1. MUHAMMAD JAWED ZAKARIA (JUDICIAL MEMBER).--- Through these appeals the taxpayer has challenged the consolidated order dated 30-12-2011 passed by the Commissioner Inland Revenue (Appeals-I, Karachi whereby he remanded back the case to the DCIR. Both the appeals are being disposed vide this consolidated order as the grounds of both the appeals are common and identical in nature except the amount as under: - "1) That the order passed by the Commissioner Inland Revenue (Appeals-I) is not only bad in law but also on facts as the order passed under section 122(5A) being illegal and without jurisdiction should have been cancelled and annulled.
2. 2) That the Commissioner Inland Revenue (Appeals) was not justified in confirming the order passed under Section 122(5A) of Income Tax Ordinance, 2001 in the case of the appellant, although it is now settled law that neither fishing inquiries are permissible, nor the order "merged" with Commissioner Inland Revenue (Appeals) can be amended, nor there is any violation of specified conditions of Section 122(5A). The order passed on 24-03-2010 is not only illegal but also time barred and without jurisdiction, hence liable to be cancelled and annulled.
3. That the Commissioner Inland Revenue (Appeals) has not only acted illegally but also on misception and incorrect appraisal of law and as well as misconstruction and misinterpretation of law as the deemed order amended under section 221 does not exist and had "merged" with the order passed under section 129 by Commissioner Inland Revenue (Appeals) which was beyond the jurisdiction and authority vested with Additional Commissioner Inland Revenue under section 122(5A) and incorrectly confirmed by Commissioner Inland Revenue (Appeals), both. being illegal, without jurisdiction and in clear violation of settled law are liable to be cancelled and annulled.
4. 4) That without prejudice to above, both the required conditions have not been fulfilled, the tax liability being the same as per Income Tax Return and amended order, the Commissioner Inland Revenue (Appeals) has erred in confirming the illegal and without jurisdiction order passed under section 122(5A) in violation and ignoring the settled law as interpreted in various decisions relied upon on the issue of erroneous and prejudice to revenue and also on merger of order with appellate decision, by recording incorrect insinuations, the order confirmed in appeal is liable to be cancelled and annulled 5) That the Commissioner Inland Revenue (Appeals) has not only acted illegally but also in clear violation of settled law that issues on certain facts and law once settled and decided in appeal, can not be reopened again and again on the same facts and law without disclosing fresh and new information available and in clear violation of an earlier decision on the same issues. The order passed by Commissioner Inland Revenue (Appeals) wherein he has confirmed the illegal and without jurisdiction order passed under section 122(5A) is liable to be cancelled and annulled 6) That the appellant had de-leased the machinery in Tax Year 2003 and thereafter depreciation had been claimed on "residual value" and "NOT" on acted cost, the Additional Commissioner and Commissioner Inland Revenue (Appeals) had verified the facts from record and depreciation schedule which was also evident from earlier order passed under sections 122 and 129, the Commissioner Inland Revenue (Appeals) has acted illegally by confirming the order and issuing adverse directions instead of cancelling the order passed under section 122(5A). The order passed by Commissioner Inland Revenue (Appeals) is liable to be cancelled and annulled.
5. 7) That the Commissioner Inland Revenue (Appeals) has erred in setting aside the dis allowance of depreciation on de-leased assets amounting to Rs.1,544,484/- instead of deleting the same, inspite of the fact that complete details and evidence have been filed and are not only available on record and were also produced before Commissioner Inland Revenue (Appeals) during the appellate proceedings. The dis allowance of depreciation on de-leased assets amounting to Rs.1,544,484/- having been made on totally false and incorrect allegations are not sustainable in law and on facts and should have been deleted 8) That the Commissioner Inland Revenue (Appeals) has erred in set-aside the order on turnover for the purpose of levy of tax under section 113 amounting to Rs.6,875,773/- instead of deleting the same."
2. Brief facts of the cage as narrated from the available record are that the taxpayer is a Public Limited Company, engaged in spinning of Yarn. Return of income for the tax year 2005 filed for the period from 01.10.2004 to 30.06.2005 declaring loss at (Rs.238, 966, 180/-) under normal law with receipts cover under FTR at Rs.621,033,865/- and final tax liability thereon at Rs.7,773,600/-, and for the period from 01.10.2003 to 30.09.2004 declaring loss at (Rs.205, 958, 414/-) under normal law with receipts cover under FTR at Rs.1,010,285,795/- and final tax liability thereon at Rs.12,776,793/-, which were treated as an assessm ent orders deemed to have been issued in terms of section 120 of the Income Tax Ordinance, 2001. The deemed orders under section 120 were subsequently rectified under section 221 vide D.C. No.14/08 dated 19.06.2006 and D.C. No.13/08 dated 19.06.2006 respectively on the issue of incorrect claim of depreciation on leased Plant and Machinery transferred to own assets. The taxpayer being aggrieved with the said treatment, filed appeals before the learned CIR(A) [The then CIT(A)], who vide consolidated order for the tax years 2004, 2005 and 2005 A (Transitional period) bearing Nos.13 to 15 dated 31.08.2006 annulled the order passed under section 221 of the Income Tax Ordinance, 2001. The deemed orders under section 120 were considered erroneous as well as prejudicial to the interest of revenue requiring further amendment under section 122(5A) of the Income Tax Ordinance, 2001. Accordingly, a notice under section 122(9) along with statutory notice dated 12.01.2010 under Rule 68 of the Income Tax Rules, 2002 was issued. Taxpayer filed reply, which was found unsatisfactory. Resultantly, the ACIR amended the order. Taxpayer being aggrieved with the said order filed appeals before the learned CIR(A), who vide his impugned order dated 30.12.2011 remanded back the case to the OIR/ACIR.
