2012 PLP (Trib (PTD)

JAVID IQBAL (JUDICIAL MEMBER).

Through these appeals assessee has contested the impugned finding passed by L/CIT(A) in Appeals Nos.672 to 675 dated 18-6-2008. The common objections raised are as follows:-- (1) That the order under section 99 of repealed Ordinance, 1979 for rejection of refund by the Taxation Officer and confirmation by the CIT(A) is illegal and unjustified. (2) That the order passed by the Taxation Officer is without any jurisdiction. (3) That the appellant had filed his refund application within the due time in Income Tax Office, Mardan as such, non-acceptance of the same is illegal. (4) That rejection of refund application on the pleas of time-barred is illegal and CIT(A) was not justified in confirming the order of Taxation Officer. (5) That any right which was given by any statue cannot denied on any technical flaws or irregularities and passing of order by both the authorities below are illegal, against the pronouncement of Superior Courts and is also against the norm of natural justice and Islamic jurisprudence. (6) That Income Tax Ordinance is not applicable in the PATA, Income of appellant is not chargeable to tax and tax paid under section 50(5) of the repealed Ordinance, 1979 is fully refundable so refusal for issuance of refund by the Taxation Officer and confirmation by the CIT(A) is illegal and unwarranted. (7) That no limitation is involved in case of refund and filing of refund application is also not mandatory as per circular Letter C.No.10 of 1995 dated 18-8-1985 which is binding upon the Income Tax authorities so the order under appeal is unjustified and is against the direction of FBR. (8) That during pendency of refund all verifications were made by the Taxation Officer but in the end he refused to issue the refund which is not understandable. (9) That the said CIT(A) was also no justified in not giving any finding on legal aspect of the case and based his order just on facts of the case and limitation which is illegal and is against the provision of law. (10) That as per judgments of Higher Courts, he period of limitation under section 99 is relevant in case of refund assessed under assessment whereas in case of the appellant no assessment was made, even no tax is leviable and tax paid under section 50(5) is automatically refundable and Taxation Officer is bound to issue the same without any delay so the order under appeal is illegal and void ab anitio. Briefly the relevancy of the facts leading to these appeals as per record are that assessee is an individual, derives its income as an importer and seller. No returns of income were filed because as per claim of assessee, the income was earned from non-taxable area, hence filing of return was not required. Thus vide simply on application under section 170 of Income Tax Ordinance, 2001 refund was asked for. Taxation Officer rejected the application on the point of limitation. Assessee filed appeals before the L/CIT(A) who confirmed the order of taxation officer. Assessee felt aggrieved from the impugned finding, hence is in present appeals before this forum. The L/AR of assessee pleaded as per grounds of appeal, while L/DR supported the impugned orders. After having heard the arguments of the parties, and from perusal of the relevant orders, and material made available before us, it has been seen that assessee has asked for refund of tax withheld at the import stage. Assessee filed refund application in the year 2007 asking for refund for assessment years 1999-2000 to 2002-2003 but no return of income tax for any of the years under appeal was filed. Then thereafter as per claim of assessee, he filed return of income and are available on assessment record which as per observation of the L/CIT(A) are undated. As per contention of L/AR of assessee these were filed in time, however he failed to prove his stance through producing any type of evidence, even the acknowledgement receipts about the filing of any return. Before me the L/AR of assessee altogether took the new plea that as the assessee's income is exempts as per Article 247 of Constitution of Islamic Republic of Pakistan, 1973, therefore, assessee was not required to file any return of Income. To controvert the finding of Taxation Officer, confirmed by L/CIT(A), the L/AR of assessee, relied upon the cases law reported as cited as Pfizyr Chemicals be mentioned, 1982 PTD 274; 1998 PTD 2012, 2008 PTD (Trib.) 370, PLD 2003 SC 614 = 2003 PTD 1913, 2008 PTD 169, 1993 PTD 443, 1973 PTD 530, 2000 PTD 2165 and 2000 PTD 3396. In the light of above cases law, it was pleaded by the L/AR of assessee that department in similar circumstances has entertained the refund application and has issued the refund without completion of assessment order. As per judgment cited by the L/AR wherein it has been held that in the cases of genuine refund, it should not be refused, even if the application of refund is filed after prescribed period of time as stipulated in the Ordinance. Now the question here for determination is that as to whether in the instant matter refund claimed by assessee is genuine, I am of the view, it is not so the case. As per the judgments of Hon'ble Supreme Court reviewed in case of Gul Cooking Oil, it has been held that the income in non-taxable area is exempt from taxation, if it is