' Vide this appeal, the assessee-appellant has assailed the order passed by the learned Commissioner Inland Revenue (Appeals-III), Lahore bearing Order No,14. Dated 15-11-2011 in respect of tax year 2008 on the following grounds:-
(1) That the Commissioner Inland Revenue Appeals, Lahore was not justified to uphold the order of the Additional Commissioner which suffered from legal flaw to the effect that while issuing show-cause notice under section 122(9) for initiating proceedings under section 122(5A) he should have also issued notice under section 122 as prescribed under. Rule 68 of the Income Tax Rules, 2002 which he failed to issue;
(2) That initiation of proceedings under section 122(5A) without requisitioning and physical examination of the assessment record by the Additional Commissioner and upholding his action on this' score by the Commissioner Inland Revenue Appeals-III, Lahore is illegal;
(4) That Commissioner Inland Revenue Appeals-Ill, Lahore was not justified in upholding the action of the Additional Commissioner with regard to initiation of proceedings under section'122(5A) who had already accepted the PTR claim of the taxpayer as the said Additional Commissioner had become functus officio to exercise such powers having remained associated in audit proceedings;
(5) That the learned Commissioner Inland Revenue Appeals-III, Lahore was not justified to uphold action of the Additional Commissioner under section 122(5A)which was initiated and based upon instructions of the Zonal Commissioner contained in an Inspection Note as the exercise of provisional jurisdiction under section 122(5A) is a very special statutory authority that must be exercised independently by the Additional Commissioner without any advice or direction from any other authority including the Zonal Commissioner of Income Tax;
(6) That observation of the learned Commissioner Inland Revenue Appeals-III to the effect that the Commissioner through the Inspection Note had taken notice of not addressing the objections raised by the Additional Commissioner which were conveyed through his letter to the Taxation Officer, is also not correct as page 2 of the order under section 122(3) passed by the Taxation Officer negates the observation of the learned Commissioner Appeals;
(7) That not only the Additional Commissioner but also the Commissioner Audit Division-H, Lahore did not raise any objection upon report of the Taxation Officer Audit-2, Audit Division-II, Lahore which was sent to the Commissioner through the Additional Commissioner (on requisitioning by Commissioner upon claim of the taxpayer regarding falling of the case under PTR based upon revised return)) wherein PTR claim of the taxpayer was accepted vide letter dated 27-2-2009 meaning-thereby that both the authorities had accepted PTR claim of the taxpayer and under such a situation none of these authorities can be judge of his own cause who had accepted the PTR claim;
(8) That action of deviation from original basis of proceedings under section 122(5A) by the Additional Commissioner (successor in office) by raising a fresh ground through another show cause notice on account of cash withdrawal as well as addition in terms of section 21(1) on prorata basis i,e, restricting the addition which normal law receipts bear to the total receipts and confirmation of such addition which normal law receipts bear to the total receipts and confirmation of such addition by the learned Commissioner Inland Revenue Appeals-III, Lahore is without any legal justification as such action of both the authorities fall under fishing enquiries;
(9) That as to how the learned Additional Commissioner has made addition of Rs,139815261 under section 21(1), is not understandable and confirmation of this addition by the Commissioner Inland Revenue Appeals-III, is also without any justification as there exists no observation of the learned Additional Commissioner passing the order;
(10) That the observation of the learned Commissioner Appeals-HI, Lahore that neither during amendment proceedings nor before the Commissioner Appeals the appellant has furnished any explanation to the effect that provisions of section 21(1) are not attracted in his case is also incorrect;
(11) That the appellant reserves the right to alter, amend and file any additional ground in addition to the above at the time of hearing of appeal.
2. Facts leading to disposal of the instant appeal are that the appellant, an individual, derives income as a goods transporter, the appellant's income tax affairs were selected for audit under section 177 of the Ordinance, 2001. During the audit proceedings, the assessee- appellant filed revised return in respect of tax year 2008 which was deemed to be an amended assessment under section 122(3) of the Ordinance. Later on, after having scrutinized the relevant record, it was found by the revenue that the said order was erroneous and prejudicial to the interest of revenue.
