2002 PLP 1539 (PTD)

(vi) The complainant filed an appeal against the rejection of application under section 156 and the CIT (Appeals) vacated the rejection order under section 156 as well as the orders under sections 87 and 89 and directed that the matter be examined de novo. The department filed second appeals before the Income Tax Appellate Tribunal on the ground that orders under sections 87 and 89 were not appeal-able. The departmental appeals were, however, dismissed vide ITAT order dated 28‑6‑2001. A show cause notice dated 7‑11‑2001 was then issued to commence the de novo proceedings under sections 87 and 89 as had been directed by the CIT (Appeals). (vii) The complainant filed a reply dated. 21‑11‑2001 to the show cause notices but fresh orders under sections 87/135 and 89/135 were passed on 30‑11‑2001 creating the same additional tax demand as before.

2. In the complaint the same objection to levy of additional tax under section 87 amounting to Rs. 13,901 and Rs. 14,152 for the assessment years, 1990‑91 and 1991‑92 has been raised as had already been taken before the Assessing Officer as well as the CIT (Appeals) viz. that the alleged default under section 53 was not mentioned in the assessment order passed under section

62. The fact, however, is that the CIT (Appeals) did not hold the levy of additional tax to be invalid and only vacated it for de novo proceedings. If the complainant had any objection to the order of the CIT (Appeals) it could have filed a second appeal before the Tribunal. The plea that the orders under section 87 were against the law cannot, therefore, be considered at this stage. As regards the factual position, the complainant has no where denied that it had committed default under section 53 of the Income Tax A Ordinance and the plea regarding pending refund is also not relevant to the period during which the default was committed under section

53. No intervention is, therefore, called for as far as the orders under section 87 for the assessment years 1990‑91 and 1991‑92 are concerned.

3. Coming to the question of additional tax levied under section 89 for the assessment year 1990‑91, the fact is that assessment for this year was made on 30‑5‑1991 and a demand of Rs.5,61,242 was created which was payable by I1‑6‑1991. The payment was actually made on 30‑3‑1992 and additional tax of Rs.1,09,577 was, therefore, charged under section 89 for the period 11‑6‑1991 to.30‑3‑1992. It is, however, seen from the record that the following refunds were created under section 135 as a result of the orders of the Income Tax Appellate Tribunal in the complainant's case: Assessment year Amount of Refund Date of Creation of Refund 1988‑89 Rs. 1,37,594 16‑2‑1991 1987‑88 Rs. 7,44,061 29‑1‑1992 The entire refund was paid to the complainant on 26‑7‑1992 but the fact is that on the due date of payment of demand for the assessment year 1990‑94 viz. 11‑6‑1991 the refund of Rs. 1,37,594 had already been created and in the light of the provisions of section 104 of the Income Tax Ordinance the Assessing Officer should have adjusted this refund against the demand. As regards the refund of Rs. 7,44,061 it was treated on 29‑1‑1992 i.e. about two months prior to the date of 30‑3‑1992 up to which the additional tax has been calculated. This refund should also have been adjusted against the demand and since the refund was more B than the demand there was no default on the part of the complainant from 29‑1‑1992 onwards. Additional tax under section 29 would, therefore, be payable under section 89 for the period from 11‑6‑1991 to 29‑1‑1992 on the tax demand for the assessment year. 1990‑91 as reduced by the refund of Rs. 137,594 for the assessment year 1988‑89.

4. In the light of the above, it is recommended that: (i) The order under section 89 dated 30‑11‑2001 for the assessment year 1990‑91 be rectified under section 156 in accordance with the observations contained in para. 3 above. (ii) Compliance be reported within 30 days. C.M.A./M.A.K./241/FTO Order accordingly.