6. Taxpayer again being aggrieved with the treatment meted out by the learned CIR(A), preferred the present appeal before this Tribunal.
3. On the date of hearing, Mr. Salman Pasha, Advocate, appeared as counsel of the taxpayer/appellant while Mr. Rafiq-ur-Rehman, learned DR from LTU represented the respondent/Department.
4. During the Court proceedings, Mr. Salman Pasha, Advocate, learned counsel for the appellant contended that the order passed by the Commissioner Inland Revenue (Appeals-I) is not only bad in law but also on facts as the order passed under section 122(5A) being illegal and without jurisdiction, therefore, he prayed that these orders should have been cancelled and annulled. He further contended that the Commissioner Inland Revenue (Appeals) was not justified in confirming the order passed under Section 122(5A) of Income Tax Ordinance, 2001 in the case of the appellant, and continued to argue that it is now settled law that neither fishing inquiries are permissible, nor the order "merged" with Commissioner Inland Revenue (Appeals) can be amended, and there is violation of specified conditions of Section 122(5A). The order passed on 24-03-2010 is not only illegal but also time barred and without jurisdiction, hence liable to be cancelled and annulled. It was also contended by the learned AR that the Commissioner Inland Revenue (Appeals) has not only acted illegally but also on misception and incorrect appraisal of law and as well as misconstruction and misinterpretation of law as the deemed order amended under section 221 does not exist and had "merged" with the order passed under section 129 by Commissioner Inland Revenue (Appeals) which was beyond the jurisdiction and authority vested with Additional Commissioner Inland Revenue under section 122(5A) and incorrectly confirmed by Commissioner Inland Revenue (Appeals), both being illegal, without jurisdiction and in clear violation of settled law are liable to be cancelled and annulled. The learned counsel for the appellant further agitated that both the required conditions of the provisions to Section 122(5A) of Income Tax Ordinance, 2001 have not been fulfilled, the tax liability being the same as per Income Tax Return and amended order, the Commissioner Inland Revenue (Appeals) has erred in confirming the illegal and without jurisdiction order passed under section 122(5A) in violation and ignoring the settled law as interpreted in various decisions relied upon on the issue of erroneous and prejudice to revenue and also on merger of order with appellate decision, by recording incorrect insinuations, the order confirmed in appeal is liable to be cancelled and annulled. He further agitated that the Commissioner Inland Revenue (Appeals) has not only acted illegally but also in clear violation of settled law that issues on certain facts and law once settled and decided in appeal, cannot be reopened again and again on the same set of facts and law without disclosing fresh and new information available and in clear violation of an earlier decision on the same issues. It was also agitated by learned AR that the appellant had de-leased the machinery in Tax Year 2003 and thereafter depreciation had been claimed on "residual value" and "NOT" on acted cost, the Additional Commissioner and Commissioner Inland Revenue (Appeals) had verified the facts from record and depreciation schedule which was also evident from earlier order passed under sections 122 and 129, the Commissioner Inland Revenue (Appeals) has acted illegally by confirming the order and while remanding issued adverse directions instead of canceling the order passed under section 122(5A). The order passed by Commissioner Inland Revenue (Appeals) is liable to be cancelled and annulled. The learned counsel for the taxpayer urged that the Commissioner Inland Revenue (Appeals) has erred in remanding back the dis allowance of depreciation on de-leased assets amounting to Rs.1,544,484/- instead of deleting the same, inspite of the fact that complete details and evidence have been filed and are not only available on record and were also produced before Commissioner Inland Revenue (Appeals) during the appellate proceedings. The dis allowance of depreciation on de-leased assets amounting to Rs.1,544,484/- having been made on totally false and incorrect allegations are not sustainable in law and on facts and should have been deleted. While concluding his arguments, learned AR once again submitted that the Commissioner Inland Revenue (Appeals) has grossly erred in remanding back the order on turnover for the purpose of levy of tax under section 113 amounting to Rs.6,875,773/- instead of deleting the same. Accordingly he prayed that the order passed by Commissioner Inland Revenue (Appeals) wherein he has confirmed the illegal and without jurisdiction order passed under section 122(5A) is liable to be cancelled and annulled. ,
5. During the course of hearing, learned AR of the taxpayer submitted copies of following documents:-- Order passed in C.As. Nos.1350-1352 of 2001 dated 26-07-2006.
