2013 PTD 1239
ORDER
1. CH. MUNIR SADIQ JUDICIAL MEMBER.-- -This order shall dispose of the titled appeals filed by the assessee pertaining to the assessment years 2001-2002 and 2002-2003 against the Revisional Assessment Order dated 31-12-2009 passed by learned Additional Commissioner Inland Revenue, L.T.U, Lahore, under section 66A of the Repealed Income Tax Ordinance, 1979.
2. Facts leading to the present appeals are that the appellant is an unquoted limited company engaged in the business of manufacturing and supply of engineering goods including plant and machinery besides rendering/providing engineering services. While completing assessments for the assessment years 2001-2002 and 2002-2003 under section 62 of the Income Tax Ordinance, 1979 (hereinafter referred to as the repealed Ordinance) the receipts, other than disclosed under presumptive tax regime in statement filed under section 143B, were taxed under normal tax regime. This treatment was subsequently found erroneous in so far as prejudicial to the interest of revenue and as such the provisions of section 66A of the repealed Ordinance were invoked for both the years by issuing a show cause notice. The invocation of provisions of section 66A of the repealed Ordinance was contested by the appellant before the Honourable Lahore High Court Lahore through filing of Writ Petition No. 6118 of 2007 and Writ Petition 6119 of 2007 and the Honourable High Court granted stay of proceedings till the final disposal of the petitions. Subsequently, the department considered the statutory period of six months as provided under Article 199(4A) of the Constitution of Islamic Republic of Pakistan, 1973 as expired and took up the proceedings for disposal. The contention of the appellant that the proceedings so initiated already stood time barred on 11-12-2008 and 24-2-2009 together with explanations offered against proposed taxation of normal receipts under presumptive tax regime were not considered and the proceedings were concluded on 31-12-2009. Hence, the assessee has filed these appeals, for the assessment years 2001-2002 and 2002-2003.
3. Learned AR of the appellant has vehemently contested that under the circumstances and on the facts of the case, the learned Additional Commissioner was not justified to invoke provisions of Section 66A and treat all local receipts at Rs.1,487,879,326, and Rs.1,624,053,778, for Assessment Years 2001-2002 and 2002-2003 respectively as taxable under section 80C of the repealed Ordinance. He submitted that the declaration of receipts by the taxpayer was in accordance with the findings of this Tribunal in the previous assessment years and, being so, there was no error in law or facts on which section 66-A could have been invoked. He further submitted that in CIT v. Paul Brothers (1995) 216 ITR 548 (Born.) (Case-law from Indian jurisdiction) it was held that where the ITO's order is passed on the basis of a binding decision, revisional power under section 263 cannot be exercised to undo the said order. In Russell Properties (P.) Ltd. v. A. Chowdhury, Addl. CIT (1977) 109 ITR 229 (Cal.) it was held that where the ITO has merely followed the decision of the Tribunal, his order cannot be said to be erroneous or prejudicial to interests of revenue so as to empower the Commissioner to exercise his revisionary powers. In CIT v. G.M. Mittat Stainless Steel (Pvt.) Ltd. (2003) 130 Taxman 67/263 ITR 255 (SC) it was held that where decision of Assessing Officer was based on the High Court's decision which was operative at the time of his order, Assessing Officer's order could not be treated as erroneous even though subsequently Supreme Court reversed such High Court's decision. He submitted that the order having been passed subsequent to lapse of period of limitation is void and non-existent in the eyes of law and the ratio as settled by the apex court through judgment in Elli Lilly's case, cited as 2009 SCMR 1279 = 2009 PTD 1392, is not applicable to the case of the appellant and is distinguishable and in support he argued that firstly the judgment has been given in altogether different scenario i.e. applicability of provisions of section 122(5A) of the Income Tax Ordinance, 2001 on assessments completed under repealed Ordinance which was not approved and it was held that the assessments completed under the provisions of repealed Ordinance would be dealt under the corresponding provisions of the repealed Ordinance and secondly the appellant was not a party in that case. Continuing his arguments the learned AR has submitted that the department itself initiated proceedings under section 66A of the repealed Ordinance well before the announcement of the relied on judgment of the apex court supra. In fact this issue was never contested by the appellant before the tax authorities or the Hon'ble High Court. Hence, its ratio is not applicable on the case of the appellant. The learned AR while continuing his arguments has drawn our attention to the relevant provisions for computation of limitation and submitted that since the orders were passed on 31-12-2009, the same being time-barred are void ab initio and non-existing in the eyes of law. It is also the argument of the AR that this learned Tribunal in the case reported as 2005 PTD (Trib.) 960 cancelled the assessment when it was found time barred and it did not dilate upon other grounds of appeal. However, he has invited our attention to the history of the case as decided by this Tribunal in the previous years on the same point and produced copies of the orders of this Tribunal as under:--
2. 1991-1992 to 1993-1994
3. ITAT in orders in I.T.As. Nos. 205 to 207 dated 13-3-1998 ordered assessment under normal law.
4. 1995-1996
5. ITAT in orders in I.T.A. No.4038 dated 13-3-1998 ordered assessment under normal law.
6. 1996-1997
7. CIT(A) directed to re-assess under normal law.
8. 1997-1998
9. CIT(A) and ITAT ordered to assess it under Normal Law. Reference application of the department was also rejected by ITAT (R.A. No. 152/LB of 2004 dated 28-4-2004) being a question of fact.
10. 1998-199
11. Return filed under normal law. No adverse order passed to-date.
12. 1999-2000
13. CIT(A) and ITAT (I.T.A. No. 6363/LB of 2004 dated 14-10-2006) both directed to assess the case under normal law.
14. 2000-2001
15. CIT(A) and ITAT (I.TA. No. 6364/LB of 2004 dated 14-10-2006) both directed to assess the case under normal law.
16. The fact finding about the nature of business of the assessee was made in I.T.As. Nos. 205 to 207 dated 13-3-1998, referred above, and relied upon subsequently in the other orders of the Tribunal read as under:--
17. "The appellant/assessee company was not a contractor simplicitor and was in fact a supplier under a contract to provide the machinery/plant at the site in working condition. The words supply becomes more authentic when agreement exists for such supply laying down the conditions and terms of the agreement. There is a regularity and the sufficiency of the amount, and the goods supplied are being manufactured by the assessee appellant on different places in view of the nature of the plant to be installed, etc, etc .. The declarations being there assessment orders under section 62 were the legal orders to be passed in such a case. The revision proceedings taken up by the learned Commissioner of Income Tax specially when his predecessor had issued exemption certificates was uncalled for and unjustified. The original orders are restored."
18. He submitted that even the reference application of the department on this issue was rejected by this Tribunal vide its order dated 28-4-2004, in Case No. 152/LB of 2004, in the following words:--
19. "It has consistently been held by the first appellate authorities as well as this forum in the case of the assessee that the assessee is a manufacturer cum supplier and, therefore, a part of assessee's receipts is to be assessed under section 62 as part of receipts comprising of supplies is to be assessed under 80C. Hence, this is a finding of fact and not a finding of law. Hence in our opinion the instant case is not a fit case for filing of reference"
20. The learned A.R. has also produced evidence in the form of sales tax returns in respect of the goods supplied by the taxpayer which were manufactured by it in support of his point that the goods manufactured by the appellant were not chargeable to tax under 80C. In the light of arguments so advanced the AR requested for acceptance of the appeals.
4. On the other hand learned DR of the department supported the order of the Inspecting Additional Commissioner and contended that the proceedings were completed well within the time limitation and in support he placed reliance on the judgment of apex court reported as 2009 PTD 1392. The learned DR continuing his arguments pleaded that so far as the limitation of proceedings in this case is concerned the FBR vide No. 8/82/LIT/09 dated 24-11-2009 directed that in order to give effect of this judgment of the Hon'ble Supreme Court of Pakistan, the limitation as provided in section 66 of the Income Tax Ordinance, 1979 for invoking provisions of section 66-A may be strictly adhered to. He also drew our attention to the provisions of section 66(1) bare reading of which shows that limitations to give effect of the Higher Court's order is two years from the end of the financial year in which such order is made and where an assessment has to be made on the assessee or any other person. In view of the above, as per DR the limitation to invoke provisions of section 66-A was intact at the time of completion of proceedings in the present case. In view of pleadings made as above, he requested to reject the appeal of the appellant.
5. After hearing the parties and going through the record, we are of the view that the case can easily be disposed of on the ground of limitation. According to section 66A(2), no order under section 66A shall be made after the expiry of four years from the date of the order sought to be revised. However, according to section 160(b) in computing the period of limitation of any assessment or other proceedings under the Ordinance, any period for which such proceedings were stayed by any court, tribunal or other authority shall be excluded. In the light of the provisions above, the position for both the years would emerge as under:--
21. Assessment year 2001-2002 Date of order under section 62 sought to be revised Limitation provided under section 66A(2)
22. Date of expiry as per original provisions
23. Period of stay by the Hon'ble LHC Date on which proceedings under section 66A became time barred
24. 12-6-2004 Within 4 years date of order
25. Date on which proceedings concluded
26. 11-6-2008 6 months 11-12-2008 31-12-2009
27. Assessment year 2002-2003 Date of order under section 62 sought to be revised Limitation provided under section 66A(2)
28. 25-8-2004
29. Date of expiry as per original provisions
30. Within 4 years from the date of order
31. Period of stay by the Hon'ble LHC
32. 24-8-2008
33. Date on which proceedings under section 66A became time barred Date on which proceedings concluded
34. 6 months
35. The finding of the department that section 66(1) was applicable to the appellant's case is not correct for the reasons; firstly that appellant was not a party to the proceedings on which the referred judgment of the Hon'ble Supreme Court was delivered nor his assessment was amended under section 122(5A) of the Income Tax Ordinance, 2001 hence contention of the department that the order was passed to give effect to the findings of the Hon'ble Supreme Court of Pakistan was a misconception and not lawful; secondly, it is on record that up to assessment year 2002-2003, the appellant never contested the proposition that proceeding were to be undertaken under section 66A of the repealed Ordinance of 1979 and not under the Income Tax Ordinance, 2001. When this was not an issue in the case of the appellant, reliance on the judgment of the Hon'ble Supreme Court by the revenue is misplaced. The A.R. has also pointed out that petitions before the Hon'ble Lahore High Court are still pending and learned DR has admitted the same, therefore, during the pendency of writ petition, the question of giving effect to the findings of the Hon'ble Supreme Court did not arise as the appellant was not a party in the case before the Hon'ble Supreme Court of Pakistan. In this regard reliance can be easily placed on 1994 PTD (Trib.) 1336, in which after going through a number of cases, this Tribunal has held as under:--
36. "We respectively follow the authoritative pronouncement from the Indian jurisdiction and hold that the provisions of section 66 are to be read with the relevant provisions of the Income Tax Ordinance conferring jurisdiction on the various authorities created under the Ordinance. Section 66 of the Ordinance purports to lift the bar of limitation only and does not enlarge the jurisdiction of the appellate authorities or the assessing authority under the relevant sections. The findings or directions referred to in section 66 are, therefore, confined to the assessment which is the subject of appeal before the appellate authority and are further confined to the relevant year under appeal and the parties in the proceedings."
37. Further, in the case reported as 2011 PTD (Trib.) 2362, this Tribunal has held that the above referred judgment of the Hon'ble Supreme Court of Pakistan does not enhance the period of limitation for action under section 66A(2) of the Ordinance. The relevant Para whereof reads as under:--
38. "Even otherwise while perusal of the above referred order of the Supreme Court of Pakistan (2009) 100 Tax 81 (S.C.Pak.)=[2009 PTD 1392], we have nowhere found that the Hon'ble Supreme Court of Pakistan has condoned the limitation period in any of the matter nor discussion regarding the provisions of section 66A of the Ordinance, which are totally different from section 65 of the repealed Ordinance 1979. We have found that only in Para 53 while referring to the arguments of the representative of the department the section 66A has been referred only for the purposes of distinguishing the application of section 122(5A) of the Ordinance. We have no where found in this judgment of the Hon'ble Supreme Court of Pakistan holding that any provisions of law can be invoked outside the time limit provided under the law. In Para 54 of the judgment while referring various cases the section 66A has been referred but the reference in this regard no way helps the department has neither any direction in this regard has been given nor any observation is regarding the condonation of time limitation provided under the law."
39. In the light of the case-law discussed above, we agree with the submissions made by the AR that reliance of the department on apex Court's decision was totally misconceived and misplaced and hold that the judgment of the apex court under which the revenue has tried to seek refuge to cover up the time barred action is neither applicable nor relevant to the facts of the case. As the proceedings completed under section 66A of the repealed Ordinance on 31-12-2009 where clearly time barred, hence the impugned orders under section 66-A for both the assessment years are cancelled being void ab initio and nullity in the eyes of law. As the appeals have been decided on legal ground, therefore, adjudication on other grounds is not warranted.
40. HBT/58/Tax(Trib.) Appeal accepted.