2010 PLP (Trib (PTD)

The Department has filed the instant appeal against the impugned order dated 20-5-2010 passed by CIR(A-II) Islamabad for the tax year, 2009 on the following grounds:-- (1) That the order of the CIT(A) is not justified to annul the order passed under section 122(5A) by placing reliance on the argument of the AR without ascertaining the real position with regard to the delegated powers to the Additional Commissioner by the Commissioner. (2) That the order of the CIT(A) is not justified as the powers were delegated by the Commissioner to the Additional Commissioner vide jurisdiction Order No.CIT(Audit-)Misc-22/Juris/2007/438 dated 5-2-2008. (3) That the learned CIT(A), in presence of judgment of Full Bench of ITAT vide I.T.A. No.1210/LB of 2006 and I.T.A. No.1209/LB of 2006 dated 22-3-2007 and I.T.A. No.758/IB of 2009 to 762/IB of 2009 dated 3-5-2010 could not annul the assessment framed under section 122(5A) on the basis of decision of ITAT in I.T.A. No.370/LB of 2009 dated 6-7-2009.

2. Brief facts of the case are that the assessee is an AOP who derives income from business of dry cleaning. The return of income was filed for the year under appeal which was deemed to be assessment under section

120. Later on, this completed assessment was required to be actioned under section 122(5A) of the Income Tax Ordinance, 2001. Show-cause notice under section 122(9) was issued and confronted to the taxpayer. The Additional Commissioner Inland Revenue considered the reply unsatisfactory. He found that the completed assessment under section 120 was erroneous as well as prejudicial to the interest of revenue. Original assessment completed under section 120 was amended by the Additional Commissioner under section 122(5A) of the Income Tax Ordinance, 2001. Being aggrieved with the treatment meted out by the Additional Commissioner, the taxpayer preferred an appeal before the first appellate authority.

3. Before the learned CIR(A), the AR of the assessee contended that order under section 122(5A) was passed by the Additional Commissioner whereas the original deemed order under section 120(1) was passed by the learned Commissioner. In the light of the decision/ finding of the learned ITAT vide ITA No.370/LB/2009 dated 6-7-2009, Additional Commissioner was not empowered to amend the assessment. Relevant extract from the same is as under:-- "The Honourable ITAT Lahore Bench, decided the same issue vide ITA No.370/LB/2009 Tax year, 2009 dated 6-7-2009 and held: "That original order under section 120(1) was by the Commissioner, therefore, the Additional Commissioner could not exercise powers under section 122(5A) of the Income Tax Ordinance, 2001." The learned CIT(A) held that the Taxation Officer (Additional Commissioner) could invoke the provisions of subsection (5A) of section 122 of the Income Tax Ordinance, 2001 as per the powers and function delegated to them by the Commissioner under subsection (IA) of section 210 of the Income Tax Ordinance, 2001. The learned CIR(A) further held as under:-- "From the plain reading of the provisions of above referred sub-section and specially the words "if he (Commissioner) consider" clearly means beyond any shadow of doubt, that the powers of the Commissioner to invoke the provisions of subsection (5A) of section 122 is wholly, solely exclusively depends upon to consider by himself that the order sought to be amended under the said provisions is erroneous so far it is prejudicial to the interest of revenue and that must formulate objective basis."

4. The learned D.R. has supported the order of the Additional Commissioner. He has contended that the original order completed under section 120 has rightly been amended the assessment under section 122(A) as the same was prejudicial to the interest of revenue. The learned DR has contended that the order of the CIT(A) is not justified to annul the order passed under section 122(5A) by placing reliance on the arguments of the AR without ascertaining the real position with regard to the delegated powers to the Additional Commissioner by the Commissioner. The learned DR has contended that the order of the CIT(A) is not justified as the powers were delegated by the Commissioner to the Additional Commissioner vide jurisdiction Order No.CIT(Audit-)Misc-22/Juris/2007/438 dated 5-2-2008. The learned DR has contended that the learned CIT(A), in presence of judgment of Full Bench of ITAT vide I.T.A. No. 1210/LB of 2006 and I.T.A. No. 1209/LB of 2006 dated 22-3-2007 and I.T.A. No. 758/IB of 2009 to 762/IB of 2009 dated 3-5-2010 could not annul the assessment framed under section 122(5A) on the basis of decision of ITAT in I.T.A. No.370/LB of 2009 dated 6-7-2009.

5. We have heard the arguments and perused the record. Learned A.R. states that under the scheme of new Income Tax Ordinance, 2001, all the powers vest with the Commissioner. Previously, Deputy Commissioner was the focal authority, whereas Commissioner has now been designated so. The Commissioner can delegate any or all his powers to the Taxation Officer. All the Taxation Officers, including the Additional Commissioners, are subordinate to the Commissioner. It is a settled principle that no subordinate authority can review/amend the orders passed by his higher authority. In this case, the amended order under section 122(5A) has been passed by the Additional Commissioner. The deemed assessment under section 120 was primarily made by the Commissioner, because section 120(3)(1)(a) provides that Commissioner shall be taken to have made an assessment of taxpayer's income on the basis of return/statement filed by him. Learned A.R, contends that amendment made by the Additional Commissioner (a subordinate officer) under section 122(5A) of assessment deemed to have been made by the Commissioner (a senior officer) is, therefore, illegal and without jurisdiction. He states that Income Tax Appellate Tribunal in their order dated 22-3-2007 in I.T.A. Nos.1210 and 1209/LB/2006 confirmed this principle of amendment of assessment. He has stated that the aforesaid order of the Tribunal was confirmed by Hon'ble Lahore High Court vide their Order PTR No.540/2007 and 629/2007 dated 10-4-2008 and C.P.L.A. filed by the Department was also dismissed by Hon'ble Supreme Court of Pakistan vide their judgment reported as (2009) 100 Tax 81 (S.C.). Learned A.R. contends that assessment deemed to have been made by the Commissioner under section 120 cannot be amended by his subordinate (Additional Commissioner) under section 122(5A). The impugned order under section 122(5A) is, therefore, illegal.

