 2379 the Honorable High Court held that:-- "There is no ambiguity in the aforesaid finding of the Appellate Tribunal that providing another opportunity to the Income Tax Authorities to fill in the lacuna was declared illegal in view of the cited judgment. It is also an admitted fact that finality is attached to the aforesaid order of the Appellate Tribunal as no reference or appeal was filed in the honorable High Court under section 136 of the Income Tax Ordinance. The contention of the learned DR for Income Tax Authorities that by annulling the assessm ent order would not deprive the authorities form reopening the case of re-assessm ent under section 62(a) is not convincing".
19. We are also in agreement with the learned AR contentions that the department did not challenged the basis of the judgment of the CIR(A) through its grounds of appeal and only agitated the basic jurisdictional of the Additional Commissioner which was not the basic issue pertaining to the department. As the learned CIR(A) has not accepted the taxpayer ground on the jurisdiction of the Additional Commissioner -for the purpose of section 122(5A) against which the taxpayer is in appeal for tax year 2004 although not pressed during the hearing due to settlement of the issue of jurisdiction at Tribunal level. We observed that the learned CIR(A) has candidly adjudicated the appeal and recorded his detailed finding on the legal and factual issues raised by the taxpayer relevant to doctrine of merger, change of opinion, definite information and the non attraction of sections 153(6) and 169, the non applicability of word "deducted" to appellant's receipts and vacated the orders being not sustainable under the law.
20. ' For the foregoing reasons and pursuing the case-laws relied by the learned AR, we have come to conclusion that the order of the learned CIR(A) is not suffering from any flaw/lacuna and the same is maintained.
21. ' The appeals filed by the revenue for tax years 2004, 2005 and 2006 as well as by the taxpayer for tax year 2004 are dismissed.
22. ' For the tax year 2003, two appeals have been filed by the department against the consolidated impugned order of the learned CIR(A) dated 13-1-2011 deciding two appeals against order passed by the Taxation Officer one under section 183 and the other under sections 124/205 of the Ordinance, 2001. Following common grounds for both the appeals have been framed.
23. "(2) That no refund was due to the taxpayer, hence penalty under section 183 and additional tax under section 205 was rightly charged by the assessing officer.
(3) That the assessing officer following the directions of the learned Appellate Tribunal Inland Revenue, provided opportunity to the taxpayer for providing evidence of refund due, but the taxpayer failed to substantiate its claim.
(4) That the Commissioner Inland Revenue (Appeals-I) without appreciating facts of the case deleted penalty under section 183 and default surcharge under section 205, which is unjustified and un-warranted."
24. ' We have heard the learned representative for both the sides and have perused the impugned order of the learned CIR(A), the order passed by the Taxation Officer and other relevant available record of the case. We have found that the learned CIR(A) has vacated the order passed by the Taxation Officer with the following observation:- "The learned Inland Revenue Officer kept the 80 C demand (2000-2001 and 2001-2002) alive, frustrated the ITAT orders dated 5-8-2003 by not giving appeal effect under section 62-A read with section 66 suo muto, nor on numerous requests of appellant nor on specific direction of this officer letter dated 6-1-2011. The learned Assessing Officer even made no effort under section 122(5A) for the Tax Year 2003, as was made for Tax Years 2004-2006 and no legal demand was created under sections 121, 122(5A), 122A or 122B to undo the effects of order under section 120 dated 30-12-2003.
25. The learned Officer did not apply his mind to the fact that if it is presumed for academic sake that the demand was payable by the appellant, even then the appellant had pre payments to its credit as given in NOTE at (c) %bove. Moreover during intervening period 30-4-2004 (date of order under section 162) to 8-8-2008 (date of setting aside by honorable Tribunal) neither default surcharge nor penalty was imposable as per case-law reported as, 1981 PTD 169 (H.C. Kar.) and 1998 PTD (Trio.)
26. 1945. It is pertinent to note that when the appellant had discharged its legal liability by filing return of income on 30-12-2003 under section 114(1) and paid due tax under section 137, then the order under section 120(1) gained finality on 31-12-2008. Furthermore it was neither hit by disability of section 120(3), nor amended under section 122(5A), therefore additional tax (default surcharge) and other taxes/ penalties were not payable by the appellant due to clear cut stipulation of section 161(1B) and section 162(2). Additionally as legal demand has not been created under sections 121, 122(5), 122(5A), 122A or 122B, as per ITAT observation dated 10-3-2009, therefore the credit/refund of taxes paid after 30-12-2003 can only be given to order under section 120(1) dated 30-12-2003 and is ordered accordingly.
27. ' As a result of the above discussion and due to inbuilt infirmities and contradictions in order under sections 205/124, under sections 183(1)(a) and 183(1)(b), the inescapable conclusion is that these are void ab initio in law and facts and therefore these cannot be sustained in law, and are accordingly vacated."
28. ' After careful' perusal of the above observation we find no warrant for interference in the impugned order as the learned CIR(A) has rightly vacated order. The impugned order of the learned CIR(A) in this respect is upheld and both the appeals filed by department for the tax year 2003 are dismissed.
