2006 PLP (Trib (PTD)

The learned Commissioner of Income Tax, Sukkur Zone is requested to assign this case to a Senior Officer who is well-versed with the accounts and capable enough to adjudicate upon the issues involved in the case".

3. Mr. Udha Ram Rajput, Advocate has appeared on behalf of the appellant and has attacked the Impugned orders of the Officers below mainly on the legal scores that the addition has not been made by the Taxation Officer after obtaining approval from the learned IAC which is the mandatory requirement of law as mentioned in the last proviso to subsection (1) of section

13. He has contended that the Taxation Officer has not obtained any approval for the addition as required under the law for all the .four years under review. He has contended that in the assessment order, the Taxation Officer has not mentioned that any approval was obtained from the learned IAC before making the addition. He has placed before us the letter of Inspecting Additional Commissioner of Income Tax, Larkana Range, Larkana, dated 28-6-2002 addressed to the Special Officer of Income Tax, Circle Shikarpur which is on the subject:-- "Permission for addition under section 13(1)(c) of the Income Tax Ordinance, 1979, in the case of Mr. Imdad Ali and Co. Shikarpur for the assessment year 1996-97, 1997-98, 1998-99 and 1999-2000". In the body of the order referring to letter No. 665, dated 28-6-2002, it has been mentioned as follows:-- "Considering the facts and circumstances of the case, permission for addition under section 13(1) is granted/accorded in the above named case as follows:-- S. No.????????????????????????? Assessment year?????????? Addition under section 13(1)(c) (1)??????????????????????????????? 1996-97?????????????????????? Rs.38,945 (2)??????????????????????????????? 1997-98?????????????????????? Rs.2,39,290 (3)??????????????????????????????? 1998-99?????????????????????? Rs.12,17,910 (4)??????????????????????????????? 1999-2000?????????????????? Rs.14,12,022." According to the learned counsel, the above letter shows that the learned IAC has not allowed any approval for the addition. He has contended that the "approval" and "permission" have different meaning and their impact is also quite different. According to learned Counsel, for the addition under section 13, approval of the IAC is pre-mandatory condition for exercise of jurisdiction. The learned counsel has contended that although there is no mention of any approval from the learned IAC in the assessment orders for all the four years and in view of the above referred letter, the Taxation Officer has sought permission, in any, and the learned IAC has also allowed permission, therefore, the additions after seeking/allowing permission from IAC is not tenable in the years of law due to lack of approval from the learned IAC, in accordance with law. In support of these contentions, the learned counsel has placed reliance on the reported decisions 2003 PTD (Trib.) 1238, 2005 PTD (Trib.) 326 and PLD 2004 AJ & K 30 wherein it has been held that "approval" and "permission" have different meanings and their impact is also quite different. Regarding the observations made by the learned CIT(A) in the consolidated impugned order that the assessee has furnished books of accounts before the Assessing Officer during the course of original proceedings and has failed to produce the books of accounts during the proceedings before the Taxation Officer under sections 65/62 of the Repealed Income Tax Ordinance, 1979, it has been contended by the learned counsel that no books of accounts were ever produced before the Assessing Officer in the original proceedings under section 62, as the books are not maintained. He has, in this respect, placed before us the diary sheet of the original assessment proceedings before the Taxation Officer wherein it has been specifically mentioned that no books of accounts have been produced before the Assessing Officer. However, certain evidence required under the law were produced before the Taxation Officer. The learned counsel has contended that original assessment order for all the four years under review has never been served upon the assessee/appellant and the assessments for all the four years were made on IT-30 which according to the learned counsel is a general practice in their circle. On the facts of the case, the learned counsel has contended that for the assessment year 1996-97, the addition has been made as per information received from Messrs F.F.C. that the amount to the tune of Rs.58,270 has not been declared by the assessee but according to the learned counsel, in this respect, it was explained to the Taxation Officer that this amount includes marketing allowance and freight charges which has been declared by the assessee in his statement of account and the alleged freight charges were for logistic purposes, as without reimbursement of this expenditure, the goods could not be brought into the godown/shop. The same being direct in nature was net off accordingly and that is why it did not appear in the statement of account. Regarding the alleged marketing allowance, it has been contended by the learned counsel that it was for growers and being direct in nature was net off accordingly as such, the same did not appear in the statement of account. Regarding the addition for bank credit, the learned counsel has submitted that there was no justification for the addition as admittedly, the bank statements for first six months and last six months are on the record of the department and as per bank statements, there was in clear term a "debit balance" which is in accordance with the liability claimed by the appellant. According to the learned counsel, the Taxation Officer has simply considered the debit and credit entries but has ignored the opening debit balance and has not in this respect confirmed/verified from the bank authorities. Regarding the F.F.C. trading liability, the learned counsel has contended that the Taxation Officer has considered the non-declaration of liability towards stock-in-trade not declared by the appellant, without considering the fact that no addition can be made in respect of liabilities under section 13 of the Repealed Ordinance, 1979. According to the learned counsel, the Taxation Officer has treated the said liability against stock in trade, therefore, the credit of this extent was warranted which has not been allowed in accordance with law and therefore according to him, the addition is not justified. The learned counsel has contended that rejection of explanation offered by the assessee about non-declaration of liability due to non-declaration of stock in equal amount was patently void and illegal. He has submitted that no addition under bank credit and trading liability was warranted and to be dealt with on the basis of wealth tax return, as the action on the basis of wealth tax return was introduced in the statute through Finance Act, 1999 without having retrospective effect. According to the learned counsel for the appellant, the addition made under section 13(1) is quite vague, as it does not disclose to which kind of eventually it falls. He has, therefore, requested that the impugned order of the learned CIT(A) may please be vacated and the additions as made by the Taxation Officer for all the four years under review may please be deleted.

