IRFAN SAADAT KHAN, J. - This Income Tax Reference Application (ITRA) has been filed against the order passed by the Income Tax Appellate Tribunal (ITAT) in ITA No. 1662/KB/2005 pertaining to the assessm ent year 1999-2000 decided on 16.09.2009, by raising the following questions of law:-
(i) Whether on the facts and in the circumstances of the case, the learned Appellate Tribunal was justified to disregard the original order passed by the CIT (A) on April 17th, 2000 which had attained finality; while deciding the appeal?
(ii) Whether on the facts and in the circumstances of the case the learned Appellate Tribunal was justified to allow the appeal for the rectification of appellate order dated April 17th, 2000 which had since become barred by time u/s. 156 of the Repealed income Tax Ordinance, 1979?
(iii) Whether on the facts and in the circumstances the Tribunal was justified to hold that the second order passed by the CIT (A) on April 16th, 2005 was rectifiable when the said order was only confirming the earlier order passed by CIT (A) on April 17th, 2000?
(iv) Whether on the facts and in the circumstances of the case, the learned Appellate Tribunal was justified to rely upon the decisions of the ITAT and High Court, which were not even passed at the time, when the original appellate order dated 17th, 2000 was passed.
(v) Whether on the facts and circumstances of the c&se, the learned Appellate, Tribunal was justified to apply the decisions of the ITAT and High Court, which were passed after original appellate order dated April 17th, 2000 was passed and also to apply the same on passed and closed decision having attained finality?
(vi) Whether on the facts and in the circumstances of the case, the learned Appellate Tribunal was justified in holing that turnover tax is chargeable on aggregate turnover including receipts under the head divided and exports?
(vii) Whether on the facts and circumstances of the case, the learned Appellate Tribunal was justified to ignore the fact that the tax paid on dividend income and export sales was adjustable against tax paid u/s. 80D of the Repealed Income Tax Ordinance, 1979 which in fact was less than the amount of tax charged u/s. 80D ibid, on total turnover?
2. Briefly stated the facts of the case are that the applicant is a Public Limited Company being assessed at Large Taxpayers Unit, Karachi (LTU). That the return of total income for the year under consideration was filed by declaring a loss of Rs. 203,745,454/-, thereafter assessment was made under the provisions of Section 62 of the Income Tax Ordinance, 1979 (the repealed Ordinance) by assessing loss at Rs. 189,909,423/- on 16.03.2000. Being aggrieved by the said order an appeal thereafter was preferred before the Commissioner of Income Tax (Appeals) [CIT(A)] who vide his order dated 17.04.2000 decided the appeal in favour of the applicant/assessee. It is, however, noted that no appeal against the said order passed by the CIT(A) was preferred by the department before the learned ITAT. Thereafter, the Additional Commissioner of Income Tax (ACIT) vide his order dated 13.10.2001 amended the order passed by the Deputy Commissioner of Income Tax
(DCIT) by exercising his power under Section 66:A of the repealed Ordinance and assessed the income of the appellant/assessee at Rs. 336,015,389/- by holding that as in the previous order, passed by the DCIT under the provision of Section 62 of the repealed Ordinance, the provisions of deemed income under Section 12(9A) of the repealed Ordinance have not been taken into consideration, thus, according to the ACIT, the order passed by the DCIT is erroneous insofar as prejudicial to the interest of revenue. Being aggrieved with the order passed by the ACIT an appeal thereafter was filed before the ITAT bearing ITA No. 2236/KB/2001 and the learned ITAT vide its order dated 30.08.2002 remanded the matter back to the ACIT for fresh examination of the case. The ACIT thereafter passed the order under the provisions of Section 62/66-A of the repealed Ordinance read with Sections 122(5) and 124(A) of the Income Tax Ordinance, 2001 (the Ordinance} on 25.02.2005 by assessing the loss of the applicant/assessee at Rs. 203,745,454/-. Being aggrieved with the order passed .By the ACIT an appeal once again was preferred before the CIT(A) who this time also vide his order dated 16.04.2005 directed the Taxation Officer that the previous instructions issued to him by his predecessor vide order dated 17.04.2000 be followed.
Thereafter an application for rectification under-the provisions of Section 221 of the Ordinance was moved by the respondent No. 2 before the CIT(A) asking him to rectify his order dated 16.04.2005.
The CIT(A) then vide his order dated 22.09.2005 dismissed the said application by observing that no issue of rectification arises from his above-mentioned order. Being aggrieved with the said order passed by the CIT(A) the department preferred an appeal before the ITAT which vide its order dated 16.09.2009 allowed the appeal filed by the department by observing that since the CIT(A) has failed to follow the decisions of the Superior Courts in respect of the issue, therefore, his order suffers with mistake apparent from the record and he ought to have allowed the rectification application filed by the department in this regard. The learned ITAT thereafter vacated the order passed by the CIT(A). It is against this order that the present reference application has been filed.
