MR. KHAWAJA FAROOQ SAEED, MEMBER (JUDICIAL).-(1). This appeal by appellant registered firm deriving income from running a hospital is directed against order dated 19.02.2000 passed u/s 66A by IAC Income Tax/Wealth Tax, Range-IV, Multan on the grounds that inferences drawn and conclusions arrived at are against the facts of the case in as much as that IAC was not justified in holding that a firm which consisted of medical professionals/practitioners (doctors) is liable to super tax.
2. Relevant facts briefly are that return was filed declaring income of Rs. 2141771/- under SAS. Tax was paid u/s 80D. Assessm ent was finalized u/s 59(1) of the Income Tax Ordinance, 1979 (hereinafter mentioned the Ordinance). Later on, on inspection of the file IAC found the completed assessm ent u/s 59(1) without satisfying/justifying mandatory provisions of law as well as self assessm ent' scheme erroneous in so far it was prejudicial to the interest of Revenue. A show cause notice dated 18.01.02 was issued confronting the appellant that on declared income instead of paying super tax minimum tax liability was made u/s 80D as per provisions of clause 2B of Part IV of the First Schedule to the Ordinance. As a result assessment u/s 59(1) was wrongly made. The leamed IAC found reply to notice mentioned above "unsatisfactory". Another show cause notice was issued pointing out the disqualification under para 2(b)(iv) of CBR Circular No. I6 of 1999 dated 11.09.99 for the reason that appeals for earlier years were pending before ITA on the same issue. In reply it was stated that return qualified to be accepted under SAS as the appeals stood decided before the assessm ent u/s 59(1) dated 31.10.1999. IAC, however was of the view that as ITAT vide order dated 31.07.1999 has set aside the assessment for the earlier years and against that miscellaneous application moved on behalf of the appellant was pending the matter was subjudise at the time of filing of the return. In view of the facts and factors mentioned above as appreciated by the IAC assessm ent completed u/s 59(1) was found erroneous as well as prejudicial to the interest of Revenue which was cancelled by invoking provisions of section 66A.
The assessing officer was directed to frame fresh assessment u/s 62 after obtaining the relevant details.
3. Learned A.R. Of the appellant has argued that IAC issued first show cause notice on 18.01.2002 confronting the appellant that as a registered firm they did not fulfill the requirements of clause 2(b) para IV of the First Schedule to the Ordinance. A reply made has not been discussed having been brushed aside with the remarks "unsatisfactory" which is against the principles of justice and fair play. IAC instead of dropping the proceedings issued another show cause notice on 01.02.2002 on altogether a different ground that return filed under SAS did not fulfill the conditions as laid down under para 2(b)(iv) of CBR Circular No. I6 of 1999 dated 11.09.99. Although reply dated 09.02.02 has been partially discussed the IAC misconceived the facts of appeals pending or decided by ITAT by the date of filing of return on 31.10.1999. The A.R. Has explained the position in chronological order in the following manner. Appeals for the assessment years 1996-97 and 1997- 98 were decided vide ITA No. 4032 & 4033/LB/1998 dated 31.07.1999 whereby departmental appeals were set aside. Appellant filed M.A. For recalling of ITAT orders referred to above. M.A. Was disposed of by ITAT vide order dated 10.12.99 whereby orders dated 31.07.99 were recalled and in the light of the arguments advanced findings by the leamed CIT(A) upheld instead of set aside as per original judgment. A.R. Has vehemently urged that on filing of miscellaneous application for recalling the ITAT orders the appeals cannot be considered pending before ITAT. In support of this contention leamed A.R. Has relied upon the meaning of word "pending" as per The Law Lexicon with legal maxims and words & phrases compiled by P. Maranatha Aiyar reprint edition 1996 highlighting as under:- "Pending. The term 'pending' means nothing more than undecided.
'Pending' is defined to mean depending remaining undecided; not terminated.
Pending proceeding. A legal proceeding is said to be pending as soon as it is commenced and until it is concluded, 12 S.L.R. 20=47 I.C. 771".
Relying upon the above definition the leamed A.R. Has emphatically urged that appeals were not pending having been against the appellant by virtue of set aside by the date of filing of return i.e., 31.10.1999.
4. On merits the leamed A.R. Has argued that in this case ITAT vide order dated 10.12.1999 in miscellaneous application upheld the decisions of the CIT(A) in as much as that the issue that appellant was registered firm of professionals and not liable to super tax stood settled. A.R. Has further stated that in this case for the assessment years 1996-97, 1997-98 & 1998-99 these issues after having been discussed in detail super tax charged was deleted. A.R., has vehemently urged that the registered firm having been declared not liable to super tax by ITAT vide judgment dated 10.12.1999 jurisdiction u/s 66A was assumed without lawful authority.
5. D.R. On her part has argued that as at the time of filing of return for the impugned year of 1999- 2000 miscellaneous application had not been disposed of IAC was fully justified to consider the appeals pending and as a consequence justified to declare that return filed not eligible for USAS in view of para- 2(b)(iv) of CBR Circular No. I6 of 1999 dated 11.09.99.
6. Both the parties have been heard and the relevant orders carefully perused. We have observed that IAC disclosed the intention to revise the completed assessment for the impugned year as clause 2(b) Part IV of the First Schedule of the Ordinance was not applicable in this case. Appellant was accordingly confronted. It has been observed that not only that reply made has not been discussed at all but thereafter on issuance of 2nd show cause notice dated 01.02.2002 this issue has not been mentioned/discussed as if proceedings initiated on this ground were dropped at this point of time that provisions of section 66A were invoked with regard to the eligibility of the return for acceptance under USAS in terms of para 2(b)(iv) CBR Circular No. I6 of 1999 dated 11.09.99. As against that it is a matter of fact that being a firm of professionals it has been declared to be covered under para 2(b) Part-IV of the First Schedule proposed to be revised by the IAC has been throughout allowed by the first appellate authorities and finally by ITAT vide their judgment M.A.
Nos. 372, 373/LB/99, dated 10.12.1999. Obviously initial basis for invoking of the provisions u/s 66A was discarded by the IAC on his own while dislodged by appellate authorities. As far as the matter of pendency of appeals before ITAT is concerned the admitted facts are that appeals for the earlier years of 1996-97 and 1997-98 decided by ITA Nos. Assessee Vs. Department {Mr, Khawaja Faruq Saeed, Member (Judicial)} 4032, 4033/LB/99 through judgment dated 31.07.1999. It is also admitted fact that M.A. Was moved on 21.08.1999 which was also decided by M.A. Nos. 372, 373/LB/99, dated 10.12.1999 whereby deletion of super tax was upheld holding that being a registered firm of professionals/medical practitioners it fulfilled the condition of para-2(b) of Part-IV of the First Schedule to the Ordinance.
7. Viewed in this perspective it becomes absolutely clear that the basis indicated by the revisional authority under the provisions of section 66A do not hold the field. The issue of pendency of appeals is more of technical or academic interest rather than anything substantial in order to deny the legal right available to the appellant. In the facts and circumstances discussed above we are of the view that jurisdiction u/s 66A was not lawfully assumed. As a consequence order passed u/s 66A dated 19.02.02 is vacated and original assessment order restored. Appeal of the appellant is allowed.