2005 PLP (Trib (PTD)

While through the second appeal, the department has objected the impugned order of the learned CIT(A), dated 21-12-1996 for the assessment year; 1993-94 allowing the claim of exemption under the "golden shake hand". As the agitated issues are amongst the same parties, we, therefore, decide both the appeals through this consolidated order. Mr. Muhammad Iabal Hashmi, Advocate has appeared on behalf of the assessee and has contended that the assessee is a Public Limited Company quoted on Stock Exchange and deriving income from manufacturing and sale of cement. According to him against the original assessment completed vide order, dated 29-6-1995, the assessee filed an appeal and during the first course of appeal before the learned CIT(A) vide order, dated 30-3-1996, the assessment was set aside and the re assessment was completed by the Assessing Officer on 8-6-1996 whereby the appeal effect was allowed and set aside issues were adjudicated upon. According-to the learned counsel for the assessee, the Assessing Officer after re-assessment proceedings, re-opened the case of the assessee under section 65 on the allegation that excess expenditure on account of gratuity had been allowed to the assessee and notice under section 65 was issued on 17-6-1996. He has contended that the observation of the Assessing Officer regarding excess payment and nature of payment to the trustees of the employees gratuity fund trust is without objective assessment and is misunderstood. Staff gratuity fund of the assessee-company was approved by the Commissioner of Income Tax in February, 1996. As per the terms and rules of the Fund, the company during the year ending 30-6-1992 charged ascertained liability of employees gratuity for that year on accrual basis. In addition to the above, the company also made payment to the trustees of the Fund which has already been mentioned in the order of the Assessing Officer at page "9", para. "d" under the head "excessive claim of gratuity" and has also been referred by the Assessing Officer in the order on page "11" in the Computation Chart. According to the learned counsel, this payment' is a yearly ascertained .liability and is in fact, has been made by the company in accordance with the provisions of Rule 94(2) of the Income Tax Rules, 1982 on account of initial distribution in respect of past services of the employees. He has contended that the payment is legally permissible and the Rule 94(2) specifically provides for this payment. According to him the object and purpose of this Rule is that the trustees fund should be provided by the company with adequate amount to unable the trustees of the Fund to discharge their liability on any given point of time on account of employees gratuity, for current and prior years. He is, therefore, of the view that there was neither any allegation nor information that initial contribution made by the company is in violation of Rule 94(2) of the Income Tax Rules and in the absence of any information that contribution to the gratuity fund by the company is excessive, no escapement of income from tax can be said to have been taken place and there was no justification for the proceedings under section

65. According to him, there was no information, as all the details referred by the Assessing Officer were already available during the initial assessment proceedings. He has contended that the Assessing Officer in the assessment order has mentioned that "while examining the case for the charge year, 1993-94, it was noticed that in the Computation Chart of income attached with the return, the claim of gratuity neither appeared on the basis of payment nor on the basis of provisions", according to the learned counsel, it is established from these, observations made by the Assessing Officer in his order that information or alleged basis on which the case was re-opened by the Assessing Officer were already available on the record and therefore, the action under section 65 cannot be initiated and the order passed by the Assessing Officer in this regard is not maintainable on the basis of material which was already on record. He has in this respect referred the decisions reported as 1999 PTD (Trib.) 3901, 1999 PTD (Trib.) 2946, 2000 PTD (Trib.) 329 and 1993 SCMR 1232=1993 PTD