3. Mr. Naveed A. Andrabi, learned counsel for the applicant, has stated that in the very first assessm ent order passed by the DCIT, dated 16.03.2000, minimum tax under Section 80-b of the repealed Ordinance was charged on dividend income also against which an appeal was preferred before the CIT(A) who has categorically observed that as aggregate tax of the applicant including tax on dividend was less than the minimum tax worked out on the basis of the turnover of the assessee, hence, the DCIT was not justified in separately taxing the dividend income in addition to the minimum tax payable under Section 80-D of the repealed Ordinance. Thereafter the DCIT was directed by the learned CIT (A) to levy minimum tax on turnover only by excluding the dividend income. The learned counsel further submitted that since no appeal has been filed against the order passed by the C!T(A), dated 17.04.2000, that order has attained finality. The learned Counsel goes on to argue that by not filing any appeal means that for all practical purposes the department has accepted the observations of the CIT(A) passed in the said order and even if for argument sake it is accepted that the said observations were erroneous the same hold the field as by not filing any appeal against the said order the department in a way has accepted the said order passed by the CIT(A). He further submitted that even no rectification application has been filed against the said order dated 17.04.2000 of the CIT(A) by the department rather it is quite strange on the part of the department that they moved an application under Section 221 of the Ordinance against the said order passed by the CIT(A), dated 16.04.2005, which very rightly was dismissed by the learned CIT(A) vide his order dated 22.09.2005 and the learned ITAT without considering this material fact has dismissed the appeal merely by observing that CIT(A) has not followed the decision of the Superior Courts in this regard. He submitted that no error, whatsoever, has been committed by the CIT(A) while dismissing the rectification application as these observations were already available in the record by virtue of the order passed by his predecessor dated 17.04.2000 regarding the issue of imposition of tax under Section 80-D on dividend income.
He further reiterated that the rectification proceedings are only available in respect of matters where mistake is apparent and patent from the record and for which no lengthy arguments are required. He submitted that since the learned ITAT has erred in allowing the appeal filed by the department, the questions of law raised by him in the present ITRA may be answered in negative i.e. In favour of the applicant/assessee and against the department. Before concluding his arguments the learned counsel in response to a question raised by the bench submitted that in fact question No. 1 raised by him in the present ITRA is the main controversy agitated by him.
4. Mr. Kafeel Ahmed Abbasi, on the other hand, has supported the order and submitted that the learned ITAT after detailed deliberation has allowed the appeal filed by the department. He further submitted that there were certain decisions given by the Superior Courts upholding the view taken by the department with regard to imposition of minimum tax on the dividend income. He thereafter submitted that since the mistake is apparent from the record that is why an application under Section 221 of the Ordinance was preferred, which was incorrectly dismissed by the CIT(A) vide his order dated 22.09.2005 and the learned ITAT correctly observed that the case of the applicant/assessee could not be considered to be a case to have attained finality and a closed case and the department was quite justified to move an application under Section 221 of the Ordinance, as the decision given by the CIT(A) dated 16.04.2005 was in conflict with the decision given by the High Court vide ITA No. 185/2002, dated 01.07.2005. He, therefore, stated that at the time of passing of the order by the CIT(A), dated 22.09.2005, the decision of the Superior Courts were in field and they have to be followed by the CIT(A). The learned counsel further reiterated that the CIT(A) being subordinate authority has to follow the instructions and decisions given by the Superior Courts and if the CIT(A) was apprised by the department about an incorrect interpretation of law, he should have rectified the same under Section 221 of the Ordinance, which was not done by the CIT(A) and hence the learned ITAT was fully justified in vacating his order and allowing the departmental appeal. He, therefore, submitted that this ITRA being devoid of any merit be dismissed by answering all the questions raised in this regard in affirmative i.e. In favour of the department and against the applicant/assessee.
5. We have heard both the learned counsel at considerable length and have perused the record.
6. In our view, the only simple proposition involved in this ITRA is whether any mistake was apparent from the order passed by the CIT(A) in his order dated 16.04.2005. A perusal of the said order reveals that an appeal has been filed before CIT(A) against the order passed by ACIT under Section 62/66-A of the Repealed Ordinance read with Section 122(5)/124 of the Ordinance wherein the learned ACIT while passing the said order has also charged minimum tax on the dividend income also, In our view, the learned ACIT has no jurisdiction to dilate upon this issue which already had been laid at rest by the CIT(A) vide his order dated 17.04.2000 against which admittedly no appeal has been preferred by the department. Had department aggrieved against the order passed by the CIT(A) dated 17.04.2000, the department would have filed an appeal before the ITAT.
