Case Judgement http://www.plsbeta.com/LawOnline/law/casedescription.asp?casedes=2...

2010 P T D (Trib.) 153

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos.635/LB to 640/LB of 2008 and M.A. No.91/LB to M.A. No.96/LB of 2008, decided on 7th
March, 2009.

(a) Income Tax Ordinance (XLIX of 2001)---

----Ss.2(65), 161, 182 & 205---Taxation Officer---Assessment years 2003 to 2007---Assessment by Deputy
Commissioner of Income Tax---Validity---Designation of Deputy Commissioner was included in the
definition provided under S. 2 of the Income Tax Ordinance, 2001 for the reason that many assessments
which were being framed by such official pertained to the assessment year which were to be governed by the
Income Tax Ordinance, 1979---Tax years 2003 to 2007 were covered by Income Tax Ordinance,
2001---Assessments which were to be framed under Income Tax Ordinance, 2001 ought to have been framed
by an official carrying the designation of Taxation Officer---Since assessments framed were made by an
official having ,the designation of "Deputy Commissioner" and not by "Taxation Officer" as mandated under
the law, the assessment so framed had been made without jurisdiction and lawful authority---Assessments
were coram non judiee and nullity in the eye of law.

2006 PTD (Trib.) 995 and I.T.A. No.6935/LB of 2005 rel.

I.T.A. No.6935/LB of 2005 and 2002 PTD 87 ref.

(b) Income Tax Ordinance (XLIX of 2001)---

----Ss. 2(65), 161, 182 & 205---Taxation officer---Assessment years 2003 to 2007---Designation "Deputy
Commissioner of Income Tax"---Purpose and jurisdiction---Law makers clearly had in their minds that
during the transitory period when the system was being shifted from the Income Tax Ordinance, 1979 to the
newly promulgated Income Tax Ordinance, 2001, there would be confusion with regard to the designated
officers/ officials, who would be having power to exercise jurisdiction to frame assessments---After
promulgation of Income Tax Ordinance, 2001, the jurisdiction with regard to completion of assessment
proceedings would be vested with the "Taxation Officer"---By an amendment brought through Finance Act,
2002, the definition of "Taxation Officer" given in S.2(65) of the Income Tax Ordinance, 2001 was extended
to include "Deputy Commissioner of Income Tax"--It was done to cater the cases which pertained to the
assessment years which fell within the domain of the Income Tax Ordinance, 1979---Phrase "Taxation
Officer" means "Deputy Commissioner of Income Tax" signifies that if an assessment relating to an
assessment year governed by the Income Tax Ordinance, 1979 was completed by "Taxation Officer", it would
be treated as having been made by "Deputy Commissioner of Income Tax" since the official who was
authorized So make assessment under the Income Tax Ordinance, 1979 was "Deputy Commissioner of
Income Tax"---One could not reconcile with the situation where an assessment was made by an officer by the
nomenclature of "Deputy Commissioner," which fell within the purview of Income Tax Ordinance, 2001.

(c) Income Tax Ordinance (XLIX of 2001)---

----Ss.239(2) & 2(65)---Income Tax Ordinance (XXXI of 1979), Ss.59A, 61, 62 & 63---Savings---Taxation
Officer---After 1-7-2002, assessment in respect of any income year ending on or before the 30th June, 2002
shall be made by an income tax authority which was competent to make an assessment in respect of a tax

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year ending on any date after 30-6-2002, let alone tax years falling under the Income Tax Ordinance,
2001---Only exception which was shown by S.239(2) of the Income Tax Ordinance, 2001, was that in order
to make such assessment, the procedure specified in S.59 or 59A or 61 or 62 or 63, would be followed
because as per S.2(65) of the Income Tax Ordinance, 2001 for the assessments pertaining to Income Tax
Ordinance, 2001, the relevant authority, who had been authorized to complete assessment was "Taxation
Officer".

(d) Income Tax Ordinance (XLIX of 2001)---

----Ss.2 (65), 161, 182 & 205---Taxation Officer---Assessments made by an official who did not figure in
the hierarchy of the persons who were authorized to frame assessment under the law, such assessments could
not be considered to be having been made in consonance with the law.

