This appeal by the assessee/appellant is directed against the order u/S. 66-A by the learned IAC Range-V, Faisalabad in respect of assessment year 1988-89.
2. Mian Muhammad Azeem, advocate for the _ assessee/appellant present while none present for the Revenue. The appeal is therefore, decided ex-parte on merits under Rule 20(2) of the That Rules, 1981.
3. The assessee challenges the order on the ground that proceedings u/S. 66A were wrongly initiated as there was no error in the order of the to, that learned IAC has wrongly held that although proceedings cannot be initiated u/S. 65 in this case yet proceedings u/S. 66-A can be initiated on the same point, and that action u/S. 66-A is barred by time. The facts of the case leading to action u/S. 66-A is that the assessee had purchased Special National Fund Bonds having fact value of Rs.10,00,000/- through bank finance of Rs.800,000/-, in the reconciliation statement submitted in connection with assessment for the assessment year 1988-89, the assessee claimed the entire face clause of the bonds as receipts. According to the learned IAC the assessee could take credit of net amount on maturity by deducting amount of loan as well as interest thereon from the face value of S.N.F.B. He relied on C.B.R.'s Circular of October, 1985 according to which only net realised value of bonds can be introduced in the books. Full amount can be brought in the books only when investment in S.N.F.B. Is self-financed. Original assessment was reopened u/S. 65. During the reassessment proceedings, the assessee explained the position to the Assessing Officer stating that the assets covered by the face value of S.N.F.B. Were intimated to the State Bank of Pakistan and that section 13 does not apply to such assets under Clause (172) of the Second Schedule, lt was further clarified that although the assessee claimed benefit of Rs.
10,00,000/- in the reconciliation statement but the assessee was given benefit of Rs.8,10,000/- as interest claimed at Rs. 190,000/- was not allowed as business expense. Therefore, Assessing Officer filed proceedings u/S. 65 by observing that the assessee contention is correct. The learned IAC was of the view that Assessing Officer "wrongly accepted the assessee contention and the dropping of proceedings u/S. 65 were not justified. Accordingly, he initiated action u/S. 66A. After detailed discussion, the learned IAC cancelled the order u/S. 62/65 dated 30-6-1992 and remanded the case back to Assessing Officer for de novo assessment. The learned AR of the assessee argues that once the reassessm ent order u/S. 65 had been passed, accepting the assessee contention, action 66A could not be taken on the same issue. We do not agree with this view because re-assessment u/S. 65 is also a assessm ent order and if the IAC finds it to be erroneous in so far as it is prejudicial to the interest of Revenue, he can invoke provisions of section 66A. The learned AR of the assessee further pointed out that the order u/S. 66-A is even otherwise of no consequence, because the order which has been cancelled was made u/S. 65 and as such its cancellation would mean that the original order u/S. 62 stands restored. That being the case now further proceedings u/S. 65 cannot be taken because the time limit for action u/S. 65 has since long expired. The learned IAC through order u/S. 66A cannot extent and the time limit of action u/S. 63 65. We have given careful consideration to the arguments of the assessee and find that the direction of the IAC to reform the assessm ent u/S. 65 is patently illegal because the time limit for such section has already expired, therefore, without going into other merits of the case, we find that the order u/S. 66-A is improper and it is hereby cancelled.
4. the assessee appeal succeeds.