' The above titled appeals were filed by the appellant for the following assessment years, against the orders passed by the learned CIR (Appeals-III), Islamabad vide orders dated 16-5-2011:- Assessm ent Year 1994-1995 to 1998-99 under section 63 Assessm ent Year 1999-2000 to 2002-03 under section 62 Assessm ent Year 1999-2000 to 2002-03 under section 108 ' The following grounds of appeals were taken in above cited appeals:--
(1) APPEALS 1994-95 TO 1998-99 UNDER SECTION 63
(1) That the confirmation of order of A.O by the CIR(A) is illegal and unwarranted same is also highly unjustified.
(2) That said CIR(A) was not justified in holding that service of notices and proceedings for appointment of agent as valid and order of A.O does not suffer any legal infirmities, so the order is illegal and against the norm of justice.
(3) That the order under section 63 is illegal and unwarranted.
(4) That the order under appeal is illegal and void ab initio because all the legal requirements were not fulfilled.
(5) That the appellant is a non resident and residing abroad since long, no agent was appointed as such the whole proceedings are illegal and void ab inatio.
(6) That assessm ent of net income is illegal and unwarranted.
(7) That issuance of notice under section 190 is illegal.
(8) That the said CIR(A) has not passed any speaking order and just hold that all notices were served properly whereas as per inspection of record by the A.R. Of the undersigned found that no notices were issued/ served as such the orders of both the authorities below are illegal.
(9) That said CIR(A) had also did not give any finding on the applicability of case-law relied by the appellant as such the order has not encircled all aspects.
APPEALS 1999-2000 TO 2002-2003 UNDER SECTION 62
(1) That the confirmation of order of A.O by the CIR(A) is illegal and unwarranted same is also highly unjustified.
(2) That said CIR(A) was not justified in holding that service of notices and proceedings for appointment of agent as valid and order of A.O does not suffer any legal infirmities, so the order is illegal and against the norm of justice.
(3) That the order under section 62 is illegal and unwarranted.
(4) That the order under appeal is illegal and void ab inatio because all the legal requirements were not fulfilled.
(5) That no notice under section 56 or under section 114 (4) was issued or served as such the order is without any jurisdiction and is illegal.
(6) That the appellant is a non resident and residing abroad since long, no agent was appointed as such the whole proceedings are illegal and void ab inatio.
(7) That assessm ent of net income is illegal and unwarranted.
(8) That issuance of notice under section 116 for penalty is illegal and unwarranted.
(9) That the said CIR(A) has not passed any speaking order and just hold that all notices were served properly whereas as per inspection of record A.R. Of the undersigned found that no notices were issued/served; as such the order of both the authorities below are illegal.
(10) That said CIR(A) had also not given any finding on the applicability of case-law relied by the appellant as such the order is illegal.
APPEALS - 1999-2000 TO 2002-2003 UNDER SECTION 108
(1) That the confirmation of order of A.O. By the CIR(A) is illegal and unwarranted.
(2) That the order under section 108 is illegal and unwarranted.
(3) That the order under appeal is illegal and void ab initio because all the legal requirements were not fulfilled.
(4) That no wilful default was committed by the appellant as such the imposition of penalty is illegal.
(5) That the appellant is a non resident and residing abroad since long, no agent was appointed as such the whole proceedings are illegal and void ab initio
(6) That the confirmation of order of A.O without establishing the wilful default and discussing case-law relied is illegal.
2. The arguments of learned counsel for both the parties have been heard. The brief facts of the case are that the proceedings in this case were started on the information that the appellant is receiving property income from different properties. The appellant in this case is a non resident and is residing in United Kingdom. Different notices on different times were issued. As per DR version notices were properly served / affixed on best known address of the assessee. Although it was on the record that the assessee is a non-resident and even on order under section 63 his address of England is mentioned. However due to non cooperated attitude of the assessee the assessm ents for years 1994-95 to 1998-99 were finalized under section 63. Whereas for the assessm ent year 1999-2000 to 2002-2003 was finalized under section 62 as follow:-- Assessment YearIncome Addition 13(1)(aa)under section Total 1994-95 150,000 2,000,000 21,500,000 1995-96 150,000 150,000
(1) (2) (3) (4)
1996-97 150,000 150,000 1997-98 150,000 150,000 1998-99 166,500 70,000,000 7,166,500 1999-2000 597,600 597,600 2000-2001 612.000 - 612,000 2001-2002 588,038 - 588,038 2002-2003 669,094 - 669,094 The assessing officer has also passed an order under section 108 and imposed penalty for late filing of returns as under:-- Assessm ent Year Penalty 1999-2000 49,680 2000-2001 45,252 2001-2002 40,457 2002-2003 38,706
3. The appellant preferred appeals before learned CIR(A) III, Islamabad and contested the assessm ent orders on legal as well as on facts. The learned CIR(A) after examination of record passed two separate orders and rejected the appeals of the appellant and upheld all the orders of the Taxation Officer.
