Case No: Income Tax Reference Application No. 39 of 2012
Judge: A. F. M. Abdur Rahman. J.
Court: High Court Division,
Advocate: Mr. Mosharaf Hossain, Mr. Abdur Rahim Bhuiyan,
Citation: 2017 (2) LNJ 176
Case Year: 2012
Appellant: Spectra SN Tex Limited
Respondent: Commissioner of Taxes, Tax Zone-02, Dhaka
Subject: Income Tax
Delivery Date: 2017-10-18
HIGH COURT DIVISION
(SPECIAL STATUTORY JURISDICTION)
AFM Abdur Rahman, J.
FRM Nazmul Ahasan, J.
Spectra SN Tex Limited, 32 Kamal Ataturk Avenue Banani, Dhaka-1213 represented by it’s Managing Director.
Commissioner of Taxes, Tax Zone-02, Dhaka, 2nd 12th Storied Government building (2nd floor) Segunbagicha, Dhaka.
Income Tax Ordinance (XXXVI of 1984)
Sections 82 BB(1), 82 BB(3) and 83 BB(3),
Whether DCT or appellate authority has any jurisdiction to adjudicate income tax case in absence of an audit report and whether tax appellate tribunal justified in passing an order without having an audit report and approval as formulated by the assessee involved the poiint as to method of reopening a self asseessement return under section 83 BB (3).The provision of section 82BB(1) has given a privilege to the taxpayer to file universal self assessment tax return. When assessee submits tax return under this section as universal self assessment, the DCT shall issue a receipt which amount to be finalisation of the assessment for the relevant year, subject to provision of reopening of the same pursuant to provision of section 83 BB(3). When receipt regarding filing of return is issued by the DCT, it will be deemed that the assessment was finalised. Being a privilege, any reopening of the said assessement shall entitle the assessee to know or to get a copy of the order of the Board of Revenue regarding selection of the return for audit. Non service of such order to instant assessee make the reopening of the finalised assessement nullity. ...(13, 14, 16)
Income Tax Ordinance (XXXVI of 1984)
Sections 35(3) and 83 (2)
The latitude is available to DCT under section 35 subject to restraint in process of assessment of total income of an assessee under section 83(2). Discretion of statutory authority in exercise of statutory power, particularly in taxation mater if thought to be unlimited then exercise of such discretion may result in arbitrariness and selectivity. Discretion for ignoring the books of accounts as submitted by assessee under section 35(3) must be substantiated by reason by DCT to extent of his dissatisfaction regarding method of accounts and must be cogent as decided in leading case of Titas Gas (T&D) Ltd. Vs. Commissioner of Taxes, 59 DLR, 463. . . . (21 and 22)
Income Tax Ordinance, (XXXVI of 1984)
Section 30 A
The Deputy Commissioner of Tax (DCT) shall not make any disallowance or deduction for any year from any claim made by an assessee in the trading account or profit or loss account without specifying reason for such disallowance. The reason must be cogent reason supported by fact, circumstances of the particular case. As DCT did not state any cogent reason, therefore, disallowances of DCT is violative of provision of this section. . . . (24 to 26)
Titas Gas (T&D) Ltd. Vs. Commissioner of Taxes, 59 DLR 463 ref.
Mr. Mosharaf Hossain, Adv.
... For the Assessee-applicant.
Mr. Abdur Rahim Bhuiyan, D.A.G.
...For the tax department
A. F. M. Abdur Rahman, J: In this Income Tax Reference, under section 160 of the Income Tax Ordinance 1984, the Assessee-applicant Spectra SN Tex Ltd. formulated the following question for an opinion of this court;
(I) In the circumstances and on the facts whether the DCT concerned or Appellate Authorities have any Jurisdiction to assess or adjudicate the income tax case of the applicant in absence of an audit report under the mandatory requirement of section 82BB(3) of the ordinance?
(II) In the circumstances and on the facts whether the taxes Appellate Tribunal is justified maintaining “discarding of books of accounts” of the applicant Company without having any defects in the method of accounts.
(III) In the circumstances and on the facts whether the Taxes Appellate Tribunal was justified maintaining the disallowances?