2006 PTD (Trib.) 995 and I.T.A. No.6935/LB of 2005 rel.

(e) Income Tax---

---Void order---Limitation---Time did not run against the void order---Order passed by the First Appellate
Authority being a void order, assessment was cancelled and the assessments framed by the Assessing Officer
were vacated by the Appellate Tribunal.

2002 PTD 87; Rehmat Bibi and others v. Punna Khan and others 1986 SCMR 962' and Syed Haji Abdul
Wahid and others v. Syed Sirajuddin 1998 SCMR 2296 rel.

Shoaib Ahmed Sheikh for Appellant.

S.A. Masood Raza Qazilbash, D.R. for Respondent.

ORDER

SYED NADEEM SAQLAIN, JUDICIAL MEMBER.---The taxpayer/appellant has come up in appeal

assailing the impugned order dated 23-4-2008, passed under sections 1611205 of Income Tax Ordinance;
2001 (hereinafter called the Ordinance) by the learned C.I.T.(A), Gujranwala (camp at Faisalabad). Similarly,
appeals under section 182 of the Ordinance have also been filed for the tax years 2006 and 2007 against the
above said impugned order.

2. The appellant has taken up a number of grounds, whereby the impugned order has been challenged on the
basis of legal premises as well as factual aspects. However, during the proceedings the taxpayer filed misc.
applications with the request that additional grounds may also be considered since the same go to the roots of
the case. The aforesaid misc. applications were accepted and the legal grounds urged by the taxpayer were
formed part of the appeal proceedings.

3. As per facts narrated in the impugned order, the taxpayer is a company limited by guarantee, running a
club by the name of Chenab Club, Faisalabad. It was narrated in the facts that the company was obliged to
withhold tax under section 153 of the Ordinance (0)3.5% on account of payments made against consumable
material. Facts further revealed that Club did not deduct tax while making purchases. It also did not furnish
annual statement under section 165(1) of the Ordinance read with Rule 44 of the Income Tax Rules, 2002.
This led to the issuance of show-cause notice under sections 1611205 of the Ordinance. As per facts borne
out from the record/impugned order, the notices issued to the taxpayer remained uncomplied with, hence the
taxpayer was treated defaulter under section 161 of the Ordinance and additional tax under section 205 was

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charged. Similarly since the taxpayer failed to submit annual statement of the tax years 2006 and 2007,
penalty under section 182(2) of the Ordinance was also levied after fulfilling the requisite requirement
of issuance of statutory notices.

4. The taxpayer approached the learned first Appellate authority with the plea that no notice was
served upon the taxpayer, hence the assessment framed by the concerned authority was without lawful
jurisdiction. Besides, assessments were also assailed on merit. The learned first appellate authority
dismissed the appeals of the taxpayer with the observation that service of demand notice and
assessment order is valid under the law. The plea of the taxpayer with regard to non-service of notice
was rejected, resultantly appeals filed by the taxpayer having been treated barred by time were held to be
not sustainable in the eye of law. The taxpayer is in further appeal before the Tribunal.

5. Both the parties have been heard and relevant orders perused. The learned A.R. has vehemently
argued the case and contended that the learned first appellate authority erred in law while dismissing
the appeals of the taxpayer in limine by treating the same to be time barred. It was contended by the
learned A.R. that the assessment orders passed by the assessing officer were void ab initio being
without jurisdiction. He averred at the Bar that the assessment orders were made by an officer having
the designation of "Deputy Commissioner" who does not figure either in the repealed Ordinance of
1979 or in the Income Tax Ordinance, 2001. He further argued that since the assessments framed by
the assessing authority was nullity in the eye of law, for the reason that the same were made by an
official whose designation has not been' mentioned in the hierarchy of the tax officials who were
authorized to frame assessments, it was a void order and, the time limit does not run against' an order
which has been passed without any jurisdiction. The learned A.R. also relied upon judgment of the
Tribunal passed vide ITA No.6935/LB/05 (Assessment years, 2002-2003. On the issue of limitation,
the learned A.R. relied upon the judgment reported as 2002 PTD 87 (H.C. Kar.).