4. On the other hand, Ms. Farzana Jabeen representing the department is supporting the impugned orders of the Officers below. According to her, the impugned order may please be maintained, as the Taxation Officer has made the additions after admittedly obtaining permission for the additions from the learned IAC in accordance with law and the learned CIT(A) has rightly upheld the addition for the assessment year 1996-97, as the concealment has been established. Regarding the other three years, the learned DR has submitted that the learned CIT(A) has already set aside the assessments for de novo proceedings and the assessee may explain his position before the Assessing Officer.

5. We have heard the learned representatives of both the sides and have also perused the consolidated impugned order of the learned CIT(A), the orders, made for all the four years under review under sections 65/62 of the Repealed Income Tax Ordinance, 1979, the case-law referred by the learned counsel for the appellant and other relevant documents placed before us on behalf of the appellant.

6. We have found that in all the four years, the Assessing Officer in the assessment order has nowhere mentioned regarding approval of the learned IAC for the subject additions which is the mandatory requirement of law for making the addition under section 13 of the Repealed Income Tax Ordinance, 1979. On behalf of the appellant, it has been established through evidence that the learned IAC in response to the letter of the Assessing Officer granted/accorded the "permission" for additions under section 13(1), which can in no way be equated to "approval" which is the requirement of law. Likewise, the Assessing Officer has failed to subscribe in the assessment orders under sections 65/62 for all the four years under review under which sub-clause the addition was made. We have further noted that the Assessing Officer in all the four orders has mentioned that during the original assessment proceedings, the record of the case was produced by the assessee, but on behalf of the assessee, the diary sheet of the original assessment has been placed before us wherein, there is no mention that the record has been produced during the course of assessment proceedings. Even otherwise, it has been contended on behalf of the assessee's learned counsel that no assessment order for the years under review has ever been issued for all the four years under review and the original assessments were made on IT-30. Regarding the production and non-production of books of accounts, the observations have been made by the learned CIT(A) without confirming from the record of the case. We are of the view that observations in this regard made by the learned CIT(A) in the impugned order are contradictory and against the facts of the case, as he has, without any justification, rejected the contentions as raised by the learned representative of the assessee and has upheld the addition for the assessment year 1996-97 and set aside the assessments for the remaining assessment years. The learned CIT(A) after giving the following observations had no justification to-set aside the assessment: "The orders for the assessment years 1997-98, 1998-99 and 1999-2000 give an impression that an important case was assigned to an Officer who does not know how to deal with such important matters. The Officer has not been able to explain as to what he wants to say and what he wants to do. Accordingly, whatever material available to him was spoiled by him." We are of the view that after giving above referred observation, the learned CIT(A) has given further opportunity to the appellant department to fill in the lacunas which cannot be cured due to lack of violation of the mandatory requirement of law. We are of the view that in the present case, the additions have been made without prior approval of the learned IAC. If there was any "permission" sought and granted/accorded that cannot be treated as "approval" under the law, as "approval" and "permission" have different meanings and their impact is also quite different as has already been held by this Tribunal as well as by the Hon'ble Superior Courts in many cases, some of which have already been referred by the learned counsel and have been mentioned supra. We, therefore, find no justification for the additions, as the additions have been made without prior approval of the learned IAC for all the four years under review. The consolidated impugned order of the learned CIT(A) is, therefore, vacated and the additions made for all the four years under review under section 13 by the Assessing Officer are deleted. All the four appeals filed by the assessee for the assessment years 1996-97 to 1999-2000 are allowed. H.B.T./471/Tax (Trib.)???????????????????????????????????????????????? Appeal allowed.