766. Regarding appeal filed by the department for the assessment year, 1993-94 the learned counsel for the assessee has supported the impugned order of the learned CIT(A) and has referred to the decision of this Tribunal 2002 PTD (Trib.) 257 wherein it has been held that there was no concept of amortization of expenses in income tax law and therefore, the expense could not be amortized. On the other hand, Mrs. Sabiha Mujahid along with Mr. Shahid Jamil, LA (Advocate) have appeared on behalf of the Department and have contended that as the Assessing Officer has found that the income to the extent of Rs.60,53,914 has escaped assessment and the under assessment could be made .good resorting to action under section 65 of the repealed Income Tax Ordinance, 1979, therefore, treatment meted out by both the officers below is fully justified. They have contended that the assessee himself claimed gratuity payment of Rs. 1,86,26,893 out which Rs.60,53,914 was found on account of gratuity which had not been actually incurred in the period relevant to the assessment year under review and therefore, the 'treatment meted out by the Officers below is justified. Regarding the appeal filed by the Department, the learned DR has contended that the learned CIT(A) was not justified to direct that expenditure under the head "golden shake hand" should be allowed without its spreading over a period of three years under the process of amortization. She has contended that the addition was rightly made because expenditure were of enduring nature. We have heard the learned representatives of both the parties and have also perused the impugned orders of the learned CIT(A) and the orders passed by the Assessing Officer. We have found that the original assessment for the assessment year, 1992-93 was set aside on 3-3-1996, the re-assessment was completed on 8-6-1996 and the Assessing Officer on 9-6-1996 has re opened the case under section 65 issuing notice to the assessee. We have further found that the original assessment was framed under section 62 of the Ordinance after examining and considering all facts of the case and explanation offered by the assessee and no omission or suppression of material evidence regarding gratuity payment was found by the Assessing Officer. It is also an admitted fact that in the computation of income, the assessee has claimed expense under the head "gratuity payment" amounting to Rs.1,86,26,293 which according to the assessee is in fact paid by the assessee to the trustees of the employees gratuity fund trust, and we are of the view that the Assessing Officer may rectify and' disallow the claim by an order under section 156 of the repealed Ordinance if there was any excessive claim, as this matter was a simple issue of admissibility or inadmissibility of the expense and this did not merit resort to action under section 65 of the Ordinance. After considering the cases referred by the learned counsel for the assessee, we are of the considered view that the material available on record could not be used for re-opening of assessment, as the same would amount to change of opinion which is not permitted under the law. There are distinct provisions of law, for the rectification of mistake, there is section 156 and if the order is erroneous and prejudicial to the interest of Revenue, the Assessing Officer can pass the information to Inspecting Additional Commissioner who would revise assessment under section 66A of the Ordinance and in the garb of re-opening of assessment, the jurisdiction to revise assessment vested in Inspecting Additional commissioner under section 66A of the Ordinance could not he conceded to the Assessing Officer. Once a assessment is completed and has attained finality, the Assessing Officer could not exercise jurisdiction to revise assessment in the garb of re-opening of assessment under section 65 of the repealed Income Tax Ordinance, 1979. We have found that in this case, the Assessing Officer has re opened the case on the basis of record which was already available and there was no definite information on the basis of which the already completed assessment can be reopened. The impugned order of the learned CIT(A) and the order passed by the Assessing Officer under section 65 are, therefore, vacated and original assessment as revised by the Assessing Officer giving effect to the order of the learned CIT(A) setting aside the assessment is upheld and the appeal filed by the assessee for the Assessment year, 1992-93 is allowed. The Department in its appeal for the assessment year, 1993-94'r has objected the direction of the learned CIT(A) allowing in toto the; expense on account of Golden Shake Hand without its spreading over a period of three years under the process of amortization. We have found that the learned CIT(A) has made the directions, as there is no concept; of amortization of expenses in income-tax law and the learned counsel for the assessee has also placed before us the order of this Tribunal reported as 2002 PTD (Trib.) 257 wherein it has been held that there is no concept of amortization of expenses in Income Tax Law and: therefore, the expense could not be amortized. We, therefore, find no warrant for interference in this respect also. The appeal filed by the; Department for the assessment year, 1993-94 is, therefore, dismissed. The appeal filed by the assessee is allowed, while the appeal filed by the Department is dismissed for the reasons as discussed supra. H. B. T./318/Tax (Trib.) Order accordingly.