7. Reported judgment of Hon'ble Lahore High Court reported as 2001 PTD 1467.
8. Reported judgment of the ATIR's Lahore Bench reported as (1969) 20 Tax 51 (Trib.).
9. Consolidated Order of the ATIR's Karachi Bench in I.T.A. No.834/KB of 2010, I.T.A. No.618/KB of 2008, I.T.A. No.52/KB of 2009 and I.T.A. No.835/KB of 2010 dated 20.11.2013.
10. Order of the ATIR's Lahore Bench in I.T.As. Nos.1688-1689/ LB/2012 dated 08.02.2013.
11. Order of the ATIR's Karachi Bench in I.T.As. Nos.61-62/KB/ 2009 dated 17.05.2011.
12. Order of CIR(A-I), Karachi dated 21-08-2006.
13. S. Depreciation Schedule and Annual Report for 2004-05.
6. After concluding his arguments, the learned AR of the taxpayer submitted written summarized synopsis, which are as under:-- "1)(1) Appellant is a Textile Mill and has continued manufacturing of Yarn. Appellant being a Textile Mill, Special Year Ending on 30th September was assigned as per section 74 of Income Tax Ordinance, 2001. However, as per Finance Act, 2004, subsection (2A) was added to Section 74, whereby special year was converted to normal Tax year ending 30th June. Hence, for Tax year 2005, appellant had filed 2 separate Income Tax Returns along with audited accounts, computation of Income, depreciation schedule etc as under.
14. (i)Tax year 2005. Tax year 01-10-2003 to 30-09-2004. First period.
15. (ii)Tax year 2005. Tax year 01-10-2004 to 30-06-2005. Second period.
16. I) (ii) As Income Tax Returns for both the period were complete in all respect, assessment for Tax year 2005 was deemed under section 120(1). Thereafter, Taxation Officer-01, Audit Division, Large Taxpayers Unit, Karachi had issued a notice under section 221(2) dated 21-05-2006 for tax year 2004 and also for both the periods of Tax year 2005 with the intention to rectify the deemed orders. According to the Assessing Officer, depreciation claimed on de-leased assessed transferred from Tax year 2003 is not an admissible deduction. Re-pies dated 7-06-2006 and 9- 062006 filed for both the years with TFD, LTU, Karachi, were summarily rejected. Deemed orders for Tax years 2004, 2005 and 2005 were rectified under section 221 on 19-06-2006 whereby, depreciation claimed on de-leased assets transferred from Tax year 2003 were disallowed.
17. 1)(iii) The Commissioner of Income Tax (Appeals-I) Karachi, as per appellate orders Nos.13 to 15 (Appeals No's 38, 39 and 40) dated 21-08-2006 had annulled all the three orders passed under section 221. But, an alternative direction to invoke Section 122(5A) was accorded. Thus, as the orders passed under section 221 for Tax years 2004, 2005 and 2005 were cancelled in appeal decided under section 129 as per order dated 21-08-2006, the orders passed under section 120(1) read with section 221 were merged with the appellate order passed under section 129, hence, the deemed order under section 120(1) does not exist and has been merged with appellate order passed under section 129 of Income Tax Ordinance, 2001 by Commissioner of Income Tax (Appeals-I), Karachi.
18. 2)(i) Subsequently, the Additional Commissioner Inland Revenue-B, Audit Division-I, Large Taxpayer Unit, Karachi, had initiated fresh proceedings under section 122(5A) as per notice issued under section 122(9) on 12-01-2010 for both the periods for Tax year 2005 only, with the intention to disallow depreciation as per and on the basis of orders passed under section 221 by his predecessor. However, no notice under sections 122(5A)/122(9) was issued for tax year 2004.
19. 2)(ii) Reply dated 01-02-2010 was dully filed wherein, we had not only contested proceedings under section 122(5A) but also jurisdiction of Additional Commissioner to initiate proceedings against order passed under section 129 for both the periods of Tax year 2005. We had also contested that the previous orders passed under sections 120(1) and 221 does not exist as the same had been merged with appellate orders passed under section 129 on 21-08-2006 by Commissioner Income Tax (Appeal-I), Karachi. Our submissions were that, after decision of Appeal by CIT (Appeals-I) Karachi, whereby, the orders passed under section 221 had been annulled and not set-aside, the Additional Commissioner cannot initiate proceedings under section 122(5A) against orders passed under section 129 which is beyond the jurisdiction and authority of Additional Commissioner to further amend the orders passed in appeal under section
129. Moreover, the order passed under section 129 was not contested in appeal before the Tribunal, hence, the said order was neither erroneous, nor prejudicial to the interest of revenue. On legal objection, we had requested to withdraw the note issued under sections 122(5A)/122(9) and drop the proceedings for tax year 2005.
20. 2)(iii) On merits of the case, we had also explained that depreciation as per audited accounts have been added back in both the periods for Tax year 2005 and as plant and machinery had been de-leased in Tax years 2003 and 2004, thereafter, appellant had adopted the residual value of plant and machinery only for the purpose of depreciation in accordance to 3rd Schedule of Income Tax Ordinance, 2001. Although, depreciation schedule as per Third Schedule, computation of income and audited accounts were available on record for tax years 2004 and 2005, but in order to justify our contention, we had again filed copies of relevant page of audited accounts, computation of income and as well as depreciation schedule, wherein depreciation on de-leased assets was claimed and was restricted to residual value and not at the written down value as per audited accounts.
