2005 PLP (Trib (PTD)

MUKHTAR AHMAD GONDAL, ACCOUNTANT MEMBER.-The Department through these five appeals has objected the consolidated impugned order of the learned AAC (A), dated' 16-1-2002 for the assessment years 1994-95 to' 1998-99 on the following two common grounds: (i) That the Appellate Additional Commissioner was not justified to direct for acceptance of declared income of the assessee. (ii) That the learned AAC Multan was not justified to reduce the agricultural income of the assessee.

2. The instant appeals for the five years under review filed by the Department were originally heard and decided by this Tribunal on 16-9-2004. Subsequently against that consolidated bearing MA 16-9-2004, the assessee filed Miscellaneous Applications Nos. 19, 58 to 61/LB of 2005 (assessment years 1994-95 to 1998-99) which were heard and decided through consolidated order, dated 1-3-2005 and the previous order of this Tribunal, dated 16-9-2004 we was recalled and the above subject appeals filed by the Department directed to be placed on their original numbers and to be heard and decided afresh for the reason that while passing the order, dated 16-9-2004 observations had been made by this Tribunal on the issues which were not agitated in the grounds of appeals by the Department A which had adversely effected the assessee. Now the matter has again put up before this Bench.

3. Brief facts relating to the instant appeals are that returns filed by the assessee in this case declaring income at Rs.33,300 Rs.44,800, Rs.46,000, Rs.50,000 and Rs.65,200 respectively for the five years under review were accepted under section 59(1) of the Repealed Income Tax Ordinance, 1979. Later on as per the assessment order, on scrutiny of records it transpired that an area of 20-kanal agricultural land was transferred to assessee whereas on perusal of income tax returns filed and processed under self-assessment scheme in the years under review reveals that income from agricultural land was never disclosed by the assessee and therefore, the Assessing Officer reopened the case under section

65. In response to notice, it was explained by the assessee that ownership of the agricultural land is not denied but the possession of the land was stated to be with father of the assessee who was claimed to have been cultivating the said land at his own hands. But this plea of the assessee was not accepted by the Assessing Officer on the ground that assessee himself is 50 years of age and his father who is himself cultivating the land would never less than 80 years or more and it is not believable that person having age of 80 years is cultivating the land at this own hands. This was considered by the Taxation Officer as an after-thought and ultimately the total income was assessed at Rs.262,000, Rs.275,300, Rs.286,000, Rs.299,500 and Rs.313,000 respectively for the five years under review. Against the above treatment meted out by the Assessing Officer, assessee filed first appeal. The learned AAC through the impugned order has held that Assessing Officer was not justified to reopen the case in the presence of instructions contained in Letter No.378/0, dated 29-7-1993 circulated by CIT. Zone-B, Lahore wherein it was directed that such cases do not attract the provisions of section 65 initiating action under section 156 needful may be done. Learned AAC in the impugned order has directed that agricultural income may be included in the declared income for rate purposes only. Regarding estimation of agricultural income out of 20-kanals or 2.5 acre of land at Rs.20,000 per annum, Learned AAC has held that Assessing Officer has estimated the income @ Rs.8,000 per acre which is extremely on the higher side. He has, therefore, reduced the income to Rs.10,000 for each year under appeal @ Rs.4,000 per acre.

3. Mr. Anwar Ali Shah, learned DR representing the appellant department has contended that assessee in this case was deriving income from manufacture and sale of safety valves used for installation of tube well bearing and installation of tubewell unit, repairing work and agricultural income. The machinery installed for the manufacture of safety valves has already been detailed in the relevant assessment order. A specific notice confronting the assessee with aforementioned facts and intimating the intended quantum of sales estimates and profit thereon was also issued. Thereafter assessments were completed after taking into consideration the reply submitted on behalf of the assessee to the notice sent under sections 65/62 of the Repealed Income Tax Ordinance and the income was accordingly estimated. According to learned DR, learned AAC in the impugned order has given observation that Assessing Officer was not justified to reopen the case in view of the instructions contained in the letter circulated by the Commissioner wherein it has been directed that such cases do not attract provisions of section 65 initiating action under section 156 and directed that agricultural income may be included in the declared income of the assessee for rate purposes only. Accordingly to learned DR, the learned AAC without any justification has reduced the agricultural income to Rs.10,000 for each year taken at Rs.4,000 per acre per annum. According to learned DR, the action of the Assessing Officer taken under section 65 should have to be upheld by the learned AAC.