6. The learned D.R. has opposed the arguments advanced by the learned A.R. He submitted that the
demand notice and the assessment order was duly served upon the assessee within time hence, filing of
appeal after prescribed period of limitation was clearly time-barred. It was also pleaded at the Bar that
subsection (65) of section 2 is an inclusive section wherein it has been mentioned that Taxation Officer
means and [Additional Commissioner of Income Tax, Deputy Commissioner of Income Tax,] Assistant
Commissioner of Income Tax Income Tax Officer, Special Officer or any other officer however
designated appointed by the Central Board of Revenue "for the purposes of this Ordinance". Therefore,
the assessment was rightly framed by a person, who was duly authorized to deal with the matter. He
pleaded for upholding the findings recorded by the learned CIT(A).

7. After hearing the assertions made by the counsel for the rival parties, we find ourselves in agreement
with the arguments advanced by the learned A.R. Perusal of the assessment order clearly shows that
the same was framed by an officer with the designation of Deputy Commissioner. Obviously, perusal of
the Income Tax Ordinance, 2001 does not mention the name of any official by the nomenclature of
"Deputy Commissioner". The learned D.R. has referred to section 2(65) of the Income Tax Ordinance,
2001 whereby it is explained that "Taxation Officer" means "Deputy Commissioner of Income Tax etc.
In our considered opinion, the designation of the Deputy Commissioner of Income Tax was included in
the definition provided under section 2 of the Ordinance for the reason that many assessments which
were being framed by such officials pertained to the assessment years which were to be governed by
the repealed Income Tax Ordinance, 1979. It is pertinent to mention here that the tax years under
appeal are 2003 to 2007 which are covered by Income Tax Ordinance, 2001, hence the assessments
which are to be framed' under this Ordinance ought to .have been framed by an official carrying the
designation of Taxation Officer. We can dilate upon the instant issue from another angle. As we have
already mentioned that the term "Taxation Officer" given by section 2(65) ibid includes (Additional
Commissioner of Income Tax Deputy Commissioner of Income Tax) etc., we are constrained to

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observe that the lawmakers clearly, had in their minds that during the transitory period when the
system is being shifted from the repealed Ordinance to the newly promulgated Income Tax Ordinance,
2001, there would be confusion with regard to the designated officers/officials, who would be having
power to exercise jurisdiction to frame assessments. It was very much apparent that after the
promulgation of Income Tax Ordinance, 2001, the jurisdiction with regard to completion of assessment
proceedings would be vested with the "Taxation Officer" so by an amendment brought about through
Finance Act, 2002, the definition of "Taxation Officer" given in the section 2(65) was extended to
include "Deputy Commissioner of Income Tax". We must not be oblivious of the fact that it was done
to cater for the cases which pertained to the assessment years which fell within the domain of the
repealed Ordinance. Because the phrase "Taxation Officer" means "Deputy Commissioner of Income
Tax" signifies that if an assessment relating to an assessment year governed by the repealed Ordinance
is completed by "Taxation Officer", it would be treated as having been made by "Deputy Commissioner
of Income Tax", since the official who was authorized to make assessment under the erstwhile
Ordinance was "Deputy Commissioner of Income Tax". However, one cannot, reconcile with the
situation where an assessment is made by an officer by the nomenclature of Deputy Commissioner,
which fall within the purview of Income Tax Ordinance, 2001. At this juncture, it would not be out of
place to refer section 239(2) of the Ordinance of 2001, which is as under:--

"The assessment, referred to in subsection (1), shall be made by an income tax authority which is
competent under this Ordinance to make an assessment in respect of a tax year ending on any date
after the 30th day of June, 2002, and in accordance with the procedure specified in section 59 or
59A [or 61] or 62 or 63, as the case may be, of the repealed Ordinance]"