Accordingly, the assessing authority issued notice under section 122(9) in response thereto, the appellant could not satisfy the assessing authority and ultimately he amended the already completed assessm ent under section 122(5A) of the Ordinance, 2001. Feeling aggrieved with this treatment meted out by the Assessing Officer, the assessee-appellant filed appeal before the learned CIR(Appeals-1II), Lahore who by virtue of his order dated supra confirmed the impugned order passed under section 122(5A) of the Ordinance, 2001 by the Assessing Officer. This dispensation has compelled the assessee-appellant to come up in appeal before the Hon'able Appellate Tribunal Inland Revenue, Lahore.
3. It is pertinent to mention here that the learned counsel of the taxpayer has also filed Additional Ground of appeal claiming therein that the order passed by the Additional Commissioner under section 122(5A) dated 30-9-2010 is hit by limitation in terms of section 122(4)(b) read with sections 114(6) and 122(3)(b) of the Income Tax Ordinance,2001 and requested that this being legal issue be taken up at first which was admitted by the Division Bench-III through their order sheet dated 5-6- 2012 with the following observation: "Learned counsel for the appellant has argued on a preliminary legal issue, relating to limitation.
The return for tax year 2008 was revised on 16-2-2009, when the original return had attained the status of order under section 120 of 30th September, 2008. Notice under section 122(5A) was issued on 29-6-2009 and the order was passed on 30-9-2010. Learned counsel submits that the order under section 122(5A) dated 30-9-2010 was time barred under section 122(4)(b) he has pointed that in clause (b) words `amended assessment' are used for which limitation is one year whereas in clause (a) of subsection (4) of section 122 words 'original assessment' are used for which limitation is 5 years.
' In our view the issue raised by learned counsel is of first impression, therefore needs consideration. DR seeks time to prepare on the issue after seeking instruction from concerned Commissioner. Learned counsel for the appellant is also directed prepare on this issue thoroughly keeping in view the other provisions of the Ordinance, to identify the meanings of words `original assessment' and amended `assessme nt' as used in the Ordinance".
4. Additional ground remained under the process of hearings, seeking adjournments on the part of the Revenue and grant of stay/extension in stay of recovery of tax demand for the year under consideration till 28-8-2012 when the learned D.R. Furnished copy of judgment of the Appellate Tribunal reported as 2011 PTD (Trib.) 936 in the case of Messrs Rafi Electropics Corporation (Pvt.)
Ltd., Lahore v. C.I.T., R.T.O. Lahore claiming that the limitation in amended assessments cases is one year in addition to 5 years and the case was adjourned for 13-9-2012 for comments on the part of the learned counsel of the taxpayer. on 13-9-2012 the learned counsel of the taxpayer furnished his rebuttal in writing with reference to Para 37 of judgement of the Supreme Court of Pakistan in the case of Messrs ELI LILLY PAKISTAN (PVT.) LTD., reported as 2009 PTD 1392 wherein the Supreme Court of Pakistan has given findings twice regarding limitation for original assessment and amended assessm ent as five years and one year respectively in the following manner:--
(i) The assessment order can be amended within five years after the Commissioner has issued or is treated as having issued the assessment order on the taxpayer while an amended assessment order can be amended or further amended within a period of one year after the Commissioner has issued or is treated as having issued the amended assessment to the taxpayer.
(ii) Power to amend or further amend an assessment order is also subject to the time limit of five years or one year.
5. The learned counsel also furnished copy of Para 37 of the Judgment of Supreme Court of Pakistan supra besides explanation to the effect that filing of revised return shall be taken for all purposes of Income Tax Ordinance, 2001 to be an amended assessment order issued to the taxpayer by the Commissioner on the day on which the revised return was furnished. The learned counsel also furnished brief facts of the case and written arguments supported by attested copies of various documents e.g. Copy of letter of the then Commissioner Inland Revenue addressed to the Taxation Officer seeking report on the claim of the taxpayer regarding falling of his case under P.T.R./F.T.R., report of the Taxation Officer confirming view point of the taxpayer on PTR endorsement of the Additional Commissioner as well as letter of the Commissioner to the Taxation Officer for completion of audit proceedings at his own level, attested copy of order sheet of the Additional Commissioner who happened to initiate the proceedings under section 122(5A) and various reported judgments on the grounds of appeal other than Additional Ground supra but former Bench-3 could not decide the case for the reasons best known to the Honourable Members of the said bench but extension in stay of recovery continued to be allowed till 24-11-2012 despite lapse of more than 8 months.
