1. CHAUDHARY KHALID YOUSAF, J.----The captioned reference has been directed against the judgment of the Income Tax Appellate Tribunal, Azad Jammu and Kashmir Council Muzaffarbad dated 16.08.2008, whereby the appeal filed by the applicant therein was partly accepted.
2. Precise facts of the instant reference, as stated are that the petitioner has been carrying cloth business within the territorial jurisdiction of District Kotli. It has been stated that the petitioner is registered with the respondent/authorities for the purpose of payment of sales tax. It has been further stated that under the Universal Self Assessment Scheme the petitioner filed Income Tax Return on 30.09.2006 under Section 114(I) for the Tax year 2006 declaring taxable income of Rs.170000/- and the same under clause (b) of the Section 120(1) of Income Tax Ordinance, 2001, become an assessment order the moment it was filed. It is further stated that Taxation Officer, Kotli issued illegal and void notice under section 120(3) pointing out such deficiencies which were not warranted by under law and also issued notice under section 114(4) on 20.03.2007 for filing the return for the Tax year 2006 which has already been filed by the applicant. It has been alleged that these notices were not even served upon the applicant. It is further alleged that the Tax Officer, Kotli passed assessment order on 09.05.2007 under sections 122(1) of Income Tax Ordinance, 2001 computing Rs.800000/- as net amount by taking daily sales at Rs.20000/- whereas no notices under sections 122(5) and 122(9) were issued by the Taxation Officer. Feeling aggrieved the applicant-petitioner challenged the assessment order before Commissioner Income Tax (Appeals), Mirpur, who reduced the sales to Rs.15000/- and reckoned taxable amount as Rs.600000/-vide its order dated 28.09.2007. Thereupon, the applicant-petitioner filed a miscellaneous application before C.I.T/(appeals) on 25.10.2007, and the same was rejected on 31.10.2007.
3. Feeling dissatisfied from the said order the applicant-petitioner filed an appeal before Income Tax Appellate Tribunal, Muzaffarabad under section 131 of Income Tax Ordinance 2001, whereby the G.P. Rate was reduced from 20% to 15% and determined the taxable income as Rs.450000/- vide its order dated 16.08.2008, hence this reference application under section 133 of the Income Tax Ordinance, 2001, wherein, the following questions formulated by the applicant;- i) on the facts and in the circumstances of the case, the learned Income Tax Appellate (ITAT) was not justified to hold that the assessing office was competent to issue notice under Section 121 and to assess the applicant under Section 122(1) of Income Tax Ordinance, 2001? ii) Whether on the facts and in the circumstances of the case, the learned Income Tax Tribunal (ITAT) has legally erred in not adjudicating all the legal issues and grounds taken in the appeal? iii) Whether on the facts and in the circumstances of the case, the learned Income Tax Tribunal (ITAT) was not justified in computing the taxable income on the basis of purchases made by the applicant ignoring the actual sales conducted during the year? iv) Whether under the law and circumstances of the case, the learned ITAT has erred by failing to declare the assessment order as null and void due to non-service of statutory notices upon the applicant? v) Whether on the facts and in the circumstances of the case, the learned ITAT was not justified to uphold the assessment order passed by the Taxation Officer, Kotli without issuance of statutory notices under sections 122(1) and 122(5) of the Income Tax Ordinance, 2001? vi) Whether on the facts and in the circumstances of the case, the learned Tribunal was not justified in ignoring the fact that amended assessment made under Section 122(1) was void ab-initio as there remained no assessment order in the field sought to be amended after issuance of notice under Section 114(4)? vii) Whether on the facts and in the circumstances of the case, the learned ITAT has legally erred by failing to consider the aspect of illegal application of statement of the applicant recorded on 09.05.2007 with retrospective effect? viii) Whether on the facts and in the circumstances of the case, the order of the learned Tribunal is an effect of misreading and non-reading of documents on record and incorrect appreciation of law?
4. Sheikh Masood Iqbal, Advocate the learned counsel for the applicant-petitioner vehemently contended that applicant submitted his return under the Universal Self Assessment Scheme on 30.09.2006 which becomes assessment order the moment it was filed under section 120(1)(b) of Income Tax Ordinance, 2001 therefore, subsequent assessment order passed by the Taxation Officer Kotli is void and liable to be quashed. Learned counsel further contended that notices under sections 114(4) and 120(3) were not properly served upon the applicant therefore, impugned assessment order is illegal being unheard and lastly prayed for acceptance of reference.
