MRS. AMBREEN ASLAM, (JUDICIAL MEMBER).-- Through this order , I intend to dispose off the titled appeal filed by the department against Order bearing No.51 dated 22-01-2015, passed by the learned Commissioner Inland Revenue (Appeals), Hyderabad on the following grounds:-
1. Order passed by learned CIR (Appeals), Hyderabad is bad in law and against facts of the case.
2. That, the law of merger was not applicable in the instant case.
3. That learned CIR(A) failed to appreciate that earlier appellate order dealt with amendment order passed under section 122(1)(5) of Income T ax Ordinance, 2001.
4. That, by virtue of section 122(5AA) commissioner had power to amend an assessment order , in respect of a subject matter which was not in dispute in an appeal.
5. Appellant craves to add, alter , amend or withdraw any ground before or at the time of hearing.
2. Brief facts of the case as gathered from the record are that the assessment under section 120(1)(b) in this case for tax year 2011 is considered erroneous as well as prejudicial to the interest of revenue due to the fact that the taxpayer declared Net sales in return of income at Rs.19,679,651/-, whereas, for the same period the sales in sales tax returns were shown at Rs.287,146,74 9. Therefore letter along with prescribed notice under section 122(9) ibid was issued to taxpayer vide No. Addl: CIR/Audit Range-B/Zone-I/R TO/Hyd/2013-14/134/dated, 02-01-2014 which was properly served. The taxpayer failed to furnish any explanation / rebuttal on due date, hence another opportunity of being heard was given vide letter No.144, dated 24-1-2014 for compliance on 30-01-2014.
3. The taxpayer through his representative furnished written reply vide letter dated 30-01-2014. No legal footing found in the said reply therefore, a letter No.233 dated 25-4-2014 was issued to the taxpayer which was replied by the taxpayer through letter dated 5-5-2014. Not satisfied with the reply of the taxpayer , the ACIR had finalized the proceedings by passing Order bearing DC No.34/05 dated 15-05-2014.
4. Against the treatment meted out form the aforementioned order passed by ACIR, the taxpayer preferred appeal before learned CIR(A) who decided the appeal of the taxpayer by passing Order bearing No.51 dated 22-01-2015 with following observations: "Perusal of record it reveals that the appellant being an individual engaged in the business of sale of wine on retail basis. The Additional Commissioner while examining the record pointed out that the order passed under section 120(1)(b) of the Income Tax Ordinance, 2001 was erroneous and prejudicial to the interest of revenue on the following ground:- "For the Tax Year 2011, Return of income has been filed showing value of sales at Rs.19,679,651/-. However , as per sales tax returns for the period under consideration value of sales (excluding sales tax) has been declared at Rs.287,146,749/-, Therefore, minimum tax liability under section 113 of the Income Tax Ordinance, 2001 on such turnover comes to Rs. 574,294/- (curtailed tax amount of Rs.2,297,173/- on account of 80% rebate as prescribed in clause (8) in Part-Ill of Second Schedule of the Income Tax Ordinance, 2001) which you have not discharged at the time of submission of income tax return.
The Additional Commissioner issued show-cause notice under section 122(9) of the Income Tax Ordinance, 2001 vide Letter No.134 dated 02-01-2014 for the impugned year, which was properly served and in response thereof the A/R of the appellant filed explanation and contended that in the sales tax returns, total sales declared at Rs.28,71,46,749/- as combined sales of Messrs Sujnani Wine Store and Messrs Arjun Wine Agency and both have declared turnover separately in the Income Tax Returns for the year under consideration. Messrs Arjun Wine Agency having separate NTN vide No.2919207-2 but the Sales Tax Registration were pending before the CRO Islamabad and who granted the Sales Tax Registration separately in May 2011 before completion of financial year.
He also contended that the tax liability as due against appellant has been paid before issuance of show-cause notice. The Additional Commissioner dis-satisfied with the explanation issued another notice and in response to the notice the A/R of the appellant repeated the same and further argued that the action of the Additional Commission was beyond the jurisdiction as the assessment completed under section 120 of the Income Tax Ordinance, 2001 has been merged firstly in the order passed under section 221 of the Income Tax Ordinance, 2001 which was challenged before the Commissioner Inland Revenue (Appeals-III). The CIR(A) passed the order vide ITA No.748 dated 30-04-2012, who annulled the order with remarks that 221 of the Income Tax Ordinance, 2001 is not the proper course. Thereafter the Commissioner Inland Revenue, Zone-I, RTO, Hyderabad selected the case for Audit under section 177(1) of the Income Tax Ordinance, 2001 and the audit proceeding were completed under section 122(1)(5) of the Income Tax Ordinance , 2001 by the Assistant Commissioner Inland Revenue, Audit-V , RTO, Hyderabad, who accepted the turnover declared in the return of income and charged the tax @ 1% on turnover declared at Rs.57,389,748/-, the return was secondly merged with the order of ACIR. Aggrieved by this order the appellant filed an appeal before the Worthy Commissioner Inland Revenue (Appeals-III). The CIR(A) vide its Appellate Order No.275 dated 27-05-2013 modified the order with reduction of rate of turnover tax in the light of Section 1 13(3) of the Income T ax Ordinance, 2001.
