I.T.As. Nos. 2226/LB to 2229/LB of 2002, decided on 13th May, 2003. Versus I.T.As. Nos. 2226/LB to 2229/LB of 2002, decided on 13th May, 2003.

ORDER

1. SYED NADEEM SAQLAIN (JUDICIAL MEMBER).---- Captioned four appeals pertaining to the assessment years 1995‑96, 1996‑97,1997‑98 & 1998‑99 have been directed against the impugned order, dated 30‑3‑2002 passed by the learned Inspecting Additional Commissioner of Income/Wealth Tax, Range‑III, Companies‑Zone‑II, Lahore. The common ground adopted for all the years under appeals are that learned Inspecting Additional Commissioner erred in law while invoking section 66A of the Income Tax Ordinance, 1979 (hereinafter called the Ordinance) to exercise his revisional jurisdiction and thus holding that assessments framed by the Assessing Officer vide order, dated 30‑6‑1999 were erroneous insofar as prejudicial to the interest of Revenue.

2. Brief facts giving rise to the present appeals are that assessee is a private limited company deriving Income from following sources:‑‑

(a) Agency Commission

(b) Services rendered

(c) Other income

(d) Presumptive income

(e) Income from AOP/Joint Venture.

2. The assessment with regard to the relevant charge years were completed under section 62/80C of the Ordinance as under:‑‑

3. Asstt year

4. Income/Loss Declared

5. Income/Loss Assessed

6. Under section

7. Date of Order

8. 1995‑96

9. (18‑Months)

10. (190,422,637)

11. (32,984,675)

12. 62

13. 30‑6‑1999

14. 1996‑97

15. (1,282,277)

16. 143‑B 65,554,042

17. (175,900)

18. 62

19. 80‑C

20. 30‑6‑1999

21. 1997‑98

22. (10,031,975)

23. 143‑B 1,811,673

24. (8,794,831)

25. 62

26. 80‑C

27. 30‑6‑1999

28. 1998‑99

29. (7,534,221)

30. (5,780,232)

31. 62

32. 30‑6‑1999

33. The record of the assessee's company was requisitioned by the Inspecting Additional Commissioner who after having examined the same came to the conclusion that assessment framed was erroneous insofar as prejudicial to the interest of Revenue which lead to the issuance of show -cause notice, dated 14‑2‑2002. Said notice is also being reproduced for the sake of convenience which is as follows:‑‑

34. "I have examined the assessment records of your company in respect of assessment years 1995‑96 to 1998‑99. Assessments for all the years have been completed under section 62 of the Income Tax Ordinance, as under:‑‑

35. Asstt year

36. Income/Loss Declared

37. Income/Loss Assessed

38. Under section

39. Date of Order

40. 1995‑96(18‑Month)

41. (190,422,637)

42. (32,984,675)

43. 62

44. 30‑6‑1999

45. 1996‑97

46. (1,282,277)

47. (175,900)

48. 62

49. 30‑6‑1999

50. 1997‑98

51. (10,031,975)

52. (8,794,831)

53. 62

54. 30‑6‑1999

55. 1998‑99

56. (7,534,221)

57. (5,780,232)

58. 62

59. 30‑6‑1999

60. Perusal of orders, accounts filed with the returns and details submitted during the course of assessment proceedings reveal that assessments made in the manner given above are not only erroneous in law but also prejudicial to the interest of Revenue for the; following reasons:‑‑

(i) Agency commission

(ii) Services rendered

(iii) Other income

(iv) Presumptive income

(v) Income from AOP i.e. joint venture

61. The company was under obligation to file separate accounts for commission income, services rendered and other income. Whereas contract executed was to be assessed under presumptive tax regime and assessed income, if any, from AOP i.e. joint venture was to be included in the income for rate purposes only. But instead of filing separate accounts the company filed joint accounts which have been made the basis of assessment.

(2) Income of the joint venture was assessed under section 80‑C and no assessed losses were at the credit of the joint venture. Accordingly, huge losses incurred on account of joint venture have wrongly been allocated towards income of the company from other sources i.e. commission income services rendered, other income etc. as under:‑‑

62. 1995‑96

63. (33,334,823)

64. 1996‑97

65. (312,062)

66. 1997‑98

67. (9,366,026)

68. 1998‑99

69. (6,239,800)

70. Due to wrong allocation of above losses, income from remaining sources have wrongly been converted into losses.

(3) Loss of Rs.3,29,84,675 erroneously assessed in respect of assessment year 1995‑96 has been brought forward in the subsequent years having the effect of enhancing the loss for all the years.

(4) Refund as under has wrongly been created as a result of above erroneous assessments:

71. 1995‑96

72. 350,178

73. 1996‑97

74. 784,719

75. 1997-98

76. 2,699,487

77. 1998‑99

78. 1,578,632

79. In view of facts narrated above, I intend to cancel assessments for all the years mentioned above. You are requested to please let me know your point of view on the issue on, 20‑2‑2002. It may kindly be noted that in case of non‑compliance or unsatisfactory explanation, assessments shall be cancelled accordingly."

