NASIM SIKANDAR, J.-- This is a case stated by the Lahore Bench of the Income Tax Appellate Tribunal. The following questions of law have been- framed for our consideration and answer:--
(i) "Whether on the facts and circumstances of the case the learned ITAT was justified in annulling the re-assessm ent orders when these assessments were made in agreement with the assessee and the assessee himself offered for agree assessment?
(ii) Whether on the facts and circumstances of the case the learned ITAT was justified in holding that action u/S. 65 was illegal in spite of the provisions of S. 154(6) of the I.T. Ordinance, 1979?
(iii) Whether on the facts and circumstances of the case the learned ITAT was justified in holding that Income Tax Officer discount did not have any definite information for action u/S. 65 in this case?
(iv) Whether 0n the facts and circumstances of the case the learned ITAT was justified in holding that amendment made in section 65(2) by the Finance Act, 1987 was applicable retrospectively?
2. According to the statement of the case the assessee an individual at the relevant time derive income from grinding and sale of chillies. Original assessments in the year 1980-81, to 1983-84 were framed under self- assessm ent scheme by accepting the assessee version of the earned income.
Subsequently on the report of another wing of the revenue his case was re-opened and he was directed to make reply of a number of objections raised by the assessing officer to his earlier declared income in the perspective of the report received. After considering the reply, the assessing officer concluded that the assessee had not been able to prove his contention regarding grinding of the said commodities on behalf of other parties, It was accordingly concluded that he had been doing business on his own account and that fact had not been .Disclosed in the return of the income earlier filed and accepted under the self assessment scheme. At the fag end of the proceedings the, assessee in the company of his advocate agreed to be assessed at net income of Rs. 75,000/-, Rs. 80,000/- Rs. 85,000/- and Rs. 95,000/- as against the earlier declared and accepted income of Rs. 29,539/- Rs. 34,539/-, Rs. 41,500/-, Rs. 42,539/- respectively in the years under review. The assessing officer after framing the assessment on agreement basis proceeded to issue notice under section 116 of the Income Tax Ordinance and finally imposed penalties of various sums.
3. His appeal before the A.C. was rejected while the learned Tribunal found for him inter alia on the ground that initiation of proceedings under section 65 of the Ordinance were without availability of definite information and that the learned I.A.C. Recorded the approval for reopening without exercising his discretion. The amendment in the section 65 of the Income Tax Ordinance by Finance Act, 1987 w.e.f. 1.7.1987 was also held to be applicable to the pending cases being procedural in nature. Accordingly the assessments framed on agreement basis as well as the penalty imposed under section 111 of the Income tax Ordinance, 1979 was found to be unjustified and therefore, cancelled.
4. After hearing the learned counsel for the revenue we will readily agreed with him that, in the first instance, appeal before the Tribunal was not competent, It will be noted that the A.C. In his order expressed his surprise as to how both the assessee as well as his learned counsel who signed the agreed assessm ent could possibly approach him complaining against the assessment order so framed. However, the learned Tribunal completely closed its eyes to the agreed assessment and entertained the objections with regard to lack of availability of definite information or improper service of notice in a manner which appears totally unusual to proceedings, before the learned Appellate Tribunal. Far fetched technicalities were reported to interfere with the agreed assessm ents, It was absolutely unjustified. The assessee being agreed to be assessed at a certain sum after hearing was found to have concealed his income. Therefore, he owed a lot of explanations to be made before his appeal could be entertained by the Tribunal and ruled upon as such. An agreed assessm ent, we have repeatedly held is binding both on the revenue as well as the assessee. Although the provisions of Civil Procedure Code are not strictly applicable to the proceedings before the tribunal, however, the general principles contained in the Code can freely be invoked to do complete justice between the parties. One of such principle is contained in sub- sec ion (3) of section 96 of the Code, It states that no appeal shall lie from a decree passed by the Court with the consent of the parties. That principle was rightly invoked by the first appellate authority, the A.C. Faisalabad. As observed earlier, the learned Tribunal rather went to the extent of allowing premium to an assessee who was caught in the middle of concealment and had offered to be assessed at a particular income. Before the Tribunal it was never their case that the agreement was got executed in a manner which amounted to coercion, mis-representation or playing of fraud on the part of the revenue, It is only on these three grounds or, reasons for which an agreed assessm ent can possibly be challenged before the first appellate authority or the Tribunal. The sanctity attached to a completed assessment with the agreement of the parties was outraged by a forum not less than that of second appeal, We therefore, share the surprise Of the learned first appellate Authority. Accordingly our answer to question (a) is in the negative.
5. The other three questions (b to d) do not arise at all inasmuch as we are of the view that in absence of a solid proof on record and the availability of any of the aforesaid elements of coercion, mis-representation or fraud on the part of the revenue appeal before the Tribunal as not competent.
6. Following common question in the year, 1980 to 1984 with regard to penalties imposed by the assessing officer has also been framed and sent to this Court for reply.
"Whether on the facts and circumstances of the case the learned ITAT were justified in cancellation of the penalty orders?
7. After hearing the learned counsel for the revenue we will return an affirmative answer to the question holding that the assessing officer was not justified in imposing penalties. Our answer however, is based upon different reasons, In a number of cases, we have held that an agreed assessm ent shall be taken to be a package deal between the revenue and the assessee and that in absence of an express provision for that purpose an assessing officer cannot make resort to penalty proceedings, In CTR No. 362/91 re: C/T v. Muhammad Hanif answered on 20.11.2000 we have examined the issue in detail and concluded that an agreed assessment served the interest of both the revenue as well as the assessee and therefore, they were bound by its terms and conditions.
Also in absence of an express mention of penalty proceedings in the agreement itself, these provisions cannot be resorted to subsequently using the agreed assessment as admission on the part of the assessee.
For the various reasons recorded in the aforesaid reference we will return an affirmative answer to the cancellation of penalty orders though as observed earlier, for reasons different from the one expressed by the learned Tribunal.