8. Bare look at the above-produced provision of law also provides that after 1-7-2002, assessment in
respect of any income year ending on or before the 30th June, 2002 shall be made by an income tax
authority which is competent to make an assessment in respect of a tax year ending on any date after
30-6-2002, let alone the tax years falling under the Income Tax Ordinance, 2001, which is the situation
in the present case. The only exception which was shown by section 239(2) ibid, was that in order to
make such assessment, the procedure specified in section 59 or 59A [or 61] or 62 or 63, would be
followed, because as per section 2(65.) of the Ordinance for the assessments pertaining to Income Tax
Ordinance, 2001, the relevant authority, who has been authorized to complete assessment is "Taxation
Officer". Even otherwise if we give weight to arguments of the learned D.R. that term Taxation Officer
included Deputy Commissioner of Income Tax we are constrained to observe that the impugned
assessment which is subject-matter of present discussion was framed by an official with the
designation of "Deputy Commissioner" who is not amongst the officials mentioned in section 2(65) of
the Income Tax Ordinance, 2001 or even in the repealed Ordinance. At this stage we must say that in a
number of judgments, the Tribunal has already held that assessments made by an official who does not
figure in the hierarchy of the persons who are authorized to frame assessment under the law, such
assessments cannot be considered to be having been made in consonance with the law. Resultantly,
these assessments have been held to be without jurisdiction. The instant issue came up for adjudication
before the Tribunal vide reported judgment cited as 2006 PTD (Trib) 995 and ITA No.6935/LB/05
dated 7-10-2007. The relevant extracts from the said judgments are as follows:--

"since it has been categorically observed by the apex Court that the Assessing Officer/Deputy
Commissioner of Income Tax has no authority to frame assessment---cancelled."

In another unreported judgment passed vide ITA No.6935/LB/05 dated 7-10-2008 it has been held:--

"We have heard the learned counsel appearing on behalf of the assessee and have also gone
through the orders passed by both the learned lower authorities. Undoubtedly, the assessment in
the instant case was framed by the Deputy Commissioner (Audit-5) whereas no such authority

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does exist under the new Income Tax Ordinance, 2001 with the powers to frame assessment
under section 207 of the Income Tax Ordinance, 2001, it is the "Taxation Officer" who is
empowered to pass the order. The term "Taxation Officer" means Additional Commissioner of
Income Tax Deputy Commissioner of Income Tax Assistant Commissioner of Income Tax
Income Tax Officer, Special Officer, but does not include Deputy Commissioner of Income Tax
(Audit), Similarly requisite approval in the instant case could only be accorded by either the
Regional Commissioner or the Commissioner and, that too, after having due authorization from
the Federal Board of Revenue."

9. In the light of above arguments and case-law, cited in support of those arguments, we have no
hesitation in holding that since the assessments framed in the present case were made by an official
having the designation of "Deputy Commissioner" and not by the "Taxation Officer" as mandated
under the law, the assessment so framed have been made without jurisdiction and lawful authority,
therefore, the impugned assessments are coram non judice hence nullity in the eye of law.

10. Now coming to the observation made by the learned first appellate authority that appeals filed by
the taxpayer were time barred, we would like to reproduce relevant extract from a judgment reported as
2002 PTD 87 (H.C. Kar.) for ready reference:--

"Alternatively Mr. Lakho argued that the impugned judgment and decree was void and nullity in
law and it was well-settled that statute of limitation do not run against such judgments and
orders. In this context he relied upon the observations of the Honourable Supreme Court in
Rehmat Bibi and others v'. Punna Khan and others 1986 SCMR 962 and Syed Haji Abdul Wahid
and others v. Syed Sirajuddin 1998 SCMR 2296. Indeed we are aware that apart from the above-
cited precedents there are several other pronouncements where their lordships, have held that no
limitation runs against a void order which is non-existent in the eyes of law and can even be
ignored. Nevertheless it is important to consider whether the impugned judgment can be
characterized as void or a nullity in law so as to attract the application of the above principle."

11. Since we have already held that assessments made in the present case were void ab initio,
following the supra cited judgment of the apex Court, we hold that the time does not run against the
void order, therefore, we vacate the impugned order passed by the learned first appellate authority;
cancel the assessments framed by the assessing officer.

12. As regards, appeal of the assessee under section 182 for the tax year, 2006 is concerned, the same
have become infructuous for the reason that the assessments framed for the tax years 2003 to 2006
already stand cancelled. For the tax year, 2007, the order of the learned CIT(A) is also vacated, the
order passed under section 182 is directed to be annulled, since the order was also passed by the
"Deputy Commissioner" who is not an authority recognized under the Income Tax Ordinance, 2001 as has
been elaborately discussed in the preceding tax years.

13. Since we have decided the case purely on legal plane, the merits of the case need not be dilated
upon.

14. Appeals of the assessee succeed.

C.M.A./118/Tax(Trib.) Appeal accepted.

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