21. 2)(iv) As per order passed under section 122(5A) on 24-03-2010 for both the periods for tax year 2005, the Additional Commissioner had disallowed depreciation of Rs. 1,544,484/-for the period 30-09-2004 and depreciation of Rs.1,517,590/- for the period ending 30-06-2005, without appreciating that the assets had been de-leased in tax years 2003 and 2004 and not in tax year 2005. Depreciation on residual value as claimed in tax years 2003 and 2004 had been allowed and depreciation during both the periods for tax year 2005 was claimed on written down value on the basis of residual value carried forward from tax years 2003 and 2004. Neither tax year 2003, nor tax year 2004 were amended, hence, entire working and observations of Additional Commissioner are incorrect and baseless.
22. 2)(v) Without prejudice to above, we may further clarify that, the issue regarding claim of lease rental was intentionally created by the Additional Commissioner in order to confuse the issue, although, no lease rental was claimed on de-leased assets, but lease rental relates to other assets which are still under Lease Agreement. Hence, observation regarding lease rental are totally incorrect, frivolous and not relevant for the purpose of depreciation claimed on written down value on the basis of residual value carried forward from preceding years.
23. 3)(i) Appellant being aggrieved with the order passed under section 122(5A) had filed appeal before the Commissioner Inland Revenue (Appeals-I) Karachi on 28-04-2010 which was registered as Appeals Nos. 444 and 445 for tax year 2005. This appeal was heard on 11-05-2011 and was decided as per order dated 30-12-2011. The CIR (A) had set-aside the order with the following observation and finding without considering the submissions of the appellant and the illegalities committed by the Additional Commissioner. The observations and finding of CIR (Appeals) as recorded in the last two pages are reproduced here under:- "Now, on merits, AR has contended that the appellant had not de-leased any asset in tax year 2005 as these assets (machinery and generator) were de-leased in the tax year 2003 and depreciation of which was correctly claimed and allowed on residual value in tax year 2004. The AR further contended that as admitted by the ACIR in the impugned order that there was no mistake in allowing depreciation on de-leased assets in tax year 2004, the subsequent action initiated under section 122(5A) for the year 2005 is totally incorrect.
24. The AR continued that the action of the ACIR invoking section 122(5A) is beyond the jurisdiction for the reason that he had recalculated depreciation for tax year 2004 in the impugned order for tax year 2005 without reopening or canceling the order for tax year 2004. The powers and authority to amend the order is restricted to the tax year 2005 for which proceedings under Section 122(5A) were initiated and not for any other .tax year, thus, he had no vested authority or power to amend the order of preceding year in the garb of Section 122(5A) without initiating proceedings under Section 122(5A) for which no notice was issued.
25. The above arguments of the learned AR are convincing, the DCIR in my opinion could not calculate the depreciation on the assets for tax year 2004 in the order wherein the proceedings uncle, Section 122(5A) was initiated for tax year 2005. If he considered that the amendment on the issue is necessary then he was required to initiate these proceedings in preceding years and without doing this the correct amount of depreciation which is calculated on the WDV can not be ascertained. In these circumstances the DCIR is directed to consider the appellant's submission that the assets were de-leased in tax year 2003 and verify the record that the same has been taken at correct residual value. And if he is not satisfied with the contention of the learned AR then he may recalculate the depreciation on these assets from the year when these were de-leased and taken in to the assets of the company accordingly."
26. 3)(ii) That the CIR (Appeals) was not justified in setting aside/ remanding the order on flimsy grounds which has neither been appreciated, nor approved, rather deprecated by higher forum.
27. Reliance is placed on the following decisions: 1996 SCMR 230 (SC Pak), in, Chairman WAPDA, Lahore and others v. Gulbat Khan 1991 PTD 463 (KHC) in, Shahab Industry Ltd. v. Commissioner of Income Tax, Karachi.
28. 2002 PTD 407 (KHC) in, AYENBEE (Pvt.) Limited v. Income Tax Appellate Tribunal, Headquarter, Karachi 1988 PTD 1014 (LHC) in, Ch. Muhammad Sadiq v. Income Tax Officer With due respect, it is respectfully submitted that although the learned CIR (Appeals) had admitted that the Additional Commissioner had patently committed an illegality and had no jurisdiction to re-compute depreciation although assets had been de-leased in tax years 2003 and 2004 and this fact had not been disputed even by Additional Commissioner Inland Revenue.
29. Moreover, as per tax depreciation schedule computed as per Third Schedule to Income Tax Ordinance, 2001, depreciation for both the periods for tax year 2005 had been computed by adopting the residual value in the year of de-leased and thereafter written down value of de- leased assets had been carried forward in tax year 2005. As this fact have not been disputed, the CIR (Appeals) was not justified in setting aside the amended order passed under section 122(5A), instead of canceling the impugned order.
