2013 PLP (Trib (PTD)

M.B. TAHIR, ACCOUNTANT MEMBER.

The titled appeals preferred at the instance of the taxpayer are directed against the consolidated order of learned Additional Commissioner Inland Revenue, Lahore passed on 29-6-2011. Facts in brief are that the original assessments for the assessment years 1996-1997 to 1998-1999 were completed under section 60 of the Income Tax Ordinance, 1979. Subsequently, on scrutiny of record the Assessing Officer observed that the appellant had claimed expenses under the head leased rental in all the years under consideration but had not furnished any details thereof and not declared any leased assets in its balance sheet. Accordingly the appellant was called on to explain the position. The reply furnished by the assessee did not find favour, therefore, original assessments were amended by invocation of provisions of section 122 of the Income Tax Ordinance, 2001. The taxpayer filed appeals and the learned CIT(A) vide its order dated 6-11-2004 cancelled the amended order. The department filed appeals and the Tribunal vide its order bearing I.T.As. Nos.418 to 420/LB/2005 dated 27-9-2006 upheld the order of the learned CIT(A) by holding that the provisions of section 122 do not have any retrospective effect. This view of the Tribunal was endorsed, by the Honourable High Court in the judgment reported as 2005 PTD 1621. Finally the matter was referred to Apex Court and the Honourable Supreme Court of Pakistan vide judgment cited as 2009 PTD 1392 re: Messrs Eli Lilly Pakistan (Pvt.) Limited also upheld the view point of the Tribunal and High Court. The Additional Commissioner was of the view that since the Honourable Supreme Court held that assessment of any year ending on or before 30th June, 2002 would be governed by the Repealed Ordinance and shall be dealt with as if the Ordinance had not come into force the Department was duty bound to take fresh action under the Repealed Ordinance in the instant case. Therefore, notice under section 66A of the repealed Ordinance was issued on 24-6-2001 and since no response was made the impugned order (which is now being challenged in the present appeals) was passed on 29-6-9011.

2. The learned counsel of the taxpayer firstly urged that the impugned order is time barred within the meaning of section 66A(2) of the Repealed Ordinance. He stated that original orders under section 62 were respectively passed on 30-4-1997, 30-5-1998 and 28-4-1999 and action under section 66A could have been taken up to 30-4-2001, 30-5-2002 and 28-4-2003 but the same had been finalized on 29-6-2011 which was clearly time barred and hit by limitation provided by law. He stated that since the order was passed beyond the period of four years it was not sustainable and liable to be struck down. According to him this issue has been examined in a number of cases and in support of his contention the learned DR has placed reliance on the judgments reported as 2009 PTD 1392 (SC) and 2011 PTD (Trib) 2362. The learned AR further urged that the impugned order is coram non-judice within the meaning of section 66A (1A) (b) of the Repealed Ordinance. He contended that the grounds on which provisions of section 66A was invoked had already been discussed in detail and decided in favour of the appellant by the learned CIT (A) in his order dated 6-11-2004. Since the order passed under section 122 in first round of litigation was cancelled in appeal and maintained up to the level of Honourable Supreme Court of Pakistan the action of the ACIR is not tenable. On merit the learned AR stated that the ACIR was not justified in adding the lease rental paid for the purpose of business to the leasing company. According to him the assets were owned by the lessor company and the ACIR had failed to point out any provision of Income Tax Ordinance which can be said to have been violated by the taxpayer in not declaring assets taken on finance lease in its balance sheet. The evidence produced before the Taxation Officer in response to notice under section 122 were available in the record of the department and discussed by the learned CIT(A) in his order clearly show that the lease rentals were paid to the well known leasing companies. Had the Taxation Officer any doubt about the payments of rentals he could have verified the same directly from the leasing companies. The AR also pleaded that proper opportunity of hearing was not afforded. He pointed out that notice under section 66A was served on the appellant on 27-6-2011 for compliance on 28-6-2011 providing only one day for compliance. The learned AR contended that the time of one day could not be held as reasonable opportunity of hearing as held by the Honourable High Court in the case reported as 2012 PTD

964. The leamed AR further urged that the impugned order was passed on the date which was not fixed for hearing; therefore it is not tenable on this ground as well. In this regard he has relied upon the judgments reported as 1981 PTD 210 (H.C.), 2008 PTD (Trib.) 1641 and 2007 PTD (Trib.) 1203. The learned DR on the other hand opposed the contentions by supporting the impugned order for the reasons stated herein.

3. We have heard the parties and are inclined to agree with the submissions advanced on behalf of the taxpayer. The contention of the learned AR that no order under subsection (1) of section 66 shall be made after the expiry of four years from the date of the order sought to be revised is legally correct. In the instant case the original orders under section 62 were respectively finalized on 30-4-1997, 30-5-1998 and 28-4-1999 therefore the impugned order of the ACIR dated 29-6-2011 is clearly time barred, and is not sustainable in the eyes of law. For the purpose of clarity subsection (2) of section 66A is reproduced hereunder:-- "No order under subsection (1) shall be made after the expiry of four years from the date of the order sought to be revised." From the bare perusal of above provision we are convinced that the action of the ACIR being passed beyond the period of four years' time limit is liable to be struck down. The Tribunal has already resolved the identical controversy in its judgment reported as 2011 PTD (Trib.) 2362, therefore the ratio settled therein fully applicable in the present case. The operative part of this order is reproduced hereunder:-- " .. We have nowhere found in this judgment of the Honourable Supreme Court of Pakistan holding that any provisions of law can be invoked outside the time limit provided under the law in Para 54 of the judgment while referring various cases the section 66A has been referred but the reference in this regard in no way helps the department as neither any direction in this regard has been given nor any observation is regarding the condonation of the time limitation provided under the law. In this case admittedly the original order under section 62 of the repealed Ordinance, 1979 have been passed by the DCIT on 2nd June, 2005. While the order under section 66A, mentioned at the title of the order under section 66A of the Income Tax Ordinance, 2001 and also in the concluding Para mentioning the order being amended under section 122(5A) of the Ordinance, 2001 has been passed on 21-9-2010. While under subsection (2) of Section 66A of the repealed Ordinance, 1979 the invocation of the said section 66A has been issued on 22-6-2010 despite the facts that the above referred decision of the Honourable Supreme Court of Pakistan, on the basis of which the order under section 66A by the Additional Commissioner has been passed with the observation that this order is being passed in appreciation of the verdict of the Honourable Supreme Court of Pakistan and the date of the order has also been mentioned in next Para as 22-6-2009. We therefore find force in the contention made by the learned counsel for the appellant that the order being passed after the time period provided under the mandatory provisions of law is without any jurisdiction and is therefore cancelled."

4. Respectfully following the above ratio we hold that the impugned order is time barred and not sustainable. Therefore, the same is annulled and the appeals are accepted. Since we have accepted the appeals on legal plane the other grounds need not to be discussed. HBT/59/Tax(Trib.) Appeals accepted.