(IV) In the circumstances and on the facts whether the Taxes Appellate Tribunal was justified in passing the impugned order without having an audit report and approval under the requirements of 82BB(3) of the Ordinance?
Facts of the Case:
2. The Assessee-applicant is a Private limited Company, having TIN No. 046-200-2301 operating in Buying House business and regularly files income tax return before the tax authority. In the assessment year 2008-2009 the Assessee-applicant filed return under the provision of universal self assessment pursuant to the provision of section 82 BB of the Income Tax Ordinance 1984 (the Ordinance 1984) showing an income of Tk. 11,42,253.00 and received the receipt the Deputy Commissioner of taxes (the DCT) which is treated as deemed assessment order under the provision of section 82BB(1) of the ordinance 1984. Subsequently the concerned DCT reopened the self assessment return and issued notice under section 83(1) and 79 of the Ordinance 1984 upon the Assessee-applicant company. The representative of the Assessee-applicant company appeared before the concerned DCT, companies, Circle-15, Taxes Zone-2, Dhaka and produced all the relevant papers and documents in support of the return and requested to supply a copy of the letter of the Board of Revenue regarding selection of the return of the Assessee-application for audit under section 82BB(3) of the Ordinance 1984 and a copy of the Audit report. But the concerned DCT did not consider the prayer and upon the papers and documents as produced by the Assessee-applicant company, made a fresh assessment under section 82BB(1)/82BB(3) /83(2) of the Ordinance 1984 for the assessment year 2008-2009, disallowing part of different heads of expenditures and also assessed income of the Assessee-applicant company at Taka 43,29,172.00.
3. Being aggrieved with and highly dissatisfied by the above assessment, the Assessee-applicant filed two unsuccessful Income Tax Appeal, one being before the commissioner of Taxes (Appeal), Taxes Appeal Zone-2, Dhaka being No. 468/2009-2010 and also further appeal to the Taxes Appellate Tribunal, Dhaka Bench No. 5 being Appeal No. 3489/2010-2011. Both of these Appeals having been disposed off in mechanical manner without considering the grounds as was taken by the Assessee-applicant and ignoring the papers and documents and the audited accounts in support of the return and also ignoring the submission of the Assessee-applicant regarding its company’s expenses, profit and loss account.
4. Being aggrieved with and highly dissatisfied by the said orders the Assessee-applicant filed the instant income tax reference before this court formulating the question stated earlier.
5. The instant reference is contested by the learned Deputy Attorney General Mr. Md. Abdur Rahim Bhuiyan appearing on behalf of the tax department, while the learned Advocate Mr. Mosharaf Hossain appeared on behalf of the Assessee-Applicant.
Arguments of the parties:
6. The learned Advocate Mr. Mosharaf Hossain appearing on behalf of the Assessee-applicant argues that the provision of section 82BB of the Income Tax Ordinance 1984 is a privilege to the Assessee-applicant to file self assessment return on the basis of his own account as regularly maintained and accordingly the Assessee-applicant filed the same for the assessment year 2008-2009 and the concerned DCT has issued the receipt accepting the said self assessment return upon which and pursuant to the provision of section 82BB(1) the assessment of the Assessee-applicant for the year 2008-2009 was finalized. But as the Provision of Sub-section 3 of section 82BB of the Income Tax Ordinance 1984 empowered the Board of Revenue for selecting the self assessment return for audit and to send back the same to the concerned DCT for audit and if required than to proceed for further assessment the concerned DCT served a notice under section 79 and 83(1) of the Income Tax Ordinance 1984 upon the Assessee-applicant informing that the self assessment return of the Assessee-applicant for the year 2008-2009 was selected for audit by the Board of Revenue. But the concerned DCT did not hold a separate audit for the accounts of the Assessee-applicant and made fresh assessment of the income of the Assessee applicant for the year of 2008-2009 on the besis of estimation in the presence of the representative of the Assessee- applicant and therefore serious prejudice occurred to Assessee-applicant.
7. The learned Advocate Mr. Mosharaf Hossain further argues that the concerned DCT in violation of the provision of section 35(4) of the Income Tax Ordinance 1984 rejected the book version of the Assessee-applicant’s account and arbitrarily assessed the income of the Assessee-applicant in a manner which is prejudicial to the Assessee-applicant and the same is not maintainable in the eye of law.