Since no appeal has been filed by the department meaning thereby that the said order has attained finality and had become a past and closed transaction. Even, if for argument sake, it is assumed that the CIT(A) has not passed a correct order since the department has not shown any grievance against the said order by way of either filing an appeal before the learned ITAT or filing, any rectification application, that order for all practical purposes cannot be disturbed by way of filing rectification application in any subsequent proceedings. The order passed by CIT(A) dated 16.04.2005 is nothing but an order passed in conformity with the previous order passed by his predecessor and in the instant order dated 16.04.2005, the only direction given by the CIT (A) to the department was with regard to following the previous order of the CIT (A) dated April 17th, 2000.
Hence the. Filing of the rectification application by the department by claiming that a mistake has accrued in the said order of the CIT(A) appears to be devoid of any merit and was very Sightly dismissed by the learned CIT(A). In our view the learned ITAT erred in observing that non-following of the order of the Superior Court has entitled the department to file a rectification application before the learned CIT(A) which we are afraid is not correct appreciation of the facts of the case.
7. In our view, there is no mistake apparent from the order passed by the CIT(A), dated 16th April, 2005 as in the said order only previous observation made by predecessor CIT (A) have been instructed to be followed. Filing of rectification application against the said order amounts to giving a new lease of life to an issue, which had already attained finality and had become a past and closed transaction, which is not permissible under the garb of either the provisions of Section 156 of Repealed Ordinance or Section 221 of the Ordinance. If the department was so aggrieved, question arises as to why no appeal has been preferred against the said order passed by CIT(A), dated 17th April, 2000 before the ITAT and why no application either under Section 156 of the Repealed Ordinance and Section 221 of the Ordinance has been given in respect of this order. Hence in our view, the objection raised by the learned Counsel for the appellant appears to be justified to the extent that since the limitation provided under Section 156 of Repealed Ordinance had expired as no such application filed within limitation period against the order dated 17.04.2000 passed by the CIT(A), which had become a past and closed transaction, thereafter as an afterthought, an application for rectification was moved against the order dated 16.04.2005 passed by the CIT(A).
We were able to lay our hands on a recent judgment given by the Hon'ble Supreme Court of Pakistan in the case of Muhammad Safdar and others v. Punjab Land Commission and others (2012 SCM R 1725). According to the facts of the case the Commissioner Lahore Division passed some order and no appeal against such order was filed. Thereafter the Hon'ble Supreme Court of Pakistan in a case of Qazalbash Waqt v. Chief Land Commissioner Punjab and others (PLD 1990 S.C.
99) declared certain provisions of Land Reform Ordinance, 1977 to be against the injunctions of Islam. The petitioner thereafter, after two years of this verdict to take benefit of the law laid down in the said dictum, filed writ petition before the learned Lahore High Court which was dismissed by a Division Bench of the said Court. A review than was filed which also remained unsuccessful and thereafter Leave to Appeal was filed before the Hon'ble Supreme Court of Pakistan, which leave was granted to consider the effect of Qazalbash Waqf case. However, the Hon'ble apex Court also dismissed the same by observing as under:- "The provisions of the Act as has been held by the learned High Court in both the judgments dated 21-3- 2002 (passed in writ jurisdiction) and also under the review are self-executory and, therefore, once the excess land of the declarant was so adjudged by the competent authorities resumed under the law, it for all intents and purposes was/is a matter covered by the rule of past and closed transaction, which cannot be reopened/annulled on the basis of the judgment in Qazalbash Waqf case".
Applying the same principle to the present ITRA, it is evident that admittedly no appeal against the order passed by the CIT(A), dated 17.04.2000, was filed, which in our view has attained finality and had become a past and closed transaction.
8. We specifically asked a question from Mr. Kafeel Ahmed Abbasi that what is the mistake apparent from the said order passed by CIT(A), dated 16.04.2005 wherein the learned CIT(A) has simply directed the department to follow the instructions issued by his predecessor vide his order dated 17.04.2000 to which no satisfactory reply was given by Mr. Abbasi except by saying that certain decisions of the Superior Courts were not followed by the CIT(A). ' however he was appraised that the learned CIT(A) vide his order dated 16.04.2005 has simply given directions to the department to follow the instructions issued by his predecessor vide his order dated 17.04.2000, he was not able to satisfy the bench that as to what was the mistake apparent from the said order passed by CIT(A) dated 16.04.2005.
9. We, therefore, in light of whatever stated above answer the question No. 01 in negative i.e. Against the department and in favour of the appellant/assessee. So far as the other questions are concerned, they are left unanswered, as in our view, the grievance of the Petitioner would be redressed by answering question No. 01 only. This ITRA is therefore, allowed and the order passed by the ITAT is set aside to the extent it pertains to the assessment year 1999- 2000 only.
10. Let a copy of this order be sent to the Registrar, ITAT, with directions that appropriate order may be passed in conformity with the decision given by this Court in this ITRA.