4. During court proceedings learned AR contends that all the orders of the assessing officer are totally illegal void, without jurisdiction on the following legal defects;-
(1) That proceedings were started without issuing any notice under section 56 or 114(4) so proceedings are void ab initio and without any jurisdiction. Without issuance of basic mandatory notice the whole structure of assessme nts cannot remain in field as held by the Tribunal as well as appellate courts in the following judgments:-2005 PTD 2345, 2011 PTD (Trib.) 218, 2009 PTD (Trib.)
2219, 2007 PTD (Trib.) 676 and (1963) 7 Tax 223 (S.C.).
2. That apart from the above legal lacuna, while-framing the assessment no proceedings under section 74 were completed and no one was appointed as agent. So the assessment is also illegal on this ground, reliance is placed on the following case-law:-
(3) That during the assessm ent years 1994-95 and 1998-99 addition under section 13(1)(aa) amounting to Rs,2,000,000 and Rs,7,000,000 were made respectively. No notice under section 13 or 111 was ever issued and additions were made with the approval of additional commissioner which is illegal and not acceptable in the eye of law. Reliance is placed on the following case-law:-- (2005 91 Tax 146 (Trib.). 1983 PTD (Trib.) 184.
(i) I.T.A. No, 1902 etc. (1B) 2005 dated 29-7-2006 Messrs Metro (Pvt.) Ltd.
(ii) (2009) 99 Tax 150, Trib.
(iii) I.T.A. No,86-91 (PB) of 2005 dated 29-7-2006.
4. Additions under section 13(1)(aa) for assessment year 1994-95 and 1998-99 ' The recovery was made on 14-4-2000 i,e, Assessment Year 2000-2001. As per proviso to section 13(1) the addition has to be made in the year of discovery i,e, Assessment Year 20002001 whereas the Assessing Officer had made addition under section 13(1)(aa) in the Assessment Year 1994-95 at Rs,2,000,000 as Rs,7,000,000 in the Assessment Year 1998-99. So both the additions are illegal, void and without jurisdiction.
(b) Assessm ent Years 1999-2000 to 2002-03 Order under section 62: Same arguments as give in paras 1 to 4 above. All the orders are illegal and void ab initio and also without jurisdiction.
(c) Assessm ent Years 1999-2000 to 2002-03 Order under section 108: No notice under section 116 was issued nor any agent was appointed and no wilful default was committed as such the charge of penalty under section 108 is illegal and baseless.
' That the all the orders under appeals suffer with so many legal infirmities as such the assessm ents are liable to annulled as held by the Tribunal in case reported as, Vol 9 No,11 Tax Forum 60.
' It is also not out of place to mention here that assumption of jurisdiction in all the years under appeal is defective as such orders are illegal as held by the Tribunal in judgment reported as 2006 PTD 673.
' It is further explained here that no notice was served upon the assessee nor deemed assessee as such all proceedings, notices, orders are illegal as held by the High Court in case reported as (2006) 93 Tax 279 (H.C. Ind.).
' As the initial notices were void so, all the super structure built thereon is void as held by the Tribunal in case reported as 2010) PTD (Trib) 111.
(5) That AR also stated that no notice under section 116 was issued as such imposition of penalty under section 108 is totally illegal. He also agitated that no approval from Additional Commissioner was obtained which is a condition precedent for imposition of penalty as given in section 116 of the repealed Income Tax Ordinance, 1979.
5. The leaned AR apart from the above legal objection also pointed out that while making the addition under section 13(1)(aa) in the assessment year 1994-95and 1998-99 no approval was acquired from Additional Commissioner. He referred the two paras of order at page 2. The relevant paras are reproduced here for ease of reference:--
(a) Subsequently the case was forwarded to worthy Additional Commissioner of Income Tax, Jhelum Range, Jhelum for the approval of addition under section 13(1)(aa) of the Income Tax Ordinance, 1979, however the approval could not be accorded with the observation that:-
(1) Firstly, if there is no Inspector in the circle then at least notice must be served through supervisor who comparatively a senior and responsible official.
(2) Secondly, to find out any acquaintance of the said person, to contact him and to provide a fair opportunity so as to avoid any possibility of injustice.
(3) Thirdly, to affix the notices on all the addresses those belong to the assessee.
(b) Ultimately the case was forwarded to learned Additional Commissioner of Income Tax, Jhelum Range, Jhelum for approval of addition of Rs,2,000,000 with income for assessment year 1994-95 and Rs,7,000,000 in respect of assessment year 1998-99 as unexplained investment No approval exists on record nor date of approval is mentioned and nothing is available in the file of the department, which is a mandatory requirement of law as given in section 13(1)(aa) read with proviso. Relevant portion of section is reproduced herein for ready reference: "13. UN-EXPLAINED INVESTMENTS, ETC., DEEMED TO BE INCOME (1) Where, [ ]--
(a) any sum is found to be credited in the books of an assessee maintained for any income year; or
(aa) the assessee is found to have made any investment or is found to be the owner of any money or valuable article, in any year or Provided further that in cases referred to in clauses (aa)to (e) such income shall , not be chargeable to tax unless H approval of the Inspecting (Additional Commissioner) has been obtained."
