2012 PLP (Trib (PTD)

MUNSIF KHAN MINHAS (JUDICIAL MEMBER).

The Department has filed the instant appeal against the order dated 9-8-2010 passed by learned CIR(A-III), Islamabad for the tax year 2008 on the following grounds:-- (i) That there is no provision in section 127 to entertain appeal against order under section 122(c). (ii) That the taxpayer never contested during tax proceeding to be a non-resident hence the issue of treating some one as agent never arose. (iii) That even if filling of return on basis of owing a vehicle was to be applicable from tax year 2010 the CIR(A) could still call for filling of return under section 114(3)(e). (iv) That your appellant craves leave to add, alter or amend the above grounds of appeal.

2. Brief facts of the appeal are that the tax payer is an individual who owned a vehicle and residing abroad. That on receipt of information regarding purchase of luxury vehicle on 25-8-2007 proceeding were initiated by issuing notice under section 114(4) of the Income Tax Ordinance, 2001, which was duly served on the address available on the record. The taxpayer did not comply to the notice and according to information available with the department and after estimating the fair market value of vehicle an amount of Rs.4,000,000 as the cost of acquisition of vehicle was added by the Assistant Commissioner Inland Revenue in the income of taxpayer for the tax year 2008. Being dissatisfied with the treatment meted out by the learned Taxation Officer, the department preferred appeal before the learned CIR (A-III) who after considering the facts and circumstances of the case deleted the add backs made by the Taxation Officer with the following observation:-- "The arguments presented have been considered, perused the order and note that while finalizing the assessment neither any agent was appointed nor any notice was issued to the agent. Assessment made by the Learned Officer of Inland Revenue without complying the statutory requirement is without jurisdiction. Provision of section 122C of the Income Tax Ordinance, 2001 was introduced through Amended Finance Ordinance dated 28-10-2009 and is applicable for the tax year 2010 and onward. As such assessment completed under section 122C for the year appeal is without jurisdiction and not maintainable in the eye of law. Keeping in view the legal lacuna and circumstances of the case, the assessment made for the year under appeal is without jurisdiction, not maintainable and hereby annulled."

3. Being dissatisfied with the treatment given by the learned CIR(A-III) the department preferred appeal before this Tribunal on the grounds raised supra.

4. In reply the AR contends that statutory notice under section 114 and show-cause notice under section 122C of the Income Tax Ordinance, 2001, were not served properly, therefore, the order passed in illegal, unwarranted and unjustified. He further stated that the appellant is non-resident (British Citizen) permanently residing in UK. Therefore, assessment finalized without appointing agent of the appellant is illegal, bad in law and unwarranted. He also argued that the income assessed/value of the vehicle adopted at Rs.4,000,000 is highly excessive and without any basis. He further argued that the appellant has sufficient sources being a British Citizen to acquire the vehicle. Therefore, its assessment as income from unexplained sources is illegal, unwarranted and unjustified. He further contended that although in the provision of section 127 of the Income Tax Ordinance, 2001 (Appeals) order passed under the provision of section 122C has specifically not been mentioned however, yet the order passed under section 122C is appealable as provided in the section "or otherwise increasing the liability of the person" covers every possible eventuality where the tax liability or obligation to pay income-tax is increased or refunds reduced. In support of this contention he relied upon the case-law reported as 1999 PTD 4061 (Karachi High Court). The issue has been discussed by the honourable Karachi High Court in detail and it has been held that:-- 8. it is correct that section 129 does not specify section 53, however, the underlined portion of the said section 129 (as above) would reads to the effect that "Any assessee objecting to an order made by a Deputy Commissioner . having the effect of enhancing the assessment or reducing a refund or otherwise increasing the liability of the assessee may appeal to the Appellate Additional Commissioner against such order," surely an order under section 53 demanding defaulting payment there under amounts to either enhancing the assessment or reducing the refund or otherwise increasing the liability of the assessee. In particular the omnibus clause in section 129" or otherwise increasing the liability of the assessee" is of wide import and there is nothing in the context to give it a restrictive interpretation. The term "otherwise" in the said section 129 covers all eventualities of increase of liability and is not necessary to be interpreted as ejusdem generic with the preceding clauses. We are fortified to arrive at such conclusion on the basis of the following reference: (10) the above discussion would amply confirm that the omnibus words in section 129 i.e. "or otherwise increasing the liability of the assessee" covers every possible eventuality where the tax liability or obligation to pay income tax is increased or refunds reduced, making such orders appealable under section

129. We accordingly hold that the impugned order in this case the order under section 53 would be appealable under section 129 . (11) Though we have held that the impugned order under section 53 is appealable under section 129 .

5. The learned AR further argues that the section 122C was introduced through Amended Finance Ordinance dated 28-10-2009 and is applicable for the tax year 2010 and onward. So completion of assessment under section 122C for the year under appeal is illegal, unjustified and without jurisdiction. He supports his contention through following case-law:-- (a) CIT v. Pakistan Tobacco Company Ltd. 1988 PTD 66 (Law applicable on the first day of assessment year will apply and not the one in existence during the next year) (b) Rustam F. Cowasjee and others v. C.B.R. and 2 others ((1985) 52 Tax 123 ((H.C. Kar.)) (for the purpose of assessment of Income the law applicable is that in force on the first day of the relevant assessment year) (c) Harjina and Company (Pak) Ltd. v. CIT 1963 PTD 867 = 1963 PLD 996 (Rights under existing laws are not to be supposed to have been repealed by implication unless intention becomes clear from language of law). The learned AR further stated that clause (vi) subsection (1) of section 114 was introduced through Finance Act, 2009 (persons Owns a vehicle- required to furnish a return) is applicable for the tax year 2010 and onward so issuance of notice under subsection (4) of section 114 of the Income Tax Ordinance, 2001 and subsequently completion of assessment under section 122C for year under appeal is also illegal, unjustified and without jurisdiction. He has further explained that appellant has transferred payment for purchase of vehicle from UK to Japan and vehicle was imported in Pakistan in his own name In the tax year 2007 and value of vehicle adopted at Rs.4,000,000 by the department is without any justification.

6. I have heard the arguments and perused the record. On merits learned AR has produced photocopy of passport that Taxpayer is U.K national. He produced bill of entry showing the booking of vehicle from Japan and consideration was transmitted to Japan from U.K. Moreso assessment made by the learned Officer of Inland Revenue is without jurisdiction because provision of section 122C of the Income Tax Ordinance, 2001 was introduced through Amended Finance Ordinance dated 28-10-2009 and is applicable for the tax year 2010 and onward. As such assessment completed under section 122C for the year under appeal is without jurisdiction and not maintainable in the eye of law. Order passed by learned CIR(A) is not open to any exception. It is upheld and maintained.

7. Departmental appeal hereby stands dismissed. C.M.A./42/Tax(Trib.) Appeal dismissed.