30. 3)(iii) Without prejudice, we may further state that as per Clause (a) of Subsection (1) of Section 129, the CIR (Appeals) was not justified in setting aside the impugned order passed under section 122(5A) instead of canceling and annulling the order. Due to above illegalities, the appellant was fully justified in filing and contesting the appeal before the Appellate Tribunal Inland Revenue, Karachi.
31. 4)Grounds Nos.1 to 5: Order passed under section 122(5A). on 24-03-2010 for fax year 2005 is an illegal order and beyond the jurisdiction under section 122(5A) for following reasons:-
(1) As per facts discussed above, the deemed and rectified order have been merged with the order passed undei section 129 by CIR (Appeals), hence, the Additional Commissioner had no jurisdiction to initiate proceedings under section 122(5A) nor can amend the order passed by CIR (A).
(ii) At this stage, we may recall the facts that, order passed under section 221 for tax years 2004 to 2005 had been annulled by CIR (Appeals) as per orders Nos.13 to 15 dated 21-08-2006. Against this order, the Commissioner, LTU, did not file any appeal before the Appellate Tribunal contesting the annulling of orders, hence, the order of CIR (Appeals) dated 21-08-2006 had attained finality and was a past and closed transaction and the original orders had merged with the order passed Under section 129 of Ordinance, 2001.
(iii) With the above facts in mind, we are relying on the ratio dividend of decision of Lahore High Court reported as 2001 PTD 1467 (LHC) in the case of Sandal Engineering (Pvt.) Limited, Faisalabad v. the Inspecting Additional Commissioner of Income Tax, Faisalabad. This decision" ,has also been confirmed by Supreme Court of Pakistan in 'Civil Appeals Nos. 1350, 1351 and 1352 of 2001 dated 27- 04-2006 as Civil Appeal was not pressed and had been withdrawn.
32. Facts of the case decided by Lahore High Court are that, the original order for the years 1994-95 to 1996-97 were passed by the IAC as Chairman of Panel on the basis of Special Jurisdiction assigned to Inspecting Additional Commissioner under sections 5(1)(c) and 5 (1)(cc) of Income Tax Ordinance, 1979 (now Repealed). Thereafter, another Additional Commissioner / IAC had initiated proceedings under section 66A of Repealed Ordinance, 1979. Jurisdiction of IAC to initiate fresh proceedings under section 66A was contested, but was not accepted by the Tribunal. The order of the Tribunal was cancelled and reversed by a Divisional Bench of Lahore High Court as per finding recorded in Paras 6, 7 and 8 on Pages 1472 to 1473 of their decision. Although, it was contested before Supreme Court of Pakistan, but was withdrawn and not pressed. Thus, the decision of Lahore High Court had attained finally.
33. Reverting back to the facts of appellant case, it is once again submitted that the Commissioner of Income Tax (Appeals-I) Karachi had annulled the orders passed under section 221 for tax years 2004 and 2005 as per order dated 21-08-2006 which was not contested before the Appellate Tribunal Inland Revenue, Karachi. Hence, the original order had merged with the appellate order passed under section 129 which still holds the field. Thus, the Additional Commissioner cannot initiate fresh proceedings under section 122(5A) as he has no jurisdiction to amend an order passed by Commissioner of Income Tax (Appeals). In view of ratio dividend of above decision, the CIT (Appeals), Karachi should have cancelled and annulled the impugned order now passed under section 122(5A). It is therefore, prayed that the order passed under section 122(5A) may kindly be cancelled.
(iv) Our next legal objection is that, proceedings under section 122(5A) besides being beyond jurisdiction are also illegal as, the Additional Commissioner, except for incorrect and frivolous objection which besides being against the facts and also evidence available on record, but he could not prove any illegality, nor erroneous and also prejudicial to interest of revenue. As both the conditions have to be fulfilled simultaneously, the order passed under section 122(5A) is liable to be cancelled and annulled. Reliance is placed on the fillowing decisions; (a)(1969) 20 Tax 51 (Trib.)
34. (b)I.T.As. Nos. 61 and 62/KB of 2009, tax years 2005 and 2006 dated 17-05-2011
(c) I.T.A. No.834/KB of 2010 and others for tax years 2004 to 2007 dated 20-11-2013 In the above decisions, it has been held that as both the conditions have not been fulfilled, the orders passed under section 34A of Repealed Income Tax Act, 1922 and also under section 122(5A) of Income Tax Ordinance, 2001 have been cancelled and annulled.
(v) Our next objection is that, the assets were de-leased in tax years 2003 and 2004. Depreciation on de-leased assets was claimed in the above years on residual value as per tax depreciation schedule and written down value was carried in tax year 2005. As residual value adopted in tax years 2003 and 2004 was accepted and these two years have neither been cancelled, nor amended, the written down value carried forward in tax year 2005 can not be disturbed without canceling or amending the tax years 2003 and 2004. Hence, proceedings initiated under section 122(5A) for tax year 2005 are illegal and without jurisdiction. The CIR (Appeals) should have cancelled and annulled the order, but can not set-aside the order under section 122(5A) which is also without jurisdiction and an illegal order passed in violation to Section 129(1) (a) of Ordinance, 2001. Order passed may kindly be cancelled and annulled.
