2010 PLP (Trib (PTD)

KHALID WAHEED AHMED, JUDICIAL MEMBER.

This appeal, at the behest of the assessee-appellant, pertaining to assessment year 2001-2002 is directed against the order of IAC of Income Tax/Wealth Tax, Mardan Range, Mardan passed under section 66-A of the Income Tax Ordinance, 1979 (hereinafter called the Repealed Ordinance).

2. Mr. Nazir Ahmed, Advocate the learned AR appeared on behalf of the assessee-appellant and Khawaja Sardar Ali, the learned DR appeared on behalf of the revenue.

3. The assessee-appellant an individual, derives income from running a private school. Assessment for the year under consideration was finalized at net income of Rs.2,13,000 under section 59(1) of the Repealed Ordinance. However, later on the proceedings under section 66A were initiated by the IAC through issuance of a show-cause notice on 22-9-2001. The reply filed by the assessee was not found satisfactory by the IAC who proceeded to cancel the assessment with the direction to the assessing officer to pass a fresh order. The order of IAC is assailed by the assessee-appellant through the grounds of instant appeal which are not specific and are argumentative and narrative in nature. However, the additional grounds were filed by the assessee whereby in addition to raising of a new issue the assessee revised the original grounds of appeals which are reproduced as hereunder:

(i) That the IAC is wrong and not justified to proceed under section 66A as the return was correctly accepted under section 59(1). That the impugned order passed by the IAC under section 66-A is illegal as no formal order was passed by the Assessing Officer which could be declared as erroneous and prejudicial to the interest of revenue. (iii) That the IAC has failed to pinpoint any illegality and loss of revenue hence the impugned order merits annulment. The legal issue raised at serial No. ii arising from the impugned order is going to the roots of the case. No objection was offered by learned DR against the filing of additional/revised ground by the assessee. The above additional ground raised by the assessee is admitted for adjudication.

4. Learned AR, in his arguments, challenged the impugned order of the IAC mainly on the ground that no action could be taken under section 66A because no order in writing was passed by the Assessing Officer under section 59(1) of the Repealed Ordinance. Learned AR stated that only the demand notice and IT-30 Form was issued to the assessee. It was the contention of learned AR that under the provisions of section 66A the action could only be taken when there was any order in writing passed by the assessing officer which was erroneous and prejudicial to the interest of revenue. It was the contention of learned AR that IT-30 Form or demand notice were not the substitute of an assessment order required to be passed in writing by the assessing officer under the provisions of section 59(1) of the Repealed Ordinance. In support of his contention learned AR relied upon the decision of ITAT reported as 2003 PTD (Trib.) 2276, 2003 PTD (Trib.) 692 and 2003 PTD (Trib.) 2749. It was also the contention of learned AR that even otherwise the assessment framed by the assessing officer under section 59(1) was not erroneous or prejudicial to the interest of revenue. According to learned AR the sources of investment stands explained. Learned DR on the other hand, in his arguments, defended the impugned order with the submission; that the action taken by the IAC was justified legally as well as on the facts of the case. According to learned DR the huge discrepancies in the value of school building shown by the assessee at Rs. 15,00,000 for the year under consideration as against shown at Rs.3,46,950 as per wealth statement of 30-6-1995 did not commensurate with the income declared by the assessee since the assessment year 1996-97 onwards. Learned DR further contended that with the communication of no demand as per demand notice along with issuance of IT-30 Form to the assessee the requirement of the acceptance of return under section 59(1) of the Repealed Ordinance were fulfilled. Learned DR who was present along with the assessment record also contended that the requirements of an order in writing even otherwise stand fulfilled by the order sheet entry dated 29-3-2001 in consequence of which the copy of IT-30 Form and demand notice were issued to the assessee. According to learned DR the copy for said order on the order sheet was not required to be issued to the assessee because the acceptance of declared income under section 59(1) was evident from the income and calculations of tax appearing on the said IT-30 Form.