8. The learned Advocate Mr. Mosharaf Hossain next argues that the DCT most arbitrarily disallowed the expenses which were incurred by the Assessee-applicant in the regular operation of the business, which being prejudicial to the Assessee-applicant is also required to be interference by this court in answering the question as formulated by the Assessee-applicant in negative.
9. The learned Advocate Mr. Mosharaf Hossain referring to the supplementary affidavit, as has been filed by the Assessee-applicant argues that as the provision of section 82BB(C) of the Income Tax Ordinance 1984 has provided two way exercise i.e. auditing and assessing the income for reopening the filed return under the provision of section 82BB of the Income Tax Ordinance 1984 which has been the practice followed by the income tax department in case of large taxpayer unit which further show discrimination in between the different assessee of the country and as such the question as formulated by the Assessee-applicant is required to be answered in negative and in favour of the Assessee-applicant.
10. On the other hand the learned Deputy Attorney General Mr. Abdur Rahim Bhuiyan appearing on behalf of the tax department argues that the provision for submitting self assessment return although made in section 82BB of the Income Tax Ordinance 1984, yet there is no rule formulated there under for reopening by selecting, auditing and assessing the said return. If the Board of Revenue requires some of the self assessment returns to be audited and further assessesed, a practice has grown up in the taxes department for auditing and assessing the self assessment return in two way exercise after it has been selected by the board of revenue only for the large tax payers and not for every taxpayer who filed return under the provision of section 82BB of the Income Tax Ordinance 1984 and therefore the question as has been formulated in the instant reference is required to be answered in affirmative and against the Assessee-applicant.
11. The learned Deputy Attorney General further argues that although it appears that the tax department follows a practice not to make audit report separately but for the purpose the taxpayer assessee is served with notice under section 79 and 83(1) of the Income Tax Ordinance 1984 in order to make the DCT satisfied about the genuinity of the income of the assessee. This process cause avoidance of any prejudice to the assessee and the assessee may submit all the papers and documents before the DCT for the purpose of assessment and in the instant case since the same practice has been followed, no question arises as to answer in negative the question formulated by the Assessee-applicant.
12. We have heard the learned Advocates, perused the materials on record.
13. It appears that the question No. I and IV as formulated by the Assessee-applicant involves the point as to the method of reopening a self assessment return under the provision of section 83BB(3) of the Income Tax Ordinance 1984. The provision of section 82BB(1) of the Income Tax Ordinance 1984 has given a privilege to the taxpayer to file universal self assessment tax return which reads as follows;
Income Tax Ordinance 1984;
Universal Self Assessment.-
“Furnishes a correct and complete return of income, the Deputy Commissioner of Taxes shall receive such return himself or cause to be received by any other official authorized by him and issue a receipt of such return and the said receipt shall be deemed to be an order of assessment for the assessment year for which the return is filed.”
14. It appears that if and when the Assessee of any class submits tax return under the provision of section 82BB(1) of the Income Tax Ordinance 1984, known as universal self assessment, the concerned DCT shall issue a receipt which amounts to be the finalization of the assessment for the relevant year, subject to the provision of reopening the same pursuant to the provision of section 83BB(3) of the Ordinance 1984 which reads as follows;
Income Tax ordinance 1984
Universal Self Assessemnt.-
“Notwithstanding anything contained in sub-section(1), the Board or any authority subordinate to the Board, if so authorized by the Board in this behalf, may select, in the manner to be determined by the Board, a number of these returns filed under sub-section(1) and refer the returns so selected to the Deputy Commissioner of Taxes for the purpose of audit and the Deputy Commissioner of Taxes shall thereupon proceed, if so required, to make the assessment under section 83 or section 84, as the case may be”
15. Under the aforementioned provision of the Board of Revenue is empowered to select some of the return filed under the provision of section 82BB(1) of the Ordinance 1984 for the purpose of audit and to re-assess the income of the assessee, if required by the DCT and accordingly in the instant case the Board of Revenue has selected the Assessee-applicants Tax return for the year 2008-2009 for audit and if required for fresh assessment by the DCT. But the Assessee-applicant feels aggrieved as he was not served with any copy of audit report made separately or the copy of the letter of Board of Revenue as to selection of the return for audit.