35. 5)Ground Nos.6 and 7.---Depreciation claimed on written down value carried forward of residual value of de-leased assets.
36. There is no dispute of facts of this case. Hence, appellant had correctly claimed tax depreciation as per Section 22 read with Third Schedule to Income Tax Ordinance, 2001 on residual value which was carried forward as written down value from tax years 2003 and 2004. We have already produced Photostat copies of tax depreciation schedule for tax years 2005 and also for earlier years. Thus, appellant had correctly claimed depreciation of Rs.1,544,484/- for the period ending 30-09-2004 and at Rs. 1,517,590/- for the period 30-06-2005, both relevant to tax year 2005.
37. Depreciation as claimed may kindly be directed to be allowed.
38. 6)Ground No.8. Exchange gain included in total turnover for levy of tax under section 113.
39. As per audited accounts, appellant had declared exchange gain on export sales as under:-
(i) Note No.29 other income. Exchange gain during 30-09-2004 Rs.6,875,773/-
(ii) Note No.28 other income. Exchange gain during 30-06-2005 Rs. 1,086,021/ As per order passed under section 122(5A), the Additional Commissioner had included exchange gain of Rs.6,875,773/- and Rs. 1,086,02I/- in the total turnover for levy of tax under section 113 of Ordinance, 2001, without confronting the appellant as this issue was neither raised, nor any notice was issued during proceedings under sections 122(5A)/122(9).
40. Without prejudice and as per our submissions before CIR (Appeals) we had explained that, (i) no notice under sections 122(9)/122(5A) was issued by the Additional Commissioner. (ii) As per clarification issued by CBR in Para 4 of Circular No.14 of 1993 dated 19-08-1993, Duty Draw Back viz, custom rebates, Compensatory rebate, export exchange difference etc relating to export sale is not liable to be taxed separately. Photostat copy of Circular is enclosed for perusal.
41. This issue has recently been decided by Appellate Tribunal Inland Revenue, Lahore in I.T.As.
42. Nos.1688 and 1689/LB/2012 tax years 2010 and 2011 dated 08-02-2013. Photostat copy of decision is enclosed.
43. As the above Circular has neither been withdrawn, nor rescinded by FBR till to date and has been saved in Income Tax Ordinance, 2001, hence is applicable as per Section 239 of Income Tax Ordinance, 2001.
44. It is therefore prayed that addition of exchange gain of Rs.6,875,773/- and also Rs.1,086,021/- added to the declare turnover for the purpose of levy of tax under section 113 during the period 30-09-2004 and 30-06-2005 relevant to tax year 2005 may kindly be deleted from the total turnover computed for levy of tax under section 113 in order passed under section 122(5A)."
45. 7.On the other hand, learned DR strongly supported the impugned orders passed by both the officers below. He prayed that the order of learned CIR(A) may be confirmed.
46. 8.We have heard the learned representatives of both the parties and have gone through the record of the case.
47. 9.The main thrust of the arguments of the learned counsel is that the learned CIR (A) was not justified in remanding back the case. The learned counsel submitted that powers of setting aside the order by the CIR, (A) has been withdrawn by the Finance Act ibid. The section 129(1) before Amendment and after amendment is reproduced as under:- Prior to substitution by Finance Act,2005 Clause (a) of Sub-Section (1) of Section 129After substitution by Finance Act, 2005
129. Decision in appeal.---(1) In disposing of a n appeal lodged under section 127, the Commissioner (Appeal) may---129. Decision in appeal.---(1) In disposing of an appeal lodged under section 127, the Commissioner (Appeals) may---
(a) in the case of an appeal against an assessment order-- -
(i) make an order to set aside the assessment order and direct the Commissioner to make a new assessment order in accordance with any directions or recommendations of the Commissioner (Appeals); or
(ii) (ii) make an order to confirm, modify or annul the assessment order; or[(a) make an order to confirm modify or annul the assessment order after examining such evidence as required by him respecting the matters arising in appeal or accusing such further esquires to be made as he deems fit; or
(b) in any other case, make such order as the Commissioner (Appeals) thinks fit.(b) In any other case, make such order as the Commissioner (Appeals) thinks fit.
48. (Underlining for emphasizing)
10. From comparison of the above, it is unambiguously clear that after the amendment by the Finance, Act, 2005, the CIR(A) may confirm, modify or annul the assessment order because the CIR(A) has wider powers to conduct enquiry and he may enhance the assessment, confirm the assessm ent or modify the assessm ent. Further, we agree with the submissions of the learned counsel for the appellant that the learned Commissioner Inland Revenue (Appeals) was divested of his powers to set aside the case for de novo proceedings. The language of the amendment brought about by the Fiance Act, 2005, is unambiguous. Even FBR (then CBR) issued the following directions in the Circular No. 1 of 2005 (Income Tax) to the same effect: "Setting Aside of assessm ent order by commissioner (Appeals).
