Versus Shahid Iqbal , S.A. Kazmi

ORDER

1. This appeal has been filed by the department against the order dated 5-5-2010 passed by CIR(A-I) Islamabad for the tax year, 2003 on the following grounds:

(a) That the learned CIR(A) was not justified to cancel the assessment on the ground of being barred by time, as the selection under section 177 was sub judice before the Lahore High Court and "limitation in this case did not apply. The department had legitimate time to amend order under section 122(1) up to 26-11-2009 in the instant case.

(b) It is settled law that whenever a matter is sub judice before a higher forum the lower authority cannot finalize the issue Reliance in this regard can be placed on a judgment of the honourable High Court in a case reported as (2002) PTD 1195 (H.C. Lah.)

2. Brief facts leading to this appeal are that Taxpayer a Private Limited Company is engaged in the business of Oil and Gas Exploration. Return for tax year under consideration was filed declaring net income for the year, 2003 at Rs.2,177,681 which was deemed to be assessed under section 120(1) of the Income Tax Ordinance, 2001. The case of the Taxpayer Company was selected for audit by the CIT(Audit) in terms of provisions of sections (b) and (d) of subsection (4) of section 177 of the Income Tax Ordinance, 2001. Audit proceedings were accordingly initiated. IDR was issued. The Taxpayer Company contested the selection of the case for audit firstly before the CIT(Audit) and then before the honourable Islamabad High Court but of no avail. Having found the non-cooperative attitude of the Taxpayer Company, despite provision of number of opportunities Taxation Officer was left with no alternative but to go for amendment of the assessment under the provision of section 122(1) of the Income Tax Ordinance, 2001 under the umbrella of mandate given by a binding judgment of the learned ITAT in a case reported as 2008 PTD (Trib.) 1354. Being dissatisfied with the treatment given by the Taxation Officer, the assessee preferred appeal under section 127(1) of the Income Tax Ordinance, 2001 before the learned CIR(A) who after considering the facts and circumstances of the case cancelled the impugned order for the year under appeal with the following observation:--

2. "Arguments have been heard and the order of the honourable Islamabad High Court has been perused. Following the ratio decided in the judgment, the order of the Taxation Officer is hereby vacated as the same has been passed beyond limitation. The order of the honourable High Court was very much clear and loud. In view of the foregoing reason the impugned order is hereby cancelled. Since the impugned order has been cancelled on legal issue, hence the other grounds of appeal do not require adjudication."

3. Being dissatisfied with the treatment accorded by the learned CIR(A), Department has come up in appeal before the Tribunal on the ground raised supra.

4. 2A. During arguments learned DR has argued that the learned CIR(A) was not justified to cancel the assessment on the ground of being barred by time, as the selection under section 177 was sub judice before the Lahore High Court and limitation in this case did not apply. The department had legitimate time to amend order under section 122(1) up to 26-11-2009 in the instant case. He further argued that it is settled law that whenever a matter is sub judice before a higher forum the lower authority cannot finalize the issue. Reliance in this regard can be placed on a judgment of the honourable High Court in a case reported as 2002 PTD 1195 (H.C. Lah.).

5. Moreso the taxpayer in response to notice itself suggested to wait for the orders of the Honourable Islamabad High Court, So no one can be allowed to take the benefit of his own fault. Taxpayer itself played the role to delay the proceedings and he cannot be benefited from the same.

6. We have heard the arguments and perused the record. In order to show chain of events following tables will help us:-

7. Selection of case for audit under section 177 of the Income Tax Ordinance, 2001 by Commissioner Audit, LTU, Islamabad.

8. 16-5-2008

9. Selection was challenged by the taxpayer and Representation filed was finally disposed of by Commissioner (Audit) vide his letter No.498, dated 18-6-2008

10. 18-6-2008

11. Taxation Officer issued IDR on 9-7-2008 for Compliance by 17-7-2008

12. 17-7-2008

13. Writ Petition No.960 lodged before Islamabad High Court in August, 2008

14. 28-7-2008

15. Interim decision accorded by Islamabad High Court

16. 18-8-2008

17. Learned AR contends that the amendment of assessment is time barred in terms of section. 174(3) because the accounts and documents required to be maintained under this section shall be maintained for five years after the end of tax year to which they relate. So in view of this section limitation expires on 31-12-2008. Secondly as per section 122(2), an assessment order shall only be amended under subsection (1) within five years after the Commissioner has issued or is treated as having issued the assessment order on the taxpayer. So even as per section 122(2) assessment can be amended upto 30-6-2009 while amended assessment order has been passed on 30-9-2009. The department has drawn our attention towards section 226(b) which embodies that in the case of an assessment or other proceeding under this Ordinance, the period, if any, for which such proceedings were stayed by [any Court, [Appellate] Tribunal or any other authority]. In computing the period of limitation stay time shall stand excluded. In this case writ petition was filed on 28-7-2008, interim order was passed on 18-8-2008 but this interim order does not show any stay rather the contents of the orders are hereby reproduced as follows:

18. "C.M.1890 of 2008

19. Hafiz Muhammad Idrees, Advocate for petitioner.

20. "Taxation Officer Audit III, Large Tax Payer

21. Unit Islamabad may proceed with the matter,

22. Subject to final decision of this writ petition and

23. Subject to notice."

24. The contents of the order do no show any stay from the honourable Islamabad High Court Islamabad. So the department also cannot get any benefit under section 226(b). The learned Legal Advisor has referred the section 124(2) which is reproduced hereunder:--

(2) Where, by an order made under Part III of this Chapter by the Commissioner (Appeals), Appellate Tribunal, High Court, or Supreme Court, an assessment order is set aside [wholly or partly,] and the Commissioner [or Commissioner (Appeals) as the case may be,] is directed to make a new assessment order, the Commissioner shall make the new order within [one year from the end of the financial year in which] the Commissioner [or Commissioner (Appeals), as the case may be,] is served with the order."

25. This section also cannot come to the rescue of the department because this relates to giving effect to the appellate order for which limitation has been prescribed one year from the end of the financial year in which the Commissioner is served with the order. So this section has to do nothing with the writ petition that too without issuance of any stay. This argument of the learned Legal Advisor that taxpayer himself was using delaying tactics and tried to print image on the mind of the Taxation Officer to wait for the final decision of the writ petition, deprives the taxpayer to contest on the front of limitation, is without any force because Taxation Officer himself is supposed to be vigilant about the limitation. Moreso on the above titled position shows that selection of this case was made on 16-5-2008 a bit less than five years had already lapsed before the selection of the case. So no edge can be given to the department who has made amended assessment which is beyond the clock. With these observations we are left with no other alternative except to uphold the order passed by the learned CIR(A). Order accordingly.

26. The departmental appeal hereby stands dismissed.

27. H.B.T./162/Tax(Trib.) Appeal dismissed.