5. Arguments of learned representatives of both the parties have been heard and the facts of the case have also been taken into consideration. The relevant provisions of law as well as the case law on the issue regarding the jurisdiction of the Inspecting Additional Commissioner to initiate proceedings under section 66A, in the case where assessment is completed on IT-30 Form only, have also been perused. The procedure and manner of assessment is provided in Chapter VII of the Repealed Ordinance. The Assessing Officer while framing any assessment under any of the section 59, 62 or 63 of the Repealed Ordinance is first required to assess the total income of an assessee by an order in writing and then to determine the tax payable on the basis of such assessment wherefrom it is evident that the assessment order consists of two pails. In the first part, income of the assessee is required to be assessed by the assessing officer, while the tax payable on the basis of income first assessed is determined in the second part of the order which comprises of the IT-30 Form. In the cases falling under section 59(1) where the declared income is adopted as assessed income no assessment of income is needed to be made, as is required in the case of an assessment being framed under sections 62, 63 or 65 of the Repealed Ordinance. In such cases the assessment of income under section 59(1) of the Repealed Ordinance is reflected from the adoption of declared income as assessed income as net IT-30 Form for the purpose of the calculation of the payable thereon. Further if the assessment completed as per IT-30 Form is considered as an assessment. having not been properly framed by the Assessing Officer under section 59(1) then in such a situation it will be an erroneous assessment.

6. Our above viewpoint to hold that the preparation and signing of IT-30 form and demand notice by the assessing officer fulfils the requirement of an order in writing under section 59(1) also finds support from the decision of Full Bench of the Tribunal reported as 1998 PTD (Trib.) 3718. It is pointed out here that decisions of Tribunal relied upon by learned AR of the assessee are of Division Benches. In the case reported as 1998 PTD (Trib.) 3718. It was held by the Full Bench of the Tribunal that in a case where the assessment was to denote only the acceptance of income as declared, the entries made in the various columns of IT-30 sheets served all the purposes of an order, in writing. The relevant part of the judgment of the Full Bench of the ITAT is reproduced as hereunder:

"To sum up, having considered the provisions of section 59(1) and comparing the same to the provisions of normal assessment under section 62 and having considered the meaning of the word `assessment' in the context of the Self Assessment Scheme under section 59(1) and having distinguished the decided cases in respect of requirement of law for an order in writing as a pre-requisite for levy of tax demand, we are of the considered opinion that in a case share return was filed under Self-Assessment Scheme and which qualified for processing under such Scheme without requiring any adjustment under section 59(3) or otherwise so that the returned income is accepted in toto as the assessed income, .the requirement of an assessment in writing are sufficiently fulfilled by preparation of a tax computation sheet in the manner described in the prescribed IT-30 Form duly signed by the assessing officer and such an order under section 59(1) can be held to have been properly made by the assessing officer for the relevant year. The contention of the appellant, therefore, that section 66A could not be invoked as there was no order in writing for the years under appeal is, therefore, rejected on this ground." In view of the discussion made as above as well as the above quoted findings of the Full Bench of the Tribunal we are not inclined to accept the plea of learned AR. In our considered opinion in the cases where declared income is accepted as such the requirement of the provisions of section 59(1) of the Repealed Ordinance to pass an order in writing is fulfilled with the preparation and signing of IT-30 form and demand notice by the Assessing Officer. Under the circumstances the initiation of proceedings under section 66A of the Repealed Ordinance on the basis of assessment framed as per IT-30 Form in the case of the assessee appellant is held to be legally justified on merits as well, the action of the IAC to invoke the provisions of section 66A of the Repealed Ordinance is held to be justified consideration the facts of the case. The addition in the assets shown by the assessee as per wealth statement as on 30-6-2000 filed along with the return for the year under consideration against those of the assets declared as per wealth statement of 30-6-2005, apparently did not reconcile with the income declared and assessed for the assessment year 1996-1997 onwards as per assessment record. Even otherwise no prejudice is caused to the assessee by the order of the IAC whereby he is provided with the opportunity to explain and substantiate his contention regarding the sources of investment.

7. As a result, the assessee's appeal stands dismissed. C.M.A./109/Tax (Trib.) Appeal dismissed.