80. Feeling dissatisfied with the reply submitted by the assessee company, the learned Inspecting Additional Commissioner cancelled all the assessments of the Assessing Officer and directed him to make de novo assessments in light of the directions made by the IAC. The assessee is in further appeal assailing the impugned order.

2. Mr. Maqsood Ahmad, ITP and Mr. Shakeel‑ur‑Rehman, Advocate were present on behalf of the appellant whereas Mr. Bashir Ahmad Shad, DR represented the Revenue.

3. Learned AR assailed the impugned order on merits as well as on legal premises. On the legal aspect, learned AR submitted that assessments for all the assessment years under appeal were framed under section 62 of the Ordinance on 30‑6‑1999. The assessee preferred appeals before the First Appellate Authority who decided aforesaid appeals vide order, dated 22‑5‑2001. Learned AR emphatically stated that after decision of the First Appellate Authority, the original order had already been merged in the said appeal order, therefore, there was no order holding the field which could be subjected to revisional jurisdiction by the learned IAC. In this regard, he stated that the, impugned order under section 66A was passed on 30‑3‑2002. Next contention of the learned AR was that original assessments framed under section 62 were reopened by the DCIT with the prior approval of the learned IAC and the same were finalized under section 62/65 of the Ordinance on 30‑6‑2001. He averred that firstly, since the IAC was involved all along during the assessment proceedings conducted under section 62/65 of the Ordinance and he had examined the relevant record, subsequent invocation of section 66A was not permissible under the law. Further argued that original assessments were modified by the DCIT and that too under close supervision of the concerned IAC, consequently, the original assessments framed under section 62 lost their entity, the exercise of revisional jurisdiction by the IAC with regard to assessment order passed under section 62 of the Ordinance was nullity in the eye of law. Learned AR also informed the Bench that appeal against order passed under section 62/65 of Ordinance is still pending for adjudication before the First Appellate Authority. To substantiate his contention, learned AR relied upon judgments reported as (1992 PTD. (Trib.) 1610 and 1984 PTD 234.

4. Learned DR has opposed the arguments advanced by learned AR and supported the stance adopted by the learned IAC while invoking under section 66A of the Ordinance.

5. We have heard learned counsels of both the parties and have gone through the relevant orders alongwith case‑law cited at the bar. In light of aforesaid submissions, we tend to agree with the contentions raised by the learned AR. The chronology of events also supports the assertion made by the learned AR for the assessee. Admittedly, the original assessments were framed under section 62 vide order, dated 30‑6‑1999. It is also matter of record that in the first‑round of litigation, assessee's appeals were heard and decided by the First Appellate Authority on 22‑5‑2001 which resulted in merger of original assessment order into appellate order. Obviously, the invocation of revisional jurisdiction under section 66A of the Ordinance by the learned IAC subsequent thereto on 30‑3‑2002 was null and void for the simple reason that original assessment orders were not in existence. Since there did not exist any assessment order framed under section 62 of the Ordinance, learned IAC could not exercise powers vested to him under section 66A with regard to various assessment orders which had already merged into appellate order.

6. With regard to second contention urged by the learned AR, we also find ourselves in full agreement with the, learned AR for the assessee. There is no denying the fact that DCIT reopened the case with the approval of learned IAC and finalized the additional assessment under section 62/65 vide order, dated 30‑6‑2001. Even from this angle, we would say that firstly the IAC himself was involved and has supervised the proceedings conducted under section 62/65 or the Ordinance and secondly after completion of assessment under section 62/65, the original assessments framed under section 62 were made to disappear having lost its legal existence. We would further add that assessee's stance also stands supported by the ratio settled through various judgments rendered by different judicial forums which have already been discussed herein above.

81. We also cannot lose sight of the fact that assessee has once again challenged the impugned assessments framed under section 62/65 before the learned CIT(A) and same is still pending adjudication.

7. In sequel to the aforesaid discussion, we vacate the impugned order passed by the learned IAC under section 66A of the Ordinance, we have no hesitation in making observation that the original assessment order passed under section 62 did not hold the field for the reason that those assessments stood merged into appellate order passed by the learned CIT(A) vide order, dated 22‑5‑2001, hence the same could not be subjected to revisional jurisdiction conferred under section 66A. Besides the original assessments ceased to exist for the reason 'that learned DCIT reopened the case under section 65 of the Ordinance and finalized additional assessments under section 62/65 vide order, dated 30‑6‑2001 and appeal against the said order is pending adjudication before the leaned CIT(A) in second round of litigation. Since all the titled appeals have been decided on legal premises, we are not inclined to dilate upon the merits of the case. Appeals of the assessee succeed as indicated above.

82. C.M.A./945/Tax (Trib.) Appeals succeeded.