Moreover the A/R of the appellant invited my attention towards the action of the Additional Commissioner who passed the order under section 122(5A) was totally against the law as the return of income was merged twicely in the appellate order as per Law of merger . He relied on the judgment of Honorable Supreme Court duly reported as 1992 PTD 932 (SC Pak), their Lordship held that:-- "Notice - Power of I.A.C. - Doctrine of merger - Assessee a non-resident company- Assessment for the assessment year 1987-88 was completed - Assessee filed an appeal before CIT(A) which was partly allowed - Assessee filed an appeal before CIT(A) which was partly allowed - Assessee and the department both filed appeals against the order of the CIT(A) --- Department withdrew its appeal which was consequently dismissed --- After dismissal of appeal department issued notice under section 65 and framed assessment - Tribunal cancelled the assessment and held that proceedings initiated under section 65 were illegal and without jurisdiction --- .IAC issued notice to revise Income Tax Officer's order --- Whether IAC had the jurisdiction or powers to initiate action in respect of the orders passed by the appellate authorities or the Tribunal- Held No - Whether Income Tax Officers order merged in the order of the T ribunal Held Yes."
From the above facts and legal discussion, the action of the Additional Commissioner is totally illegal and unwarranted as the order passed under section 120 of the Income Tax Ordinance, 2001 has already been merged twicely in the appellate order on same issue, and the assessment under section 120 of the Income Tax Ordinance, 2001 was not in field at the time of issuing show-cause notice under section 122(5A) of the Income Tax Ordinance, 2001, therefore I declare that the order under section 122(5A) is NULL and VOID, ab initio illegal and is hereby annulled."
5. Being aggrieved and dissatisfied from the aforementioned order passed by learned CIR(A), the department preferred titled appeal before this Tribunal.
6. On the date of hearing, Mr. Abid Aziz Memon, D.R attended Court proceedings on behalf of the appellant/department while Mr . Salman Ahmed, Advocate attended on behalf of respondent / taxpayer .
7. During course of proceedings, learned DR argued that the Order passed by learned CIR (Appeals), Hyderabad is bad in law and against facts of the case as the law of merger was not applica ble in the instant case and the learned CIR(A) failed to appreciate that earlier appellate order dealt with amendment order passed under section 122(1)(5) of Income Tax Ordinance, 2001. He further argued that by virtue of section 122(5AA) commissioner had power to amend an assessment order , in respect of a subject matter which was not in dispute in an appeal. He prayed for setting aside of impugned order passed by learned CIR(A).
8. On the other hand, the learned AR vehemently opposed the arguments advanced by the learned representative of the department and fully supported the order passed by the learned CIR(A) by stating that the Inland Revenue Officer was not justified in not considering the contentions of the taxpayer and the order passed by the learned CIR(A) is legal, lawful and within the framework of law. Lastly , he prayed for dismissal of the instant appeal of the department.
9. I have considered the arguments advanced by the learned representatives of both sides, perused the case record including impugned order and the grounds containing in the appeal. To decide the instant appeal the question before me is whether the impugned order requires interference?
10. Precisely the department alleged against the taxpayer that for the tax year 2011, he filed return of income showing value of sale is at Rs.19,679,651/- excluding sales tax declared at Rs.28,146,749/- therefore the minimum liability in terms of Section 113 of Income Tax Ordinance, 2001 on such turnover minimum liability calculated Rs.5,74,294/- after taking in account 80% rebate as prescribed in clause 8 in Part-III of Second Schedule of Income Tax Ordinance, 2001 allegedly which has not been discharged by the taxpayer at the time of submission of returns.
11. Keeping in mind above charge, I have minutely examined the record, record reveals that assessment under section 120 of the Income Tax Ordinance, 2001 was merged while passing order under section 221 of Income Tax Ordinance, 2001 which was challenged before the Commissioner (A) which was annulled by the Commissioner (A) thereafter the case of taxpayer got selected under Section 177(1) for audit thereon, audit proceedings held by the department and the ACIR accepted the turnover declared in the return of income @ 1% on declared turnover .
12. Again the order was merged and appeal was also preferred before Commissioner (A) who was pleased to modified the order with reduce turnover tax rate.
13. Keeping in mind above position, I have taken in account Order No.275 of the Commissioner (A) dated 27-5- 2013 and other orders which are placed by the learned counsel for the taxpayer . Perusal of the said order shows that the taxpayer assailed order passed under sections 122(1)(5)/177(6) of the Income Tax Ordinance, 2001 with prayer that Assistant Commissioner violated the principles as the issue of charging of turnover tax has already been subjudice before the Higher Authori ties and he cannot raise the same in the audit proceedings under section 177(6) while passing Order under section 122(1)(5) of the Income Tax Ordinance, 2001.