6. The taxpayer's counsel filed another application on 20-11-2012 seeking extension in stay of recovery on the ground that appellate order of the Appellate Tribunal is still awaited as the final hearing was conducted on 13-9-2012 which was discarded on 23-11-2012 with the observation that the learned Tribunal has already granted stay more than 180 days and the case was directed to be fixed for hearing of the main appeal of the appellant pertaining to the tax year, 2008 for regular hearing in the 2nd week of December, 2012 to resolve the controversy before any available bench.
7. Finally, the case was fixed for hearing of the present bench on 14-12-2012. Mr.Jafar lqbal D.R.
Represented the Revenue and Mr. Inayat Ali Chaudhry, Advocate attended on behalf of the taxpayer. The learned counsel of the taxpayer requested that at the very outset additional ground of appeal on the point of limitation which has already been admitted by the former bench of the Appellate Tribunal by virtue of their order dated 17-5-2012 and in light of the observations of the Tribunal contained in order sheet dated 5-6-2012 in I.T.A. No,38/LB of 2012 may be decided besides rebuttal furnished in writing on 13-9-2012 based upon para 37 of the Supreme Court of Pakistan reported as 2009 PTD 1392 furnished by the A.R. With reference to judgment of the Tribunal reported as 2011 PTD (Trib.) 936 presented by the D.R.
8. When questioned regarding other grounds of appeal, the learned counsel referred to the written arguments already furnished before the Appellate Tribunal supported by various documents and reported judgments in support of his grounds of appeal on the points of nonobservance of condition precedent with regard to issuance of prescribed notice under section 122(1) in terms of Rule 68 of the Income Tax Rules, 2002, change of opinion, initiation of proceedings under section 122(5A) under instructions of the Zonal Commissioner in the shape of Inspection Note, finalization of amended assessm ent deviating from original basis of proceedings to that of cash withdrawal which has been termed to be fishing enquiry by the learned counsel supported by reported judgments etc. And explanation of the case on each point exhaustively as detailed below:-- Ground No,2(non Issuance of prescribed notice under Rule 68
(i) (1971) SCMR 681 Collector Sahiwal and 2 others v. Muhammad Akhtar. (Relevant Page 685);
(ii) 2006 SCMR 129 Director, Directorate General of Intelligence and Investigation and others v.
Messrs AI-Faiz Industries (Pvt.) Ltd. And others (Paragraph 15 at page 349);
(iii) PLD 1958 SC 104, 2007 SCMR 818 wherein it has been held that "Where basic action/order is without lawful authority, then superstructure built on it have to fall on the ground automatically"
(iv) (2003 YLR 1555) wherein it has been observed that " Rules have the same force as the provision of the statute under which those are framed"
' Ground No,3 (Initiation of proceedings without physical examination of record. Judgment reported as (1996) 73 Tax 95 (Trib.) (Relevant page No,108A )
' Ground No,4 (Change of Opinion on PTR claim by the same IAC) Judgments reported as (i) 1992 PTD (Trib) 1610 (Relevant Page 1616 B) and 2005 PTD (Trib.) 344 (Relevant Pages 397(B, 397)C, 399(D 406)E and 406)D/1.
' Ground No,5 (Invocation of S.122(5A) under instructions of CIT) Judgment reported as 2003 PTD (Trib.) 279 (Relevant page 287)C.
' Ground No,6 (Alleged non-compliance of instructions of the CIT at P.8 of CIR Appeals-III). Pages 2 and 3 of the order under section 122(3) dated 30-9-2009 negate the observation of the learned CIR Appeals-III, Lahore which can be witnessed.
' Ground No,7 (Having accepted PTR claim by IAC and CIT, none could be judge of his own cause.
On filing of revised return and request for deletion of the case from list of audit by the A.R., Zonal Commissioner sent letter to the Taxation Officer asking for report on PTR claim who sent his detailed report concluding therein that the PTR claim is well justified.
