I. T. A. NO. 333/ KB OF 1984-85, DECIDED ON 8TH AUGUST, 1988. Versus I. T. A. NO. 333/ KB OF 1984-85, DECIDED ON 8TH AUGUST, 1988.
ORDER
1. FARHAT ALI KHAN, (CHAIRMAN). This departmental appeal is directed against the order of learned C.I.T. (A) recorded by him on 19th April, 1984 relating to assessment year 1971-72.
2. The brief facts giving rise to this appeal are that during the assessment year 1971-72 the I.T.O. granted tax holiday under section 15-BB of the repealed Income-tax Act, hereinafter referred to as 'the Act', to the respondent. From perusal of section 15-BB it appears that in such case it became the duty of tile respondent to create a reserve and then utilize it as prescribed by aforesaid section. It further appears that on 1st July, 1979, the Act was replaced by Income Tax Ordinance of 1979, hereinafter referred to as 'the Ordinance'. Let us also mention here that section 15-BB was omitted. However, sometimes in 1982 it was discovered by the I.T.O. that the respondent had violated the terms and conditions of Section 15-BB of the Act. He, therefore, issued notice under section 65 of the Income Tax Ordinance and the respondent filed its return under protest but the I.T.O. added the amount of unutilized tax reserve to the already declared total income and framed assessment accordingly. Having been aggrieved and dissatisfied the respondent went up in appeal and the learned C.I.T. (A) by his impugned order annulled the entire proceedings with the following observation:-
3. "In view of subsection (2) of section 166 of Income Tax Ordinance, 1979, and in view of the rules of interpretation of statutes and further in the presence of innumerable decided cases of the superior Courts on the subject, I feel no hesitation in holding that the notice issued under section 65 of the Income Tax Ordinance 1979 in 1982 to re-open the assessment for the year 1971-72 was ab initio illegal. Consequently, I hold further that the assessment finalised in furtherance of the said notice issued under section 65 of the Income Tax Ordinance, 1979, for the year 1971-72 is equally illegal and void and is, therefore, annulled."
4. This time the Department feels aggrieved and has come up in second appeal. Mr. Mohammad Farid, the learned D. R., supporting the departmental appeal quoted extensively from the Income Tax Law by Chuturvedi and S. M. Pithisaria, 3rd Edition Volume 6, Page 5339 and the Law and Practice of Income Tax by J. B. Kanga and N. A. Palkiwala, 6th Edition volume 1, Page 1101. The learned DR also cited the following cases.
(i) 1969 (71) ITR 806.
(ii) 1969 (72) ITR 787.
5. The pith and substance of his argument is that even though action under section 15-BB was not protected by section 166 of the Ordinance yet section 6 of General Clauses Act applied with fill force in this case and the 'earned C.I.T. (A) seriously erred in law in annulling the assessment proceedings. The learned D. R. argued that the I.T.O. was within time as he framed the additional assessment within 4 years from the date of discover- of violation of conditions ;)f section 15-BB of the Act. Relying upon a decision of this Tribunal reported as 1985 P T D (Trib.) 742, the learned D. R. also argued that the right of the I.T.O. to re-open the assessment order for assessment year 1971-72 under section 65 of the income-Tax Ordinance was upheld in this case. Mr. Javed Siddiqui, the learned counsel for the respondent, on the other hand, relying upon a decision of this Tribunal recorded in ITA No.335/KB of 1984-85 dated 2-5-1988 -untended that the departmental appeal was devoid of any merit and should be dismissed as the decision relied upon by him was on all fours of this appeal.
6. We have heard both the learned D. R. as well as the learned counsel for the respondent and have also gone through the relevant law. Mr. Mohammad Farid thinks that section 15-BB stands revived with the help of section 6 of the General Clauses Act and that the period of Limitation for addition to be made under that section starts running from the date of the discovery made by the I.T.O. that the reserves were not utilized by the respondent according to the terms and conditions of section 15-BB. However, we feel that we can't do either. As far as section 6 of the General Clause Act is concerned, it could have come to the rescue of Mr. Mohammad Farid had the I.T.O. discovered the violation of terms and conditions of section 15-BB before the repeal of the Act. It is important to note that it is not the violation of terms and conditions of section but the discovery thereof which gives power of add back to the I.T.O. However, under the facts and circumstances of this appeal the I.T.O. learnt about the alleged violation something in 1982. Thus, at the time of repeal he had no existing right or privilege, which could fall within Clause (a) or (c) of section 6 of General Clauses Act. Consequently his first argument fails. Let us mention here that the same position emerges from perusal of both the rulings and commnetaries relied upon by the learned DR. Now turning to his second leg of argument, we again find it devoid of any merit. Subsection (3) of section 65 talks of 10 years from the end of assessment year in which the total income of the said income year was first assessable. It does not lay down either a H period of 4 years or the discovery as point of time from which it' would start running. We, therefore, think that since the notice was issued under section 65 of the Ordinance it should have beer, issued conformity with provisions of subsection (3) of that section.
7. Now as far as our decision relied upon by Mr. Mohammad Farid is concerned, it is also wide off the mark as the notice a/s 65 was within a period of 10 years in that case.
8. Thus, we see no reason to depart from our earlier decision which has been relied upon by Mr. Javed Siddiqui, the learned counsel for the respondent
9. In view of discussion made above we find no force in this departmental appeal and it stands rejected accordingly.
10. M. B. A. /545/T ----- Appeal dismissed.