established that income has been earned there from. Now the question is as to how it is to be determined that the income has been earned from non taxable areas, onus lies on assessee to prove the same. The Income Tax Ordinance provides the procedure of assessment for determination of income and creation of refund. As per the law contained in the Ordinance, the assessment could be framed for last five years from the end of the financial year in which it was first assessable. In present matter the assessment years involved are 1999-2000 to 2002-2003, for which the periods of limitation for computation of assessment has already been expired as during prescribed period of limitation, neither the returns of income have been filed, or any proceeding for assessment have been initiated, or any assessment has framed or refund has been created. The L/AR expressed his view, that it is correct that no assessment could be framed in a case after five years from end of the financial year, in which it was first assessable. However on filing of voluntarily return, assessment could be framed and refund could be created. While in the case of assessee he derives income from non-taxable area and under Article 247 of Constitution of Islamic Republic of Pakistan, he was not liable to file any return. However, on this point the L/AR. failed to specify any of the provision of law contained in the Ordinance, 1979 where such situation be coped with. In my view in either case whether the return has been filed voluntarily or on notice by department asked for filing of return or returns, no assessment could be framed after prescribed period of limitation as envisaged in the Income Tax Ordinance, 1979 and Ordinance, 2001 i.e. 5 years from end of financial year where income was first assessable. In the absence of any proceedings or any assessment order, how it is to be established that income has been earned from non taxable area, which as per reviewed judgment of Gul Cooking Oil does not entitle assessee from exemption of tax because as per the above judgment it is mandatory upon assessee to prove that assessee has earned income from non-taxable area. In this case assessee has imported tea leaf in huge quantity and has failed to prove that the sale of it has been effected in non taxable area. Thus in case even if return is filed within prescribed period of limitation and fact of it sale is not proved or established in non taxable area even then assessee is not entitled to exemption. Also otherwise assessee is commercial importer and tax has been deducted at the time of import, while is discharge of final liability of tax. As per judgment of Supreme Court, AJK reported as PLD 2005 SC (AJ&K) 373, the tax at import stage is taxable irrespective of destination of raw material. Similarly I also do not find any force in the contention of L/AR of assessee that department in similar circumstances has issued the refund after voluntarily filing of return beyond the prescribed period of limitation of 5 years, 1stly he has failed to give any stance, 2ndly if it is so, the court is not bound of an illegal act of authorities below, but the courts or tribunals are bound to apply the law on its own. Income Tax Ordinance, 1979 provide the procedure as under: in case income of assessee is required to file the return under section 55 of the repealed Ordinance, 1979. In case assessee do not file the return, and Deputy Commissioner is of the opinion that income of assessee is taxable, through notice under section 56 of Income Tax Ordinance, 1979 assessee could be asked for filing of return of income. After filing of return, in next stage assessment had to be completed in any of the sections 59(1) 59(A), 62, or 63 as the case may be. Whereas after completion of assessment, there is a procedure to make the additional assessment under section 65 as per conditions laid down in this section of law, or in case where the order is erroneous and pre-judicate the interest of revenue the power of revision by IAC has been provided under section 66A of the repealed Ordinance, 1979. In case of additional assessment or in the case where no assessment has been framed, it could be framed only for the last 5 assessment years from the end of financial year in which the income wax 1st assessable. So giving accumulative effect to the above discussed facts, I am of the view, that Taxation Officer has though rejected the application on the issue of limitation Taxation Officer had not consider the non-filing of returns, completion of and passing of any assessment order the non creation of refund in consequence of any assessment orders but rejected the refund application on issue of limitation, where as under the law he was supposed to have taken all the pros and cons of the matter in accordance to law. Regarding the cases law referred by the L/AR of assessee these deals with the situation of genuine refund, while it is not so the case in the instant matter. Assessee has failed to prove the fact that he has effected the sales and has earned the income from non taxable area, hence for the above reasons assessee is not entitled to any refund, hence its rejection is maintained but for the reasons recorded above. In this way appeals on behest of assessee being devoid of merits stand rejected. H.B.T./36/Tax(Trib.) Appeal rejected.