' Neither. The IAC nor the Zonal Commissioner with this finding of the Taxation Officer. Also reported judgments reported in Ground No,6.
' Ground No,8 (Deviation from original basis to cash withdrawal termed to be fishing enquiry).
' Judgment reported as 2008 PTD (Trib.) 1491 (Relevant pages of this judgment cited by the A.R are P.1493]B and P.1494]D and
(i) Judgment of the Appellate Tribunal in I.T.A.No,697/LB/2010(Tax Year 2004) (Relevant paras cited by the A.R. Are 9, 10 and 11).
9. Although the learned counsel has substantiated his view point in the taxpayer's case on all the grounds supported by various documents and copies of reported judgments furnished as discussed above. However, at this juncture we would like to give our due consideration to the burning issue of limitation and to decide it on the following observation.
10. The A.R. Through additional ground of appeal on the point of limitation has claimed that amended assessm ent finalized by the Additional Commissioner through his older dated 30-9-2010 is hit by limitation in terms of section 122(4)(b) read with sections 122(3)(b) and 114(6) of the Income Tax Ordinance, 2001 which was admitted by Honourable Members of Bench-3, of the Appellate Tribunal, Lahore by virtue of their order dated 17-5-2012. Later on, the Revenue continued to seek adjournments on the point of limitation from 17-5-2012 to 28-8-2012 when the learned D.R on behalf of the Revenue furnished copy of judgment of the Appellate Tribunal reported as 2011 PTD (Trib.) 936 in the case of Rafi Electronics Corporation (Pvt.) Limited. Copy of the reported judgment presented by the D.R. Was provided to the counsel of the taxpayer for its rebuttal and the case was adjourned to 13-9-2012.
11. On 13-9-2012, the learned counsel of the taxpayer has written to state that in Para 37 of the judgment of Supreme Court of Pakistan in the case of Messrs Elli Lilly Pakistan (Pvt.) Ltd., reported as 2009 PTD 1392, the Supreme Court of Pakistan has given findings twice regarding limitation for original assessm ent and amended assessment as five years and one year respectively in the following manner:--
(i) The assessm ent order can be amended within five years after the Commissioner has issued or is treated as having issued the assessment order on the taxpayer while an amended assessment order can be amended or further amended within a period of one year after the Commissioner has issued or is treated as having issued the amended assessment order to the taxpayer.
(ii) Power to amend or further amend an assessment order is also subject to the time limit of five years or one year.
12. The learned counsel also explained provisions relating to original assessment in terms of section 120, filing of revised return under section 114(6) to be amended assessment in terms of section 122(3)(b) and limitation of the amended assessment to be one year in terms of section 122(4)(b) of the Income Tax Ordinance, 2001. It was also explained that the case cited by the D.R. Relates to merger of assessm ent C and original assessment under section 120 and not amended assessm ent. The learned D.R. Appearing on behalf of the Revenue could not rebut the arguments and the findings of the Supreme Court of Pakistan through Para 37 of the judgment reported as 2009 PTD 1392 as submitted by the learned counsel of the taxpayer.
13. In view of the discussion held heretofore we hold that the limitation in the present case is one year as argued by the learned counsel based upon judgment of the Supreme Court of Pakistan reported as 2009 PTD 1392 and cancel the amended assessme nt under section 122(5A) dated 30- 9-2010 holding it to be hit by limitation. Having taken regard to the facts of the case in its entirety as well as the ratio settled in the reported judgment of the Hon'ble Supreme Court of Pakistan cited supra, we have no ambiguity in our 'mind to declare that the orders passed by the authorities are against the doctrine of natural justice and are not sustainable in the eye of law. Consequently, we have no hesitation to mention here that the order passed by the Additional Commissioner dated 30-9-2010 is illegal, void ab initio obviously passed after the stipulated period and confirmation thereof by the learned Commissioner are vacated/ canceled. This would result into acceptance of the assessee's appeal for the tax year 2008 on legal plane.
14. Since we have decided the case purely on legal plane, so in the presence of legal ground there is no need to give our decision or dilate upon the other grounds raised by the appellant.
15. Ordered accordingly.