5. Haji Muhammad Afzal Khan, Advocate filed written arguments, on behalf of the respondents wherein it has been stated that applicant filed return under the Universal Self Assessment Scheme without any documentary proof which is basic requirement of law and the Income Tax Officer is competent to ask the tax payer to meet the deficiencies in this regard notices under sections 114(4) and 120(3) were issued. It has been further stated that notices were served on the business place and received by one Sheikh Abdul Habib, the real brother of the applicant, but the same were not complied with, thereupon the respondent No.2 issued letter No.2076 dated 20.04.2007 and in compliance of said letter the petitioner himself appeared before the Income Tax Officer and got recorded his statement on 09.05.2007. It has been further stated that ultimately the assessment order under section 122(1) of Income Tax Ordinance, 2001 was passed on 09.05.2007 whereby the net income of the petitioner was assessed of Rs.800000/-. It has been further averred that petitioner filed an application for rectification under section 221 of ITO, 2001 which was rejected on 31.10.2007 and the same has not been challenged before any forum hence got finality. It has been further averred that questions raised in the reference are questions of facts whereas as per law, this Court has only jurisdiction to resolve the questions of law. Finally, it has been prayed that reference may be dismissed with costs.
6. We have heard the learned counsel for petitioner as well as learned Legal Advisor on behalf of the Department and gone through the record of the, case with utmost care.
7. The main contention of the learned counsel for the petitioner that the return filed by the petitioner under Self Assessment Scheme, became an assessment order the moment it was filed and remained protected, therefore, the assessment order subsequently issued by the Taxation Officer Kotli is against the law and liable to be set- aside. Whereas, on the other hand, the argument of the learned counsel for Taxation Department is that return filed by the Tax Payer applicant was not complete as per requirement of section 114(2) of the Income Tax Ordinance, 2001, therefore, the notices were issued to the applicant and informed him such deficiencies but said notices were not complied with by the Tax Payer therefore, impugned assessment order was issued.
8. For better appreciation the relevant sections 114(2) and 120 (3, 4) of the Income Tax Ordinance, 2001, are reproduced which read as under; 114(2). A return of income,-
(a) shall be in prescribed form and shall be accompanied by such annexure, statements or documents as may be prescribed;
(b) shall fully state all the relevant particulars or information as specified in the form of return, including a declaration of the records kept by the taxpayer; and
(c) shall be signed by the person, being an individual, or the person's representative where section 172 applies.
9. "120(3). Where the return of the income furnished is not complete, the Commissioner shall issue a notice to the taxpayer informing him of the deficiencies (other than incorrect amount of the payment of the tax payable) and directing him to provide such information, particulars, statement or documents by the such date specified in the notice.
(4) Where a taxpayer fails to fully comply, by the due date, with the requirements of ^the notice under subsection (3), the return furnished shall be treated as an invalid return as if it had not been furnished."
10. From the plan reading of the above reproduced sections, it transpires that where the return filed by the Tax Payer is incomplete the same shall be treated as invalid as it had not been furnished and the Commissioner is competent to issue notice to Tax Payer informing him such deficiencies.
11. In the case in hand, the return filed by the Tax Payer was not considered as a complete and the respondent Tax Department issued notices to the petitioner herein to meet the deficiencies, but said notices were not complied by the Tax Payer therefore, the Tax Officer Kotli issued the assessment order under Section 122(1) of Income Tax Ordinance, 2001, assessing the net income as Rs.800000/- on filing of the appeal against the said assessment order the same was reduced by the Commissioner Income Tax (Appeals) and further reduced by the Appellate Tribunal and the same was fixed Rs.450000/- the petitioner through this reference solicited further reduction after the survey of aforementioned sections of Income Tax Ordinance, 2001. It can safely be concluded that in absence of a complete and valid return filed under Self Assessment Scheme the Taxation Officer is competent to issue assessment order as done in the case in hand.
12. So far as the contention of the learned counsel for the petitioner that the impugned assessment order was issued being unheard is concerned. We have perused the record and found that the impugned notices were issued and served on business place. The address provided by the Tax Payer/applicant herein i.e. Data Cloth House and said notices were received by one Sheikh Abdul Habib, the real brother of the present petitioner.
13. Therefore, when the notices were served at business place owned by the Tax Payer, it can safely be concluded that notices were severed upon the petitioner. It further reflects from the record that before passing the impugned assessment order the Income Tax Officer recorded the statement of petitioner, therefore, it cannot be said that the impugned assessment order was passed without extending the opportunity of hearing to Tax Payer. The remaining points stated in the reference application and agitated at bar by the learned counsel for the petitioner are the questions of facts, do not require any response from this Court while deciding the reference application filed under Section 133 of Income Tax Ordinance, 2001.
14. In view of the above discussion, the instant reference application needs no further interpretation of law and same is hereby answered in negative and order / judgment passed by the learned Income Tax Appellate Tribunal Azad Jammu and Kashmir dated 10.08.2008 is hereby upheld.
15. The instant reference/application is disposed of in the manners indicated above: