I.-T. AS. NOS. 1845/LB AND 1846/LB/1 OF 1984-85, DECIDED ON 31ST JULY, 1985. Versus I.-T. AS. NOS. 1845/LB AND 1846/LB/1 OF 1984-85, DECIDED ON 31ST JULY, 1985.

ORDER

ABRAR HUSSAIN NAQVI (MEMBER).‑‑ These are two departmental appeals against an assessee relating to the assessment year 1980‑81. One appeal is against the proper assessment and other is against penalty under section 111.

2. The brief facts of the case under which these appeals have arisen are that originally the assessee's case was selected for detailed scrutiny and during the course of assessment proceeding the assessee agreed to be assessed at an income of Rs.6,00,000. Subsequently, on the basis of a complaint the case of the assessee was reopened and the income of the assessee was re‑assessed at an income of Rs.37,05,573. In addition, a penalty of Rs.54,88,840 was also imposed under section 111 of the Income‑tax Ordinance for concealment of income.

3. The assessee filed the appeals before the learned A.A.C., Range‑B, Multan. It appears that the learned A.A.C. heard the case at Bahawalpur on 10‑11‑1984 where rough note book, on the basis of which the assessment was made were produced by the I.‑T.O. The order sheet entry, dated 10‑11‑1984 is reproduced below.

AR, Mr. M.A. Hadi, I.‑T.O's. Mian Qasim Ali, Pervez Akhtar and I. A. C. Mr. Shaudullah Khan as an observer are heard with reference to records the photo state copies of important documents only retained on supply) written arguments given by the AR are handed over to the I.‑T.O. and a copy for the A.A.C., I.‑T.O. would like to submit reply to the written argument by 18th November, 1984 with copy to the A.R. by that date. Adjourned to 18th November, 1984.

The case was adjourned to 18‑11‑1984. The order sheet entry, dated 18‑11‑1984 reads as under:‑

Mian Qasim Alt, I.‑T.O. and AR, M.A. Hadi and a partner Hafiz Ghulam Qadir present I.‑T.O. has moved an application for allowing the department to file counter‑arguments to the written arguments submitted by the AR. The AR opposes the adjustment request of the I.‑T.O. on the ground that the Department cannot make good any deficiencies in their order by their written arguments that the Department cannot add or take away anything from their order and that the Department is conspiring to take a coersive action for recovery and intimidation. If the assessee who is in appeal and that the Department had closed its side on 10‑11‑1984. After considering the application of the I.‑T.O. and the arguments AR., I order alloy Meanwhile the I.‑T.O. is directed to submit the complete records of the case under record. Adjourned finally to 28th November, 1984.

In the meantime Notification No. 3260/Admn./1/84, dated 27th November, 1984 was issued by the Regional Commissioner of Income‑tax under section 5(1)(b) of the Income‑tax Ordinance, 1979, according to which various cases were transferred from the jurisdiction of the I. A. C. to the jurisdiction of Commissioner of Income‑tax (appeals). In this list, the case of this assessee was also included which meant that jurisdiction in regard to this case was transferred to C. I. T. (A) (Zone‑I) Lahore from the jurisdiction of the learned A.A.C. 'B' Range Multan. This notification was admittedly received by the learned A. A. C. on 27‑11‑1984 and which finds mention in the impugned order of the learned A. A. C. According to the learned A. A. C. this notification was received in his office on 27‑11‑1984 which he directed to be placed before him on 28‑11‑1984. The learned A.A.C. on 28‑11‑1984 wrote a detailed order in which he challenged the legality of jurisdiction of the learned Regional Commissioner of Income‑tax to take away the jurisdiction of the case from him. According to the learned A.A.C. he had already announced the order on 25‑11‑1984 i.e. before the receipt of the notification. The relevant entry of the order‑sheet, dated 20‑11‑1984 and 28‑11‑1984 are reproduced below:‑

"A.R. M.A. Had and a partner are present. I.‑T.O. is called absent up to the working hours. Nor any reply is filed in spite of the final opportunity for arguments allowed to the I.‑T.O. on 18th November, 1984. Judgment announced."

The order‑sheet entry, dated 28‑11‑1984 reads as under:‑

"The AR, M.A. Hadi and a partner present. The I.‑T.O. is again absent nor have the case records been sent. Meanwhile a notification, dated 27th November, 1984 is received and placed on record. It is considered void in law as per my order in respect of jurisdiction.

Let a copy of the order be sent to the Regional Commissioner of Income‑tax."

The learned A.A. C. in his detailed order has expressed the following views:‑‑

(1) That the power to transfer 'of cases from the jurisdiction of A.A.C. to C.I.T. (Appeals) vest with the C.B.R. alone and the letter under which the C.B.R. has authorised the Regional Commissioner of Income‑tax (Appeals) is ultra vires of the powers of the C.B.R. as provided under section 5(1)(b) of the Income‑tax Ordinance.

(2) That the C.B.R. having conferred jurisdiction on him to decide certain cases, the jurisdiction in regard to these cases could only be taken away by the C.B.R. Authority Regional Commissioner of Income‑tax.

(3) That the order of the Regional Commissioner of Income‑tax in regard to the transfer of jurisdiction was against natural justice as it has been passed without any basis or without giving any reasons.

(4) That the C.I.T. (Appeals) not being subordinate to the Regional Commissioner of Income‑tax the jurisdiction could not be conferred on him by the Regional Commissioner of Income‑tax.

(5) Notwithstanding the provisions contained in proviso to section 5(1)(b) of the Income‑tax Ordinance, the Regional Commissioner of Income‑tax's powers are not concurrent with the C.B.R.

After taking this view, the learned A.A.C. even otherwise held that since he had already announced the order, on 25‑11‑1984, therefore, the notification under which the case was taken away from his jurisdiction was ineffective and not applicable on this case.

6. The department has come up in appeal against this order. The department case actually is that the Regional Commissioner of Income‑tax had jurisdiction to transfer the case from the A.A.C. Range 'B' to C . I . T . (A) , Lahore on the notification having been received by the A.A.C., on 27‑11‑1984 and the order having been passed by him on 28‑11‑1984, the order of the learned A. A. C., is without jurisdiction. An affidavit has also been filed by the I.T.O., concerned to the effect that on 18‑11‑1984 the case was in fact adjourned to 28‑11‑1984 and not to 25‑11‑1984 and as such there was no occasion for the A.A. C. to announce the order, on 25‑11‑1984.

7. Before discussing the case it may be convenient and proper to reproduce the relevant provisions of law as well as various notifications conferring the jurisdiction. Section 5(1)(b) is reproduced below:‑‑

"The Commissioner and the Appellate Assistant Commissioner shall perform their functions in respect of such persons or classes of persons or such areas as the Central Board of Revenue may direct; (and the Central Board of Revenue may, by general or special order in writing direct that the powers conferred on the A.A.C. by or under this Ordinance shall, in respect of appeals relating to specified cases or classes of cases or specified persons or classes of persons, be exercised by the Commissioners and for the purposes of any proceedings in respect of such cases or persons reference in this Ordinance or in any rules made thereunder 'Appellate Assistant Commissioner' shall be deemed to be referred to 'Commissioner' 2(a) 3 (provided that the Central Board of Revenue may by general or special order in writing direct that the jurisdiction of the A. A. C. shall be determined by the Regional Commissioner or the Commissioner".

In exercise of the powers conferred by section 5 (1) (b) the C. B. R. issued Circular letter C‑No. 1(10)ITI/84 on 2nd August, 1984. Along with this letter an annexure was attached in which duties/functions of the Regional Commissioner were given.

Item 2 of Part II of this annexure reads:‑‑

"He shall determine jurisdiction of Commissioners (Appeals) and Appellate Assistant Commissioners within his own region."

It is under this authority that the Regional Commissioner of Income‑tax purports to have exercised his power and transferred this case from A.A.C.‑B, Range, Multan to C.I.T. (Appeals) Zone‑I, Lahore.

8. The first question, therefore, for determination is as to whether a Regional Commissioner of Income‑tax has the power to transfer the jurisdiction of particular cases from an A. A. C. to C. I. T. (Appeals). Section 5(1)(b) has already been reproduced which allows that power of transfer from A.A.C. to C.I.T. Appeals) in regard to the appeals relating to the specified cases or classes of cases or specified persons or classes of persons vests with the C.B.R. The proviso (added by the Finance Ordinance, 1981) empowers the C.B.R. to direct that the jurisdiction of the Appellate Assistant Commissioners can be determined by the Regional Commissioner of Income‑tax or the Commissioners. It may be noted that a C. I. T. (A) has no independent power of his own to hear appeals but the. C.B.R. has been authorised under section 5 (1) (b) to confer jurisdiction on the C. I. T. who can exercise the powers of the A. A. C. to hear the appeal in regard to the specified cases or classified cases. Thus, admittedly the C.B.R., has the power in regard to the specified cases to confer jurisdiction on C. I. T. (Appeals) to hear appeals in regard to the specified cabes. In explanation added to section 5(1) it has been further clarified that power to confer jurisdiction under the aforesaid subsection includes the power to transfer jurisdiction from one Income‑tax Authority to another. Thus the power to confer jurisdiction on an A.A. C. or C. I. T. (A) FAIS includes transfer of specified cases from one A. A. C., to another A. A. C. , or from an A. A. C. , C. I. T. (A) . This power of the C'. B. R. can also be exercised by a Regional Commissioner of Income‑tax if so directed in writing by the C.B.R. We have seen above that vide circular letter, dated 2nd August, 1984 the C.B.R. has assigned the duties and functions of the Regional Commissioner of Income‑tax detail of which is given in the annexure. One of such powers exercisable by the Regional Commissioners of Income‑tax is to determine jurisdiction of C.I.T. (Appeals) as well as of A. A. Cs. within his own region. The learned counsel for the assessee has taken an objection to the manner of conferring jurisdiction on the Regional Commissioners of Income‑tax. According to him the direction has not been given by the C.B.R. formally nor any notification has been issued to this effect. It was‑contended, that while conferring jurisdiction on the Regional Commissioner of Income‑tax, the C.B.R. should have passed a formal and specific order quoting the authority under which the power was being exercised. However, we are not persuaded to accept this contention. The proviso to section 5(1)(b) does not lay down any specific manner in which the power has to be conferred by the C.B.R. to the Divisional Commissioner. It only lays down that the C. B. R. can direct that the jurisdiction of the A. A. C. could be determined by the RCIT. Such a direction is contained in the Circular letter, dated 2nd August, 1984 and, therefore, no exception could be taken to this circular which is validly and legally issued. Similarly, the learned A. A. Cs. view that the powers conferred by the C.B.R. under the aforesaid proviso under section 5(1)(b) of the Ordinance, are ultra vires of the Income‑tax Ordinance is also erroneous and incorrect. Admittedly the C.B.R. has the power to delegate its power to the Regional Commissioner of Income‑tax and that power has been legally exercised by the C. B. R.

9. The next question which has been raised by the learned A.A.C. and requires determination is as to whether the Regional Commissioner of Income‑tax has the power to transfer a case which is already pending for determination before the learned A.A.C. in regard to certain cases which had been assigned to that particular A.A.C. by the C.B.R. itself. The learned A. A. C's view appears to be that Regional Commissioner of Income‑tax can confer jurisdiction in regard to the fresh cases and not in regard to the pending cases. According to him since the jurisdiction on him in regard to certain canes had been conferred by the C. B. R. itself and the power being not concurrent, the R.C.I.T. as a delegate of the C.B.R. has not power to withdraw the jurisdiction of the case assigned to him by the C.B.R. In our opinion this view of~ the learned A.A.C. is also incorrect. The explanation to section 5(1) of the Ordinance has clarified that, power to confer jurisdiction includes power to transfer jurisdiction. The specified cases can De transferred from the jurisdiction of one A. A. C. to another A. A. C. (including Commissioners of Appeals).

10. The third question which has to be determined in this case is as to whether the learned A. A. C. was functus officio when the order of transfer was passed and received by the A.A.C. According to the learned A.A.C. the case was adjourned to 25‑11‑1984 and on that date had announced the judgment while the order of the R.C.I.T. was passed on 27‑11‑1984 and, therefore, this order has no application on the case which already stood decided. We have already reproduced the order sheet entry, dated 18‑11‑1984. According to the I.‑T.O. the case was adjourned to 28‑11‑1984 while according to the A. A. C. it was adjourned to 25‑11‑1984. From the perusal of the order sheet entries both views are possible and it appears that there was a genuine misunderstanding in the mind of the I.‑T.O. The order sheet entry, dated 18‑11‑1984 shows, that the learned A.A.C. had allowed time to the I.‑T.O. up to 25‑11‑1984, the relevant words used in the order sheet entry were:

"I order and allow adjournment to the I.‑T.O. up to 25‑11‑1984 without any further date to the parties."

At the same time at the end of the order, the words used are: "adjourned finally to 28th November, 1984."

However, we have noted that "28th" is overwritten and it appears that 25th has been changed into "28th". In regard to this overwriting the learned D.R. who was assisted by the I.‑T.O. concerned explained that what happened was that the case was adjourned to 25‑11‑1984 but it was on the request of the I.‑T.O. that the date was changed to 28th November, 1984 as the I.‑T.O. had show his inability to appear on 25‑13‑1984 because of the tour programme of the R.C.I.T. The I.‑T. O's contention also supported by the entry in the side of the order sheet were he has written as under:‑‑

"I will try to submit the reply by 28th instant."

It, therefore, appears that the I.‑T. O. was under the genuine impression that the case was adjourned to 28‑11‑1984. Therefore, while the learned A.A.C. was under the impression that the case was adjourned to 25th November, 1984, the I.‑T.O. thought that the case was adjoruned to 28th November, 1984. Since on 25‑11‑1984 the A.R. appeared before the A.A.C. and according to the order sheet entry the learned A.A.C. marked his presence and announced the judgment, there is a presumption that the case was in fact adjourned to 25th November, 1984. At the same time since the order in fact was passed on 28‑11‑1984 legality of the order of the learned A. A. C. is doubtful as, on 27‑11‑1984 the order of transfer of the case had been passed and received in the A. A. C's office. The learned counsel for the assessee has argued that since the order had been announced on 25‑11‑1984 therefore, the learned A. A. C. could not but had to write a judgment already announced. Be that as it may, we have already held that the order of transfer passed by the R.C.I.T. on 27‑11‑1984 was valid and a legal order. The learned A.A.C. has admitted in his order that on 28‑11‑1984 the record was to be submitted by the I.‑T.O. for reference purposes. As such the learned A. A. C. acted in haste to pronounce the judgment on 25‑11‑1984 without seeing the record which was yet to be submitted on 28‑11‑1984. He should have waited for the record before announcing the judgment as after the announcement of the judgment the examination of the record would be futile and useless. In this circumstance we are of the view that though the learned A. A. C. genuinely thought that he had adjourned the case to 25th November and only record was to be submitted on 28‑11‑1984 but the I.‑T.O. cannot also be blamed for his impression that the case had been adjourned to 28‑11‑1984. We have already held that it was improper on the part of the learned A. A. C. to pass an order before examining the record, Since the order has been passed by learned A. A. C. admittedly without examining the record which was to be submitted, on 28‑11‑1984 the department stands prejudiced. We, therefore, while holding that the order had been lawfully passed by the learned A. A. C. , on 25‑11‑198 4 and that the R. C. I. T. had the jurisdiction of transfer the cases from A . A. C. , we also hold that the transfer order had no application on this case as the judgment had been announced, on 25‑11‑1984. However, since the order has been passed by the learned A. A. C. without examining the record which was admittedly to be placed before him on 28‑11‑1984, .we feel that the order of the learned A. A. C. has to be set aside. We accordingly set aside the order of the learned A. C. and remit the case back to tile Appellate Authority, wherever it may be, and direct that the appeals should be decided on merit. Since we have decided this appeal on a purely legal issue, we refrain from making any comments on the case on merits as that would prejudice the mind of the appellate authority.

M.Y.H. Case remanded.