' The AR has also placed reliance on following judgments:-- 1988 PTD (Trib.) 992, 1988 PTD 612, 2006 PTD (Trib.) 429, 2006 PTD (Trib.) 123, 1993 PTD (Trib.) 1172, 2003 PTD (Trib.) 1238, 2004 PTD (Trib.) 463, 2004 PTD (Trib.) 726 and 2010 PTD (Trib.) 567.
6, It is further contended by the learned AR that this lacuna is very fatal and addition under section 13(1)(aa) and penalty imposed under section 108 is not maintainable. The appellate authorities even in case of non obtaining of 2nd approval or only on the basis of permission given by A.C, deleted the addition and not approved the orders of the assessing officers.
7. The learned DR contends that department made all efforts and served all notices properly. The assessee also partly complied, filed returns and different documents as such, now, he cannot challenge the assessm ent. DR however did not deny that approval was not on record. He prayed that all the orders passed by the assessing officer to be maintained. Learned DR further contends that non obtaining of approval is not fatal and it is a technical lapse and assessment cannot be annulled on this score. He further contended that as per section 239(3) of Income Tax Ordinance, 2001 procedure given in Ordinance, 2001 will be adopted even for the assessment prior to tax year 2003. However when confronted about the subsection (1) and (2) of section 239, the learned DR did not explain his point of view. For ready reference section 239(1), (2) and (3) are reproduced herein:- "239. Savings. [(1) Subject to subsection (2), in making any assessment in respect of any income year ending on or before the 30th day of June, 2002, the provisions of the repealed Ordinance in so far as these relate to computation of total income and tax payable thereon shall apply as if this Ordinance had not come into force.)
[(2) The assessm ent to in sub-section (I) shall be made by an income tax authority which is competent under this Ordinance to make an assessment in respect of a tax year ending on any date after the 30th day of June, 2002, and in accordance with the procedure specified in section 59 or 59A or 611 or 62 or 63, as the case may be, of the repealed Ordinance.] [(3) the provisions of [subsections) (1) and (2) shall apply, in like manner, to the imposition or charge of any penalty, [default surcharge/ or any other amount, under the repealed Ordinance, as these apply to the assessment, so however that procedure for such imposition or charge shall be in accordance with the corresponding provisions of this Ordinance.]"
8. At this juncture the learned AR contended that the returns available on the record were not filed by the assessee because no man of ordinary prudence can provide further limitation to department to make assessm ent and charge tax. As per record the returns for the assessment years 1994-1995 to 1998-99 were filed on 30-6-2003. On that very date all the assessments were time barred. He further argues that there is something wrong on the part of department however the learned DR states that department is not supposed to file returns on its own. It is not needed because department has powers to proceed in either of situation. The learned AR further challenged the assessm ent were passed without issuance of basic statutory notices under section
56. He prayed for annulment of all the assessments.
9. We have considered the arguments of both the learned representative and find that although the assessing officer fulfilled most of the requirements of law. The objection of the learned AR regarding non issuance of notices under section 56 or 114(4) is not maintainable when the assessee himself filed the returns for the years under appeals and income declared in the returns also tally with the statement filed by the assessee which is available on the record. So, issuance of notice under section 56 becomes irrelevant. As such the objection of the learned AR is not maintainable and same stands rejected. As regard the requirement of appointment of agent for assessm ent of a non resident is concerned, the objection of learned AR has weight. However on this failure of department, whole assessment cannot be quashed. This is a technical lapse and whole proceeding can neither be vitiated nor assessment can be annulled on this ground.
10. However, we have observed that non existence of approval from Additional Commissioner for addition under section 13(1)(aa) is very fatal. As per settled principle of law no addition can be made under section 13(1)(aa) without the approval of Additional Commissioner. In this case it is established that addition was made without any approval, as such the said additions cannot sustain. The objection of learned AR regarding the approval from Additional Commissioner instead of Inspecting Additional Commissioner in this case is irrelevant. As the addition under reference for the assessm ent year 1994-95 at Rs,20,000,000 and Rs,7,000,000 for the assessment year 1998-99 was made without obtaining the approval of Additional Commissioner and as such same merits to be deleted being unlawful, without jurisdiction, nullity in the eye of law, which is accordingly deleted. However assessm ent of property income for all the years under appeals is hereby confirmed. As regard the imposition of penalty under section 108 for late filing of returns, same was also imposed without the approval of Additional Commissioner and as per section 116 of the Ordinance, 1979 is a mandatory requirement and as such penalty imposed under section 108 is hereby deleted.
11. Assessee's appeals succeed partially to the extent and in the manner indicated above.
Appeals partially accepted.