49. (Section 129(1)(a)):-- "Clause (a) of subsection (1) of section 129 has been substituted and Commissioner (Appeals) has been divested of the option of set aside an assessment. After amendment Commissioner (Appeals) would be able only to modify, confirm or annul the assessment after making (or modify, confirm or annul the assessm ent after making (or getting conducted) enquiries or examining the books of accounts etc. as he deems fit. This will bring relief to the taxpayers and also stop unnecessary deferment of revenue. The provision of said clause will be applicable in case of appeals filed on July 1, 2005 and onwards."
11. The language of the amended provision clearly empowers the Appellate Authority to undertake further enquires and examine the record for deciding the case by the Authority itself without sending the case back to the Assessing Officer/OIR/ACIR. The Appellate Authority had inherent jurisdiction to set aside the case, was rendered in oblivion of the language of the amendment and the unambiguous law regarding the concept of set aside of assessment for de novo proceedings under the Income Tax Law. We, therefore, follow the legal provisions as amended vide Finance Act, 2005 and hold that the Commissioner Inland Revenue (Appeals) lacked jurisdiction to set aside [(set aside the assessm ent order and <u>direct the Commissioner to make</u> a new assessment with an <u>directions or recommendations of the CIR(A)], </u> if word set aside read with the phrases given in bracket / italic/underlined it amounts to remand back in Income Tax Proceedings.
50. If the appellate authority sets aside the assessment without any directions for fresh assessment then, if it is simply "set aside" it means annulment even in income tax/fiscal proceeding and the assessm ent order amounts to annulment of assessment in toto. Before the amendment in Finance Act, 2005 the CIR(A) had the powers to set aside / remand back the assessment and direct the Commissioner to make a fresh assessment, but after amendment vide Finance Act, 2005 the CIR
(A) was given very wide powers to make further enquiries and scan the evidence to be produced before him to arrive at the conclusion and give his own findings which ought to be based on reasons after application of judicious and conscious mind himself. After the amendment vide Finance Act, 2005 the CIR(A) cannot set aside with direction to re-do / remand back. The said amendment in Section 129(1)(a) is beneficial, benevolent and curing in nature. It is in the nature of relief to both the parties i.e. taxpayer as well as to the Department and it is for speedy and meaningful dispensation of justice, therefore, it will apply retrospectively and applicable to all pending appeals though relevant to prior years to year 2005. The impugned appeal decided on 30.12.2011, therefore, the law as applicable regarding the appeal procedures and amendment in section 129(1)(a) will apply accordingly and CIR(A) ought to strictly follow the same in the light of said amendment, CIR (A) was not justified in remanding back this appeal to ACIR with adverse inference otherwise it will tantamount to vexing twice the taxpayer for the same cause. The learned counsel for the appellant rightly pointed out that the CIR(A) was not justified in remanding the order on flimsy grounds which have neither been appreciated, nor approved, rather deprecated by higher forum. He placed reliance in on the following decisions:-- I) 1996 SCM R 230,in, Chairman WAPDA, Lahore and others v. Gulbat Khan 2) 1991 PTD 463 (KHC) in, Shahab Industry Ltd. v. Commissioner of Income Tax, Karachi 3) 2002 PTD 407 (KHC),in, AYENBEE (Pvt.) Limited v. Income Tax Appellate Tribunal, Headquarter, Karachi.
51. 1988 PTD 1014 (LHC) in, Ch. Muhammad Sadiq v. Income Tax Officer.
12. This amendment does not curtail the power of CIR(A). In fact this has enhanced the power of CIR(A) and is also beneficial for both the parties. The concept of finalization of all issues up to the level of CIR(A) is obviously for the benefit of taxpayer and the department. This has also gear up the appellate machinery at rate of knots and speedy trial of the case and to avoid protracted litigation between the parties and to rescue the taxpayers as well as department from vexing twice for the same cause and quick dispensation of the justice. The learned CIR(A) has the same powers which the assessing officer vested with him. Taxpayer filed return in the year 2005. Subsequently, the CIR(A) remanded back this case. The CIR(A) is included in the Income Tax Authority under section 207 of the Income Tax Ordinance, 2001, CIR(A) working under the hierarchy of FBR, CIR(A) is working specially under FBR Member (Legal) and fully falls under the dominance of FBR.
52. AO/OIR/DCIR/ ACIR and so also CIR(A) working under one umbrella of FBR and working under the Member Legal. Just for quick disposal of the case and to save the taxpayer from unnecessary litigations the legislature has withdrawn the powers of remand back of assessment order knowingly, deliberately and willingly as CIR(A) is special value to value the assessment by further enhancing or confirm or modifying or annulling the income of the taxpayer by conducing inquiry, hence he has been given wider powers then the Appellate Court, hence his powers are wide than those of an appellate court under the code of Civil Procedure. His competence is not to be restricted to dealing with subject matter of appeal. CIR(A) may examine all matters covered by the assessm ent order. As discussed above, he may enhance assessment subject to fulfillment of requirements of law. Therefore, in our opinion, the CIR(A) is not enjoying powers of the appellate court as he is not an independent, impartial though he ought to be. Further, by virtue of section 127 of the Income Tax Ordinance, 2001, there is right of appeal only to the taxpayer (person) and not to the revenue department. Hence, the department cannot, appeal against any order of the income tax authorities. Though the department has other remedies against such orders of the DCIR/OIR/CIRs by initialing proceedings under sections 122, 177, 221 etc. of the Income Tax Ordinance, 2001 by taking action.