4. On the other hand, Mr. Shahid Abbas, Advocate has appeared on behalf of the assessee and is supporting the impugned order of the learned AAC. He has contended that appeals filed by the Department is not maintainable as the learned AAC in the impugned order has not directed to accept the declared income of the assessee. According to learned counsel as the grounds of appeals framed by the appellant department for all the five years under review are vague, unspecific and against the ITAT Rules, all the appeals filed by the Department should have to be dismissed.

5. On the merits of the case, learned counsel has contended that no agricultural income had ever been received by the assessee for all the years under review as the land in-question is still in possession and in use of the assessee's father. Learned counsel has contended that omission of agricultural income in filing the returns do not justify action under section 65 in view of the expression/instructions contained in C.B.R.'s Circular No.5 of 1990, dated 25-6-1990. Learned counsel in support of his argument has placed reliance on the decision of this Tribunal, dated 12-11-2004 in I.T.As. Nos. 2313 to 2315/LB of 2002 (assessment years, 1996-97) to 1998-99) wherein it has been held that non-declaration of agricultural income is not a definite information for reopening of assessment under section

65. It has further been held in that order that if the assessee says that he is not earning income from agricultural, the Department is nobody to say that he is earning income from the said source. Learned counsel for the assessee has contended that in the consolidated assessment order under sections 62/65 for all the five year under review, the Assessing Officer has mentioned that case was recommended for 'reopening to the IAC and the permission was accorded by the IAC. According to learned counsel for reopening the assessment under section 65, the approval of the IAC is mandatory requirement as provided in subsection (2) of section 65 of the Repealed Income Tax Ordinance, 1979. But in the present case, no approval as per law has been obtained from the IAC. He has in this respect placed reliance on the decision of this Tribunal reported as (2004) PTD (Trib.) 463 wherein it has been held that if permission and not `approval' was granted, the order based upon that `permission' was not tenable in law due to sheer negligence and casual attitude of the departmental officers. Learned counsel for the assessee has, therefore, submitted that impugned order of the learned AAC may please be upheld and appeals filed by the Department may please be dismissed.

6. We have heard the learned representatives of both the sides and have also perused the consolidated impugned order of the learned AAC and the assessment order.

7. We have found that learned AAC in the impugned order has held that Assessing Officer was not justified to reopen the case in the presence of instructions issued by the Commissioner in this regard even otherwise there is no justification in reopening the assessment in view of the decision of the Tribunal, dated 12-11-2004 wherein it has been held that non-declaration of agricultural income is not a definite information for reopening or assessment under section

65. We are, therefore, of the view that directions made by the learned AAC warrant for no interference. Likewise, the learned AAC has rightly reduced the agricultural income of the assessee as estimation made by the Assessing Officer is also without any basis. We, further find force in the arguments of the learned counsel for the assessee that case of the assessee has been reopened under section 65 without prior approval of the Inspecting Additional Commissioner which is mandatory requirement as provided in subsection (2) of section 65 of the Repealed Income Tax Ordinance, 1979. Although in the assessment order, there is reference of `permission' accorded by the IAC but as has already been held by this Tribunal, the order passed upon `permission' was not tenable in law as the departmental officers are supposed to know the exact meaning of provision of law and to implement law in its real form and perspective. The famous legal maxim "A Communi Observantia Non Est. recendendum" (where anything was provided to be done in a particular manner, it has to be done in that manner and if not so done, the same would not be lawful) is an established principal of law which has also be provided under Article 4 of the Constitution of Islamic Republic or Pakistan, 1973 giving right to individuals to be dealt with in accordance with law, which has been said to be inalienable right of every citizen wherever he may be and of every other person for the time being within Pakistan. The word 'approval' is very specific and it is a statutory requirement of law and has different meaning as compared to word permission' and due to this sheer negligence the assessment reopened under section 65 is liable to be cancelled. With these observations. All the five appeals filed by the Department for the assessment years 1994-95 to 1998-99 are dismissed. C.M.A./424/Tax (Trib.) Appeals dismissed.