16. It appears that by the provision of section 82BB(1) of the ordinance 1984, if and when the receipt regarding filing of return is issued by the DCT, it will be deemed that the assessment was finalized. That being a privilege, any reopening of the said assessment shall entitle the assessee to know or to get a copy of the order of the Board of revenue regarding selection of the return for audit, since he already obtained privilege will be affected by such order of the higher authority in accordance with the provision of statute. Non-service of such order to the instant Assessee-applicant make the reopening of the finalized assessment nullity.
17. The provision of section 82BB(3) of the Ordinance 1984 has an indication that upon auditing the return if the DCT considers for fresh assessment, he can proceed for assessment afresh. This provision indicates the two way exercise in the matter, firstly ‘Audit’ and than if required ‘fresh assessment’. Because these two words have been used in the section in disjunctive manner indicating step to be taken one after another.
18. It has been disclosed by the learned Deputy Attorney General that this two way exercise has become a effective practice in the Taxes department for the large taxpayer unit only but the same has not been followed for the small taxpayers of the country. Such of the practice established the fact of this two way exercise in order to reopen a self assessment return as selected by the Board of revenue. Therefore, we find that a discrimination is being caused in the instant case in not following the provision of the section 83BB(3) of the Income Tax Ordinance for the small Taxpayers, like the instant Assessee-applicant.
19. The Annexure-A shows that the concerned DCT without making an audit separately assessed the income of the Assessee-applicant in a accumulated manner which appears from its opening assertion, which reads as follows;
״Llc¡a¡ ®L¡Çf¡e£ 31-12-2008 Cw a¡¢lM ¢hhQÉ Ll hvpll SeÉ e£V Bu 11,42,253/- V¡L¡ fËcnÑe L¢lu¡ p¡hÑ Se£e ü¢edÑ¡le fÜ¢aa BuLl ¢lV¡ZÑ c¡¢Mm Ll k¡q¡ ¢h¢d ®j¡a¡hL ¢eÖf¢š Ll¡ quz flhaÑ£a BuLl ¢lV¡ZÑ¢V fl£r¡ L¢lu¡ ®cM¡ k¡u ee-Af¡l¢Vw Bu hÉ¡wL p¤c fË¡¢ç MlQl p¢qa pjeÄu f§hÑL Bu fËcnÑe L¢lu¡R k¡q¡ p¢WL qu e¡Cz Cq¡ R¡s¡J fËc¢nÑa Ge 64,82,808/- V¡L¡l pjbÑe ®L¡e fËj¡e¡¢c c¡¢Mm Ll e¡Cz Eõ¢Ma œ¦¢Vl L¡le BuLl ¢lV¡eÑ¢V A¢XVÑl SeÉ p¤f¡¢ln Ll¡ quz A¢XV p¤f¡¢lnl ®fË¢ra S¡a£u l¡Sü ®h¡XÑ, Y¡L¡l e¢b ew-S¡l¡h¡/Ll-7/Bx Bx ¢hx/82 ¢h¢h(A¢XV)/2008-2009/214, a¡w 08-10-2009 Cw Hhw Ll L¢jne¡l, Ll A’m-2, Y¡L¡l e¢b ew 4H-44/LA-2/Bp¡/82¢h¢h(A¢XV)/2009-2010/385, a¡w 11-10-2009 Cw à¡l¡ BuLl ¢lV¡eÑ¢V A¢XVl SeÉ ¢ehÑ¡¢Qa quz A¢XV ¢ehÑ¡Qel fË¢ra Llc¡a¡ ®L¡Çf¡e£L Eõ¢Ma ¢hou…m¡ EõM f§hÑL ¢m¢Mafœ S¡l£ L¢lu¡ hÉ¡MÉ¡ Q¡Ju¡ Hhw BuLl AdÉ¡cn, 1984 Hl 83(1) J 79 d¡l¡u ®e¡¢Vn S¡l£ Ll¡ quz ¢m¢Mafœ J ®e¡¢Vn S¡l£l ®fË¢ra Llc¡a¡ ®L¡Çf¡e£l rja¡fË¡ç fË¢a¢e¢d Se¡h Bî¡p E¢Ÿe, HXi¡LV öe¡e£l SeÉ q¡¢Sl qe Hhw ¢lV¡eÑl hÉ¡MÉ¡ fËc¡e Llez ¢a¢e A¢XVX ¢hou ®j±¢ML hÉ¡MÉ¡, J ¢el£¢ra ¢qp¡h ¢hhle£ MlQl ¢LR¤ fËj¡e¡¢c c¡¢Mm Llez c¡¢MmL«a L¡NSfœ J j¡jm¡ pÇfLÑ fË¢a¢e¢dl p¢qa ¢hØa¡¢la Bm¡Qe¡ Ll¡ qCm Hhw a¡q¡l hš²hÉ ö¢em¡jz öe¡e£a c¡¢MmL«a J ¢lV¡ZÑl p¢qa c¡¢MmL«a L¡NSfœ fl£r¡¿¹ ¢ejÀl¦fi¡h BuLl j¡jm¡ ¢eÖf¢š Ll¡ qCmx ״
20. The learned Deputy Attorney General has argued that this has not caused prejudice to the Assessee-applicant. But as the law is to be followed by the tax department, such failure on the part of the concerned DCT made the entire assessment, upon reopening, a nullity. The provision of Income Tax law being fiscal law is to be followed strictly in order render justice to the taxpayer of the country. Therefore, we find merit in the submission of the learned Advocate Mr. Mosharaf Hossain so far the question of audit and assessment is involved in a reopening of self assessment return, as provided in section 82BB(3) of the Income Tax Ordinance 1984 is concerned.
