2002 PLP 2110 (PTD)

Miss Laila Ghafoor, D.C.I.T. for Respondent. DECISION/FINDINGS The facts in brief are that 1999‑2000 was the first year of business for which return was filed under S.A.S. declaring income at Rs.70,000 on a capital investment of Rs.1.6 M. Due to deductions at source a refund of Rs.360,658 emerged when return was accepted under section 69(1) of the Income‑Tax Ordinance. This was issued to the complainant after due approval by the I.A.C./C.I.T. and after obtaining wealth statements not only for the year 1999‑2000 but also for an earlier year. Wealth Tax Returns also were filed and assessments completed. Subsequently, Income‑tax return for the assessment year 2000‑2001, filed under S.A.S., declaring income at Rs.180,000 was accepted on 23‑7‑2001 resulting in a refund of Rs.521,

924. When the Department was approached to issue refund for this amount, the case record was sent to the I.A.C. and then to C.I.T. for approval. The Commissioner instead of giving approval, suggested action under section 66A of the Ordinance, A show‑cause notice was consequently issued by the I.A.C. under section 66A of the Income Tax Ordinance on 30‑8‑2001 both for the assessment years 1999‑2000 and 2000‑2001. It was pleaded that the proceedings under section 66A were an excuse to deny the complainant the refund due to him amounting to Rs.521,924 determining as per IT‑30 dated 23‑7‑2001 for the assessment year 2000‑2001.

2. In the respondent's reply dated 2‑10‑2001 it was stated that the first return filed in the case was for the year 1999‑2000 and though it was accepted under the Self‑Assessment Scheme, and a refund issued, it 'was found at the time of C.I.T.'s administrative approval. for issuance of refund for the year 2000‑2001 that the return for the year 1999‑2000 had not fulfilled the condition in S.A.S. for new taxpayers viz. that the declared income should be at least 1/3rd of the capital employed. In fact against the capital of Rs.16,00,000 the complainant had declared income of only Rs.70,000 whereas it should have been declared at Rs.533,

333. Some discrepancies were statedly noted by the C.I.T. in the return for the assessment year 2000‑2001 also and a letter dated 9‑8‑2001 was therefore sent by him to the officers below. Consequently on 30‑8‑2001 show‑cause notices were issued by the I.A.C. under section 66A of the Income Tax Ordinance.

3. During the hearing, the respondent‑Department took time to produce documents and ultimately then informed that order under section 66A has been passed cancelling the two assessments by order, dated 12‑10‑2001.

4. From the assessment of facts and the contentions raised it is clear that the action under section 66A was taken and proceedings were started before the filing of the complaint and much before the notice was sent by this Office to the respondent. Therefore, the objections that some proceedings were initiated to circumvent the proceedings in the complaint are not justified. The facts pointed out by the department in its reply are briefly narrated‑above. Action under section 66A was taken on legal grounds‑and for the reason, the refund was withheld. Now that the order under section 66A of the Ordinance has been passed on 12‑10‑2001 cancelling the assessments for both the years 1999‑2000 and 2000‑2001, fresh assessments have to be framed after affording an adequate opportunity to the assessee of pleading its case.

5. It is, therefore, recommended that: (i) As a result, if any refunds become due, the same should be determined and paid forthwith. (ii) Compliance may be reported with 30 days. C.M.A./M.A.K./286/FTO Order accordingly.