53. 13.We with great concern would observe that the Government functionary including taxing officer/CIR\CIR(A) henceforth is to work hand in hand with the judiciary to usher in an age of the speedy justice delivery systems in our beloved and beautiful country to remove the adage "JUSTICE DELAYED IS JUSTICE DENIED" from Pakistan Judicial system. Early and meaningful speedy disposal of pending appeals will bring some relief to the taxpayers and may also stop unnecessary deferment of revenue. In this way CIR(A) may protect and safeguard the interest of both taxpayer as well as of revenue, Delay in dispensation of complete and meaningful justice dispensed with and at times makes it worthless. Facts and conduct of appeal shows deliberately contribute to the delay after the amendment in Finance Act, 2005.
14. The CIR(A) can himself decide the issue on his own. CIR(A) need not remand the matter to the DCIR/OIR/CIR for fresh consideration. The CIR(A) can exercise all such powers as the DCIR/OIR/ACIR/CIR could have exercised at the time of original hearing of assessment. An appeal is but continuation of the original proceeding, and what the DCIR/OIR/ACIR/CIR/ assessing officer could have done, the CIR(A) can also do in appeal proceeding; the scope of his power is coterminous and co-extensive with that of the DCIR/OIR/CIR/ assessing officer. The order of the CIR(A) is, therefore, not sustainable in the eyes of law and the matter is remanded back to the CIR(A) to pass speaking judicious order after application of judicial, judicious and conscious mind and after examination of records of assessment and details/information and cross verification of details and after confrontation and obtaining rebuttal of the taxpayer within 60 days of the receipt of this order subject to reasonable opportunity of being heard to the appellant as well to the revenue department.
15. Though the CIR(A) had inherent powers to remand the assessment order which were ancillary and necessary for the disposal of the case but when the law has been given to do something it must be done in the same manner. A plain reading of section 129 (1) reproduced above clearly shows that the CIR(A) has no powers to remand the assessment but in other cases /orders other than assessm ent order viz. penalty, additional tax and default surcharge, etc. (which falls under the category of order but not "assessm ent order") the CIR(A) has ample powers under section 129(1)(b) to remand the other orders back to the DCIR/OIR/CIR, but not in the case of appeal against assessm ent order. There is much difference between "Assessment Order" and "Order is any other cases", words used in this Section 129(I)(b)(Supra)" in any other case." "means other than assessm ent order." CIR(A) is not an administrative authority but discharging judicial functions, if not, at least quasi judicial function and such an order from such authorities are not expected. The settled principle regarding administration of justice are that CIR(A) dispensing justice and exercising judicial powers are supported to apply his mind to the cases and to determine respective stances taken by the taxpayer and after giving also opportunity to the department and further evaluating those to give his own verdict justified by reason, we are sorry that we are remarking with a great dismay that the order impugned can in no manner be placed in the arena of judicial order or even quasi judicial order.
16. For the reasons discussed above. We with heavy heart remand back because it cannot be given premium to lethargic first appellate authority who totally failed to fulfill in discharging of his bounden judicial duty. The Taxpayer is being vexed on the simple issue which the CIR (A) could decide it. Therefore, to avoid further such practice by the CIR (A) and for want of correct application of law, we remand back the Order dated 30.12.2011 to the CIR (A) to apply his own judicious and judicial mind and decide the appeal after providing reasonable opportunity to the Taxpayer and the Revenue. These appeals are deemed to be pending for adjudication before the CIR(A). The Appellant /taxpayer is at liberty and may take up all factual and legal grounds and all aspects of the issues of the case afresh/de novo.
54. 17.Before parting with this judgment we must observe that:-- TAX LAWS, LIKE ALL OTHER LAWS, TO BE RESPECTED, MUST BE MADE RESPECTABLE.
55. THE LAW IS LIKE APPAREL, WHICH ALTERS WITH THE TIME, THE LAW IS NOT THE SAME MORNING AND NIGHT. THE LAWS OF A STATE CHANGE WITH THE CHANGING TIME.
56. The important question is whether a judge is honest and DOES HE HAVE THE COURAGE TO DO JUSTICE OF HIS OWN CONVICTIONS TO DO WHAT IS RIGHT AT THE MOMENT last but not the least, with profound respect we would quote: Sir Sidney Smith, English Esayist [Peter Ply Mley's letter] who observed in the year 1807: "WHEN I HEAR ANY MAN TALK OF AN UN-ALTERABLE LAW, THE ONLY EFFECT IT UPON ME PRODUCES IS TO CONVINCE ME THAT HE IS AN UNALTERABLE FOOL:"
18. In terms of the above findings both the appeals are hereby disposed off.