21. It appears that the question No. 2 as to the ignoring of the books of account of the Assessee-applicant has already been decided in several similar cases by this bench, one of such is the case of Titas Gas (T&D) Ltd. vs. commissioner of taxes, reported in 59 DLR 463 wherein the scope of DCT to exercise discretion has been considered with the following opinion;
“The latitude available to the Deputy Commissioner of Taxes under section 35 is no doubt very wide but can not be thought to be without any restraint in the process of assessment of the total income of an assessee under sub-section (2) of section 83 of the Ordinance. Discretion of statutory authority in the exercise of statutory power, particularly in taxation matter if thought to be unlimited then exercise of such discretion may result in arbitrariness and selectivity”.
22. It was further decided that the discretion for ignoring the books of accounts as has been submitted by the Assessee-applicant company under the provision of section 35(3) of the ordinance, must be substantiated by reason by the concerned DCT to the extent as to his dissatisfaction regarding the method of accounts and that also must be cogent
23. It appears in the instant case that the DCT has not reasoned for ignoring the book version of the Assessee-applicant company as to the method of accounting, rather he simply disbelieved the item expenditure and as such we find reason to answer the question No. 2 in negative and in favour of the Assessee-applicant.
24. In question No. 3 the disallowance as has been made by the DCT has been challenged on the ground that the same being not reasoned by the DCT cogently is violative of the provision of section 30 A of the ordinance 1984. Section 30A of the Ordinance 1984 runs as follows;
Income Tax Ordinance 1984
Provision for disallowance.-
“Notwithstanding anything contained in sections 28, 29 and 30, the Deputy Commissioner of Taxes shall not make any disallowance or deduction for any year from any claim made by an assessee in the trading account or profit or loss account without specifying reason for such disallowance or deduction”.
25. The word reason as has been provided must be cogent reason supported by the facts and circumstances of the particular case. The only mention that the DCT has reason to believe is not sufficient.
26. In the assessment order, Annexure-A, the concerned DCT did not state any reason for the disallowance of the expenditure but mechanically discarded the claim of the Assessee-applicant. Therefore, it appears that the disallowance as has been made by the DCT is violative of the provision of section 30A of the ordinance 1984. The discretion as has been applied by the DCT has not been supported by cogent reason and accordingly we find the answer to question No. 3 in negative as well.
27. Accordingly, we find merit in the instant Income Tax Reference and therefore the reference application succeeds.
28. Accordingly we answer the question, as has been formulated in question No. 1 to 4 in negative and in favour of the Assessee-applicant. Consequently the assessment made in Annexure A shall have no legal implication and the return filed under universal self assessment Scheme shall prevail.
29. However, there shall be no order as to cost.