9. The department has objection against the impugned order of the learned CIR(A) dated 7-2-2011 for the Tax Year 2007 regarding order passed by the Taxation Officer under section 205(1A) of the Ordinance, 2001 on the following ground:- "2. That the learned CIR(A) was not justified to vacate the order under section 205(1A) as at the time of installments of payment of advance tax, the order for the base year was in filed"
29. ' In the impugned order the learned CIR(A) has given all the details which have been argued by both the parties. We therefore reproduce the same for the facility of judgment:-- "In response to call notice Mr. Abdul Ali Khan, Advocate attended the office on behalf of the appellant, case discussed and he pleaded the case as per grounds of appeal and various application given to learned the IRO from time to time and also filed copy of, order under section 205 (1B) passed on 5-10-2009 for tax year 2007 and proof of payment of Rs,56,716 of additional tax imposed was also filed. The AR stated that there were two orders' in the filed, the one dated 5-10- 2009 with total amount of installments at Rs,563750 on the basis of return of income dated 31-1- 2008 and the other impugned one dated 29-4-2010 (now under appeal), with total amount of installments at Rs,1028208 on the basis of presumed income of tax years, 2005 and 2006, already quashed by the honorable ITAT vide No, ITAs. 494-496/1B/08 dated 10-3-2009. The order dated 5- 10-2009 is under section 205(1B) and the order dated 29-4-2010 is under section 205(1A), ' The appellant has pointed out that the order under section 205 (1A) is not maintainable due to following inconsistencies and illegalities:-
(a) The basis of calculations of amount of installments totaling to Rs,1,028,208 is unknown.
(b) The income of tax years 2005 and 2006 as base years is not feasible or possible.
(c) The date of order under section 205(1A) is 29-4-2010 and the date of ITAT order quashing the base years (tax years 2005 and 2006) is 10-3-2009 i,e, the base years income etc.; was nullified 13 months ago and it was in the knowledge of the learned IRO but unfortunately he did not consider this fact for calculations of installments.
(d) Due to (c) above the base for installments purposes would be return of income for tax year 2007 filed on 31-1-2008 as adopted in, the order under section 205(1B) dated 5-10-2009 by the predecessor of the IRO.
(e) The order dated 5-10-2009 is preceding and the order dated 29-4-2010 is succeeding one and therefore as per legal practice and procedure the succeeding order has to give way to the preceding order i,e, the order dated 5-10-2009 would prevail and remain in the field.
(f) The learned IRO did not give statutory and proper opportunity to the appellant.
(g) In spite of all the above, even then the appellant was not required to pay any amount default surcharge/additional tax as it has sufficient credits at its disposal.
(h) The learned IRO has not given any credit .For the tax already paid (Rs,32409) as the same was allowed in the order under section 205(1B) dated 5-10-2009 and no credit was given for the tax imposed/paid (at Rs,56716) under section 205 (1B) inspite of specific provisions of section 147(6A)
(b) of the Income Tax Ordinance, 2001.
(i) Notwithstanding anything contained above, if at all for academic sake, the appellant was liable to pay tax under section 205 (1A), even then it was not payable, as there was a refund of Rs,90445 as per ITAs Nos: 824,825/IB/2002 dated 5-8-2003 and same could have been adjusted against the impugned demand.
30. I have applied mind to the facts of the case, the contention of the learned IRO and the submission of the AR of the appellant. Technically, the order dated 29-4-2010 was framed later on and original order under section 205 dated 5-10-2009 was in the field, therefore, the impugned order under appeal has to give way and the order daied 5-10-2009 would be holding field. Moreover, there was no default on the part of appellant, the learned IRO had imposed tax under a wrong premises of law, the base years upon which additional tax was based was quashed by the honorable ITAT on 10-3-2009 and therefore the demand created has no locus standi, it is illegal and cannot be sustained in law and is hereby vacated."
31. ' After considering the above observations no interference is required in the matter the appeal filed by the department against the above referred impugned order is therefore dismissed.
10. The remaining two appeals are against the consolidated impugned order dated 7-2-2011 for the Tax Years 2007 and 2008 on the following common ground:-- "2. That the learned CIR(A) was not justified to delete the penalty under section 182(2) as the tax payer had not filed annual e-statement of employees for the year."
32. ' We have heard learned representative from both sides and have perused the impugned orders the penalty order for the two years and available record of the case. We have found that the learned CIR(A) has vacated both the orders of Penalty for the Tax Years 2007 acid 2008 with following observation:-- "In response to call notice Mr. Abdul Ali Khan Advocate attended the office on behalf of the appellant the case was discussed and he pleaded as per grounds of appeal and various applications given to learned IRO from time to time and also filed copy of reply dated 6-9-2010 and acknowledgement proofs of filling of e-statements for both years i,e, Tax Years 2007 and 2008.
33. I have given my due consideration and applied my mind to the facts of the case, the contention of the learned IRO and the submission of the AR of the appellant. The needful has already been done, e-statements for both years have been filed and the appellant had replied to the show cause notice on 6-9-2010 as per copy received at the facilitation centre and it is duly stamped. There was not default for non-filing of e-statements non-compliance of notice under section 190(1) and therefore there was no justification for imposition of penalty under section 182(2) and both the penalties under appeal are hereby vacated."
34. ' After going through. The above observation we find no warrant for interference in the impugned order which is upheld and both the appeals filed by the department against Penalty order for Tax Years 2007 and 2008 are also dismissed.
8. All the nine appeals, one filed by the Tax Payer and remaining eight filed by the department are decided in the manner referred supra.