6. Learned D.R. states that under the new Income Tax Ordinance, 2001, 'Commissioner' is the focal authority. Section 2(13) provides that Commissioner means a person appointed as Commissioner of Income Tax under section 208 and includes a Taxation Officer, vested with all or any of the powers or functions of the Commissioner. Learned D.R. has stated that powers of assessment have been delegated by the Commissioner to the Taxation Officer, who is also included in the definition of Commissioner. Scheme of law under the new Income Tax Ordinance, 2001 is being misconstrued by the taxpayer. In fact, the deemed assessment under section 120 is made by the taxation officer, who is included in the definition of Commissioner under section 2(13) and his order can be amended under section 122(5A) by the Additional Commissioner. Section 2(65) provides that Taxation Officer means any Additional Commissioner of Income Tax, Deputy Commissioner of Income Tax, Assistant Commissioner of Income Tax, Income Tax Officer, Special Officer or any other - officer however designated appointed by the Board for the purposes of this Ordinance. He further states that section 122(5A) envisages that subject to section 122(9), the Commissioner may amend or further amend an assessment order, if he considers that assessment order is erroneous in so far as it is prejudicial to the interest of revenue. Learned D.R. emphatically states that deemed assessment under section 120 is made by the Commissioner and amendment under section 122(5A) is also made by the Commissioner. The word 'Commissioner' has been used at both these places, but it bears totally different connotation at both these places. In the new Income Tax Ordinance, sometimes, this word is used to convey the meaning of Taxation Officer, sometimes the Additional Commissioner and sometimes the Commissioner himself. At every place, its meanings have to be taken in the perspective of its use. Learned D.R. has further stated that it is only through delegation of powers under section 210 that functions of assessment have been streamlined. Section 210(1) provides that the Commissioner, may by an order in writing, delegate to any Taxation Officer all or any of the powers or functions conferred upon or assigned to him. Section 210(1A) provides that Commissioner shall not delegate powers of amendment of assessment under section 122(5A) to the Taxation Officer below the rank of Additional Commissioner. Learned D.R. has stated that legal position of the matter is very clear. The functions of assessment and amendment of assessment have been streamlined through the above mentioned machinery provisions under which, the assessment is first made by the Taxation Officer and then, if so warranted, the amendment of assessment can be made by the Additional Commissioner under section 122(5A). He has stated that learned A.R. of the taxpayer is too over-stretching the aforesaid judgment of the Tribunal dated 22-3-2007. In fact in that judgment also, it was held that amendment of assessment can be made under section 122(5A) by an authority one step higher to the Taxation Officer, which is the Additional Commissioner. He referred to paras, 13 and 14 of the judgment of Hon'ble Islamabad High Court in Writ Petitions Nos.517 and 518 of 2009 and Writ Petition No. 653 of 2009 dated 16-7-2009, which reads as under:-- "(13) The arguments of learned counsel for the petitioner in support of Writ Petition No. 653 of 2009 that since the order treated as issued under section 120 is deemed to have been passed by the Commissioner under the law, the Additional Commissioner cannot amend such an order under subsection (5A) is too technical to be accepted. As a matter of fact, said order is not passed by the Commissioner. It is only treated to have been passed by him. The law empowers the Commissioner to revise such order under subsection (5A) of section

122. Section 210(1) confers power on the Commissioner to delegate its powers subject to subsection (1A) to a Taxation Officer. The Commissioner has delegated his powers under section 122(5A) to Additional Commissioner. He was therefore, competent to issue notice to the petitioner in Writ Petition No. 653 of 2009. There is no force in the Writ Petition No.653 of 2009. (14) Resultantly, all the three listed writ petitions are dismissed with no order as to costs.

7. Learned D.R. has pressingly stated that the case law being referred to by A.R. of the taxpayer does not directly deal with the issue in hand, because these decisions were given in 6ifferent perspective and in different set of circumstances, whereas aforesaid judgment of Hon'ble Islamabad High Court being relied upon by the Department in addition to being recent is direct and specific on the issue in dispute. We tend to agree with arguments of learned D.R. Although under the scheme of new Income Tax Ordinance, 2009 the focal authority is the Commissioner, but under section 210, delegation of powers and functions have been made by him for streamlining the functions of assessment. The power of amendment of assessment has been given to the Additional Commissioner in the light of ratio settled through the judgment referred to by learned D.R. After the judgment of Hon'ble Islamabad High Court, no doubt should now remain on this issue that amendment of assessment can be made under section 122(5A) by the Additional Commissioner. The law on this point is very clear, which gets further support from aforesaid judgment of Hon'ble Islamabad High Court relied upon by the Department. Keeping in view all these facts and circumstances. We hold that the impugned order under section 122(5A) was legally correct and objections raised by the taxpayer about its legality, are misplaced. Resultantly the order passed by the learned CIR(A) is hereby set aside and case is remanded to him for deciding the appeal on merits after providing an opportunity of being heard to the assessee. Order accordingly. H.B.T./161/Tax(Trib.) Case remanded.