14. Keeping in mind above position, I feel necessary to reproduce here relevant findings of the Commissioner(A) passed in Order No.275 dated 27-5- 2013 for the sake of convenience, I am reproducing the same as under: "4. 1 have considered the grounds of appeal, written submissions and have gone through the case record and it transpires that the deemed assessment order has been amended in a slip shod manner , the AC1R has disallowed 4th of the breakage of bottle, salary , fright and other expenses without pinpointing any defects except using stock phrases of being unverifiable and personal nature.
All additions have been made without confronting the taxpayer as there is no mention in the order regarding the issuance of notice under section 122(9) which is a mandatory precondition for amendment of assessment; there is no mention in the whole order that whether appellant was ever confronted on the quantum of addition or any basis thereof. The assessing officer has given detail of purchases in the order but has made no comment on the sale of the appellant except that they were controlled by central excise and sales tax department. It transpires that relevant excise record was never requisitioned nor it was ever examined and any finding given on that. There is mention on the first page of the order that AR of the taxpayer informed that income tax return has been separately filed by Arjun Wine Store Mirpurkhas vide NTN 2919207-2 but why this fact has been recorded in the amendment assessment order is beyond any compreh ension as there is no reference to the context and there is no finding on this statement of the AR.
On page 2 of the order there is a narrative statement that sales declared as per sales tax returns are Rs.56,389,748/- as against sales declared in the income tax return of Rs.19,679,651/- but in the entire order there is no mention as to how this discrepancy has been reconciled by the appellant taxpayer and why there was such a huge difference in the two, it may be due to duties and etc. but the amended order is totally silent on the issue.
There is also no mention as to why the ACIR has accepted sales as per Income Tax record inspite of such huge difference of Rs. 36.710(M) which is 200% of the declared sales. As there is no finding on sales aspect of the taxpayer's disclosures therefore it is beyond comprehension as to how the audit was conducted and completed without trashing this important aspect.
The appellant taxpayer claimed salary expenses of Rs. 6.5(M) and the officer has made remark that in absence of supporting evidence the above mentioned claim does not merit acceptance and personal nature can also not be ruled out therefore he resorted to addition of the 1/4th the amount. The officer failed to examine and give any finding on whether the appellant field withholding tax statement what was the number of employees how the personal element was there is salary expense and how the ACIR he arrived at a universal formula of disallowance of 1/4th of the claim.
In the end the officer resorted to apply minimum tax on the sales declared as per sales tax return and apparently without confronting the appellant.
With this background of amendment of assessment and contentions of the appellant before me it appears that the entire audit proceedings and amendment of assessment is prearranged and they both are hand in glove with one and other . The contentions of the appellant are solely against the charging of minimum tax after inclusion of sales tax and excise duty which is contended to be excluded. The appellant is also agitating on the rate applied (1%) of the turnover instead of allowing 80% rebate on the basis that the goods sold by the appellant qualify to the consumer goods and therefore, the appellant was entitled to the rebate.
Contention of the appellant that turnover for imposing minimum tax is exclusive of sales tans federal excise duty besides other item mention in section 1 13(3)(a) of the Income T ax Ordinance, 2001.
In the light of the above the amended assessment order is annulled"
15. Keeping in mind above findings of the Commissioner (A) in Order No.275 dated 27-5-2013, I feel it is proper to have glance over relevant part of the order-in-original date 15-5-2014. The perusa l of the same indicates that the Officer opined that above orders passed by the authority don't put bar on the assessment under section 122(5A).
16. From the above orders of the authorit ies below , it is evident that the taxpayer in every forum tried to delude the authorities with one reason or for the other and has also tried to demonstrate that the authorities are double jeopardize him and is calling inference on minimum tax etc.
17. I have also notice that the audit proceedings were initiated just to club or facilitate the taxpayer and huge difference of Rs.36.710/-(M) which is 200% of declared sale have not been taken in account in every step of proceedings the taxpayer has tried to take benefit of technicalities. Since Tribunal is the apex fact finding court and this is duty of the court that the court should try to find out that the innocent persons do not get involved in the matter of punishment. At the same time it is the duty of the court to see that the technicality should not prevail.
18. Since the Commissioner (A) in order No.51 dated 22-1-2015 has not appreciated the entire record and has passed the order on conjunctures and surmises therefore the same is set aside. However , in the interest of justice case is remanded to member legal with direction to assign this case to any honest and competent officer to adjudicate the same on merits and the taxpayer is directed to produce entire evidence before the concerned officer and he shall decide the same on merits after providing opportunity of being heard.
19. Appeal stands disposed of f in the manner as indicated above.